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Results for the year ended 31 December 2010

Provident Financial plc ("Provident Financial") 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

  2010 2009 Change
       
Customer numbers 2.41m 2.28m 5.7%
Average customer receivables1 £1,053.8m £1,009.8m 4.4%
       
Profit before tax and exceptional costs £144.5m £130.1m 11.1%
Basic earnings per share before exceptional costs 78.6p 71.4p 10.1%
       
Profit before tax £142.0m £125.7m 13.0%
Basic earnings per share 76.7p 67.5p 13.6%
       
Final dividend per share 38.1p 38.1p -%
Total dividend per share 63.5p 63.5p -%

Highlights

Group

  • Profit before tax and exceptional costs up 11.1% to £144.5m (2009: £130.1m), well ahead of receivables growth due to strong management of yield, impairment and costs.
  • Strong balance sheet and liquidity:
    • Year-end gearing ratio of 3.3 times (2009: 3.3 times) against a bank covenant of 5.0 times.
    • Banking headroom of £370m at end of February 2011 following additional funding of £128.5m raised from private placements since year end, including £100m provided by M&G Investments.
    • Roadshow underway to promote a second retail bond.
  • Full-year dividend of 63.5p per share, with dividend cover before exceptional costs increased to 1.24 times.

Consumer Credit Division

  • Home Credit profit before tax of £129.1m2 (2009: £128.9m) benefiting from early actions taken to manage margins and reduce costs.
  • Sound collections performance with a strong performance in the final quarter.
  • Strong pick-up in fourth quarter growth rate from sales to good quality existing customers.

Vanquis Bank

  • Profit before tax up by 89.4% to £26.7m (2009: £14.1m) with customer growth of 27.7% and average receivables1 growth of 25.1%.
  • Increase in risk-adjusted margin3 to 33.9% (2009: 30.1%) reflecting strong revenue yield and sustained reduction in delinquency during the year.
  • Business achieved its target post-tax return on equity of 30% and is now generating surplus capital.
  • Tight credit standards to remain in place until there is greater clarity over direction of employment market.
  1. Based on an average of month-end receivables throughout the year.
  2. In order to align the weekly Home Credit business with the group's financial year, Home Credit's 2010 financial year includes 53 weeks compared with 52 weeks in 2009.
  3. Revenue less impairment as a percentage of average receivables for the 12 months ended 31 December.

Peter Crook, Chief Executive of Provident Financial, commented:

“I am pleased with the strong performance we delivered in 2010. Through continuing to focus on the needs of our customers, we have been able to expand the flow of credit to consumers whilst continuing to lend responsibly. By careful management of yield, impairment and costs, we have delivered earnings growth well ahead of receivables growth. We have also made excellent progress in further diversifying our funding base and now have banking headroom of £370m following additional funding raised through private placements since the year end.

Both Home Credit and Vanquis Bank have made a good start to 2011. Combined with our strong funding and liquidity position, we are well placed to continue to deliver good quality growth through this year. When the UK economy begins to recover, we see an enhanced opportunity to build on our leading position in the UK non-standard consumer lending market.”

Enquiries: Today Thereafter
Media    
David Stevenson, Provident Financial 020 7404 5959 01274 351351
Gill Ackers/Eilis Murphy, Brunswick 020 7404 5959 020 7404 5959
     
Investor Relations    
Gary Thompson, Provident Financial 020 7404 5959 01274 351351