11th Sep 2007 07:00
Provident Financial PLC11 September 2007 Provident Financial plc Interim results for the half-year to 30 June 2007 H I G H L I G H T S Provident Financial plc ("Provident Financial") is the market-leading providerof home credit in the UK and Ireland, with a successful, developing credit cardbusiness. Following the recent demerger of the International business, itsongoing UK operations comprise UK home credit and Vanquis Bank. However, as thedemerger was completed after 30 June 2007, the results of International for thefirst half of 2007 are included as a continuing operation within the ProvidentFinancial group for the purposes of these statements. Key financial results H1 H1 2007 2006 Change £m £mOngoing UK operationsProfit before tax and exceptional items(1) 38.2 32.0 19.4% Continuing operations (comprising ongoing UK operationsand International)Profit before tax and exceptional items(1) 56.3 47.0 19.8%Earnings per share (pre-exceptional items) 15.38p 12.80p 20.2%Earnings per share (basic) 10.97p 12.80p (14.3%) Interim dividend per share (2) 25.40p (1) Exceptional items comprise demerger costs totalling £11.8m incurred in the first half of 2007 (2006nil). (2) after adjusting for the recent 1-for-2 consolidation of Provident Financial shares and taking intoaccount the 1.90p per share interim dividend declared today by International Personal Finance plc, theaggregate interim dividend per share represents an increase of 0.8% on the interim dividend of 14.48p pershare paid by Provident Financial in 2006. Highlights Group • Restructuring of the group complete following the sale of Provident Insurance for £170.5m in June, generating a post-tax profit on sale of £68.4m, and the demerger of the International business in July • Pre-tax profit from ongoing UK operations up by 19.4% to £38.2m reflecting the strong progress made at Vanquis Bank, and maintained profits at UK home credit UK home credit • Growth in customer numbers of 1% and average customer receivables of 6.5% supported by continuing success of marketing through direct mail and internet channels, despite tightened underwriting criteria • Impairment charge held at similar level to last year • Real Personal Finance brand launched Vanquis Bank • Strong improvement in performance at Vanquis Bank, with customer numbers up by 36.3% to 289,000 and revenue doubling compared with the first half of 2006 • Progress reinforced by successful re-pricing of the book at the end of 2006, tightened underwriting criteria and strengthened arrears process • Moved into monthly profit in June and on track to trade at around break-even for 2007 as a whole Peter Crook, Chief Executive of Provident Financial, commented: "Provident Financial has had a good first half, with Vanquis Bank in particularbenefiting from the management actions executed towards the end of 2006 to placeit on a sounder commercial footing. We remain confident that Vanquis Bank willtrade at around break-even for 2007 as a whole, in comparison to the full yearloss of £18.3m in 2006. UK home credit continues to perform well. The restoration of customer andrevenue growth over the last eighteen months, combined with the benefits oftight credit management and improvement to the arrears processes introducedduring 2006, have allowed further investment in new technology and marketingwhilst maintaining profits." John van Kuffeler, Chairman of Provident Financial commented: "During 2007, Provident Financial has seen some of the most significant changesin its history. The successful sale of Provident Insurance and the subsequentdemerger of the International business means that Provident Financial is now ona sound and focussed footing, well positioned to take advantage of changingconditions in the UK non-standard lending market and to develop a broader rangeof simple and affordable credit products. Provident Financial is totally unaffected by the crisis in the credit marketsand we are confident that our continuing UK operations will deliver good profitsgrowth for 2007 as a whole." Enquiries: Today ThereafterMediaDavid Stevenson, Provident Financial 020 7404 5959 01274 731111Kevin Byram, Brunswick 020 7404 5959 020 7404 5959 Investor RelationsStuart Caldwell, Provident Financial 020 7404 5959 01274 731111 Chairman's statement 2007 has seen some of the most significant changes in Provident Financial's longand successful history. The completion on 15 June 2007 of the sale of ProvidentInsurance for a gross consideration of £170.5m, and the subsequent demerger ofthe International business on 16 July 2007, leaves Provident Financial able tofocus on its objective of developing a broader portfolio of simple andaffordable credit products for the UK non-standard lending market. I am therefore very pleased to report that the ongoing UK operations ofProvident Financial, comprising UK home credit, Vanquis Bank and the run-off ofthe Yes Car Credit receivables, have all had a good first half. Profit beforetax and exceptional items from these operations increased by 19.4% to £38.2m. As the demerger was completed after 30 June 2007, the results of Internationalfor the first half of 2007 are included as a continuing operation within theProvident Financial group for the purposes of these statements. Profit beforetax and exceptional items for the group as a whole increased by 19.8% to £56.3m. The directors of both Provident Financial and International Personal Financehave stated their intention, in the absence of unforeseen circumstances, to payan aggregate level of dividends per share in 2007 that is at least equal to theamount of 36.50p per share paid in 2006. The long standing policy to payapproximately 40% as an interim dividend has been retained and ProvidentFinancial has therefore declared an interim dividend of 25.40p per share,equivalent to 12.70p after taking account of the recent 1-for-2 shareconsolidation. Similarly, International Personal Finance has declared an interimdividend of 1.90p per share. Market conditions Economic conditions for households on average or below average incomes in the UKremain challenging, with continued pressures being seen from rising food,domestic fuel and utility bills. However, the weekly visit from the home creditagent, our national network of branches and the outbound calling capacity of theVanquis Bank call centre ensure that we remain uniquely placed to react quicklyto changing circumstances and make appropriate adjustments to our underwritingcriteria and arrears management. There continues to be a general tightening of lending criteria by mainstreamcredit providers, and there is evidence that some lenders are withdrawing fromthe non-standard credit card market in order to protect their prime brands,rather than have them associated with higher APRs. These factors present anincreasing market opportunity for the group, both through its existing productsin UK home credit and Vanquis Bank, but also through the development of abroader range of credit products. It is important to note that the majority of our customers do not have mortgagesand have lower levels of other unsecured personal debt than is generally thecase in the mainstream marketplace. Consequently, the recent rises in UKinterest rates, increased availability of lower-cost Individual VoluntaryArrangements and bankruptcy solutions for unsecured debts, and the volatilityseen in the US sub-prime mortgage markets are not factors which have any impacton Provident Financial. Similarly, the group does not sell any payment protection insurance products,and is therefore not exposed to the outcome of the current CompetitionCommission inquiry into that area. Operations UK home credit H1 H1 2007 2006 Change £m £m % Customers numbers ('000) 1,486 1,472 1.0Credit issued 393.1 390.8 0.6Average customer receivables 630.0 591.7 6.5 Revenue 292.0 289.6 0.8Impairment (107.4) (106.4) (0.9)Revenue less impairment 184.6 183.2 0.8 Costs (120.4) (121.2) 0.7Interest (17.2) (15.0) (14.7) Profit before tax 47.0 47.0 - The medium-term prospects for UK home credit have improved in the last twelvemonths. Increased investment in marketing, particularly through newer channelssuch as the internet and direct mailing, together with favourable developmentsin the competitive environment, have continued to stimulate increased levels ofdemand for home credit. We have invested in enhanced credit management to maintain the quality of thereceivables book in the face of challenging market conditions, and to reduce thelevel of annual customer turnover over time. Over 50,000 applications forcredit were rejected in the first half of 2007 as a result of our enhancedpre-screening credit processes. Many of these would previously have beenaccepted. As a result, we have been able to hold impairment flat at 31.0% ofrevenue on an annualised basis. Notwithstanding this prudent underwriting approach, overall customer numbersgrew by 1% in the twelve months to June 2007, providing further evidence thatthe trend of decline seen from 2002 to 2005 has been reversed. Customerreceivables have grown at a faster rate, up 6.5% compared to the first half of2006. This is partly due to the impact of longer larger loans, which nowrepresent almost 17% of credit issued (2006 15%). Costs remain under tight control, with the cost of investment in new technologysuch as agent handheld devices being offset by the full-year benefits of theintegration of the Provident Personal Credit and Greenwood Personal Credit backoffices. Overall, profit before tax for the first half of 2007 at £47.0m was the same asfor the equivalent period in 2006. We are currently piloting an unsecured direct repayment personal loan product intwo locations under the brand name Real Personal Finance. The average loanadvance is approximately £3,000 repayable over 36 months. This businessrepresents a logical extension to our product range and, by basing it from ourexisting national branch network, is not expected to require a material level ofincremental investment. We expect to expand this pilot in the second half of2007 and will provide a more detailed update on the potential for this businessat the full year results presentation in March 2008. We were delighted to welcome Chris Gillespie as Managing Director, UK ConsumerCredit in June with responsibility for continuing to develop the UK home creditbusiness. He brings huge experience of consumer finance and specialist lendingmarkets in the UK. He joined the board of Provident Financial upon thedemerger. Vanquis Bank H1 H1 2007 2006 Change £m £m % Customers numbers ('000) 289 212 36.3Average customer receivables 105.0 67.2 56.3 Revenue 27.8 13.9 100.0Impairment (12.8) (8.1) (58.0)Revenue less impairment 15.0 5.8 158.6 Costs (16.6) (15.4) (7.8)Interest (2.6) (1.1) (136.4) Loss before tax (4.2) (10.7) 60.7 During the second half of 2006, a series of management actions were executed toplace Vanquis Bank on a sounder commercial footing for its future development,including re-pricing the existing portfolio. Underwriting criteria have alsobeen tightened progressively since 2005 and arrears management processes werestrengthened during 2006 in the light of market conditions. The strong progress shown by the results for the first half of 2007 demonstratesthe positive impact on the business of these management actions, with there-pricing of the existing book at the end of 2006 being implemented withoutmaterial levels of customer attrition or reductions in credit line utilisation.Credit quality has seen the benefit of the underwriting tightening and theongoing refinement of both initial lending decisions and subsequent credit lineincrease decisions. Customer recruitment from both the internet and directmailing continued to be strong, leading to a 36.3% increase in customer numbers. The combined effect of this growth and the re-pricing of the portfolio led toa doubling of revenue compared to the first half of 2006. Receivables grew at a faster rate than customer numbers, whilst, as expected,impairment as a percentage of revenue during the first six months fell sharplyto 46.0%, compared to 58.3% in 2006. This performance illustrates the benefitsof the "low and grow" strategy of granting customers relatively low initialcredit lines and then managing credit line increases without compromisingimpairment. Costs increased at a much lower rate than revenues as the businessbenefited from additional scale. The start-up losses in the first half of 2007 at £4.2m were substantially lowerthan both the £10.7m incurred in the first half of 2006 and the £7.6m incurredin the second half of 2006. Vanquis Bank moved into monthly profit in June andwe remain confident that it will trade at around break-even for the year as awhole. We recently set out medium-term targets for Vanquis Bank, indicating that weexpect it to be able to achieve a portfolio of approximately 500,000 customersand net receivables of £300m earning a post-tax return on equity of 30%. We are also very pleased that Michael Lenora has joined Vanquis Bank as ManagingDirector in June. With over 25 years' experience in the non-standard creditcard sector in both the USA and in Europe, he is very well qualified to manageVanquis during its next phase of development through break-even and intoprofitability. Yes Car Credit Net collections totalling £52m were received in the first half of 2007. Thiswas in line with expectations and outstanding receivables now stand at £60.8mcompared to £108.6m at the end of 2006. The business is expected to record asmall operating loss of approximately £3m in each of 2007 and 2008 as thecollection activities are wound down. Motor insurance The motor insurance division reported a pre-tax profit of £11.8m for the periodup to its disposal on 15 June 2007. In addition to this, a net post-tax profitof £68.4m was reported on disposal. International Performance throughout the first half of 2007 was good and marked another sixmonths of significant progress. Profit before tax increased by 20.7% to £18.1m,with the contribution to profit from the established Central European businessesrising to £31.9m compared with £24.9m for the six months to June 2006.Investment in start-up losses in developing the Mexican and Romanian markets wasincreased from £6.1m in the first half of 2006 to £8.8m in the first half of2007. Central Europe Profit before tax in the first half for Central Europe increased by £7.0m(28.1%), to £31.9m. Customer numbers increased by 1.2% since the year end to1,542,000 reversing the reduction in customer numbers in 2006 that accompaniedthe introduction of tighter credit controls. This led to an increase in creditissued of 8.3% compared with the first half of 2006. The key feature of the first half was the continuation of the improvement incredit quality and reduction in impairment as a result of the introduction ofimproved credit management techniques in 2006. The impairment charge reduced by£30.2m (46.9%) with annualised impairment as a percentage of revenue at June2007 of 19.9% compared with 26.8% at the end of 2006. Developing markets Mexico continued to show strong customer growth. The customer count stood at317,000, which represents growth of 65,000 customers or 25.8% since the start ofthe year. In Puebla, no new branches have been opened since April 2006 and improved creditquality is the key focus of management attention. Guadalajara continued toperform in line with expectations. Overall, impairment stabilised and was 46.3% of revenue at June 2007, a slightimprovement from the 47.3% reported at the end of 2006. Start-up losses forMexico during the first half were £6.9m, which compares with a loss of £5.0mlast year. Romania continued to perform well and in line with expectations. At June 2007 ithad 17,000 customers, an increase of 11,000 since the end of 2006, and reporteda loss of £1.9m, compared with £1.1m in 2006. Credit quality remained good, withimpairment running at 5.9% of revenue. Balance sheet Pro forma net assets for the ongoing UK group, adjusted for the demerger of IPF,as at 30 June 2007 were £286.1m, as set out below. PFplc IPF UK group £m £m £m Receivables 1,154.2 355.2 799.0Pension asset 68.6 3.5 65.1Borrowings (including fair value of derivatives) (844.5) (262.4) (582.1)Other assets 72.5 68.4 4.1Net assets 450.8 164.7 286.1 The level of pro forma gearing, calculated to exclude the pension scheme asset,as required under our funding facilities, stood at 2.6 times compared to therelevant borrowings covenant of 6.0 times. The reported level of capital adequacy for the combined group as at 30 June 2007was 32.8%, benefiting from capital generated by the sale of Provident Insuranceduring the period. This was comfortably in excess of the limit set by the FSA.The pro forma equivalent ratio after adjusting for the demerger of IPF was37.2%. As reported at the time of the demerger, in the light of its high dividendpayout ratio the company has retained surplus capital of some £80m to fundgrowth opportunities and provide a sensible degree of strategic flexibility. Timing of dividend payments Historically, under UK GAAP reporting, the quantum and timing of interim andfinal dividends paid by the group traditionally followed the pattern of theunderlying earnings of the business. However, the transition to IFRS in 2005 hasdistorted that position. The payment in May of the larger final dividend, whichhas historically represented approximately 60% of the previous year's fulldividend, and the payment of the interim dividend in October results in atemporary reduction in net assets during those months. Given the requirements ofthe FSA to maintain a minimum level of capital adequacy at all times, it isproposed to amend the timing of the dividend payment dates to better reflect theseasonality of the group's earnings as recognised under IFRS. The interimdividend of 25.40p per share will therefore be paid on 28 November 2007, withthe final dividend now expected to be paid in June 2008. Group outlook The recent strengthening of management and the improved medium-term prospectsfor both UK home credit and Vanquis Bank have placed the group in a strongposition from which to focus upon its strategy to develop a broader range ofcredit products for the non-standard UK lending market. We are confident that our continuing UK operations will deliver good profitsgrowth for 2007 as a whole. John van Kuffeler Chairman 11 September 2007 Consolidated interim income statement Notes Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mContinuing operations Revenue 2 521.4 517.6 1,019.9 Finance income 3.8 3.4 7.2Total income 525.2 521.0 1,027.1Finance costs (36.4) (33.6) (69.8)Operating costs (271.3) (298.9) (517.3)Administrative expenses (173.0) (141.5) (300.8)Total costs (480.7) (474.0) (887.9) Profit before taxation 2 44.5 47.0 139.2 Profit before tax and exceptional costs 2 56.3 47.0 150.3Exceptional costs - demerger costs 2 (11.8) - (11.1)Profit before taxation 2 44.5 47.0 139.2Tax expense - UK (10.5) (10.0) (27.3) - Overseas (5.9) (4.4) (17.4)Total tax expense 3 (16.4) (14.4) (44.7)Profit after taxation for the period fromcontinuing operations 28.1 32.6 94.5 Discontinued operations Profit after taxation for the period fromdiscontinued operations 4 76.6 13.9 30.4Profit for the year attributable to equityshareholders 10 104.7 46.5 124.9 Notes Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006Earnings per share from continuing operations Basic 5 10.97p 12.80p 37.08pDiluted 5 10.88p 12.75p 36.94p Earnings per share attributable to equityshareholdersBasic 5 40.87p 18.26p 49.00pDiluted 5 40.55p 18.19p 48.83p Dividend per shareProposed dividend* 6 25.40p 14.48p 22.02p Paid in the period 6 22.02p 21.37p 35.85p * The proposed dividend per share for the six months ended 30 June 2007 is basedon the number of shares in issue following the one for two share consolidationwhich took place on 16 July 2007 in conjunction with the demerger of theinternational business. The total cost of dividends paid in the period was £56.4m (30 June 2006 £54.4m,31 December 2006 £91.4m). Consolidated interim statement of recognised income and expense Notes Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m Profit for the year attributable to equityshareholders 104.7 46.5 124.9Exchange losses on foreign currency translations - (4.8) (0.2)Net fair value gains/(losses) - cash flow hedges 4.7 (0.7) 0.2Actuarial gains/(losses) on retirement benefit 8 51.4 7.7 (0.3)assetTax charge on items taken directly to equity (16.8) (2.0) (0.1)Net income/(expense) recognised directly in equity 10 39.3 0.2 (0.4) Total recognised income for the period 10 144.0 46.7 124.5 Consolidated interim balance sheet Notes Unaudited Unaudited Audited As at As at As at 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mASSETS Non-current assetsGoodwill 3.1 3.1 3.1Other intangible assets 26.4 28.0 30.0Property, plant and equipment 57.2 47.2 58.7Retirement benefit asset 8 68.6 6.7 8.9Deferred tax assets 11.2 31.9 30.8 166.5 116.9 131.5Current assetsFinancial assets:- Amounts receivable from customers: - due within one year 7 1,061.2 967.1 1,103.2 - due in more than one year 7 93.0 152.2 129.5- Total amounts receivable from customers 7 1,154.2 1,119.3 1,232.7- Derivative financial instruments 2.9 5.3 2.7- Cash and cash equivalents 69.9 438.3 438.8Trade and other receivables 30.1 36.6 30.6Insurance assets - 63.3 56.2Current tax assets - - 8.1 1,257.1 1,662.8 1,769.1Total assets 1,423.6 1,779.7 1,900.6 LIABILITIES Current liabilities Financial liabilities:- Bank and other borrowings (165.8) (28.3) (87.4)- Derivative financial instruments (42.2) (39.4) (44.1)Trade and other payables (92.8) (89.3) (114.1)Insurance accruals and deferred income - (347.8) (328.3)Current tax liabilities (31.3) (15.3) (37.3) Provisions (1.3) (1.3) (1.8) (333.4) (521.4) (613.0) Non-current liabilitiesFinancial liabilities:- Bank and other borrowings (639.4) (948.3) (933.6) (639.4) (948.3) (933.6) Total liabilities (972.8) (1,469.7) (1,546.6) NET ASSETS 2 450.8 310.0 354.0 SHAREHOLDERS' EQUITY Called-up share capital 9 26.7 26.5 26.5Share premium account 10 117.6 108.1 110.8Other reserves 10 10.4 0.1 5.7Retained earnings 10 296.1 175.3 211.0TOTAL EQUITY 10 450.8 310.0 354.0 Consolidated interim cash flow statement Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mCash flows from operating activities Cash generated from operations 147.6 64.5 109.7Finance costs paid (45.4) (40.4) (67.0)Finance income received 10.9 13.0 25.9Tax paid (17.2) (6.1) (24.9)Net cash generated from operating activities 95.9 31.0 43.7 Cash flows from investing activitiesPurchases of property, plant and equipment (11.6) (13.2) (33.3)Proceeds from sale of property, plant and equipment 2.8 2.0 4.6Purchases of intangible assets (4.1) (2.0) (6.0)Net proceeds from disposal of insurance business (note4) 152.4 - -Net cash generated from/(used in) investing activities 139.5 (13.2) (34.7) Cash flows from financing activities Proceeds from borrowings 67.3 174.2 225.7Repayment of borrowings (281.9) (155.1) (161.7)Dividends paid to company shareholders (56.4) (54.4) (91.4) Proceeds from issue of share capital 7.0 0.4 3.1Proceeds from the sale of treasury shares 0.4 0.2 2.3Net cash used in financing activities (263.6) (34.7) (22.0) Net decrease in cash and bank overdrafts (28.2) (16.9) (13.0)Cash and bank overdrafts at beginning of period 431.6 444.4 444.4Disposal of insurance division (343.1) - -Exchange (losses)/gains on cash and bank overdrafts (0.1) (0.6) 0.2Cash and bank overdrafts at end of period 60.2 426.9 431.6 Cash and bank overdrafts at end of period comprise: Cash at bank and in hand 47.9 51.4 61.9Short-term deposits 22.0 386.9 376.9Cash and cash equivalents 69.9 438.3 438.8Overdrafts (held in bank and other borrowings) (9.7) (11.4) (7.2) 60.2 426.9 431.6 All short-term deposits have a maturity of three months or less on acquisition.The cash and short-term deposits held by those businesses that are regulated arerequired to be strictly segregated from those of the rest of the group and arenot available to repay group borrowings. As at 30 June 2007 the cash andshort-term deposits held by the group's regulated businesses amounted to £22.0m(30 June 2006 £396.4m, 31 December 2006 £387.2m). Cash generated from operations Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m Profit for the period 104.7 46.5 124.9Adjusted for: Tax expense 20.0 19.5 55.3 Finance costs 36.4 33.6 69.8 Finance income (11.2) (12.3) (25.3) Share-based payment charge/(credit) 1.2 (0.3) (1.9)Pension charge/(credit) 0.6 0.4 (5.5)Depreciation of property, plant and equipment 7.5 6.2 12.6 Amortisation of intangible assets 11.7 11.5 24.4Loss/(profit) on sale of property, plant and equipment 0.2 (0.2) (0.1) Profit on disposal of insurance business (note 4) (68.4) -- -Changes in operating assets and liabilities: Inventories - 7.4 7.4 Amounts receivable from customers 78.4 138.2 36.5 Trade and other receivables (2.2) (8.2) 1.1Insurance assets (24.9) (7.9) (11.7) Trade and other payables 3.8 (29.9) (14.0) Insurance accruals and deferred income (5.1) (11.4) (30.9) Retirement benefit asset (2.6) (105.0) (109.3) Derivative financial instruments (2.0) (0.2) (0.7)Provisions (0.5) (23.4) (22.9)Cash generated from operations 147.6 64.5 109.7 Notes to the interim financial information 1. Basis of preparation The financial information comprises the consolidated balance sheets for theperiods ended 30 June 2007, 30 June 2006 and 31 December 2006 and the incomestatements and cash flow statements for the periods then ended of ProvidentFinancial plc (hereinafter referred to as "the financial information"). Thefinancial information has been prepared in accordance with the Listing Rules ofthe Financial Services Authority. In preparing this financial information management has used the accountingpolicies set out in the group's 2006 financial statements and has chosen not toadopt IAS 34 'Interim Financial Reporting'. IFRS 7 'Financial Instruments:Disclosures' and IAS 1 'Amendments to Capital Disclosures' are effective forannual periods beginning on or after 1 January 2007. These standards aredisclosure standards and do not impact on the recognition or measurement ofitems accounted for under the accounting policies used in the group's 2006financial statements. As the financial information is not required to includeall disclosures required by International Financial Reporting Standards, thedisclosures required by IFRS 7 and the amendment to IAS 1 have not been made.Full disclosures in accordance with IFRS 7 and the amendment to IAS 1 will bemade in the group's 2007 financial statements. This financial information does not constitute a set of statutory financialstatements under section 240 of the UK Companies Act 1985 and is unaudited. Thecomparative figures for the financial year ended 31 December 2006 are an extractfrom the group's 2006 financial statements which have been reported on by thecompany's auditors and delivered to the Registrar of Companies. The report ofthe auditors on these financial statements was unqualified and did not containstatements under section 237(2) or (3) of the UK Companies Act 1985. This document (the interim report 2007) will be published on the company'swebsite in addition to the normal paper version. The maintenance and integrityof the Provident Financial plc website is the responsibility of the directorsand the work carried out by the auditors does not involve consideration of thesematters. Legislation in the UK governing the preparation and dissemination ofaccounts may differ from legislation in other jurisdictions. 2. Segment information Primary reporting format - business segments Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mRevenue - continuing operationsUK home credit 292.0 289.6 576.7Vanquis Bank 27.8 13.9 34.2Yes Car Credit 10.0 26.9 43.7Total UK businesses 329.8 330.4 654.6International 191.6 187.2 365.3 Total group 521.4 517.6 1,019.9 Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mProfit before taxation - continuing operationsUK home credit+ 47.0 47.0 127.5Vanquis Bank (4.2) (10.7) (18.3)Yes Car Credit (1.2) (0.5) (1.5) 41.6 35.8 107.7 Central - Costs (4.5) (4.3) (6.0) - Interest receivable 1.1 0.5 2.4 Total central+ (3.4) (3.8) (3.6) Total UK businesses 38.2 32.0 104.1International 18.1 15.0 46.2 Total before exceptional costs 56.3 47.0 150.3 Exceptional costs - demerger costs (11.8) - (11.1) Total group 44.5 47.0 139.2 + In the group's 2006 financial statements, the allocation of the group'sinterest charge to UK home credit changed to reflect revised borrowings based onan average ratio of borrowings to UK home credit receivables of 80%. Theresults for the six months to 30 June 2006 have been restated on a comparablebasis resulting in a reduction in UK home credit profit for the six months to 30June 2006 of £4.7m and a reduction in the interest cost held centrally of £4.7m. The change has had no impact on reported group profits. All of the above activities relate to continuing operations as defined in IFRS 5'Non-current Assets Held for Sale and Discontinued Operations'. Consistent withthe treatment in the 2006 financial statements, the Yes Car Credit operation hasbeen classified as part of continuing operations on the basis that revenue andimpairment will continue to be generated from the loan book until it has beenfully collected out. On 16 July 2007, the group completed the demerger of its international businesswhich was approved by the company's shareholders at the Extraordinary GeneralMeeting of the company on 13 July 2007. As at 30 June 2007, the demerger wasstill subject to shareholder approval and therefore the international businessdid not meet the criteria within IFRS 5 of a discontinued operation.Accordingly, the results of the international business have been included withincontinuing operations in the interim financial information. In addition, as thedemerger was effected by a dividend in specie and there was no issue of newshare capital or any sales proceeds involved, the international business alsodid not meet the criteria of an asset held for resale. Accordingly, the assetsand liabilities of the international business have not been separately presentedfrom the rest of the group. For the group's 2007 full year results, theinternational business will meet the IFRS 5 criteria of a discontinued operationand will therefore be presented as a discontinued operation in the incomestatement. Demerger costs comprise costs incurred in preparing for the demerger of theinternational business. In the six months to 30 June 2007, the costs comprise£7.1m of professional fees (30 June 2006 £nil, 31 December 2006 £6.4m) and £4.7mof other separation costs (30 June 2006 £nil, 31 December 2006 £4.7m). All ofthe demerger costs have been classified as administrative expenses within theconsolidated income statement. £6.7m of the demerger costs relate to centralactivities (30 June 2006 £nil, 31 December 2006 £6.9m), £1.8m relate to UK homecredit (30 June 2006 £nil, 31 December 2006 £nil) with the remaining £3.3mrelating to International (30 June 2006 £nil, 31 December 2006 £4.2m). Unaudited Unaudited Audited As at As at As at 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mNet assets/(liabilities)UK home credit# 201.7 197.0 176.0Vanquis Bank 34.3 28.0 32.0Yes Car Credit (39.6) (36.0) (37.4)Central# 89.7 (10.1) 19.9 Total UK businesses 286.1 178.9 190.5International# 164.7 56.8 82.2 Total continuing operations 450.8 235.7 272.7 Discontinued operation - Insurance - 74.3 81.3 Total group 450.8 310.0 354.0 # During 2007, the allocation of group net assets has been amended to (i)reallocate certain centrally held tax provisions to the international businessin line with the arrangements in place on demerger and (ii) adjust the statutorynet assets of the UK home credit business to reflect a borrowings to receivablesratio of 80% consistent with the treatment adopted for charging interest to theincome statement. Prior year comparatives have been restated on a comparablebasis which has resulted in International net assets as at 30 June 2006 and 31December 2006 reducing by £9.3m and £7.0m respectively, UK home credit netassets as at 30 June 2006 and 31 December 2006 reducing by £94.0m and £180.3mrespectively and central activities net assets as at 30 June 2006 and 31December 2006 increasing by £103.3m and £187.3m respectively. Secondary reporting format - geographical segments Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mRevenue - continuing operations UK and Republic of Ireland 329.8 330.4 654.6Central Europe 173.1 175.8 338.6Mexico 17.1 11.4 26.4Romania 1.4 - 0.3 Total group 521.4 517.6 1,019.9 Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m Profit before taxation - continuing operations^ UK and Republic of Ireland 33.2 28.2 96.7Central Europe 31.9 24.9 65.7Mexico (6.9) (5.0) (9.7)Romania (1.9) (1.1) (2.4) 56.3 47.0 150.3UK and Republic of Ireland: Exceptional costs - demerger costs (11.8) - (11.1) Total group 44.5 47.0 139.2 ^ In the group's 2006 financial statements, the allocation of International UKdivisional overheads changed to more accurately reflect the costs attributableto Central Europe, Mexico and Romania. The results for the six months to 30June 2006 have been restated on a comparable basis resulting in a reduction inthe profit in Central Europe of £1.8m, an increase in the loss in Mexico of£0.3m and a reduction of costs in the UK and Republic of Ireland of £2.1m. Thechange has had no impact on reported group profits. 3. Tax expense The total tax charge for the period comprises: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mContinuing operations:- UK 10.5 10.0 27.3- Overseas 5.9 4.4 17.4Total continuing operations 16.4 14.4 44.7Discontinued operations:- UK 4.5 5.1 10.6Total tax expense 20.9 19.5 55.3 The tax expense for the period for continuing operations has been calculated byapplying the directors' best estimate of the effective tax rate for the year,which is 30.0% (30 June 2006 30.6%), to the profit before demerger costs for theperiod. Included within the UK tax expense relating to continuing operations is a taxcredit in respect of demerger costs of £0.5m (30 June 2006 £nil, 31 December2006 £1.1m). The tax expense in relation to discontinued operations includes atax charge of £0.9m in respect of the profit on disposal of the insurancebusiness (see note 4). 4. Discontinued operations On 15 June 2007, the group completed the disposal of the companies forming theinsurance business to Car Care Plan (Holdings) Limited, a subsidiary of GMACInsurance Holdings Inc. Accordingly, this business has been presented as adiscontinued operation in accordance with IFRS 5. There is no impact on theprior period financial statements other than a change in the presentation of theinsurance business results to discontinued operations. The profit attributable to discontinued operations can be analysed as follows: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mProfit after taxation for the period from tradingactivities 8.2 13.9 30.4Profit after taxation on disposal of the insurancebusiness 68.4 - -Profit after taxation for the period fromdiscontinued operations 76.6 13.9 30.4 The profit after taxation for the period from trading activities can be analysedas follows: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007* 30 June 2006 31 Dec 2006 £m £m £mRevenue 61.8 78.0 160.9 Finance income 7.4 8.9 18.1Total income 69.2 86.9 179.0Operating costs (49.0) (56.8) (120.1)Administrative expenses (8.4) (11.1) (17.9)Total costs (57.4) (67.9) (138.0) Profit before taxation for the period fromtrading activities 11.8 19.0 41.0Tax expense - UK (3.6) (5.1) (10.6)Profit after taxation for the period fromtrading activities 8.2 13.9 30.4 * Represents five and a half months trading under the group's ownership. Included within operating costs is a credit of £13.9m (30 June 2006 £16.2m, 31December 2006 £42.7m) in respect of the release of provisions for prior yearclaims. All of the above activities relate to activities in the UK and Republic ofIreland. The tax rate applied to the trading activities of discontinued operations in thesix months ended 30 June 2007 is 30%, consistent with the overall group taxrate. The tax charged in respect of 2006 represents the actual tax charges ofthe insurance business. The profit after taxation on disposal of the insurance business can be analysedas follows: £mSales proceeds 170.5 Termination of interest rate swaps (6.9)S75 pension contribution (note 8) (3.4)Disposal costs (7.8)Net cash consideration 152.4Tax recoverable from purchaser 1.7Total net consideration 154.1 Pension curtailment credit (note 8) 2.9Share-based payment charge (note 10) (0.6)Increase in pension asset following S75 pension contribution 3.4Net assets on disposal (90.5)Profit before taxation on disposal of the insurance business 69.3 Tax charge (0.9) Profit after taxation on disposal of the insurance business 68.4 The interest rate swaps were held to hedge the interest rate risk on theinvestment funds held by the insurance business. These swaps were terminated ondisposal. The S75 pension contribution represents a reduction in consideration for thepayment of £3.4m of pension contributions into the group's defined benefitpension schemes by the insurance business following sale. The group's retirementbenefit asset has increased by a corresponding amount (see note 8). Disposal costs comprise professional fees and the cost of bonuses for the seniormanagement team of the insurance business. The tax recoverable from the purchaser of £1.7m represents an adjustment to theconsideration to reflect tax relief obtained by the purchaser as a result of thetransaction. The pension curtailment credit of £2.9m arises as a result of the reduction inthe group's projected defined benefit obligation following the insurancebusiness employees ceasing to be active members of the group's pension schemes. A deferred tax liability of £0.9m has been recognised on the pension curtailmentcredit. The share-based payment charge represents the crystallisation of the shareoptions of the insurance business management team as a result of the disposal. No tax liability arises on the disposal of the insurance business due to theavailability of the Substantial Shareholdings Exemption. The cashflows from discontinued operations were as follows: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m Profit after taxation for the period 8.2 13.9 30.4Adjusted for: Tax expense 3.6 5.1 10.6 Finance income (7.4) (8.9) (18.1) Share-based payment charge - - 0.1Pension charge/(credit) 0.1 0.2 (0.7)Depreciation of property, plant and equipment 0.3 0.2 0.5 Amortisation of intangible assets 8.6 10.6 22.2Changes in operating assets and liabilities: Trade and other receivables (0.2) (0.1) (1.2)Insurance assets (24.9) (7.9) (11.7) Trade and other payables 0.8 (2.3) (1.3) Insurance accruals and deferred income (5.1) (11.4) (30.9) Retirement benefit asset (0.4) (11.4) (11.7)Cash used in operations (16.4) (12.0) (11.8)Finance income received 7.1 9.6 18.7Tax paid (2.1) (3.2) (9.0)Net cash used in operating activities (11.4) (5.6) (2.1)Net cash used in investing activities (0.6) (0.1) (0.6) Net cash used in financing activities - (7.0) (14.4)Net decrease in cash and bank overdrafts (12.0) (12.7) (17.1) The cashflows above do not include the cashflows associated with the disposal ofthe insurance business. 5. Earnings per share Basic earnings per share (EPS) is calculated by dividing the earningsattributable to ordinary shareholders by the weighted average number of ordinaryshares outstanding during the year, excluding those shares held by the ProvidentFinancial Qualifying Share Ownership Trust and in respect of the PerformanceShare Plan. For diluted EPS, the weighted average number of ordinary shares inissue is adjusted to assume conversion of all dilutive potential ordinaryshares. The directors have elected to show an adjusted EPS prior to demergercosts. This is presented to show the EPS generated by the group's continuingoperations. The weighted average number of shares in issue during the period can bereconciled to the number used in the basic and diluted EPS calculations asfollows: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 Number Number Number m m m Used in basic EPS calculation 256.2 254.7 254.9 Dilutive effect of options 2.0 0.9 0.9 Used in diluted EPS calculation 258.2 255.6 255.8 A reconciliation of the profit after taxation used in the EPS calculations is asfollows: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mProfit after taxation attributable to equity shareholders 104.7 46.5 124.9Profit after taxation from discontinued operations (76.6) (13.9) (30.4)Profit after taxation from continuing operations 28.1 32.6 94.5Demerger costs, net of tax credit 11.3 - 10.0 Adjusted profit after taxation 39.4 32.6 104.5 Reconciliations of basic and diluted EPS are as follows: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 Pence Pence Pence Basic EPS 40.87 18.26 49.00Basic EPS from discontinued operations (29.90) (5.46) (11.92)Basic EPS from continuing operations 10.97 12.80 37.08Demerger costs, net of tax credit 4.41 - 3.92 Adjusted EPS from continuing operations 15.38 12.80 41.00 Diluted EPS 40.55 18.19 48.83Diluted EPS from discontinued operations (29.67) (5.44) (11.89)Diluted EPS from continuing operations 10.88 12.75 36.94Demerger costs, net of tax credit 4.38 - 3.91 Adjusted diluted EPS from continuing operations 15.26 12.75 40.85 6. Dividends paid and proposed Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m 2005 final - 21.37p - 54.4 54.42006 interim - 14.48p - - 37.0 2006 final - 22.02p 56.4 - - Dividends paid 56.4 54.4 91.4 An interim dividend in respect of 2007 of 25.40p per share*, amounting to atotal dividend of £33.1m, has been declared by the directors. The interimfinancial information does not reflect this dividend payable as it will be paidafter the balance sheet date. * The proposed dividend per share for the six months ended 30 June 2007 is basedon the number of shares in issue following the one for two share consolidationwhich took place on 16 July 2007 in conjunction with the demerger of theinternational business. 7. Amounts receivable from customers Unaudited Unaudited Audited As at As at As at 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m UK home credit 623.9 587.7 695.6Vanquis Bank 114.3 75.9 97.5 Yes Car Credit 60.8 161.2 108.6 Total UK businesses 799.0 824.8 901.7 International 355.2 294.5 331.0Total group 1,154.2 1,119.3 1,232.7 Analysed as: - due within one year 1,061.2 967.1 1,103.2 - due in more than one year 93.0 152.2 129.5 Total group 1,154.2 1,119.3 1,232.7 The impairment charge in respect of amounts receivable from customers reflectedwithin operating costs can be analysed as follows: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m UK home credit 107.4 106.4 178.8Vanquis Bank 12.8 8.1 19.4Yes Car Credit 5.5 14.2 22.6 Total UK businesses 125.7 128.7 220.8 International 41.8 69.5 103.1Total group 167.5 198.2 323.9 8. Retirement benefit asset The group operates a number of UK based pension schemes. The two major definedbenefit schemes are the Provident Financial Senior Pension Scheme ('the seniorpension scheme') and the Provident Financial Staff Pension Scheme ('the staffpension scheme'). The schemes cover 76% of employees with company providedpension arrangements and are of the funded, defined benefit type providingretirement benefits based on final salary. The assets of the schemes are heldin separate, trustee administered funds. Following a full group review ofpension scheme arrangements during 2005, from 1 April 2006 members were providedwith a choice of paying higher member contributions to continue accruingbenefits based on final salary or paying a lower member contribution andaccruing benefits based on a percentage of salary which would be revalued eachyear. The most recent actuarial valuations of plan assets and the present value of thedefined benefit obligation were carried out at 1 June 2006 by a qualifiedindependent actuary. The valuation used for the purposes of IAS 19 has beenbased on the results of these valuations which have been updated by the actuaryto take account of the requirements of IAS 19 in order to assess the liabilitiesof the scheme at 30 June 2007. Scheme assets are stated at fair value at 30June 2007. The major assumptions used by the actuary were: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 % % % Price inflation 3.40 3.00 3.10Rate of increase in pensionable salaries 4.90 4.58 4.68Rate of increase to pensions in payment 3.30 3.00 3.10Discount rate 5.70 5.10 5.10Long term rate of return - Equities 7.85 7.85 7.85 - Bonds 5.70 5.10 5.10 - Index-linked gilts 5.10 4.50 4.50 - Other 6.00 5.25 5.25 - Overall 6.97 6.92 6.62 The mortality assumptions used in the valuation of the defined benefit pensionschemes are based on the mortality experience of insured pension schemes andallow for future improvements in life expectancy. For members of the staffpension scheme it is assumed that members who retire in the future at age 65will live on average for a further 21 years if they are male and for a further24 years if they are female. For members of the senior pension scheme it isassumed that members who retire in the future at age 60 will live on average fora further 29 years if they are male and for a further 32 years if they arefemale. If assumed life expectancies had been one year greater for bothschemes, the charge to the consolidated income statement would have increased byapproximately £0.2m in the six months to 30 June 2007 and the defined benefitobligation would have increased by approximately £18.0m. The amounts recognised in the balance sheet are determined as follows: Unaudited Unaudited Audited As at As at As at 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m Equities 272.5 233.3 254.5Bonds 22.5 22.5 22.1Index-linked gilts 20.0 19.7 21.8Other 176.5 165.9 169.5Total fair value of scheme assets 491.5 441.4 467.9Present value of funded defined benefit obligations (422.9) (434.7) (459.0)Net asset recognised in the balance sheet 68.6 6.7 8.9 The amounts recognised in the income statement are as follows: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m Current service cost (3.5) (3.9) (7.6)Interest cost (11.5) (10.5) (21.0)Expected return on scheme assets 14.4 14.0 27.5Net expense before past service and curtailment credits (0.6) (0.4) (1.1)Past service credit - - 2.2Curtailment credit 2.9 - 4.4Net credit/(expense) recognised in the income statement 2.3 (0.4) 5.5 Following the disposal of the insurance business on 15 June 2007, the relevantemployees of the insurance business ceased to be active members of the group'spension schemes. Accordingly their benefits are no longer linked to futuresalary increases and therefore the projected defined benefit obligation relatingto them is less than that anticipated prior to the sale. The reduction in theprojected defined benefit obligation of £2.9m has been recognised as acurtailment credit in the six months ended 30 June 2007. This amount has beenincluded within the profit on disposal of the insurance business (see note 4).The remaining net credit/(expense) has been included within administrativeexpenses. During 2006, changes to the rules of the pension schemes and to the tax applyingto pension scheme benefits meant that in most cases members of the pensionschemes would be able to take a larger proportion of their benefits in the formof a cash lump sum at retirement. Due to the terms under which members' pensionsare converted into cash lump sums, in the year ended 31 December 2006 thesechanges led to a £2.2m past service saving relating to deferred members of thepension schemes and a £4.4m curtailment saving relating to active members of thepension schemes. Movements in the fair value of scheme assets were as follows: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m Fair value of scheme assets at start of period 467.9 331.1 331.1Expected return on scheme assets 14.4 14.0 27.5Actuarial gains/(losses) on scheme assets 6.5 (5.1) 7.1S75 contribution on disposal of insurance business 3.4 - -Contributions by the group 2.6 105.0 109.3Contributions paid by scheme participants 1.6 1.8 3.5Net benefits paid out (4.9) (5.4) (10.6)Fair value of scheme assets at end of period 491.5 441.4 467.9 The S75 contribution on disposal of the insurance business of £3.4m is thestatutory pension debt arising as a result of the insurance business ceasing toparticipate in the group's pension schemes following sale. It was calculated inaccordance with Section 75 of the Pensions Act 1995. In January 2006, the group made an additional special contribution of £102.2m inorder to ensure that the defined benefit pension schemes were fully funded basedon the June 2005 deficit position. The increase in the group's interest payableafter funding the deficit has been broadly offset by a reduction in the IAS 19pension charge to the consolidated income statement. Movements in the present value of the defined benefit obligation were asfollows: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m Defined benefit obligation at start of period (459.0) (436.7) (436.7)Current service cost (3.5) (3.9) (7.6)Interest cost (11.5) (10.5) (21.0)Past service credit - - 2.2Curtailment credit 2.9 - 4.4Contributions paid by scheme participants (1.6) (1.8) (3.5)Actuarial gains/(losses) on scheme liabilities 44.9 12.8 (7.4)Net benefits paid out 4.9 5.4 10.6Defined benefit obligation at end of period (422.9) (434.7) (459.0) An analysis of amounts recognised in the Statement of Recognised Income andExpense (SORIE) is as follows: Unaudited Unaudited Audited Half-year to Half-year to Full year to 30 June 2007 30 June 2006 31 Dec 2006 £m £m £m Actuarial gains/(losses) on scheme assets 6.5 (5.1) 7.1Actuarial gains/(losses) on scheme liabilities 44.9 12.8 (7.4)Total gains/(losses) recognised in the SORIE in the period 51.4 7.7 (0.3) 9. Called-up share capital As at 30 June 2007, the group had authorised share capital of £40.0m ordinaryshares of 10 4/11 pence each (30 June 2006 £40.0m, 31 December 2006 £40.0m) ofwhich £26.7m was issued and fully paid up (30 June 2006 £26.5m, 31 December 2006£26.5m). The movement in the number of shares in issue during the six months ended 30June 2007 was as follows: Number At 1 January 2007 256.1Shares issued pursuant to the exercise of options 1.1At 30 June 2007 257.2 Following shareholder approval of the demerger of the international business on13 July 2007, the group's ordinary share capital has been reduced on the basisof one share for every two shares. 10. Consolidated interim statement of changes in shareholders' equity Unaudited Attributable to equity shareholders of the company Called-up Share share premium Other Retained capital account reserves earnings Total £m £m £m £m £mBalance at 1 January 2006 26.5 107.7 5.5 177.7 317.4Exchange losses on foreign currencytranslations - - (4.8) - (4.8)Net fair value losses - cash flow hedges - - (0.7) - (0.7) Actuarial gains on retirement benefit asset - - - 7.7 7.7Tax credit/(charge) on items taken directlyto equity - - 0.2 (2.2) (2.0)Net (expense)/income recognised directly inequity - - (5.3) 5.5 0.2Profit for the period - - - 46.5 46.5 Total recognised (expense)/income for theperiod - - (5.3) 52.0 46.7Increase in share premium - 0.4 - - 0.4 Movement in treasury shares - - 0.2 - 0.2 Share-based payment credit - - (0.3) - (0.3) Dividends - - - (54.4) (54.4) Balance at 30 June 2006 26.5 108.1 0.1 175.3 310.0 Balance at 1 July 2006 26.5 108.1 0.1 175.3 310.0 Exchange gains on foreign currency translations - - 4.6 - 4.6Net fair value gains - cash flow hedges - - 0.9 - 0.9 Actuarial losses on retirement benefit asset - - - (8.0) (8.0)Tax (charge)/credit on items taken directlyto equity - - (0.4) 2.3 1.9Net income/(expense) recognised directly inequity - - 5.1 (5.7) (0.6)Profit for the period - - - 78.4 78.4 Total recognised income for the period - - 5.1 72.7 77.8Increase in share premium - 2.7 - - 2.7 Movement in treasury shares - - 2.1 - 2.1 Share-based payment credit - - (1.6) - (1.6) Dividends - - - (37.0) (37.0) Balance at 31 December 2006 26.5 110.8 5.7 211.0 354.0 Balance at 1 January 2007 26.5 110.8 5.7 211.0 354.0Net fair value gains - cash flow hedges - - 4.7 - 4.7 Actuarial gains on retirement benefit asset - - - 51.4 51.4Tax charge on items taken directly to equity - - (1.4) (15.4) (16.8)Net income recognised directly in equity - - 3.3 36.0 39.3 Profit for the period - - - 104.7 104.7 Total recognised income for the period - - 3.3 140.7 144.0 Increase in share capital 0.2 - - - 0.2 Increase in share premium - 6.8 - - 6.8 Movement in treasury shares - - 0.4 - 0.4 Share-based payment charge* - - 1.8 - 1.8 Transfer of share-based payment reserve - - (0.8) 0.8 - Dividends - - - (56.4) (56.4) Balance at 30 June 2007 26.7 117.6 10.4 296.1 450.8 * £0.6m of the share-based payment charge arises as a result of thecrystallisation of the share options of the insurance business management teamfollowing the disposal of that business on 15 June 2007. This amount has beenincluded within the profit on disposal of the insurance business (see note 4). Independent review report to Provident Financial plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprises the consolidated interimbalance sheet as at 30 June 2007 and the related consolidated interim statementsof income, recognised income and expense and cash flows for the six months thenended and related notes. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The Listing Rulesof the Financial Services Authority require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual financial statements except where anychanges, and the reasons for them, are disclosed. This interim report has been prepared in accordance with the basis set out innote 1. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the disclosed accounting policies have been applied.A review excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit and therefore provides a lower level of assurance. Accordingly we do notexpress an audit opinion on the financial information. This report, includingthe conclusion, has been prepared for and only for the company for the purposeof the Listing Rules of the Financial Services Authority and for no otherpurpose. We do not, in producing this report, accept or assume responsibilityfor any other purpose or to any other person to whom this report is shown orinto whose hands it may come save where expressly agreed by our prior consent inwriting. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. PricewaterhouseCoopers LLP Chartered Accountants Leeds 11 September 2007 Information for shareholders 1. The shares will be marked ex-dividend on 31 October 2007. 2. The interim report will be posted to shareholders on 28 September 2007. 3. The interim dividend will be paid on 28 November 2007 to shareholders onthe register at the close of business on 2 November 2007. Dividend warrants/vouchers will be posted on 26 November 2007. 4. The Provident Financial Company Nominee Scheme ('the scheme') enablesshareholders who are eligible, namely individuals, to take advantage of theCREST system for settling transactions in shares in the company by means of alow-cost dealing service. It includes a dividend reinvestment scheme for thosewho wish to use this facility. Shareholders who wish to take advantage of thescheme should contact the company's registrar, Capita Registrars, The Registry,34 Beckenham Road, Beckenham, Kent BR3 4TU (telephone: 0870 162 3100) to requestan information pack. The registrar's website is www.capitaregistrars.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
PFG.L