Provident suffers weak first quarter demand

Money lending group Provident Financial admitted that customer numbers had fallen since the start of the year and more customers were slipping into arrears.

Money lending group Provident Financial admitted that customer numbers had fallen since the start of the year and more customers were slipping into arrears.

The Bradford-based group said customer numbers at the end of March were down around 2.0% on the prior year, with the pressure of rising living costs on household incomes and higher heating bills to blame, and was "unlikely to improve".

However, due to "very strong" growth from its Vanquis banking division, management said the group as a whole was performing in line with its internal plans.

First quarter trading results for the Consumer Credit Division (CCD) was weaker than 2012 equivalents and management expectations and so was being "tightly managed on the basis that the trading environment is unlikely to improve in the near term".

With confidence low across the customer base of the CCD, Provident said demand for credit had been weak during the first quarter of the year, with both customers and agents displaying increased caution.

There was a 3.0% year-on-year reduction in receivables, reflecting the weaker demand and a shortening of the duration of the loan book, although the annualised revenue yield remained robust, increasing to approximately 90% at the end of the first quarter, compared with 89% in 2012.

Provident a consequence of the weaker demand was that the number of accounts going into arrears had worsened as existing customers who did not extend their credit had less incentive to bring their accounts up to date.

The annualised ratio of impairment to revenue in the CCD increased to approximately 35% at the end of the first quarter, compared with 33% in 2012.

The Vanquis Bank subsidiary delivered strong, growing its customer base to 952,000 at the end of March, up from 899,000 at the start of the year, and maintaining year-on-year growth of 30%.

Overall, the group said Vanquis Bank's first quarter performance was ahead of expectations and "substantially ahead" of the first quarter of 2012.

Chairman John van Kuffeler, who will retire in January 2014, said overall performance was in line with the company's internal plan despite the weak demand from the Consumer Credit Division.

He added: "The group's funding position is strong, being sufficient to fund all contractual debt maturities and execute in full on its growth plans through to the end of 2015."

The group raised £65m from a retail bond issue to strengthened its funding and liquidity positions, and with committed debt facilities at March 31st providing headroom of £319m, the group's total funding capacity amounted to £493m.

Shares in Provident Financial were down 5.1% at 1,598p at 13:46 on Thursday.

OH

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