Interim results for the six months ended 30 June 2010

Provident Financial plc is the market-leading provider of home credit in the UK and Ireland, with a successful, developing credit card business. Its operations consist of the Consumer Credit Division and Vanquis Bank.

Key financial results

Highlights

Group

• Pre-tax profit of £54.0m, ahead of prior year, after absorbing £7.0m attributable to higher funding rates following successful extension of bank facilities and raising of new debt funding.
• Strong balance sheet and liquidity with a gearing ratio of 3.2 times and banking headroom of £328m.
• Interim dividend of 25.4p per share supported by strong capital generation. 

Consumer Credit Division

• Pre-tax profit of £49.3m† (2009: £52.0m) after absorbing £5.4m attributable to higher funding rates.
• Growth in home credit customer count of 5.4%.
• Granting of credit continues to be tempered by cautious customer behaviour and tight underwriting.
• Credit quality of receivables book remains good, reflecting sound first-half collections performance.
• During a period of lower receivables growth, performance benefiting from early action taken to manage margins and costs which will continue through the second half.

† In order to align the weekly home credit business with the group's financial year, home credit's 2010 financial year will include 53 weeks and the first half of the year is a 27-week period compared with 26 weeks in 2009.

Vanquis Bank

• Pre-tax profit up by 82.0% to £9.1m (2009: £5.0m) after absorbing £1.6m attributable to higher funding rates.
• New customer growth of 16.1% and average receivables growth of 21.5%.
• Increase in risk-adjusted margin to 31.1% (2009: 30.0%) reflecting strong revenue yield and reduction in delinquency during second quarter.
• Business generating surplus capital and set to reach targeted post-tax return on equity run rate of 30% by end of 2010.
• Tight credit standards to remain in place while there is uncertainty over direction of employment market.

Peter Crook, Chief Executive, commented:

“I am pleased to report half-year results ahead of last year. Whilst home credit customers remain cautious, I am encouraged by the growth in customer numbers of over 5% which will underpin the medium-term growth of the business when market conditions improve. In addition, the early action taken to manage margins and costs is paying off and will provide ongoing benefit through the second half of the year. Vanquis Bank is making excellent progress whilst maintaining a cautious approach to granting new credit. It is expected to achieve the target set three years ago of a post-tax return on equity run rate of 30% by the end of 2010.

The group’s balance sheet and liquidity are strong and our plans to deliver good quality growth in 2010 remain on track.”

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