Pre-tax profits take a dive at subprime lender

Provident Financial chief executive Peter Crook
Provident Financial chief executive Peter Crook

Despite a massive drop in pre-tax profits and with chief executive Peter Crook declaring his “disappointment” at the performance of its home credit business, dividends at Provident Financial have been maintained.

The Bradford-based subprime lender saw pre-tax profits for the first half of the year, to 30 June 2017, reduce by 85.5% to £6.3m, from £43.5m in the same period last year.

It said that annualised return on assets of 13.1% to June 2017 was reduced from 15.7% in the first half of 2016, primarily due to the impact of trading disruption in home credit and the investment to support medium-term growth in Vanquis Bank.

Despite this, its proposed interim dividend per share maintained at 43.2p.

The company announced a profit warning earlier this year which saw £750m wiped off its value in one day.

Provident Financial said it had completed the recruitment of 2,500 full-time staff, it said attrition has created vacancy levels of 12% recently, more than double what was expected.

Peter Crook, chief executive, commented: “Whilst I remain disappointed by the higher than expected operational disruption to trading in the home credit business, the new business model was deployed as planned during the first week in July.

“Our focus will be on customer service, embedding the new model and improving collections through the third quarter of the year. I am confident in the strategic rationale for the change and the business is working hard to improve customer service and collections performance ahead of the seasonally busy fourth quarter.

“Vanquis Bank, Moneybarn and Satsuma are booking record volumes of new business derived from a combination of product innovation and enhanced distribution.

“The group has continued to exercise strong discipline around credit and not observed changes in customer behaviour in relation to either demand for credit or credit performance.

“The board has maintained the interim dividend recognising the group’s medium-term growth opportunities.”

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