Provident Financial PLC Capital Markets Day (4278B)
April 04 2017 - 1:00AM
UK Regulatory
TIDMPFG
RNS Number : 4278B
Provident Financial PLC
04 April 2017
Provident Financial plc
Capital Markets Day
Tuesday 4 April 2017
Provident Financial plc, the leading UK non-standard lender, is
today hosting a Capital Markets Day.
The event will primarily focus on the significant organic growth
opportunities at Vanquis Bank, Moneybarn and Satsuma together with
the migration to a more efficient and effective operating model in
home credit and the associated financial benefits. The event will
also include an update on the development of the group's digital
proposition and the increased synergies available to the group's
businesses to improve competitive advantage.
Presentations will be made by the senior management teams of
Vanquis Bank, the Consumer Credit Division (CCD) and Moneybarn. The
presentation slides will be available on the company's website,
www.providentfinancial.com, at 10.30am in conjunction with the
commencement of the event.
Commenting on the Capital Markets Day, Peter Crook, Chief
Executive, said:
"At today's event, our management teams will provide detailed
updates on the enhanced growth, efficiency and cross-group synergy
opportunities for each of our businesses. These plans support an
upgrade to the group's medium-term growth and profit potential
which will extend the group's track record of delivering
shareholder value."
The group's refreshed guidance for the medium-term potential of
each of its businesses is as follows:
Vanquis Bank
As reported at the preliminary results, the initiatives put in
place by Vanquis Bank in the second half of 2016 to expand credit
card distribution, together with the launch of the Chrome branded
card to address the nearer prime segment of the non-standard market
have resulted in a step-up in new account bookings. In addition,
there is a good pipeline of opportunities to partner with other
lenders, brokers and providers of retail finance. As a result, the
medium-term potential for Vanquis Bank has been increased from a
customer base of between 1.5m and 1.8m with an average balance of
GBP1,000 to a customer base of between 2.0m and 2.3m with an
average balance of between GBP1,000 and GBP1,100. Customer numbers
at the end of 2016 were 1.5m with an average balance of GBP922. The
business is expected to deliver an ROA(1) in the medium term of
between 12% and 13%. This is modestly lower than the ROA(1) of
13.8% generated in 2016 due to the incremental growth opportunities
available to Vanquis Bank that are expected to deliver an ROA(1) in
the range of 10% to 12% which is consistent with the group's
minimum ROE(2) threshold of 30%.
The Vanquis Bank wider loans proposition, which was launched in
the second half of 2016, is making good progress. The market for
unsecured loans of between GBP1,000 and GBP5,000 over durations of
1 to 5 years at APRs of between 29.9% and 49.9% is underserved and
growing. Vanquis Bank's proposition is currently focused on
providing unsecured loans to existing credit card customers during
the pilot phase with an open market proposition expected to be
developed towards the end of 2017. Based on the available market
opportunity, management estimate that Vanquis Bank loans has the
medium-term potential to build a receivables book of between
GBP200m and GBP250m at an ROA(1) comparable to its credit cards
business.
CCD
The migration to a more efficient and effective field
organisation which was announced at the 2016 preliminary results is
progressing in line with the CCD's internal timetable. The new
model involves employing Customer Experience Managers to serve
customers rather than using self-employed agents, as well as
streamlining the field management structure. It will be supported
by the deployment of further technology including route planning
and voice recording which we consider will enhance control and
regulatory compliance. There will be an immediate cost reduction
from July 2017 when the new model is in place and it is also
expected to improve sales and collections performance in due
course. As a result, the home credit business is expected to
increase its annual profits in the medium term by at least GBP30m
to over GBP150m, with approximately half of the increase derived
from cost savings and half derived from sales and collections
performance improvements. In order to secure the medium-term
financial benefits, a one-off exceptional cost of between GBP15m
and GBP20m will be incurred in 2017 in respect of redundancy,
retention and training costs. In addition, there is expected to be
a net short-term trading impact of up to GBP10m in 2017, comprising
a shortfall in contribution of up to GBP15m during the first half
of the year as the organisation migrates to the improved operating
model before the anticipated benefits of cost savings in the second
half of approximately GBP5m.
Satsuma made good progress during 2016 in developing its
distribution, underwriting and digital platform in the small-sum,
short-term unsecured online loans segment of the non-standard
market. The uplift in new business volumes experienced in the last
quarter of 2016 has continued in early 2017 and the business is
expected to make a small profit contribution for the year as a
whole. In addition, the business plans to further enhance its
digital capability in 2017 and expand the product proposition into
larger sum lending and revolving credit products in the future. The
current development trajectory of Satsuma is encouraging and the
business has clear potential in the medium term to grow its
receivables book from GBP18m at the end of 2016 to between GBP100m
and GBP150m in the medium term generating an ROA(1) of
approximately 20%.
Moneybarn
Moneybarn continues to generate strong growth as a result of the
extension of the product offering, the ongoing development of its
best in class customer platform and access to the group's funding
lines. Receivables have now increased to over GBP300m, exceeding
the lower end of the previous guidance of between GBP300m and
GBP400m. There remains strong growth potential from increasing
Moneybarn's share of the underserved non-standard car finance
market, further development of the light commercial vehicles
proposition, expansion into other asset classes and the development
of its B2C proposition. Accordingly, the medium-term potential of
the business has been increased to a receivables book of between
GBP400m and GBP500m generating an ROA(1) of approximately 13%,
consistent with the returns being made by the business
currently.
Summary
Business ROA(1) Product Medium-term growth
potential
Vanquis c.12%-13% Credit cards 2.0m-2.3m customers
Bank with an average balance
of GBP1,000-GBP1,100
Unsecured GBP200m-GBP250m receivables
loans
Provident c.25% Home credit Profit of GBP150m+
loans
Satsuma c.20% Online loans GBP100m-GBP150m receivables
Moneybarn c.13% Vehicle finance GBP400m-GBP500m receivables
The 2017 Provident home credit result will include:
1. A one-off exceptional cost of approximately GBP15m-GBP20m
associated with transition to the new home credit business model
comprising redundancy, retention and training costs; and
2. A short-term net trading impact of up to GBP10m comprising a
shortfall of contribution of up to GBP15m in the first half of the
year during the period of transition before the anticipated
benefits of cost savings in the second half of approximately
GBP5m.
(1) ROA is calculated as profit before interest after tax
divided by average receivables.
(2) ROE is calculated as profit after tax as a percentage of
average equity (average equity is stated after deducting the
pension asset, fair value of derivatives and the proposed final
dividend).
Enquiries:
Media
David Stevenson/Jade Byrne,
Provident Financial 01274 351900
Nick Cosgrove/Simone Selzer,
Brunswick 020 7404 5959
Investor Relations
Gary Thompson/Vicki Turner,
Provident Financial 01274 351900
investors@providentfinancial.com
This information is provided by RNS
The company news service from the London Stock Exchange
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