Provident Financial (PFG) experienced mixed fortunes in the first half, with another storming performance from the sub-prime lender's credit card, Vanquis, partly offset by weakness in the consumer credit division (CCD). Accordingly, management has reduced the CDD workforce at a cost of £4.5m in order to generate annual cost savings of £18m by next year.
Management blamed a continued squeeze on disposable income for a 5.8 per cent drop in CCD customers and a 3.6 per cent fall in receivables. This weakness in demand also led to a rise in impairments as existing customers not wishing to take out new credit are more inclined to remain in mild arrears. As a result, profits fell from £49.3m to £36.1m.
By contrast, Vanquis boosted pre-tax profits by 70.7 per cent to £50.2m, helped by a 29 per cent increase in customer numbers which hit one million for the first time. Receivables jumped by 40.3 per cent, but not at the expense of the quality of the loan book as delinquency levels remain at a record low. The pilot credit card operation in Poland is also progressing well and the overall financial position remains strong, with debt facilities and retail deposits at Vanquis sufficient to fund requirements through to 2016.
Analysts at Numis are forecasting full-year pre-tax profits of £202.8m and EPS of 115.4p (from £184.4m and 103.5p in 2012).
| PROVIDENT FINANCIAL (PFG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,622p | MARKET VALUE: | £2.26bn | |
| TOUCH: | 1,620-1,624p | 12-MONTH HIGH: | 1,691p | LOW: 1,173p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 264p | |||
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 480 | 71.5 | 40.3 | 28.8 |
| 2013 | 545 | 72.0 | 41.0 | 31.0 |
| % change | +14 | +1 | +2 | +8 |
Ex-div: 30 Oct Payment: 29 Nov | ||||
