Provident Financial swings to a loss and scraps interim dividend
Subprime lender Provident Financial has swung to a first-half loss and scrapped its dividend, as its revenues slipped amid the coronavirus pandemic.
The figures
Doorstep lender Provident Financial reported a £28m pre-tax loss in the six months to the end of June, compared to a £43.1m profit in the same period a year earlier.
On an adjusted basis, the FTSE-250 listed lender also swung to a loss of £32.6m from a profit of £80.4m.
Revenue fell to £445.5m from £501.5m.
The board has scrapped an interim dividend “with the continued aim of preserving capital and supporting business stability”, but said it intends to resume payouts as soon as conditions normalise.
Why it’s interesting
Provident had previously cancelled its final dividend for last year and said it will only resume payments once “operational and financial conditions normalise”.
Levels of arrears and payment holidays due to the pandemic have returned to more normal levels, below four per cent.
Provident’s subsidiaries Vanquis Bank and Moneybarn kept their heads above water and remained profitable for the period.
Vanquis Bank posted a profit of £11.8m for the first half of the year, but it was sharply down on the £90.5m reported a year earlier. Provident said this had been driven by a reduction in customer spend and impairment caused by the pandemic.
A slight increase in the annualised impairment rate, from 14.9 per cent to 18 per cent, was due to a £70m hit from the impact of coronavirus and economic outlook.
Provident’s car finance division Moneybarn remained open during lockdown and delivered pre-tax profit of £2.4m, down on the £15.5m reported in the same period last year.
The increase in Moneybarn’s revenue was offset by increased impairment.
The lender also said that its performance was “better than expected” and it would therefore repay all furlough support to the government.
What Provident Financial said
Chief executive Malcolm Le May said: “The group’s response to challenges brought on by the early stages of Covid-19 was swift, putting us in a stronger position heading into the second half of 2020. Since the end of June, some encouraging signs of increased activity levels in our markets can be seen, with improving customer demand and spending trends evident….
However, the potential economic shock, and uncertainty, that Covid-19 will bring to the UK economy over the coming months must not be underestimated. Looking to the full year results, the Group continues to trade in line with internal plans.”