Non-standard loan provider Provident Financial delivered another strong performance in 2010 despite a backdrop of customer uncertainty over unemployment and wage constraints.
In fact, management was quick to position the group to address the uncertainty caused by public sector cuts and changes to welfare benefits, which combined to temper demand for credit in the first nine months of last year. During this time, management concentrated on maintaining credit standards and driving down costs, as well as working on improved collections and arrears. And conditions in the final quarter improved noticeably as customer visibility on future earnings improved.
Vanquis Bank, which handles the group's credit card operation, put in a very strong performance, pushing profits up by 89 per cent to £26.7m, while impairments fell from 47 per cent to 39.4 per cent of revenue. This helped the credit card business to beat its stated target of delivering a post-tax return on equity in excess of 30 per cent. The larger core home credit division posted flat pre-tax profits of £129m, while impairment levels showed little change at 32.9 per cent.
Numis Securities is forecasting 2011 adjusted pre-tax profits of £159m and EPS of 87.2p (from £146.3m and 79p in 2010).
| PROVIDENT FINANCIAL (PFG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 973p | MARKET VALUE: | £1.3bn | |
| TOUCH: | 972-973p | 12-MONTH HIGH: | 1,043p | LOW: 725p |
| DIVIDEND YIELD: | 6.5% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 228p | |||
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 1.18 | 180 | 49.0 | 36.5 |
| 2007 | 0.69 | 115 | 40.9 | 63.5 |
| 2008 | 0.75 | 129 | 70.9 | 63.5 |
| 2009 | 0.82 | 126 | 67.5 | 63.5 |
| 2010 | 0.87 | 142 | 76.7 | 63.5 |
| % change | +6 | +13 | +14 | - |
Ex-div: 11 May Payment: 21 Jun | ||||
