Provident Financial restarts interim dividend as profits rise despite hostile bid costs

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Provident Financial PLC (LON:PFG) reinstated an interim dividend as it delivered profit growth despite spending GBP23.6mln on batting off a GBP1.3bn hostile takeover bid from rival subprime lender Non-Standard Finance PLC(LON:NSF).


NSF, which is headed by Provident’s ex-boss John Van Kuffeler, in June abandoned its plan to buy Provident after failing to secure enough support from shareholders.


Provident said its statutory profit before tax rose 8.8% to GBP37.6mln in the six months to the end of June, reflecting lower exceptional costs.


READ: NSF walks away from hostile takeover of Provident Financial


Excluding bid defence costs, the group’s reported pre-tax profit jumped 76.9% to GBP61.2mln.


Adjusted pre-tax profit, which strips out one-off costs, was flat at GBP74.9mln as growth in the car finance arm, Moneybarn, offset weaker profit in the Vanquis Bank business and losses in the troubled home credit business.


Moneybarn profits jump


Moneybarn delivered a 46.2% rise in adjusted pre-tax profit to GBP13.6mln on strong demand for used cars.


Provident said the Financial Conduct Authority’s investigation into Moneybarn over past misdemeanours is “close to being concluded” and expects the financial impact to be within the GBP20mln provision it has previously set aside.


The FCA is looking into how Moneybarn decides whether applicants can afford its loans and on how it treats customers who fall into financial difficulty.


The home credit business narrowed its losses in the period on the back of cost cuts as part of turnaround plan. The company expects the division to return to profitability in the second half of 2020.


Vanquis Bank, however, saw pre-tax profit fall 12.6% to GBP85.0m after paying customers refunds related to its Repayment Option Plan (ROP), which aims to help customers struggling to pay their bills.


The Financial Conduct Authority last year fined Vanquis nearly GBP2mln and ordered it to repay nearly GBP168mln in compensation after an investigation found the lender failed to tell ROP customers that interest would be added unless the balance was cleared at the end of the month.


Provident said its ROP refund programme was completed in the first half with more than 1.3 million current and former customers compensated.


Provident restarts interim dividend


The group recommended an interim dividend of 9p per share.


“After a year of recovery in 2018, the first six months of 2019 has seen a renewed momentum in the delivery of the group’s long-term strategic objective to deliver good outcomes for customers combined with sustainable and attractive returns to shareholders,” said chief executive Malcolm Le May.


“Despite the distraction of the unsolicited and hostile offer, the group has maintained its focus on delivering on its strategic initiatives.


“Looking forward to the full year, the board confirms that overall the group continues to trade in line with internal plans.”


Shares rose 4% to to 432.9p in morning trading.


Peel Hunt turns positive on stock


Peel Hunt upgraded its rating on the stock to ‘buy’ from ‘hold’ and left its target price unchanged after the results.


The broker said the first half has been dominated by the failed takeover approach by NSF but Provident has still made progress on the initiatives it has implemented and is starting to see the benefits that should deliver a “more sustainable business over the long term”.


“With significant upside to our target price, we upgrade our recommendation to Buy, believing the balance of risk has shifted towards the upside,” it said.

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