Provident Financial slumps to loss, although pandemic hit ‘not as bad as feared’

Sub-prime lender Provident Financial has tumbled to a first half loss amid falling doorstep lending customer numbers, but said the hit from the pandemic was not as bad as first feared.

Shares jumped 12% as it said it performed better than expected, despite swinging to an underlying pre-tax loss of £32.6 million for the first six months of 2020, against profits of £80.4 million a year ago.

Its doorstep lending arm took the hardest hit, with losses more than doubling to £37.6 million, though its Vanquis Bank and Moneybarn businesses remained profitable.

Customer numbers in its doorstep lending consumer credit business tumbled around 29% to 379,000 as knockdown hit its ability to take on new borrowers.

Provident booked impairment charges of £240.3 million for the first half, but it said losses were better than it had internally braced for at the start of the coronavirus lockdown.

On a reported basis, it sunk to a pre-tax loss of £28 million compared with profits of £43.1 million.

It pledged to repay employee furlough cash to the Government, but cancelled its interim shareholder dividend payout.

Malcolm Le May, chief executive of Provident Financial, said the first half of the year had been “the most difficult and testing in my career”.

But he said: “Financial and operational performance were better than expected, and therefore we have decided to repay all furlough support to the Government.

“We believe this is the right thing to do.”

The group said it had seen some “encouraging signs of increased activity levels” since the end of June, with its car finance division Moneybarn seeing record new business in July.

But it cautioned: “The potential economic shock, and uncertainty, that Covid-19 will bring to the UK economy over the coming months must not be underestimated.”