Shares in Provident Financial fell 4 per cent after the company warned that home credit customers will continue to experience pressure on their household incomes, and are likely to remain cautious on taking out new lending. That said, the home credit and credit card specialist still managed to put in a decent enough performance in the first half, pushing customer numbers up by 5.4 per cent to 1.81m, while the Vanquis Bank credit card business boosted numbers by 16.1 per cent to 483,000.
While total impairment charges rose from £160m to £181m, the average size of the loan book showed stronger growth, rising from £991m to £1.03bn. And tight lending criteria helped to keep the ratio of annualised impairments to revenue down to 33.3 per cent, a modest rise from 32.2 per cent at the end of last year. Group finances remain in pretty good shape, too, with undrawn committed bank facilities of £328m and a significant surplus of capital over the minimum regulatory requirement.
Most of the group's income came from the consumer credit division, where pre-tax profits fell from £52m a year earlier to £49.3m, although this was after absorbing an extra £5.4m of interest costs incurred as a result of higher rates applied to the latest extension of bank facilities. New business in the second half is expected to be restrained not only by customer caution but also through a tighter lending regime designed to kip a lid on bad debts. The group's smaller Vanquis Bank credit card division is ramping up profits, though, contributing first-half pre-tax profits of £9.1m, up from £5m a year earlier, which puts the bank on target to reach a post-tax return on equity of 30 per cent by the year-end.
Numis Securities is forecasting full-year pre-tax profits of £144m and EPS of 78.8p (£130m and 70.9p in 2009).
| PROVIDENT FINANCIAL (PFG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 845p | MARKET VALUE: | £1.1bn | |
| TOUCH: | 844-845p | 12-MONTH HIGH: | 986p | LOW: 786p |
| DIVIDEND YIELD: | 7.5% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 181p | |||
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 401 | 53.1 | 29.3 | 25.4 |
| 2010 | 440 | 54.0 | 29.5 | 25.4 |
| % change | +10 | +2 | +1 | - |
Ex-div: 3 Nov Payment: 30 Nov | ||||
