Provident Financial restarts dividend and returns to profit

Provident Financial reinstated its dividend as the subprime lender returned to annual profit after bad-debt provisions fell.

Adjusted pretax profit was £64.8m in the year to the end of December compared with a £54.6m loss a year earlier as revenue fell to £534.6m from £615.4m.

Provident Financial declared a dividend of 12p a share. There was no dividend in 2020. The company said it expected to increase its payout ratio to about 40% in 2022 from 30% in 2021.

Statutory pretax profit was £4.1m compared with a £113.5m loss the year before. Bad-debt impairments dropped to £50.4m from £312.6m a year earlier.

The FTSE 250 group tightened lending standards during the Covid-19 crisis and scrapped the doorstep lending operation that was once the core of its business. Its business now comprises credit cards, vehicle finance and a new personal loans division.

Malcolm Le May, Provident Financial's chief executive, said: "The group's financial performance in FY'21 improved significantly year-on-year and, as a result, our adjusted profit before tax from continuing operations was marginally ahead of market expectations.

"Reflecting the improved performance of the group, I am pleased to report that the board is proposing a dividend of 12p per share."

Shares of Provident Financial rose 2.1% to 324.2p at 08:29 BST. The shares were valued at more than £23 in 2017 but have plunged because of a series of errors and complaints from customers that pushed its doorstep lending business close to collapse.

Adjusted pretax profit at the credit card business rose to £173.9m from £39.5m as bad-debt provisions fell. The company said new credit card accounts were ahead of expectations in the first quarter of 2022 and delinquency rates were favourable.

Gary Greenwood, an analyst at Shore Capital who recommends buying Provident Financial shares, said: "Following a tumultuous past few years, we believe the group is now on a much sounder footing, with a well-capitalised and well-funded balance sheet giving it the firepower to take advantage of growth opportunities in its chosen mid-cost credit markets."