Key performance indicators

The group uses a number of KPIs to assess progress against each of its strategic objectives, including both financial and non-financial measures.

These KPIs are helpful in assessing progress but are not exhaustive as management also takes account of a wide range of other measures in assessing performance.

Growing high-return businesses in non-standard markets

  • Generate high returns in order to provide high returns to shareholders. High returns are available in the non-standard market to those companies with the right business model which focuses on delivering the best possible customer outcomes.
  • Are sustainable and maintain high levels of regulatory compliance at all times.
  • Have good growth potential to deliver future earnings and dividends growth.
  • Enjoy a strong market position, preferably a top-3 market position in each segment of the non-standard market in order to develop the market in a responsible manner.
  • Have good management and cultural fit.

Adjusted profit before tax (£m)


Adjusted profit before tax has increased by 14.1% to £ 334.1m (2015: £292.9m) reflecting strong growth in profits at both Vanquis Bank and Moneybarn and an improved profit performance in CCD following a reduction in the start-up losses associated with Satsuma and glo. Statutory profit before tax increased by 25.7% to £343.9m (£273.6m).

Adjusted profit before tax in 2016 is stated before: (i) £7.5m of amortisation in respect of acquisition intangibles established as part of the acquisition of Moneybarn in August 2014 (2015: £7.5m); and (ii) a net exceptional credit of £17.3m comprising an exceptional gain of £20.2m in respect of Vanquis Bank’s interest in Visa Europe following completion of Visa Inc.’s acquisition of Visa Europe on 21 June 2016 and an exceptional impairment charge of £2.9m in respect of glo’s IT platform within CCD following the decision to develop guarantor loans as part of the wider Vanquis Bank loans proposition on a separate IT platform (2015: exceptional cost of £11.8m in respect of a business restructuring in CCD).

Group ROE %


The ROE has reduced modestly to 45% (2015: 46%) due to the impact of the bank corporation tax surcharge of 8% on Vanquis Bank’s profits in excess of £25m which became effective on 1 January 2016.

Group ROA %


The reduction in the group’s ROA to 15.3% (2015: 16.1%) is primarily due to the impact of the bank corporation tax surcharge on Vanquis Bank’s profits. Excluding the impact of the bank tax surcharge, the group’s ROA modestly increased to 16.2% due to stronger returns at CCD and Moneybarn.


Risk-adjusted margin (%)


The risk-adjusted margin in 2016 was 32.2%, compared with 32.8% in 2015. The reduction in the risk-adjusted margin over the last 12 months primarily reflects a 1.0% decline in the revenue yield from the fall in interchange income following the agreement between Visa and the EU which took full effect from December 2015 together with the further reduction in penetration of the ROP product within the customer base.

Return on assets (%)


Vanquis Bank delivered an ROA of 13.8% in 2016, down from 15.8% in 2015 primarily due to the impact of the 8% bank corporation tax surcharge on Vanquis Bank profits which became effective from 1 January 2016. Excluding the bank corporation tax surcharge, Vanquis Bank’s ROA reduced from 15.8% to 15.1% in 2016 due to the expected reduction in revenue yield previously communicated together with a £6m investment in initiatives to augment medium term growth.


CCD risk-adjusted margin (%)


The modest reduction in revenue yield together with the stable delinquency performance compared with the strong improvements seen in 2015 has produced a risk-adjusted margin for CCD of 78.4% in 2016, lower than 82.2% in 2015.

CCD return on assets (%)


The strategic development of CCD continues to drive improved returns with the return on assets increasing to 22.3% in 2016, up from 21.2% in 2015.


Risk-adjusted margin (%)


Default rates have increased during 2016 consistent with the mix of business being written. Moneybarn’s risk-based pricing models have proved effective in maintaining its risk-adjusted margin at 24.1% in 2016, compared with 24.3% in 2015.

Return on assets (%)


The business has continued to invest in the resources necessary to support future growth as well as meet the more exacting regulatory standards set by the FCA. Accordingly, headcount has increased from 151 at the end of 2015 to 195 at the end of 2016.This has resulted in cost growth of 31.4%, lower than the growth in average receivables as the business has benefited from some operational leverage. This produced a return on assets of 13.1%, up from 12.9% in 2015.

Generating high shareholder returns

  • Generate sustainable growth in profits and dividends to deliver increasing shareholder returns; and
  • Maintain a dividend cover of at most 1.25 times.

Adjusted earnings per share (p)


Adjusted basic earnings per share is up 9.2% to 177.5p (2015: 162.6p), a lower rate than the 14.1% growth in adjusted profit before tax. This principally reflects the impact of the bank tax surcharge on Vanquis Bank’s profits. Basic earnings per share increased by 19.8% to 181.8p (2015: 151.8p).

Excluding the impact of the bank corporation tax surcharge, adjusted basic earnings per share shows growth of 15.3%. This is higher than the growth in adjusted profit before tax due to a lower underlying effective tax rate of 19.0% in 2016 compared with 20.25% in 2015 reflecting: (i) the change in the UK statutory corporation tax rate from 21% to 20% on 1 April 2015; and (ii) a tax credit in respect of prior years in 2016.

Dividend per share (p)


Dividend per share has increased by 12.1% to 134.6p (2015: 120.1p), a higher rate of growth than adjusted basic earnings per share.

Total shareholder return (%)


Annual total shareholder return of -11.7% in 2016 (2015: +40.9%) following five years of strong growth.

Dividend cover


Dividend cover has reduced to 1.32 times (2015: 1.35 times) but is well above the group’s minimum dividend cover target of 1.25 times. The group’s dividend is supported by strong capital generation.

Maintaining a secure funding and capital structure

  • Maintain borrowing facilities which, together with Vanquis Bank’s retail deposits programme, meet contractual maturities and fund growth over at least the next 12 months;
  • Maintain a maximum gearing ratio of 3.5 times to ensure alignment with the minimum dividend cover target of 1.25 times and the group’s growth plans, whilst maintaining a comfortable surplus of regulatory capital over the capital requirements set by the Prudential Regulation Authority (PRA); and
  • Continue to diversify the group’s sources of funding.

Gearing (times)


Gearing remained stable at 2.3 times (2015: 2.2 times) compared with a maximum of 3.5 times and a banking covenant of 5.0 times. The modest increase from 2.2 times in 2015 reflects the leverage of 3.5 times that supports the funding of receivables growth approaching £300m in 2016.

Headroom on the group’s committed facilities amounted to £140m at the end of 2016 and, including the additional capacity available for Vanquis Bank to take retail deposits, total funding capacity amounted to £374m. Including the recent extension to the group’s syndicated bank facility, funding capacity increases to £441m and is sufficient to fund contractual maturities and projected growth in the business until October 2019 when the £250m senior bond matures.

Acting responsibly and with integrity in all we do

  • Operating our core business of lending to our customers in a responsible and sustainable manner, putting their needs at the heart of everything we do;
  • Acting responsibly and sustainably in all our stakeholder relationships in order to:
    • Create a working environment that is safe, inclusive and meritocratic;
    • Treat our suppliers fairly; and
    • Support our communities.

Customer satisfaction (%)


Customer satisfaction of 93% for Provident home credit (2015: 93%), 89% for Vanquis Bank (2015: 88%) and 89% for Moneybarn (2015: 89%).

Community investment (£m)


Invested a total of £3.1m in various community programmes, money advice programmes and social research (2015: £3.1m).

KPI descriptions:

Adjusted profit before tax – Profit before tax, the amortisation of acquisition intangibles and exceptional costs.

Return on assets (ROA) – Adjusted profit before interest after tax as a percentage of average receivables.

Return on equity (ROE) – Adjusted profit before tax as a percentage of average equity. Equity is stated after deducting the group’s pension asset, net of deferred tax, and the fair value of derivative financial instruments, and the proposed final dividend.

Risk-adjusted margin (RAM) – Revenue less impairment as a percentage of average receivables.

Adjusted earnings per share – Profit after tax, excluding the amortisation of acquisition intangibles and exceptional costs, divided by the weighted average number of shares in issue, excluding own shares held by the group.

Dividends per share – The total dividend per share, comprising the interim dividend per share paid and the proposed final dividend per share.

Gearing – Borrowings (based on contracted rates of exchange and excluding deferred arrangement fees) less the liquid assets buffer, including liquid resources, divided by equity. Equity is stated after deducting the group’s pension asset, net of deferred tax and the fair value of derivative financial instruments, in line with the group’s banking covenants.

Customer satisfaction – The percentage of customers surveyed who are satisfied with the service they have received.

Community investment – The amount of money invested in support of community programmes, money advice programmes and social research.

Total shareholder return – The change in the group’s share price, together with any dividend returns made to shareholders