4th Jul 2006 07:01
Provident Financial PLC04 July 2006 Pre-close briefing Provident Financial will today provide the following pre-close briefing toanalysts and investors. UK home credit In UK home credit it is pleasing to see that increased marketing investment, inexisting and new sales channels, has resulted in increasing numbers of newcustomers, with year-on-year customer growth being recorded in June after threeyears of reducing customer numbers. Credit issued volumes also showed growth,up 1% for the five months to May 2006 compared to the same period in 2005,despite 2005's volumes benefiting from the increased issue of larger loansrepayable over eighteen months to two years. Impairment costs continue to increase reflecting growth in receivables of 7%together with continued pressure on customers' disposable incomes. As planned, first half marketing and IT costs are running some £5m ahead of thecorresponding period in 2005. This expenditure will reduce half year profitsbut benefit results in future periods. The integration of the back office andfield operations of Provident Personal Credit and Greenwood Personal Credit hasbeen executed ahead of plan and the programme to develop hand-held personalcomputers for agents and field staff, which will deliver both efficiency gainsand increased agent effectiveness, is on track to begin roll-out during 2007. In April, the Competition Commission (CC) published its Provisional Findings andPossible Remedies resulting from its inquiry into the UK home credit sector anddelayed the scheduled date of its final report to October 2006. Vanquis Bank Through the early part of 2006 Vanquis has improved the underwriting criteria itapplies to new customers and to the extension of credit to establishedcustomers. In addition, the business has now established viable distribution ofits products through the internet and face to face canvassing which supplementits direct mail channel and increase customer reach. Customer numbers now exceed 200,000 and the rate of growth has improved in thesecond quarter as the new sales channels have come on stream. The tightening ofcredit in the second half of 2005 and the more recent improvement tounderwriting criteria have successfully controlled impairment charges. Thetrade-off has been slower growth in revenues during the first half of 2006,which, when coupled with the recent increase in marketing activity, willincrease 2006 start-up losses to approximately £15m. These start-up losses willbe heavily weighted towards the first half. The second half should seecustomer numbers pass 250,000 and a substantial reduction in the rate ofstart-up losses. We continue to expect the business to move into profit for2007. Yes Car Credit The collection of the Yes Car Credit receivables book is progressing well withtotal collections of £70m, £3m ahead of plan, representing 30% of the 2005 yearend receivables of £235m. The disposal of vehicle stock has been completed and good progress has been madein surrendering branch lease obligations within the costs provided in the 2005accounts. Motor insurance Provident Insurance is trading as expected, with profits continuing to benefitfrom the favourable development of claims costs. International As planned, 2006 has seen a significant step-up in start-up losses to supportexpansion of the international division. This comprises the regional roll-outin Mexico, the opening of the Romanian business in April, the piloting of a newrange of monthly home collected and monthly remotely collected loan products inPoland and preparatory work on potential new country openings in 2007 and 2008.The aggregate of these investments in 2006, all of which impact the profit andloss account, will be approximately £15m, up from £4m in 2005. Hungary, the Czech Republic and Slovakia displayed good growth and, inaggregate, customer numbers at the end of May and credit issued during the fivemonths ended May both achieved double digit growth over the prior year. In Poland, customer numbers and credit issued have reduced as a result of theactions taken to tighten credit controls to address the adverse trends incollections and impairment which emerged during 2005. These actions willcontinue to reduce receivables, credit issued and revenues, below previouslyexpected levels, in the near term. However, the tighter credit policies willbegin to benefit impairment costs in the second half of 2006 and into 2007.Poland will then have a stronger platform from which growth can resume. Duringthe current year, we have successfully completed the roll-out of the modifiedhome credit offer to comply with the Polish interest rate cap legislation. As a result of the focus on improving the quality of lending in Poland, customernumbers in Central Europe at the end of May were just 3% higher than a yearearlier and credit issued in the five months ended May reduced by 1% compared tothe same period in 2005. Expansion continues in Mexico with customer numbers reaching 171,000 at the endof May, up from 131,000 at the start of the year. The business inPuebla-Veracruz has been augmented by the expansion in Guadalajara-Leon, thesecond of five regions we intend to develop, each with a population of about 20million. Separate listing for International We said, at the time of our 2005 preliminary results announcement last March,that we were at the early stages of considering the benefits of obtaining aseparate listing for International. Since that time, we have made good progress with our review and consultedextensively with our larger shareholders. The board believes that a demergerwould create shareholder value by allowing the international growth opportunityto be captured more quickly. Work is underway to implement the separation andthe board currently expects the demerger to take place in Spring 2007 followingthe announcement of the 2006 results. A further update will be provided withthe interim results in September and we expect to publish full details of thedemerger in March 2007. Interim results The group's interim results for the half year ended 30 June 2006 will bepublished on 13 September 2006. Enquiries: Today Thereafter MediaDavid Stevenson, Provident Financial 01274 731111 01274 731111Kevin Byram, Brunswick 01274 731111 020 7404 5959 Investor RelationsHelen Waggott, Provident Financial 01274 731111 01274 731111 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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