(Alliance News) - Sub-prime lender Provident Financial on Monday said its Consumer Credit Division faces liquidation unless a scheme of arrangement can be agreed to pay off increasing customer complaints.
"When combined with the impact of Covid-19 on its profitability, customer complaints can no longer be treated as part of operating costs," Provident explained.
It continued: "If approved, a scheme will bring certainty for stakeholders and ensure that customers with a legitimate claim get fair access to redress payments. The group will fund legitimate scheme claims with GBP50 million and will cover further scheme related costs estimated at approximately GBP15 million. The total commitment would be met out of PFG's existing resources."
The company said customer complaint payments were about GBP25 million in the second half of 2020. On top of this, the unit processed balance reductions for home credit customers of about GBP11 million during the same period.
"If the scheme is not approved, it is likely that CCD will be placed into administration or liquidation. If this were to happen, CCD customers would not be expected to receive any redress payment. Whilst the financial repercussions for CCD would be expected to be substantial, the direct financial or operational repercussions for Vanquis Bank and Moneybarn of an administration or liquidation of CCD would not be significant," Provident added.
The doorstep lender also noted the UK Financial Conduct Authority has opened an enforcement investigation into its CCD unit - focusing on the consideration of affordability and sustainability of lending to customers for the period between February 2020 and February 2021.
"CCD intends to work closely with the FCA in the coming months, including in relation to the investigation, which is unlikely to conclude until 2022," Provident said.
In better news for Provident, it said its fourth-quarter performance was ahead of internal expectations, and, as a result, for the year as a whole.
Chief Executive Malcolm Le May said: "Whilst the latest [UK] government lockdown has reduced the demand for unsecured credit in our markets so far this year, we continue to see scope for growth opportunities, post-Covid, over the medium-term."
Provident Financial shares were down 18% early Monday following the pre-market announcement.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.4% at 6,788.85
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Hang Seng: up 0.2% at 28,801.39
Nikkei 225: closed up 0.2% at 29,766.97
DJIA: closed up 293.05 points, or 0.9%, at 32,778.64
S&P 500: closed up 4.00 points, or 0.1%, at 3,943.34
Nasdaq Composite: down 78.81 points, or 0.6%, at 13,319.86
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EUR: down at USD1.1920 (USD1.1940)
GBP: down at USD1.3920 (USD1.3985)
USD: up at JPY109.19 (JPY109.00)
GOLD: up at USD1,722.80 per ounce (USD1,710.65)
OIL (Brent): firm at USD69.88 a barrel (USD69.63)
(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
0930 GMT UK consumer prices inflation basket of goods and services 2020
1100 GMT Ireland goods exports and imports
0830 EDT US Empire State manufacturing survey
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UK Prime Minister Boris Johnson has insisted that the UK will "beat Covid" in the coming months. Johnson said that "in the not-too-distant future" businesses would be able to reopen and people would once again be able to hold family and friends. With the UK vaccination programme having "roared into life in every corner of this country", he said restrictions that have been in place across the UK for much of the last year could soon be removed. Johnson said: "In the coming months we will beat Covid – we will vaccinate everyone in our country and we will be able to remove restrictions. In the not-too-distant future, we will be able to reopen businesses, see friends in each other's houses and hold our loved ones again."
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Johnson will set out plans to drive investment into domestic industries when he announces the outcome of the UK government's far-ranging review of foreign and defence policy this week. The prime minister said Britain's international ambitions must "start at home", as he pledged to use the Integrated Review to ensure the UK is on the cutting edge of innovation and "match fit" for a more competitive world. Johnson is expected to make the case for more investment in national infrastructure, innovation and skills – with a push for investment in industries including defence, technology and alternative energy. He is said to want the UK to be stronger and more secure, prosperous and resilient by 2030. The Integrated Review – covering foreign, defence, security and development policy – has been billed as the most significant overhaul of the UK's strategic posture since the Cold War.
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BROKER RATING CHANGES
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JEFFERIES INITIATES MOONPIG WITH 'BUY' - TARGET 510 PENCE
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JPMORGAN INITIATES MOONPIG WITH 'OVERWEIGHT' - TARGET 415 PENCE
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BERENBERG INITIATES BOOHOO WITH 'BUY' - TARGET 460 PENCE
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COMPANIES - FTSE 100
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AstraZeneca on Sunday has insisted its coronavirus vaccine is safe, after concern around blood clots prompted Ireland to become the latest European country to suspend use of the jabs. A review of available safety data in more than 17 million people who have been vaccinated across the UK and EU has shown no evidence of an increased risk, the pharmaceutical giant said. People across the UK are still being urged to get their vaccine. The decision followed reports of serious clotting in adults in Norway which left four people in hospital. The number of cases of blood clots reported is lower than the hundreds of cases that would be expected among the general population, AstraZeneca's Chief Medical Officer Ann Taylor said.
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Flutter Entertainment responded to a CNBC report saying the betting giant is considering spinning out US sports betting subsidiary FanDuel as a separately traded company on a US stock exchange. Flutter noted it "regularly evaluates" its organisational and capital structure in an attempt to best position itself. "Options including the listing in the US of a small shareholding in FanDuel are being considered but no decision has been made at this time. Should a decision be made to proceed with a listing in due course, an announcement will be made as appropriate," the Paddy Power owner added.
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Blue-chip support services group DCC said its Healthcare business has agreed to acquire Worner Medizinprodukte, a supplier of medical and laboratory products to the primary care sector in Germany and Switzerland. The deal, expected to close in April, is for an initial enterprise value of about EUR80 million. Worner Medizinprodukte recorded revenue of about EUR70 million in 2020 and employs 158 people. Worner will continue to be led by its existing management team from its headquarters in Reutlingen, Germany.
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Royal Dutch Shell noted its wholly-owned subsidiary, QGC Common Facilities Co Pty Ltd, has completed the sale of a 26% interest in the Queensland Curtis LNG Common Facilities to Global Infrastructure Partners Australia for USD2.5 billion, following regulatory approval. The deal, first announced at the end of December, is consistent with Shell's strategy of selling non-core assets, the oil major said, in an effort to "simplify" its portfolio.
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COMPANIES - FTSE 250
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Business-to-business media and events firm Ascential reported a widened loss in 2020 as its Marketing and Retail & Financial Services units saw a severe drop in revenue. Ascential reported a pretax loss of GBP184.3 million in 2020 compared to a loss of GBP7.9 million in 2019. Total revenue fell 31% to GBP263.7 million from GBP380.3 million. The firm's Marketing unit revenue fell 60% and Retail & Financial Services revenue dropped 78%. It Digital Commerce unit, however, saw revenue grow 32% to GBP103.1 million. Chief Executive Duncan Painter said: "Digital Commerce is now our largest and fastest growing segment and is well placed to benefit from the structural gains arising from the acceleration in e-commerce adoption. While our two marquee events are ready for a recovery as conditions allow, the Covid-19 pandemic restrictions continue to influence the timing of a return to maximum participation at venues. "Nevertheless, the resilience and underlying momentum within the business model, combined with our strong balance sheet and strong trading in the first two months of the year, give us confidence of further good progress in the year ahead." Ascential decided against dividends in 2020, versus the 1.8 pence payout in 2019, but said it will keep shareholder payouts under review.
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COMPANIES - MAIN MARKET AND AIM
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Takeaway food delivery service Deliveroo confirmed its plans for initial public offering on the London Main Market, hoping to raise GBP1 billion from the issue of new shares. Existing shares also will be offered. As previously disclosed, the IPO will include a "community offer" in which the company will allow UK-based customers of the firm, with a Deliveroo account, to apply for shares. Deliveroo also confirmed it will have two classes of ordinary shares: Class A shares and Class B shares. The Class B shares will, on admission, be held solely by Deliveroo's Founder & Chief Executive Will Shu. The Class A shares will be entitled to one vote for every share, while the Class B shares will be entitled to 20 votes for every share held. The Class B shares will not be admitted to listing or to trading on any stock exchange. On the third anniversary of an IPO, Deliveroo noted, the Class B shares will automatically convert into Class A shares.
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Social Capital Hedosophia, a partnership of dealmakers Chamath Palihapitiya and Ian Osborne, is planning to list a company in London worth at least USD1 billion that will be focused on climate-change solutions, Bloomberg reported late Friday, citing "people with knowledge of the matter". The investment vehicle will pursue multiple acquisitions, while also building out its own operations tackling environmental issues, Bloomberg said. Social Capital Hedosophia is working with Barclays and Credit Suisse Group on the listing, which is targeted for later this year, the news agency said.
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Monday's Shareholder Meetings
Hardide PLC - AGM
Jupiter UK Growth Investment Trust PLC - GM re liquidation
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By Tom Waite; thomaslwaite@alliancenews.com
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