Provident Financial Share Discussion Threads

[jonwig] 16/1/2008 16:12

Provident's presence begins to grow again

Edited by Yvette Essen
Last Updated: 1:34am GMT 18/12/2007

Provident Financial
790½p -18
Questor says Buy

Fortune favours the brave, so the saying goes, and Provident Financial is a case in point. When Britain's leading door-to-door lender demerged from its fast-growing overseas division this summer, International Personal Finance (IPF), Provident looked like becoming little more than a boring income stock, backed for the yield and little else.

Questor: Provident Financial

The UK market for door-to-door lending - unlike foreign markets - is mature, which is why investors fancied the stand-alone attractions of IPF. But Provident is beginning to deliver growth again.

Management can be applauded for expanding Provident's presence beyond its established low-income customer base, where it has 60pc of the UK's 2.5m door-to-door borrowers, and into the more marginal area of those who just fall short of mainstream lenders' standards. But mostly, the new-found growth is a function of good timing.

Provident demerged from IPF in July, just as the money markets began to shut down. Only a few months previously, it had secured a new £350m funding line at attractive rates, that would pay for all its growth plans until 2010. A few months later and it may have been a different story.

The credit crisis has exacerbated what was already happening, namely that banks were beginning to steer clear of the riskier customers, leaving them with little option but to use the likes of Provident. Its customer growth of 3.8pc for the year to November underlined the change.

With the embarrassment of its Yes Car Credit business behind it (costing £141m to close) and a new management team installed, the business is now expanding on its core skills. Vanquis, the credit card offering to non-standard customers which was set up in 2005, is now moving into the black and Provident continues to trial its Personal Finance arm. These two divisions will take Provident into a new market with 6m-7m customers.

Unsurprisingly, Provident's bad debts are high - at 30pc of revenues - but the numbers are built into the business model. The dividend has been guaranteed this year and, though it is unlikely to be increased until the cover improves, it pays a near 8pc yield. Trading on 12 times 2008 forecasts, buy.

[wad collector] 28/8/2007 18:24

Still can't figure out the rebased chart, but no-one else has commented.Is it so obvious you are all too embarassed to point it out to me!

[wad collector] 19/7/2007 10:52

The header chart has become a bit confusing now as it has rebased the price history on a closing price last week of about 1060 on the old PFG.I can't figure out why as it doesn't seem to represent the combined price or any obvious connection with the addition of the IPF price.As I write we are 473+ 268 = 741 compared to the closing price of 708.
No-one has started a new thread for IPF - presumably level 2 is needed.

[pres1] 16/7/2007 17:03

Thanks Geoff. Agree your calcs.
Pres

[gj2] 16/7/2007 16:50

For every one old (10 4/11 pence) PFG share, you now have half a new (20 8/11 pence) PFG share and a full new IPF share.

And it works out correctly : - old PFG closed at 708 ish on Friday
- now have new PFG (0.5*940)
+ new IPF (1*263)
=(470+263)=726p

i.e. up 18p or just over 2% tday. When I did the calsulation earlier today, we were just under 1% up.

Looking at the circular on ADVFN, it appears those with a fractional entitlement (due to holding an odd number of old PFG shares) get a cheque for the single old PFG that cant't get converted.

Geoff

[wad collector] 16/7/2007 15:56

No , though that is what it says in one of the announcements , is clearly wrong , as the prices don't add up.Unfortunately.

[mountpleasant] 16/7/2007 13:49

Not as understand it; 2 of PF and 1 of IPF for every PFG held originally.

[wad collector] 16/7/2007 11:55

Looking at the consolidation notices I see 262 quoted for the new company - presumably we now have half a new share at about 450 and half a IPF share at 262 ie 712 total in lieu of one old Providential share .

[wad collector] 16/7/2007 08:48

Yeah , no excitement after all .

[qackers] 16/7/2007 08:22

looks like a consolidation of shares. look at the egm resolution note in the news section in the header above.

[timsnaps] 16/7/2007 08:10

up 30% - 216p. Anyone know what's happening here this morning?

[wad collector] 04/7/2007 12:38

Up 40 today and the only news is about the investigation of Subprime Lending.It doesn't name the companies and doesn't seem to have much of a conclusion , so hard to see that is the cause of a sharp rise.

[wad collector] 09/3/2007 21:41

I think this is an all time high close (My memory is short).Obviously setting the BB alight!

[Abuse team] 18/1/2007 01:09

Post removed by ADVFN

[spob] 18/1/2007 01:09

Provident to sell insurance business

Jill Treanor
Wednesday January 17, 2007
Guardian Unlimited

Provident Financial has put its car insurance arm up for sale after receiving a number of approaches for the business, which analysts say could fetch up to £200m.

The group, which is in the process of splitting itself into two, promised to update investors on the progress of any sale of the Provident Insurance operation on March 7, when it is due to publish its 2006 results.

Shares in Provident Financial, which last year escaped potentially punitive price caps by the Competition Commission, rose 59.5p to 804p on speculation that it would be a takeover target if the car insurance operation is sold off.

Provident Insurance has around 470,000 customers and made profits of £19m in the first half of 2006. In 2005 it reported record profits of £40m. Some analysts believe that premiums are on the rise again, which could make the business attractive to potential bidders.

The business provides insurance to the elderly, to women and for second cars and is thought likely to prove attractive to private equity buyers or smaller insurers. It is separate to Yes Car Credit, the controversial car financing operation it closed down after problems were uncovered by the BBC's Whistleblower programme.

Merrill Lynch, the investment bank which acts as broker to Provident Financial, estimated the car insurance arm was worth £188m in a research note published this month.

The possible sale of the business comes as the City is preparing for Provident Financial to split itself between its UK arm - essentially a door step lender - and its international business, which has operations in central Europe.

Provident Financial said it had decided to "commence discussions" with possible bidders "in response to third-party approaches for its non-core insurance business". The company hopes to establish whether "greater shareholder value could be created through the sale of that business than would be likely to be achieved if it were to remain within the UK group following the demerger of its international business".

In preparation for the demerger the company has been without a chief executive since Robin Ashton left at the end of last year. The UK arm dominates the doorstep lending market and recently escaped price caps after a Competition Commission investigation into so-called home credit. The international business has also had to tackle regulatory matters, in Poland and Hungary.

[spob] 17/1/2007 17:09

Provident Financial May Sell U.K. Insurance Division (Update3)

By Ben Livesey and Jon Menon

Jan. 17 (Bloomberg) -- Provident Financial Plc, a U.K. lender to low-income households, will consider selling its U.K. auto insurance operation after receiving buyout offers.

Provident is weighing whether to sell the ``non-core'' insurance unit or keep it in the U.K division after the company splits off its international business, the Bradford, England-based lender said in a statement today. It didn't name potential buyers.

Chairman John van Kuffeler, taking over after Chief Executive Officer Robin Ashton stepped down last year amid slumping profit, will oversee separation of the faster-growing overseas unit.

``It makes sense in terms of simplifying the business after the demerger to sell a non-core business,'' said Katrina Preston, a London-based analyst at Bridgewell Group Ltd.

Provident shares rose 0.6 percent to 754.5 pence at 3 p.m. in London. The shares are up 36 percent from a year ago, buoyed by Provident's plan to break up the company, according to James Hutson, a London-based analyst at Keefe, Bruyette & Woods Ltd. He rates the stock ``market perform.''

The auto insurance unit, with 455,000 policyholders, is worth about 188 million pounds ($369.5 million), according to an estimate by Merrill Lynch & Co. analyst Philip Middleton in a note published Jan. 8. The unit's first-half pretax profit fell 18 percent to 19 million pounds amid U.K. competition, the company said last year.

Provident is tightening credit criteria to help raise profits amid declines in recent years. First-half profit fell 21 percent after it closed its vehicle finance unit and bad loans rose.

Provident will provide more information on the possible unit sale and the split, which will mean a separate stock listing for the overseas division, when it reports full-year financial results March 7, the bank said today. Lexicon Partners Ltd. is handling the potential sale of the unit, the company said.

[spob] 17/1/2007 17:01

any shorters hanging around :)



Insurance arm ticking along very nicely.

...it would have to be an outrageously huge offer to satisfy me.

[spob] 17/1/2007 16:55

Motor insurance division - interim details

Revenue 77m H1
Profit 19m H1 after yesinsurance start up costs ( 2005 23m )

Pre tax margin 10.7%

Provident Insurance delivered a good performance in a UK
motor insurance market that remained competitive during
the first half of this year. Average premiums in the market
continued to drift down by about 2%. We maintained our
policy of pricing for an adequate return on equity and
increased our base premiums whilst also making selective
changes to improve our competitiveness on certain, more
profitable, parts of the business. As a result, motor insurance
policyholder numbers reduced to 455,000 (December
2005 473,000). The profitability of current year business is
relatively weak reflecting the absence of increases in market
premiums since 2002, together with a small increase in the
number of large personal injury claims which have been
reserved prudently at this early stage of their development.
Claims provisions, in respect of earlier claims years, have
continued to develop favourably and have benefited
underwriting profit. The average investment fund reduced
by 14% to £372 million and yielded income of £8.9 million
(June 2005 £10.8 million).

The rapid development of the internet as the preferred
channel for motorists to obtain insurance quotes has
created the opportunity for us to progress with a full roll-out
of an internet-based distribution channel during the first half
of 2006. The new brand, yesinsurance.co.uk, offers car
insurance as well as home insurance and van insurance
policies underwritten by a panel of insurers including
Provident Insurance. It provides a new distribution channel
with significantly lower acquisition costs and a greater
degree of control over the relationship with the customer
than the traditional intermediated business. In the first half
of 2006, yesinsurance.co.uk sold 30,000 policies and
incurred start-up costs totalling £1.3 million.
First half pre-tax profit for motor insurance, after the
yesinsurance.co.uk start up costs, reduced by 18% to
£19.0 million (June 2005 £23.1 million).
The market remains competitive and most insurers have
been holding or reducing prices despite increasing claims
costs. We have recently seen indications that some
competitors may begin to increase prices – this action is
needed and overdue. The favourable development of claims
provisions is expected to continue, but to produce a smaller
benefit than in 2005. The start-up loss of yesinsurance.co.uk
is expected to be £3 million for the full year, rising to
£5 million in 2007, with the business reaching its breakeven
point towards the end of 2008. Overall, we expect a good
profit again from motor insurance in 2006, but lower than
the record level of 2005.

[spob] 17/1/2007 13:55

Provident Financial in talks to sell insurance arm UPDATE


(Adds background)
LONDON (AFX) - Shares in Provident Financial PLC soared as the UK sub-prime
lender said it is in talks to sell its insurance division, Provident Insurance,
after receiving a number of approaches for the business from unnamed parties.
Provident Insurance, which sells car insurance to women drivers, had a
pretax profit of 40 mln stg in 2005, accounting for almost 20 pct of overall
earnings.
By 9.40 am, Provident shares were up 3.6 pct pct at 777 pence, making them
the top riser in the FTSE 250 share index.
"They say that they've had approaches, which suggests they will probably get
a full price," said Altium Securities analyst Martin Cross, who has a "sell"
stance on the stock.
Industry sources named Cox Insurance and Highway Insurance Holdings PLC as
possible buyers, and said private equity investors might also be interested.
Provident, which plans to demerge its fast-growing overseas arm from the UK
division in the spring, said the talks would clarify whether selling its
insurance unit would deliver better returns to shareholders than keeping it
within the UK business.
The company, whose main business is advancing small unsecured loans to
borrowers who cannot get credit from mainstream banks, has described its
insurance division as "non-core" for some time.
But analysts say the insurance business offsets the impact of rising
interest rates on the core lending division, with stronger investment income on
the insurance side partly outweighing reduced lending revenues as borrowing
becomes more expensive.
Provident said it will provide a progress report on the sale talks when it
publishes its full-year results on March 7.

[wad collector] 17/1/2007 09:48

Healthy looking response to todays Insurance Sale Plan.I almost sold these last week , but my Mentor pointed out the dividend now exceeds the price he paid for them (admittedly a while ago) so I shall sit on my hands longer.

[spob] 18/12/2006 07:28

Provident Financial PLC
18 December 2006


PROVIDENT FINANCIAL PRE-CLOSE UPDATE

Overall, the group has traded in line with the Board's expectations in the
eleven months ended 30 November 2006.


UK Home Credit

The UK Home Credit business has performed in line with expectations in the
eleven months to November 2006. At the end of November, customer numbers were
up 0.5% on the prior year despite tighter controls over the acceptance of new
customers. This growth reflects further gains from the marketing investment in
new sales channels, including direct mail and the internet. The continuing
pressure on the disposable incomes of consumers in UK Home Credit's target
market has seen impairment charges increase at a faster rate than revenue,
consistent with the trend reported in the first half of the year.


Vanquis Bank

Vanquis' focus on developing and applying more rigorous underwriting criteria
together with increasing the resources dedicated to collections, has proved to
be the right set of priorities in difficult market conditions which have seen
impairment charges rise across the industry. Customer numbers continue to grow
and were close to 250,000 at the end of November, assisted by internet
recruitment which has supplemented its primary direct mail sales channel. As
previously indicated, Vanquis is expected to report a start-up loss in 2006
which is slightly greater than the guidance issued at the time of the Interim
Results in September and reach breakeven in 2007.


Motor Insurance

Provident Insurance is trading ahead of expectations, with profits continuing to
benefit from the favourable development of claims costs. Yesinsurance.co.uk,
its internet-based distribution channel launched earlier this year, is trading
well.


Yes Car Credit

The collect out of the Yes Car Credit receivables book has continued to progress
well.


International

The international home credit businesses have, in aggregate, performed in line
with expectations and at the end of November customer numbers were up 3% on the
prior year.

Over the past two years, the Polish operation has had to contend with rolling
out the new product to comply with the interest rate cap legislation introduced
in February 2006 and also respond to the adverse trends in collections and
impairment that emerged during 2005. Management have successfully met both
challenges and it is now pleasing to report an improvement in the quality of
lending and the receivables book which is generating a significantly reduced
level of impairment charges. The business is now investing in marketing and its
field operations to restore profitable growth.

In Hungary, the changes to administrative procedures and the status of agents
required by the PSZAF, the Hungarian financial supervisory authority, have been
completed and lending recommenced on 6 December, having been temporarily
suspended on 17 October.

In Mexico, customer numbers stood at almost 250,000 at the end of November, more
than double the prior year and up from 184,000 at the end of June. As stated at
the Interim Results, the current priority is building the experience of the
local management and field operations before resuming geographic expansion
through further branch openings.


Demerger

Good progress continues to be made with preparations for the proposed demerger
of the international business, and full details will be provided with the
announcement of the Group's Preliminary Results for 2006 on 7 March 2007.