Provident Financial Plc is proposing an interim dividend of 5.0p with respect to H1'22. Shareholders on the register as of 12 August 2022 will be eligible and it will be paid on the 22 September 2022.
Other Financial Highlights:
Well positioned to support customers and deliver sustainable returns despite the challenging macro backdrop
- Provident Financial Plc adjusted continuing profit before tax (PBT) of £54.3m (H1'21 PBT: £63.5m) reflects growth in the receivables book year-on-year and new customer bookings partly offset by the planned increase in central costs.
- Provident Financial Plc statutory PBT of £37.3m (H1'21 LBT: £44.2m) includes £3.7m of exceptional costs related to corporate costs incurred centrally and £9.6m of discontinued items related to the continued wind-down of the Consumer Credit Division (CCD).
- At the end of June, Provident Financial Plc held Common Equity Tier 1 of approximately £460m (H1'21: £585m), which equated to a CET1 ratio of 27.3% (H1'21: 32.5%) and total capital of approximately £660m (H1'21: £585m) equating to a Total Capital Ratio (TCR) of 39.2% (H1'21: 32.5%). The increase in total capital year-on-year reflects the statutory performance of the Group and the issuance of a Tier 2 bond in H2'21, partly offset by the unwind of the IFRS 9 transition on 1 January 2022.
- Total liquidity at the end of June stood at approximately £520m (H1'21: £510m) including approximately £430m (H1'21: £280m) held by Vanquis Bank, of which £145m is surplus non-bank funds placed on deposit with the Bank.
- In July, Provident Financial Plc was notified by the regulator that it has decided not to proceed with its planned investigation into CCD's historic lending between February 2020 and February 2021. This has resulted in a £4.1m provision being released as an exceptional credit through discontinued operations in the H1'22 results.
- Following the continued wind-down of CCD, Provident Financial Plc now focuses exclusively on the mid-cost and near-prime segments of the credit market. This is expected to have a positive impact on the impairment and cost profile of the Group. Combined with its strong balance sheet, this is expected to enable the Group to deliver focussed and sustainable growth whilst also delivering attractive returns to shareholders.
The credit card business delivered growth in receivables and customers year-on-year with stable delinquency trends
- Provident Financial Plc's credit card business reported a profit before tax for the first six months of the year of £75.8m (H1'21: £57.0m), driven by receivables growth and active customer spend levels being maintained year-on-year.
- New customer bookings for the period were 105k (H1'21: 93k) notwithstanding the ongoing prudent approach to risk management amidst an uncertain macroeconomic environment.
- Credit card spend per active customer during the period was consistent with pre-pandemic levels. However, utilisation rates are still lower at approximately 48% (H1'21: 50%).
- Customer receivables ended the period at £1,035m (H1'21: £978m) representing growth year-on-year driven by new customer bookings and active customer spend trends improving year-on-year.
- During the first six months of the year, delinquency trends remained stable and, as a result, the annualised impairment rate remained below trend at 3.5% (H1'21: 5.8%). This also represents the work that has been done over the last two years to refocus the credit card business towards lower risk customers on average. This trend can also be seen on the balance sheet, where the coverage ratio decreased by 0.6% to 24.4% during H1'22.
The vehicle finance business delivered meaningful growth in PBT year-on-year
- Provident Financial Plc's vehicle finance business delivered a PBT for the period of £20.2m (H1'21: £15.5m) driven by higher revenue year-on-year, as a result of the growth in the average receivables book, and lower interest and impairment costs.
- Credit issued during the period increased to approximately £155m (H1'21: £150m) driven by new business volumes and a buoyant pricing market for used vehicles.
- Customer receivables were £598m at the end of June (H1'21: £602m), which is broadly consistent with the level reported at the end of December 2021 as new customer bookings were offset by early customer settlements.
- The annualised impairment rate improved to 6.0% during the period (H1'21: 6.8%) which also reflects the move towards a lower risk customer base on average since the start of the pandemic.
Personal loans pilot phases concluded at the end of June with good receivables and customer growth
- The Vanquis Bank Open Market Loans pilot significantly exceeded internal expectations and saw consistently strong demand from its target customer segment with good new business volumes. The Sunflower Loans pilot phase also exceeded internal expectations but the Open Banking trial ended its pilot phase below commercial expectations despite high brand and customer approval scores.
- As a result, the personal loans business will focus on developing its core offering around Vanquis Bank Loans (VBL) at sub-50% APR. This offering will be supported by the Group's new IT platform, 'Gateway', and work will commence to transition VBL in H2'22.
- At the end of June, the personal loans business had receivables of £42m (H1'21: £16m) and total customer numbers of 24k (H1'21: 16k).
