Lender Provident Financial warns on H1 results

LONDON (Reuters) - Lender Provident Financial said on Tuesday its first-half performance was likely to miss market expectations due to weakness in its car loans business, sending its shares down as much as 5 percent.

Provident said its Yes Car Credit unit, which helps people with poor credit ratings to buy cars, made a pretax loss of 4.6 million pounds in the five months to May 31 on sales volumes down 26 percent.

Yes Car Credit will now post a full-year loss of up to 20 million pounds, Provident said in a statement, adding a newly strengthened management team was implementing a plan aimed at returning the business to break-even in 2006.

"Market conditions remain depressed, with reduced year-on-year volumes in the used car credit market and new regulation causing a reduction in the sales penetration of insurance products," it said in a trading update ahead of first-half results on September 14.

Advertisement starts

Advertisement ends

"The remainder of the group, as a whole, is generating good profit growth," Provident said.

Bridgewell Securities analyst Katrina Preston called the trading update a profit warning and said she would likely cut her full-year earnings per share forecast by 7 percent to 56 pence. "We continue to recommend investors switch from Provident into (rival) Cattles ."

Provident shares fell as low as 700 pence in early trading before recovering slightly to 707 pence by 0730 GMT, down 3.9 percent and valuing the business at 1.8 billion pounds. Cattles Plc shares were down 1.6 percent at 311.5 pence.

Provident, which sells its loan products on its customers’ doorsteps, said overall customer numbers were down 4 percent at the end of May, but credit issued for the first five months of the financial year was up 5 percent.

Investors are on red alert for signs the long-running credit boom is running out of steam, as debt-laden consumers struggle to cope with recent interest rate rises.

Barclays , Britain’s biggest credit card lender, set alarm bells ringing in May by saying consumer debts were rising beyond its previous expectations.

Latest government data showed there were 13,229 individual insolvencies in the January-March period -- the highest since records began in early 1960s. This was an increase of 1.6 percent compared with the previous three months.

Within the total, there were 10,091 bankruptcies -- an increase of 24.5 percent on a year earlier -- and 3,139 voluntary agreements, which allow debtors to come to an agreement with their creditors.

2009 Reuters Click for restrictions