Provident Financial plc swings to a loss in the fiscal first half

on Aug 26, 2020
Updated: Feb 29, 2024
  • Provident Financial plc swings to £32.6 million of loss in the fiscal first half.
  • The sub-prime lender sets aside £240 million to cover for expected credit losses.
  • Provident's CCD customers declined from 531 thousand to 379 thousand.

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Provident Financial plc (LON: PFG) said on Wednesday that it concluded the fiscal first half (H1) in loss as it set aside £240 million to cover for expected credit losses due to the Coronavirus pandemic. In a bid to cushion the economic blow from COVID-19, Provident also decided in favour of suspending its dividend on Wednesday.

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For the consumer credit division (CCD), the British doorstep lender reported an increase in impairment coverage ratio to 71.6% as it warned that job losses will result in a sharp increase in bad loans. Provident named Margot James as a non-executive director in the last week of July.

Goodbody analysts’ comments on Provident’s H1 update

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According to Goodbody analysts, however:

“It could have been much worse. While impairments are very high, some of this will be seen as judicious prudence on the part of management – and should reduce the need for substantive charges in the coming quarters.”

Following the statement, the sub-prime lender jumped roughly 14% in the stock market on Wednesday. Including the price action, Provident is now trading at 229 pence per share. In comparison, the stock had sunk to 145 pence a share in mid-May when the impact of COVID-19 was at its peak.

As per Provident, the number of its CCD customers declined from 531 thousand last year to 379 thousand as of the end of the fiscal H1. The decline, the company added, was attributed to stricter credit conditions.

CEO Malcolm predicts an increase in the demand for loans

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CEO Malcolm Le May predicted an increase in the demand for loans in the upcoming months as COVID-19 continues to fuel unemployment. He said:

“Our market will grow due to the pandemic, but at present it appears the supply of credit into the market is decreasing, which cannot be a good outcome for customers, nor a public policy one for the UK.”

At £32.6 million, the Bradford-based lender’s pre-tax loss in the six months that concluded on 30th June was significantly worse than £80.4 million of profit in the same period last year. Provident is currently struggling to pull out of heavy fines incurred due to its selling practices in the past.

At the time of writing, the doorstep lender is valued at £588 million and has a price to earnings ratio of 7.02.


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