Sub-prime lender Provident Financial (PFG) delivered another robust half-year performance, led by a strong growth at its Vanquis Bank credit card business. Poor credit histories typically leave Vanquis's customers struggling to obtain cards from mainstream lenders. With economic recovery driving higher levels of employment, customer numbers in the business consequently rose 17 per cent year on year to 1.18m. Yet credit quality has continued to improve - the impairment charge dropped nearly 12 per cent. That helped drive the unit's profit up 36 per cent to £68.3m.
It's a more sedate story at the home-collected credit arm. The benefits of recovery are less apparent for its customer base of temporary, part-time and casual workers, and customer numbers fell 25 per cent. Still, tighter credit standards and a new arrears and collection system helped push the impartment charge down by a quarter, which allowed divisional profits to grow 2.5 per cent to £37m.
Some £4m of cost savings are planned for the unit during 2015. Looking further forward, the Satsuma online offering - launched in October and with just 11,000 customers at present - should provide a boost. And slackening competition as payday-type lenders withdraw amid tighter regulation may also help.
Broker Numis Securities expects full-year pre-tax profit of £222m, giving EPS of 128p (from £196m and 112p in 2013).
PROVIDENT FINANCIAL (PFG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,094p | MARKET VALUE: | £2.94bn | |
| TOUCH: | 2,091-2,094p | 12-MONTH HIGH: | 2,297p | LOW: 1,540p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 300p | |||
| Half-year to 30 Jun | Pretax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|
| 2013 | 72.0 | 41.0 | 31 |
| 2014 | 90.1 | 51.8 | 34.1 |
| % change | +23 | +26 | +10 |
Ex-div: 29 Oct Payment: 28 Nov | |||
