LON:PFG | PFG - Trading Statement - 5% Yield And 10%+ Growth Forecast

15th Jan '14 by jjis

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I have written this one up on my blog. After a power cut today don't have time to cut and paste it and all the links here so you can go there if the headline has whetted your appetite for a tasty yield.

However, if lending to poor people is not to your taste, then move along please nothing to see here.

jjis.weebly.com

Here is a copy of an update I wrote yesterday on my blog / website.

I introduced this one in a post on the 15th January 2014 when they were trading around the 1700p mark. They have reported their final results today which are slightly ahead of forecasts at the Turnover £1078.1+10% v £1074(F), adjusted eps 112p +11.6% v 111.2p(F) and dividend level 85p +10% v 84.4p(F).

The Vanquis Bank was the strongest feature with profits there rising by 59.5% as credit standards have remained tight and the business continues to generate strong customer growth (+22.2%) and margins through developing the under-served non-standard credit card market. Good progress is also being made in their repositioning of the home credit business as a leaner, better-quality, more modern, high-returns business whilst the Satsuma online instalment lending product has apparently made an encouraging start following its launch in November 2013.

As expected they invested £7.6m into starting up a credit card business in Poland and expect a similar run rate of losses in the coming half year. This continues their history of building business (such as Vanquis Bank) on the back of the cash flows from the Consumer Credit Division (CCD). Talking of which the profits on that side of the business were down by £20.4m or around 16.6% as customer numbers and receivables declined and impairments increased. However the repositioning of the home credit business as a leaner, better-quality, more modern, high returns business is progressing well. In particular, the development and roll-out of the smart phone and tablet apps that support the step-change in productivity and compliance across the agent and branch network is apparently fully on track and expected to be substantially completed in 2014. The credit quality of the receivables book is also improving through a combination of tighter credit standards and early benefits from the standardisation of collections and arrears processes. The first phase of the cost reduction programme implemented in July…

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jjis

24th Jul '14

Provident Financial (PFG) - announced some strong looking interim results which included a 10% increase in the dividend which is the sort of rate of increase I was hoping for when I wrote it up earlier in the year and after their final results. Today's interims in addition to the dividend increase saw profits up by 23% and adjusted earnings by 24.6%. This was driven by Vanquis Bank which delivered further strong growth through developing its presence in the under-served, non-standard credit card market with first-half UK profits up 36.1%. They continue to develop a Polish operation and incurred slightly increased start up losses of £4.6 million here in the first half versus £3.6 million last year. They are also flagged that the credit tools and infrastructure to support the development of Satsuma (their new on line instalment loan business) is on-track to be completed during the second half of the year.

The Consumer Credit Division (CCD) remained more subdued with profits up 2.5% as customer confidence remains at a low level and, as planned, the tighter credit standards introduced in September last year have significantly curtailed the recruitment of more marginal customers into the business. As a result, CCD customer numbers and period-end receivables showed year-on-year reductions of 24.9% and 17.9% respectively. However, the marked improvement in the quality of the receivables book and the implementation of standardised arrears and collections processes have combined to produce a significant reduction in credit losses with the annualised ratio of impairment to revenue improving from 38.7% at December 2013 to 35.2% at June 2014. This also supported an increase in the annualised risk-adjusted margin to 62.9% at June 2014, up from 58.9% at December 2013. Thus with these actions plus the on going modernisation and cost cutting they are continuing to reposition the CCD as a leaner, better quality business focused on returns rather than growth.

The shares are up today to nearly 2100 pence and up by nearly 25% from 1700 pence when I first wrote about them, but with strong mid teens growth forecast for this year they still seem worth holding onto on a 16x and 4.5%+ yield before any changes on the back of these numbers.

Website: Compound Income

PFG - Trading Statement - 5% Yield and 10%+ Growth Forecast

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