The rapid loss of value from shareholders is shocking. It is a remainder of the (not so recent) financial crisis when banks were on the firing line, as the biggest financial institutions went bust, acquired or lost over 90% of their market value.

There is some similarity with Provident, given it is a subprime lender. But, management is insisting this rapid deterioration is an internal issue, not an economic slowdown of the UK economy.

We will see.

Now, let’s assess the impact of their last three major updates and results.

Before we discuss the latest trading statement, let’s look at the June’s trading statement and their interim results.


June’s trading statement

Provident mentioned weaker collection period, due to recruiting 2,500 full-time staff. That is understandable, but it didn’t give specific details on their collection performance (very important).

Also, it didn’t care to mention the number of self-employed agents converting to this new arrangement. That’s important because recruiting 2,500 staff from scratch will disrupt Provident home credit division leading to a severe loss in sales. So, I’m sure that some have stayed on, but we don’t know how many talented people were lost.

They did give some financial detail, saying weaker collections contributed to a shortfall of £15m in profits. Also, it has promised that the collection period will normalised by July.

Pre-exceptional profits from their Consumer Credit Division has fallen to £60m from £115m.



Provident’s Interim Results

Here is a summary of the key data: -

Revenue is reported at £619.4m, up from £571.6m.

Operating Costs rose to £296.5m from £228.9m.

Total Costs rose to £529.4m from £406.2m.

Profit before tax fell to £90m from £165.4m.

Exceptional Items of £21.6m.

Net cash flow fell to £45.5m from £101.3m.


Details from individual division: -

Vanquis Bank manages profit before tax (PBT) of £100m, unchanged from last year.

CCD was the loser with PBT coming in at £6.3m from £43.5m.

Moneybarn saw profits improve to £16.9m from £13.6m.


Other important details to note are: -

The group impairment charge rose to £221.9m from £157.8m. This gives a default rate of 35.8% from 27.6%.

It mentioned the FCA was looking at credit card…

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