By Steve Slater
LONDON (Reuters) - Consumer lender Provident Financial
But the stock rose 7.3 percent to 685 pence in light trade as dealers said the troubles had been well flagged in July and there was relief credit quality had held stable.
The company said higher fuel and utility costs -- more than interest rate rises -- appeared to have hurt car sales and led to some early signs of slowing repayments from Provident’s 1.5 million UK home credit customers, typically low earners borrowing 200 to 300 pounds.
"We have seen since the half-year some increase in slow payment but I think that’s less to do with consumer confidence and more to do with the impact of higher petrol prices and utility bills," Chief Executive Robin Ashton told Reuters.
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Provident said pretax profit for the six months to end-June fell 1.3 percent from a year earlier to 82.9 million pounds. It raised its interim dividend by 3 percent to 14.06 pence per share.
Its Yes Car Credit unit incurred a 6.2 million pound loss, after a 5.7 million pound profit a year ago, which offset 14 percent growth in profits in the rest of the group.
Provident repeated that Yes is expected to make a full-year loss of 15 to 20 million pounds and said it would consider selling it if new management and a recently implemented recovery plan failed to reverse the slump. Analysts said the company could also close the business down.
"Whether or not we continue to own the business will be one of the things that we consider when we monitor performance against the improvement plan," Ashton said.
DOORSTEP LENDING
Provident said its number of UK home credit customers slipped 4 percent from a year earlier, but credit issued to them was up 4 percent as it lends more to low-risk customers.
The company specialises in doorstep lending -- where its agents deliver small, short-term loans and call each week to collect the repayments -- so it is seen as exposed to credit problems among low earners.
It said the UK lending market would stay tough as competition had increased, and it expected a "modest reduction" in profit for the full-year and a further reduction in 2006 if current conditions persist.
Profit from its motor insurance unit rose 39 percent to 23.1 million pounds and start-up costs for credit card business Vanquis left it with a loss of 7.2 million pounds, but revenues more than tripled to 7.2 million.
International growth continued to outpace the UK market, and Provident’s 1.6 million customers in Central Europe and Mexico fuelled a 79 percent jump in profit to 19.2 million pounds.
"There were no great surprises, but there are still quite a few question marks," said Katrina Preston, analyst at Bridgewell Securities. "I’ll be keeping my ’underweight’ rating pending evidence they are resolving the issue of Yes Car Credit and that the Vanquis credit card is going to deliver on its targets."
Provident said the Competition Commission, the UK regulator which last year launched an investigation into the 2 billion pound home credit industry, could publish its "emerging thinking" document on the probe later this month and a provisional findings report by the end of the year.
