Provident Financial Group

Annual Report 2013


This year's story

2013 saw the group make excellent progress. Despite continuing tough market conditions, we increased pre‑exceptional profits by 9.9% and have put the group in shape to achieve yet further growth in 2014.
Peter Crook Chief Executive

Key differentiators

Small sums…
tailor-made advances

People in the non-standard credit market tend to have relatively low incomes or have had trouble with credit in the past, so it makes sense for them to borrow smaller sums. This means borrowing the few hundred pounds they can afford on a Vanquis Bank credit card, a home credit loan, or a Satsuma loan, rather than the few thousand they can’t afford from a mainstream lender.

High customer contact…
tailor-made relationships

Those with little leeway in their income have to budget much more carefully than those with greater leeway. We’ve found that staying in close contact with customers to discuss at an early stage the inevitable bumps in the road that come along, helps our customers to stay in control of their credit. It also helps us keep bad debt in check, which may allow us to lend to the customer again.

tailor-made solutions

Over 130 years of serving the non-standard credit market has taught us that customers on relatively low incomes will occasionally have trouble in making repayments. In the mainstream market, the likelihood is that the customer would have to pay default charges and additional interest at the time they can least afford to. Our home credit and Satsuma loans have no extra charges whatsoever when this occurs and Vanquis Bank offers a product which allows extra flexibility.

Being a responsible lender…
tailor-made for customer satisfaction

Small sums advanced, high levels of customer contact, forbearance and flexibility, together with good regulatory compliance, add up to lending responsibly in the non‑standard credit market. Our high levels of customer satisfaction and low levels of customer complaints go some way to showing that we have tailor-made our products to ensure they meet the particular needs of our customers.

Our business model

Tailor‑made for the
non‑standard marketplace

The group is successful in lending to customers whom others find it difficult to serve because of the way we manage the customer relationship and the solid foundations that we have built for our business.

  1. Non‑standard

    We lend to non-standard customers whom others find it hard to serve

    We specialise in non-standard credit; our business model benefits from 130 years of experience.

  2. Better risk

    We manage the inherent risk of non-standard lending better than others


    •  Individual relationships

    •  Selective,
       gradual and

    • Simple,

    • Responsibility
       built in

    Our approach is highly adapted to our marketplace

    We pay close attention to lending and collecting activities, ensuring that we maintain high levels of contact.

    We offer simple, flexible products which underpin our responsible lending approach.

  3. Resilient, conservative and
    flexible business fundamentals

    We underpin our business with solid financial foundations

    We focus on organic growth through high return on equity businesses which are cash and capital‑generative.

    We have a diverse range of funding sources and borrow long and lend short.

    We adopt prudent, appropriate accounting policies.

Key numbers

Financial highlights

  • Profit before tax and
    exceptional items1,2m)

  • Adjusted earnings
    per share1,2 (p)

  • Dividend
    per share (p)

  • Dividend cover1,2 (times)

    1.32 times
    1.30 times
  • Gearing (times)

    3.0 times
    3.2 times
  • Community investment (£m)

  • Return on equity (%)

  • Receivables (£m)

  • Receivables by division (£m)

    • Vanquis Bank
    • Consumer Credit Division
  • Profit before tax and exceptional items by division (%)

    • Vanquis Bank
    • Consumer Credit Division
    • Central costs
  1. Profit before tax in 2013 is stated before an exceptional item of £13.7m in respect of the cost of a business restructuring within the Consumer Credit Division. Profit before tax in earlier years is stated before an exceptional credit of £15.6m in 2012 and exceptional costs of £2.5m and £4.4m in 2010 and 2009 respectively. Statutory profit before tax, after exceptional items, amounts to £182.4m in 2013 (2012: £194.0m, 2011: £157.2m, 2010: £137.5m, 2009: £125.2m).
  2. Profit before tax and exceptional items in prior years has been restated following the mandatory adoption and retrospective application of the amended IAS 19, ‘Employee Benefits’ from 1 January 2013 (2012: £181.1m to £178.4m, 2011: £162.1m to £157.2m, 2010: £144.5m to £140.0m, 2009: £130.1m to £129.6m).

Quick facts

  • 3,600 employees
  • 2.6m customers
  • 18% of total UK lending was to the non‑standard market
  • £69bn lent to non‑standard credit sector

Our strategy

How we measure our performance

  1. Growth of higher return businesses in non‑standard markets

    We specialise in investing in and developing businesses that provide high returns on a relatively small amount of equity capital deployed. In particular, we focus on small‑sum unsecured credit as: (i) this area of the market offers high margins and high returns to companies with sustainable business models such as ours; and (ii) lending small amounts to millions of customers who do not have much indebtedness elsewhere means that our risks are well spread.

  2. Generating high shareholder returns

    Our strategy of developing businesses which generate strong returns on equity capital underpins our dividend policy which aims to distribute up to 80% of our profits to shareholders. We aim to generate sustainable growth in profits and dividends to continue to deliver attractive shareholder returns.

  3. Maintaining a secure funding and capital structure

    We maintain a strong balance sheet and prudent funding structure. Our business model is based on borrowing long and lending short and maintaining a diverse funding base, including bank funding, public and private bonds, private placements and retail deposit‑taking in Vanquis Bank. Our maximum target gearing ratio is 3.5 times, comfortably inside our banking covenant of 5.0 times. This means that we have not had the funding or capital strain that has affected other lending businesses through the credit crisis.

  4. Acting responsibly in our relationships with customers and making a positive contribution to the communities served by the group's businesses

    We are passionate about providing our customers with an excellent product proposition and service. Agents see the majority of customers every week in our home credit business and we have much higher levels of contact than mainstream lenders in our direct repayment businesses, including a welcome call to all new customers.

Download Our strategy section (pdf 0.3MB)

Our stories

Gaining a sense of purpose

Last year I got the job I’d been after for a while – which was great until I realised I couldn’t afford the travel expenses to get there. I applied for a Vanquis Bank card and used it to buy a bike that I now commute on. I honestly don’t know what I would have done without it
Nick, London

Helping me manage better

I’m the first to admit I haven’t been great at managing money in the past. For me, the best thing about Vanquis is the text reminders when a payment is due. It stops me getting behind and I can easily keep on top of things.
Sarah, Northampton

It’s all about my family

I used to dread birthdays and Christmas, it was so hard wanting to give the kids the day they wanted without the money we needed. With Provident, I can borrow as little as £50 and pay it back in small chunks. It has made all the difference to our family.
Angela, Bradford

Keeping me on the road

It’s when things go wrong that life can get very tough. I always dread it when the MOT is due, but now that I’ve discovered Satsuma loans, I know I can handle whatever comes our way.
Paul, Worcester

Capturing the
entrepreneurial spirit

I started my own business a few months ago and things were very difficult at the beginning, especially because I had very little credit history. Vanquis Bank gave me the chance I needed and it has helped to ease out the peaks and troughs when things don’t always go to plan.
Stuart, Derby