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Provident Financial PLC on Wednesday said it is monitoring the cost of living crisis in the UK as it reported a decline in interim adjusted profit.
Shares in FTSE 250-listed Provident were down 6.9% at 191.70 pence in London on Wednesday morning, making it the worst performing mid-cap stock in early trade.
For the six months to June 30, revenue inched up 0.7% to £266.2 million from £264.4 million a year before.
The Bradford, England-based lender swung to a pretax profit of £37.3 million from a loss of £44.2 million a year before, as its loss from discontinued operations shrank to £9.6 million from £101.9 million.
The discontinued items were related to the wind-down of its Consumer Credit Division.
‘Following the continued wind-down of CCD, the group now focuses exclusively on the mid-cost and near-prime segments of the credit market. This is expected to have a positive impact on the impairment and cost profile of the group. Combined with its strong balance sheet, this is expected to enable the group to deliver focussed and sustainable growth whilst also delivering attractive returns to shareholders,’ it said.
On an adjusted basis, however, pretax profit fell 14% to £54.3 million from £63.5 million. Central costs jumped to £31.0 million from £9.1 million, in part due to investments which it expects will drive ‘significant improvements’ in cost efficiency going forwards.
Provident will pay an interim dividend of 5.0p, versus nothing a year before.
Looking ahead, Provident said the economic outlook for the UK remains ‘challenging’. It said decided to increase a cost of living provision in credit cards to £10 million from the £7.8 million taken at year-end due to rising inflation and higher energy costs.
‘The outlook remains uncertain, with high inflation driven through volatile energy prices exacerbated by the war in Ukraine yet unemployment levels remaining low and stable,’ it said. ‘The impact on customers of the increased cost of living is being monitored closely and currently there are no early warning indicators suggesting any deterioration in credit risk.’
It will monitor this ‘closely’ throughout the second half of 2022.
Chief Executive Malcolm Le May said: ‘We are all acutely aware of the potential challenges that the macroeconomic environment might present.’
In addition, Provident is in talks with regulators over future capital requirements following the wind-down of the ‘higher-risk’ CCD business. ‘As the macroeconomic environment stabilises, and when PFG has greater clarity as to its future capital requirements, the group intends to hold a Capital Markets Day to update the market on its financial targets, customer vision and growth strategy,’ it said.
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