Provident Financial plc (PFG or ‘the group’) is the leading provider of credit products which provide financial inclusion for those consumers who are not well served by mainstream lenders. The group serves 2.4 million customers and its operations consist of Vanquis Bank, Moneybarn, and the Consumer Credit Division (CCD) comprising Provident home credit and Satsuma.
Key financial results
Adjusted profit before tax1
Amortisation of acquisition intangibles
Exceptional costs (excluding bid defence costs)
Profit before tax and bid defence costs
Exceptional costs – bid defence costs
Statutory profit before tax
Adjusted earnings per share1
Basic earnings per share
Annualised return on assets2
Interim dividend per share
Continued good recovery of the group underpins the Board’s reinstatement of the interim dividend
Group profit before tax and bid defence costs up 76.9% to £61.2m (2018: £34.6m).
Group adjusted profit before tax1 of £74.9m (2018: £74.9m), in line with internal plans and the first half of 2018.
Improvement in the annualised return on assets from 5.3% to June 2018 to 7.7% to June 2019, with Vanquis Bank and Moneybarn both delivering returns above the group’s target of 10%.
Strategic initiatives well underway to deliver the group’s ‘Vision for the Future’, including a number of product developments, combining online loans capabilities and cost and funding efficiencies.
Further strengthening of the senior management team and Board following the appointments of Neil Chandler as Managing Director of Vanquis Bank, Robert East as Chairman of Vanquis Bank and a member of the group Board and Graham Lindsay to the group Board.
Revolving syndicated facility successfully refinanced from £450m to a planned level of £235m, reflecting a lower funding requirement for the non-bank group now that Vanquis Bank is fully ring fenced and funded with retail deposits.
The Board proposes an interim dividend of 9.0p per share (2018: nil), underpinned by the group’s ongoing recovery.
Vanquis Bank has delivered strong new account volumes despite adapting to changes in regulation
In line with internal plans, Vanquis Bank’s profit before tax reduced to £85.0m (2018: £97.2m) primarily reflecting the expected reduction in ROP income and a shift in mix to nearer prime.
New customer account bookings of 190,000, 3,000 higher than the first half of 2018 and ahead of management’s plans, notwithstanding tighter underwriting and the impact of revised affordability processes.
Improvement in the annualised impairment rate from 15.7% of average receivables to June 2018 to 15.1% to June 2019, reflecting an improvement in delinquency trends due to tighter underwriting and the shift in mix of business to nearer prime.
Costs and interest charges reduced by 2.1% and 12.6% respectively, reflecting tight cost control and the impact of fully funding the business with retail deposits.
Moneybarn delivers further strong growth in new business
Adjusted profit before tax1 up 46.2% to £15.5m (2018: £10.6m) reflecting strong growth and improved credit quality.
Demand for used cars has remained robust which, together with an improved customer experience, has resulted in strong growth in new business volumes of 34%, notwithstanding tighter credit standards.
Annualised impairment rate of average receivables reduced to 12.3% (2018: 14.1%), reflecting stable default and arrears levels following progressive tightening of underwriting through 2017 and 2018.
CCD turnaround progressing well with a view to return the business to profitability in the second half of 2020
Reduction in adjusted loss before tax1 to £15.1m (2018: loss of £23.2m) reflects ongoing recovery of the home credit business.
UK new customer growth in home credit 15% higher than the first half of 2018.
Reduction in first half costs of 11% reflects the impact of headcount reductions over the last 18 months with cost efficiency remaining an ongoing priority for the business.
Testing of enhanced performance management of the field force through a balanced scorecard with some element of variable pay has been well received, with full roll-out taking place through the second half of 2019.
Satsuma has continued to deliver good growth and produced a break even result in the first half of the year.
Malcolm Le May, Chief Executive Officer, commented:
“Despite the distraction of the unsolicited bid from February to June this year, I am pleased with the group’s operational and financial performance during the first half of the year. We have delivered strong new business volumes whilst maintaining stable delinquency trends and our first half results are in line with our internal plans. We are pleased to announce reinstatement of an interim dividend of 9.0p per share, which reflects our confidence in the ongoing recovery of the group. We will be hosting a Capital Markets Day on 7 November 2019 where we will provide further detail on the medium-term strategy and outlook for the group.”
Richard King, Provident Financial
Nick Cosgrove/Simone Selzer, Brunswick
Adjusted profit before tax is stated before: £3.7m (2018: £3.7m) of amortisation in respect of acquisition intangibles established as part of the acquisition of Moneybarn in August 2014 and exceptional charges of £33.6m (2018: £36.6m) comprising: (i) £23.6m of defence costs associated with Non-Standard Finance’s (NSF’s) unsolicited offer for the group; and (ii) £10.0m in relation to the turnaround of the home credit business following the poor execution of the migration to the new operating model in July 2017. Exceptional costs in the first half of 2018 also included £18.5m in respect of the refinancing of the senior bonds maturing in October 2019.
Annualised return on assets is calculated as adjusted profit before interest after tax as a percentage of average receivables for the 12 months ended 30 June.