Provident Financial PLC Trading Statement (5962O)
22 August 2017 - 4:01PM
UK Regulatory
TIDMPFG
RNS Number : 5962O
Provident Financial PLC
22 August 2017
Provident Financial plc
Trading update
22 August 2017
Disruption to home credit trading
The new home credit operating model, which involves employing
full-time Customer Experience Managers (CEMs) to serve customers
rather than using self-employed agents, was deployed on 6 July
2017. This followed a period of higher operational disruption than
planned between the announcement of the proposed structural changes
on 31 January 2017 and deployment of the new operating model. The
impact of higher than expected agent attrition and reduced agent
effectiveness on collections performance and sales resulted in the
announcement on 20 June 2017 that forecast pre-exceptional profits
from CCD would be reduced to around GBP60m.
The primary objectives set for the third quarter of 2017 were to
embed the new operating model and to progressively restore customer
service and collections performance to acceptable levels in
preparation for the seasonal peak in lending during the fourth
quarter. The rate of progress being made is too weak and the
business is now falling a long way short of achieving these
objectives. Collections performance and sales are both showing
substantial underperformance against the comparable period in 2016.
The routing and scheduling software deployed to direct the daily
activities of CEMs has presented some early issues, primarily
relating to the integrity of data, and the prescriptive nature of
the new operating model has not allowed sufficient local autonomy
to prioritise resource allocation during this period of
recovery.
Collections performance is currently running at 57% versus 90%
in 2016 and sales at some GBP9m per week lower than the comparative
weeks in 2016. The extent of this underperformance and the
elongated period of time required to return the performance of the
business to acceptable levels invalidates previous guidance. The
pre-exceptional loss of the business is now likely to be in a range
of between GBP80m and GBP120m.
In response, a thorough and rapid review of home credit's
performance is underway to secure the turnaround of the
business.
Other businesses
The trading performance of Vanquis Bank, Moneybarn and Satsuma
remain in line with internal plans.
Financial Conduct Authority (FCA) investigation into Vanquis
Bank's Repayment Option Plan (ROP)
Vanquis Bank is co-operating with an investigation by the FCA
into the ROP ancillary product. ROP currently contributes gross
revenues, before impairment and costs, of approximately GBP70m per
annum.
The FCA indicated that it has concerns about the ROP product and
is investigating the period from 1 April 2014 to 19 April 2016.
Vanquis Bank agreed with the FCA to enter into a voluntary
requirement to suspend all new sales of the ROP in April 2016 and
to conduct a customer contact exercise, which has now been
completed. Vanquis Bank has also agreed with the Prudential
Regulation Authority (PRA), pending the outcome of the FCA
investigation, not to pay dividends to, or enter into certain
transactions outside the normal course of business with, the
Provident Financial Group without the PRA's consent.
2017 dividend, capital and liquidity
In view of the substantial deterioration in the trading
performance of the home credit business, together with the
uncertainty created by the FCA's investigation at Vanquis Bank, the
Board has determined that the group must protect its capital base
and financial flexibility by withdrawing the interim dividend
declared on 25 July 2017 and indicate that a full-year dividend is
unlikely. Protecting the highly valuable franchises of Vanquis
Bank, Moneybarn and Satsuma is the Board's first priority whilst
the turnaround of the home credit business is secured and the FCA's
investigation is concluded. The Board remains strongly committed to
the payment of future dividends and delivering long-term value to
shareholders.
Management changes
In the circumstances, Peter Crook has decided to step down as
Chief Executive with immediate effect. Manjit Wolstenholme will
assume the role of Executive Chairman.
Manjit Wolstenholme, Executive Chairman, commented:
"I am very disappointed to have to announce the rapid
deterioration in the outlook for the home credit business.
Protecting the group's capital base through withdrawing the interim
dividend and in all likelihood the full-year dividend is the
appropriate response to maintain the highly valuable franchises of
Vanquis Bank, Moneybarn and Satsuma. My immediate priority is to
lead the turnaround of the home credit business."
This announcement includes inside information.
An analyst conference call will take place at 8.00am BST on 22
August 2017. UK number: 0844 8719470 / International number: +44
(0) 1452 588613 / Conference code: 6913751.
Enquiries:
Media
David Stevenson / Jade Byrne,
Provident Financial 01274 351900
0207 404
Simone Selzer, Brunswick 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
END
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