Provident results bolster defence as NSF circles

By Reuters

Published on 03/05/2019 - 11:04•Updated 20/04/2024 - 10:29

By Noor Zainab Hussain

(Reuters) - Sub-prime lender Provident Financial reported an improving picture for its business on Friday, hoping to win over investors in what has become an increasingly bitter hostile bid from smaller rival Non-Standard Finance (NSF).

Provident has been rebuilding after a botched restructuring of its home credit business led to profit warnings and the departure of its CEO in 2017, triggering an investigation by Britain's financial watchdog.

Non-Standard Finance (NSF) on Monday expressed "strong confidence" in its takeover bid, giving investors more time to accept its 1.3 billion pound ($1.69 billion) offer. Provident has rejected the offer and hit back at NSF accusations of mismanagement.

Provident had been trying to reorganise a business that had traditionally relied on self-employed agents offering high-interest loans of up to 1,000 pounds and collecting repayments through weekly household visits.

However, it failed to recruit enough people for its plan to replace external agents with direct employees and the failed restructuring led to customers moving to other lenders.

On Friday, however, Provident reported higher customer numbers and volumes for its main business units for the first three months of 2019.

New and returning UK home credit customer growth was up 27 percent on the same period last year.

"We have put the group's legacy issues behind us," Chief Executive Officer Malcolm Le May said.

The home credit business, however, remains in the midst of the turnaround efforts while the consumer credit division reported an adjusted pretax loss for 2018.

Shares in Provident, which swung to a pretax profit in 2018, were up 1.8 percent at 521 pence at 0814 GMT.

STRENGTHENING DEFENCE

Provident said that customer numbers at Vanquis Bank were up 13 percent year on year. The increase is a welcome boost for a business that Provident has placed at the heart of its bid defence, saying it will focus on expanding the banking business.

Vanquis Bank, headquartered in the heart of London's historic financial district, accounts for more than half of Provident's revenue.

"These points will also strengthen their defence arguments in the context of the NSF offer ... it will certainly convince some investors that management is running the business well," Goodbody analyst John Cronin told Reuters.

Provident, established in 1880 and based in the northern English city of Bradford, also said that Moneybarn - its car and van financing arm - had delivered record volumes of new business, up 40 percent on the same period last year.

"It's a very positive trading statement ... The numbers will strengthen PFG's defence arguments," Cronin added.