Provident Financial falls short

Sub-prime lender Provident Financial has disappointed the market with a smaller than expected 1% increase in underlying profit in 2009 and cautious outlook statement.Profit before tax and exceptional costs rose to £130.1m from £128.8m in 2008, but analysts had wanted about £134m. Pre-tax profit fell 2.4% to £125.7m.The consumer credit business grew by 5.1% to 1.84m customers, but cautious customer behaviour towards the year end and poor weather increased impairments as a percentage of revenue by 1.7% to 32.2%.Vanquish Bank raised profit before tax by 76% to £14.1m and increased customer numbers by 5.4% to 426,000, thanks to strong demand for non-standard credit cards.But the outlook statement failed to convince. "Cautious consumer behaviour is expected to persist through 2010, resulting in relatively modest growth in receivables," said the group. "As a result, there will be a strong focus on cost efficiency."Provident says total committed debt facilities available at the end of 2009 stood at £1.2bn, representing undrawn headroom of £331m, providing sufficient capacity for at least 18 months.Despite this, analysts at Daniel Stewart believe there is regulatory risk potential given the OFT review of the consumer credit market and the Department for Business Innovation and Skills' consultation into the future regulation of credit cards.An unchanged final dividend of 38.1p a share makes a total payout of 63.5p, the same as 2008.