Provident on road to recovery but profits fall after overhaul
CREDIT LENDER Provident Financial saw profits tumble following the reorganisation of its home credit business, but said it is now on the road to recovery.
The Bradford-based FTSE 100 company, which provides credit to people who do not meet the lending criteria of mainstream banks, said pre-tax profit fell 23 per cent to £115.3m in the six months to June 30, hit by a reduction in the number of debt collection agents at its home credit division.
CEO Peter Crook said he was disappointed by the higher than expected operational disruption to trading in the home credit business as the group switched from using self-employed agents to directly employed ones.
“Basically, more of our agents walked off the case than we expected,” he said.
“88 per cent stayed whereas we thought we’d keep 92 to 93 per cent. Perhaps they were not as fired up and motivated.
“Fortunately, it’s behind us now and we have got a fully employed workforce. It will take until the end of September to bed it down. The good news is we are on the journey to recovery.”
Provident has maintained its interim dividend at 43.2p, reflecting the group’s confidence in the future.
“The board has looked through the temporary nature of the disruption. The other businesses are all trading very well,” said Mr Crook.
The group said it has seen no change in behaviour following the recent political upheaval.
“Everybody is looking for it. We are very diligent, but we can’t see any change in customer behaviour,” said Mr Crook.
Provident operates Vanquis Bank and consumer credit brands including Satsuma, Provident and glo and Moneybarn.
Home credit receivables ended the first half at £471.7m, down £18.3m from June 2016, with customer numbers down 11.1 per cent to 731,000. However, Vanquis signed up 234,000 new customers to produce a record half year. The credit quality improved slightly and Vanquis now has 1.65 million customers.
Steve Clayton, at Hargreaves Lansdown, said: “Interim results from Provident Financial show the impact of their botched introduction of a new way of working in their consumer credit division. Growth at Moneybarn and Vanquis was offset by a collapse in the Consumer Credit Division’s earnings.”
Basically, more of our agents walked off the case than we expected. Peter Crook, chief executive of Provident Financial