Consumer credit provider counts the cost of failed £1.3bn takeover bid for rival

Listed consumer credit provider Non-Standard Finance (NSF) has this morning revealed its recent half-year pre-tax profits were down 790% compared to the previous year as the Leeds-based firm counts the cost of its failed £1.3bn takeover of Provident Financial.

Reporting on the six month period to 30 June 2019, NSF said its reported pre-tax losses stood at £22.7m, a drop from the £2.5m pre-tax losses it reported in the same period last year. Its revenue, however, increased 16%; from £75m to £87m.

The losses were attributed to exceptional items, which includes the cost of its failed takeover bid of Bradford-based Provident Financial earlier this year – which was called off in June after failing to gain shareholder approval and Provident fiercely defending its assets.

NSF said an exceptional charge of £25.3m (2018: £nil) included fees and costs associated with the offer for Provident Financial of £12.7m (2018: £nil).

In the period, NSF saw its total net loan book increase 26% to £335.6m (30 June 2018: £267.4m).

Its branch-based lending was up 22% with seven new branches opened in the first half and guarantor loans were up 53%, which it said reflected further investment and strong market demand. But its home credit division was down 6%.

NSF’s group CEO, John van Kuffeler – who previously ran Provident – said: “The Group delivered another good performance in the first half of 2019 with strong loan book growth and a further reduction in impairment as a percentage of revenues.  We have secured a leading position in three highly attractive segments following a four-year programme of investment.  During this period, Everyday Loans has doubled the size of its loan book, our Guarantor Loans Division has more than doubled and Loans at Home has grown substantially.  Now this phase of significant investment is complete, we expect a greater proportion of future revenue growth to be translated into profit.

“Whilst we believe strongly that a combination with Provident Financial plc would have accelerated the delivery of benefits for customers, employees and shareholders, each of our businesses continued to perform well during the first half. Our strategy remains unchanged and we remain on course to deliver attractive long-term returns through a combination of income and capital growth.

“As well as fees and other deal-related costs, exceptional items in the first half also include an impairment charge for Loans at Home goodwill.  Whilst Loans at Home is highly profitable, is performing strongly and is ahead of plan, the significant decline in the peer group multiples since December 2018 has prompted the impairment of the goodwill asset in the Group’s balance sheet.  We are continuing to see a strong level of demand in both branch-based lending and guarantor loans while in the more mature home credit market, demand remains steady.”

The firm announced a 17% increase in the half year dividend to 0.7p per share.

Meanwhile, shares in NSF have more than halved since it first announced its hostile takeover of Provident; wiping £108m off its value since the initial announcement.

According to reports, shareholders are now hoping NSF is rescued and it has been suggested that Provident could begin its own takeover bid.