(Alliance News) - Subprime lender Provident Financial on Monday confirmed it plans to get out of the home credit business one way or another, placing the division into run-off and considering a sale.
Bradford-based Provident earlier this month had said its review of the business was nearing completion, following press reports that it would wind-up both the home credit unit and online lending arm Satsuma to focus on its credit card business, Vanquis Bank, and its car finance operation, Moneybarn.
Provident on Monday said it has decided to withdraw from the home credit market "entirely" and is considering a sale of the Consumer Credit Division, which includes Satsuma.
"The home credit business will be placed into a managed run-off, which would be expected to conclude by December 2021. We expect to manage the IT infrastructure and support service expenditure lower as the receivables book falls. At the end of March 2021, CCD had approximately 2,100 employees and an internal consultation for these employees has started today. It is anticipated that the cost to the group of placing the business into managed run-off or disposing of CCD will be up to circa GBP100 million," the company said.
The announcement came as Provident reported a swing to loss last year.
Total revenue for 2020 amounted to GBP807.8 million, down 19% from GBP996.1 million the year before as both interest income and fee income fell. Provident turned to a pretax loss of GBP113.5 million from a profit of GBP119.0 million.
Covid-19 had an "immediate impact" on customer demand for credit, said Provident, which tightened underwriting standards in April in response to a "changing consumer landscape". As a result, new bookings for 2020 fell and so did receivables.
Provident Financial shares were up 0.9% early Monday, reversing after having fallen by 1.0% at the open.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 7,151.51
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Hang Seng: down 0.2% at 28,550.29
Nikkei 225: closed up 0.6% at 29,518.34
DJIA: closed up 229.23 points or 0.7%, at 34,777.76
S&P 500: closed up 0.7% at 4,232.60
Nasdaq Composite: closed up 0.9% to 13,752.24
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EUR: flat at USD1.2160 (USD1.2156)
GBP: up at USD1.4065 (USD1.3995)
USD: up at JPY108.96 (JPY108.52)
GOLD: up at USD1,835.03 per ounce (USD1,834.71)
OIL (Brent): up at USD69.01 a barrel (USD68.20)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Monday's Key Economic Events still to come
0830 BST UK Halifax house price index
1100 BST Ireland live register latest monthly figures
1000 EDT US employment trends index
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UK Prime Minister Boris Johnson is expected to confirm the next stage of lockdown easing in England will go ahead as planned, with measures to take effect in a week's time. Step three of the road map out of lockdown is expected to begin from May 17 after the UK government said the latest data confirms its four tests for easing Covid-19 restrictions have been met. Ministers will hold a meeting on Monday morning to agree the next set of measures, which could see the rule of six or a group of up to two households allowed indoors. The government said the latest data suggests easing restrictions from May 17 is unlikely to risk a resurgence in infections. Johnson is set to host a press conference on Monday afternoon to confirm the further easing of restrictions.
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Ireland is taking some further steps back toward normality as a series of lockdown restrictions lift on Monday. A phased reopening of non-essential retail will begin, with click-and-collect services and in-store shopping by appointment allowed, while close contact services, such as hairdressers, can resume. Restrictions on inter-county travel have also lifted while some of the limitations on indoor and outdoor social gatherings have eased. Many museums, galleries and libraries are now able to reopen and the number of people allowed to attend religious services, including weddings and funerals, has increased to 50.
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In its latest attempt at comprehensive reform, the EU kicked off a new conference in Strasbourg on Sunday aimed at shaping the bloc's future. With the help of citizen dialogues and an online platform, the conference aims to have developed proposals by spring 2022 on becoming more citizen-friendly and efficient. In opening remarks, French President Emmanuel Macron said the EU had proven its merits during the pandemic. Now is the time when the EU has to think about what it will look like in 10 years, Macron said, calling for a model that protects European values and strengthens research and investment.
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BROKER RATING CHANGES
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JPMORGAN RAISES BERKELEY GROUP TO 'OVERWEIGHT' ('NEUTRAL') - TARGET 5,400 (5,100) PENCE
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RBC RAISES FRESNILLO TO 'SECTOR PERFORM' ('UNDERPERFORM') - TARGET 950 (800) PENCE
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JPMORGAN RAISES VICTREX TO 'OVERWEIGHT' ('NEUTRAL') - TARGET 2800 (2150) PENCE
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RBC RAISES CENTAMIN TO 'OUTPERFORM' ('SECTOR PERFORM') - TARGET 140 (120) PENCE
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COMPANIES - FTSE 100
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Lloyds Banking Group is in talks to acquire savings and retirement products provider Embark Group for GBP400 million, Sky News reported on Saturday. The high-street lender is in advanced talks to finalise what would be its biggest corporate acquisition since it was returned to full private ownership four years ago, Sky News said. An announcement could come as soon as this month, it said, citing "City sources". London-based Embark was established in 2012 and offers retirement and savings products under brands including The Adviser Centre and Vested. The deal would fill a gap in Lloyds' retail investment proposition and open up a more effective distribution channel for Scottish Widows mutual fund products, Sky reported citing an "insider".
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COMPANIES - FTSE 250
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Greggs said full-year profit could reach pre-pandemic levels. The baker said it has seen a strong recovery in sales since restrictions began to ease across the UK, with like-for-like sales in the 18 weeks to May 8 down 14% on the same period in 2019. In the ten weeks to March 13, sales were down 23% on two years ago, but this narrowed to a decline of just 3.9% in the eight weeks to May 8. Since non-essential retail shops were allowed to reopen in England on April 12, two-year like-for-like sales have been positive, Greggs said. "Sales have recovered well in recent weeks as out-of-home activity levels have increased, albeit in the absence of competition from indoor seated catering operators. If restrictions continue to ease in line with current plans, then we now expect our overall sales performance for the year to be stronger than we had previously anticipated," the sausage roll maker said. While there is still uncertainty over trading conditions, Greggs believes that 2021 profit is likely to be materially higher than previous expectations and could be around 2019 levels in the absence of further restrictions.
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British Gas-owner Centrica said trading conditions have remained tough but cost savings are on track. The energy utility said its restructuring is on track, with year-on-year operating cost savings of more than GBP100 million expected in 2021. Less positively, the pandemic has seen electricity demand from UK business customers hit by around 15% in the first quarter, residential boiler installations were down 11% and non-essential service visits were postponed. "As expected, trading conditions have remained tough in the year to date. However, the modernisation of our group remains on track and the difficult, but necessary process to move colleagues onto new terms and conditions is now complete," said Chief Executive Chris O'Shea. "Although the external environment remains uncertain, our tight focus on cash and on fixing the basics across the group leaves us well placed as we continue the turnaround of our company." Centrica had net debt of GBP500 million at the end of the first quarter, down from GBP3.0 billion at the start of the year.
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Polymer supplier Victrex said it is comfortable with its full-year expectations after reporting a decline in profit for the first half. Revenue for the half-year to March 31 edged down 0.4% to GBP150.9 million, but pretax profit declined 7% to GBP46.6 million. The gross margin nudged down to 53.9% versus 57.3% a year ago. Despite the profit fall, Victrex declared an interim dividend of 13.42p, versus nothing a year prior. The interim dividend for the 2020 financial year was deferred and subsequently cancelled as part of cash conservation measures. The payout just declared is at the same level as the interim dividend for 2019.
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JO Hambro Capital Management, a private equity firm with a 9% stake in St Modwen Properties, said Blackstone Group's bid for the property firm is too low, Bloomberg reported late on Friday. London-based J O Hambro told Bloomberg it probably won't support Blackstone's bid, which values St Modwen at around GBP1.2 billion. "Our preference would be to work with the existing board to help support, both strategically and financially, the continuation and acceleration of the existing strategy," which would deliver value "well in excess of the potential offer," JO Hambro senior fund manager Alex Savvides told Bloomberg.
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COMPANIES - GLOBAL
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The US government declared a regional emergency Sunday as the largest fuel pipeline system in the US remained largely shut down, two days after a major ransomware attack was detected. The Colonial Pipeline Co ships gasoline and jet fuel from the Gulf Coast of Texas to the populous East Coast through 5,500 miles of pipeline, serving 50 million consumers. The company said it was the victim of a cybersecurity attack involving ransomware – attacks that encrypt computer systems and seek to extract payments from operators.
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Italy's government and UniCredit are set to restart talks within weeks on the potential takeover of Banca Monte dei Paschi di Siena, Bloomberg reported on Friday. Talks with UniCredit for a possible takeover were halted earlier this year amid a government reshuffle and the exit of the Chief Executive Officer Jean Mustier, who was replaced by Andrea Orcel on April 15. Citing people with knowledge of the matter, the news agency said the Italian government is open to alternative solutions for troubled lender Paschi, but a takeover by UniCredit remains the preferred option, adding that meetings to resume government contact with the Milan-based bank may be scheduled as early as this month.
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Monday's Shareholder Meetings
Alfa Financial Software Holdings PLC - AGM
Centrica PLC - AGM
Gresham Technologies PLC - AGM
Midwich Group PLC - AGM
Real Good Food PLC - GM re Brighter Foods sale
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By Tom Waite; thomaslwaite@alliancenews.com
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