Having previously cancelled its final dividend for last year, the home credit provider and sub-prime lender decided not to resume its paying returns to shareholders, saying it will do this “as soon as operational and financial conditions normalise”.
Levels of arrears and payment holidays due to the coronavirus (COVID-19) pandemic have returned to more normal levels, below 4%, with the company noting that its customers are “typically less sensitive to changes in economic conditions as they are more used to managing on tight budgets and they have lower levels of debt than prime customers”.
However, the FTSE 250-listed group’s Vanquis Bank business made a first-half impairment charge of roughly £70mln from the impact of COVID-19 and the adverse macro-economic outlook.
Along with revenue falling to £445.6mln from £501.5mln and net interest margins tightening, the group reported a £28mln loss before tax for the first six months of the year, compared to the £43.1mln profit reported a year earlier.
Though adjusted profits fell 87% and 85% respectively, both Vanquis Bank and Moneybarn remained profitable, while the home credit business more than doubled its losses.
Chief executive Malcolm Le May said group losses were “better than our initial view of Covid-19’s potential impact on our businesses” and as a result, the group has decided to repay all furlough support to the government.
With total liquidity at the end of June of £1.2bn, May noted that Provident Financial‘s “strong financial position will mean that we can keep helping, and responsibly lending to, our customers, many of whom are key workers, as we, and they, face the challenge of furlough support ending and unemployment rising in the coming months”.
“Our market will grow due to the pandemic, but at present, it appears the supply of credit into the market is decreasing, which cannot be a good outcome for customers, nor a public policy one for the UK,” Le May added in the results statement.