Provident Financial rewards shareholders with 150 per cent dividend hike

​The Bradford-based firm said adjusted pre-tax profit rose 1.6 per cent to £162.6m in 2019 as the business adapted to the evolving regulatory environment and its successful defence against the hostile bid from rival Non-Standard Finance.

The group said it will pay out a final dividend of 16.0p per share, which represents a 150 per cent increase in the total dividend in 2019, as a result of its good progress and the group’s strong funding and capital positions.

Provident’s chief executive Malcolm Le May said the dividend increase reflects the firm’s confidence that it is moving in the right direction.

“We’ve always said that our longer term strategy is to return to a dividend policy of at least 1.4 times cover,” he said.

“That has always been linked to the recovery of the home collected credit business. It reflects the confidence we have that we are on that path.”

Provident said the home credit business finished 2019 strongly and is well placed to deliver a break even result in 2020.

The division saw a significant 46 per cent reduction in its adjusted loss before tax to £21m from £39m in 2018, reflecting an improvement in new customer acquisition, collections performance and cost efficiency.

Mr Le May said: “Overall it was a good operational and financial performance in 2019.

“Looking at the history of what we’ve been through over the last couple of years, starting off with the disasters of 2017, then we went through the rights issue, then we had the hostile bid, so it’s nice to be talking with a degree of normality.”

Statutory pre-tax profit jumped 32 per cent to £128.8m, reflecting lower exceptional costs.

The group said the strategic initiatives outlined at its Capital Markets Day in November are well underway to deliver the group’s “Vision for the Future” and financial targets.

Mr Le May said the group delivered an increase in profits as it adapted the businesses and culture to changing customer needs and the evolving regulatory environment.

“As a result of the regulatory change, we basically are in a much better position than we were in two years ago,” he said.

“Sadly the sector we serve is between 10 and 12 million of the UK population. Their need for credit is not going away. Their need for credit to be given to them in a responsible way is absolutely critical.”

All the group’s divisions have progressively tightened underwriting over the last two years and the firm said it has built good momentum entering 2020.

“We are making good progress towards the medium term financial targets set out at our Capital Markets Day in November,” said Mr Le May.

Analyst Gary Greenwood at Shore Capital said: “While investors may focus on the accounting changes within these results, we think it makes more sense to reflect upon the improving operational performance, particularly within the home credit business.

“While there is still plenty of work to be done, we believe the group is now moving firmly in the right direction and we see potential to increase our conservatively struck 485p fair value in due course.

“Although we retain our ‘hold’ stance for now, we are nonetheless warming to the investment case,” he added.