12th Jul 2005 07:00
Provident Financial PLC12 July 2005 Pre-close briefing Provident Financial will today provide the following pre-close briefing toanalysts and investors. The largest of the group's businesses, UK home credit continues to produce asolid performance. Although market conditions remain competitive and customernumbers at the end of May 2005 were 4% lower than a year before, credit issuedfor the five months to 31 May 2005 increased by 5% compared with thecorresponding period of 2004 as a result of selective increases in loan size tolower risk, established customers. Costs remain under tight control and creditquality is stable. In the five months to 31 May 2005, Yes Car Credit reported an unaudited pre-taxloss of £4.6 million on sales volumes down by 26% on the corresponding period ofthe previous year. Market conditions remain depressed with reduced year on yearvolumes in the used car credit market and new regulation causing a reduction inthe sales penetration of insurance products. We have also seen a poorer thanexpected collection performance in the early months of 2005 leading to a higherthan expected IFRS impairment charge. As a result, we now expect bigger tradinglosses, including some non-recurring costs, in the range of £15 million to £20million for the full year in 2005. In response, we have made substantialchanges to strengthen the quality and depth of management, appointing a numberof key individuals in the last three months. We are implementing a comprehensiveimprovement plan designed to restore profitability. The initial target is tomove the business back to breakeven in 2006. Although we have begun to seeearly signs of improvement from changes made it is too early to quantify theoverall benefit that will be achieved. We will provide a further update onprogress on the improvement plan with our interim results in mid September. Vanquis Bank, which offers credit cards to the non-standard UK market, isperforming to plan. In the initial months of the year we successfully expandedour infrastructure to support the move from pilot to operational scale and inthe second quarter we increased the rate of customer recruitment. At the end ofMay 2005 we had 108,000 cardholders and are making good progress towards ourtargets. Provident Insurance is continuing to deliver excellent results. Policyholdernumbers are stable at around 500,000 and claims costs continue to developfavourably. International division continues to generate strong growth with customer numbersat the end of May 2005 20% higher than a year before and credit issued for thefive months to 31 May 2005, on a currency adjusted basis, growing by 16%. IFRSimpairment charges are higher than anticipated, largely as a result of lowerthan expected collection performance in Poland, but this is partly offset by animprovement in the Czech Republic. Favourable foreign exchange rates arebenefiting performance and, overall, results are in line with our expectations. The performance of the group at this half-year is likely to be below marketexpectations, but only as a result of the poor performance at Yes Car Credit.Clear plans are now in place to correct this. The remainder of the group, as awhole, is generating good profit growth. The comments in this briefing are made in relation to the group's results asreported under International Financial Reporting Standards ("IFRS"). We haveset out at Appendix 1 the unaudited results for the half-year to 30 June 2004prepared under IFRS in order to provide comparative data. The group's interim results for the half-year ended 30 June 2005 will bepublished on 14 September 2005. Enquiries from 7.30 am: Elizabeth Bottomley 01274 377939 Appendix 1 Unaudited results for the half-year to 30 June 2004 and full year to 31 December2004, prepared under International Financial Reporting Standards. Profit before taxation Unaudited Unaudited Half-year to Full year to 30 June 2004 31 Dec 2004 £m £m UK home credit 61.1 154.0Yes Car Credit 5.7 (2.7)Vanquis Bank (4.8) (9.0)UK consumer credit 62.0 142.3InternationalCentral Europe 16.3 51.0Mexico (1.1) (2.2)Central divisional overheads (4.5) (9.0)Total international 10.7 39.8Insurance 16.6 34.6Central costs (5.3) (11.2)Profit before taxation 84.0 205.5 Tax rate 29.7% 29.7% Earnings per share (pence) 23.32 57.00 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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