NSF.L Regulatory News (NSF)

This announcement and the information herein is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into the United States, Canada, New Zealand, Japan, or any other Restricted Jurisdiction in which such release, publication or distribution would be unlawful.

25 March 2019

Non-Standard Finance plc ("NSF")

Response to the board circular (the "Provident Circular") publishedby Provident Financial plc ("Provident")

Provident Circular

The Provident Board is still searching for the coherent strategy that they have consistently failed to develop, let alone deliver, over recent years. Our view is that the Provident Circular is a further example of the Provident Board yet again failing to articulate a decisive plan for resolving Provident's problems or any kind of clear vision for Provident's future. With over a month having passed since we announced our Offer, the only slim hope offered by the Provident Board, that they would "explore all appropriate alternatives", appears to have faded.

Provident Shareholders deserve better and have a clear choice between:

· our Offer, which presents a clear transformation plan applying a new strategic direction under the leadership of an experienced management team with unrivalled knowledge of the non-standard finance sector. The NSF Board believes that this plan will address the multiple self-inflicted problems that have blighted Provident in recent years while unlocking substantial value for Provident and NSF shareholders; and

· more of the same from the Provident Board and senior management team, which have presided over Provident's recent chaos and business disruptions, have insufficient operational experience in the sector (even following Provident's new appointments) and have no clear strategic plan for Provident. They appear to have lost sight of what success looks like, having described the 18-month period culminating in an incredibly disappointing set of full-year results following a profit warning in January as "immense progress" and its 2018 results as a "testament to the successful turnaround" of Provident.

The NSF Board believes that the time for change is now and urges Provident Shareholders to accept the Offer without delay.

Commenting on the Provident Circular, John van Kuffeler, NSF's Chief Executive, said:

"The front page of the Provident Circular tells shareholders not to allow their company's future to be put at risk. I couldn't agree more. With Provident being led by a management team with no credible vision for the future and by a CEO who has let down Provident shareholders as senior independent director, executive chairman and CEO, we urge the Provident shareholders to accept our Offer without delay so that we can get on with the job of fixing and de-risking Provident's problems, restoring its business culture and unlocking substantial value through the execution of our transformation plan.

"Our Offer will create a leading non-standard finance group with strong positions in all four main segments of the sector and a management team with significantly more relevant experience than that of Provident (even following Provident's addition of two directors fresh from the failures at Cattles and Wonga). We believe our Offer and our proposed strategy will again deliver good customer outcomes and improved returns to all shareholders, which is why, as previously announced, we already have such substantial shareholder support."

The NSF Offer

The Offer will, in the view of the NSF Board:

(1) Introduce highly experienced and effective management across the Provident businesses within the Enlarged NSF Group

(2) Revitalise Provident through the implementation of a clear transformation plan

(3) Implement lasting change by improving Provident's culture and working closely with regulators

(4) Address Provident's lack of leadership, governance and vision to drive improved financial performance

Each of these points is expanded upon, and contrasted with the assertions made in the Provident Circular, below:

(1) Introduce highly experienced and effective management across the Provident businesses within the Enlarged NSF Group

· Future leadership - The NSF Board and senior management team have significantly more experience than the Provident Board (even following Provident's new appointments), both in the non-standard finance sector and at Provident itself:

The NSF Board has more than double the experience of the Provident Board,both in the non-standard finance sector generallyand on the Provident board in particular[1]

· Our leadership: With 68 years of combined experience in non-standard consumer finance (including over 33 years of experience at Provident) and over 175 years in financial services, the NSF senior management team has a strong track record of enhancing shareholder value and greater and more relevant experience (including executive experience in the sector) across the businesses of the Enlarged NSF Group, than the Provident Board.

· The NSF Board includes board members who:

· have generated substantial shareholder value at Provident, including John van Kuffeler who, during his 22 years on the Provident Board, generated a cumulative total shareholder return of over 4,000 per cent.[2] In contrast, since Malcolm Le May joined the Provident Board the Provident share price has declined by 57 per cent.[3];

· have held major roles at banks, including Niall Booker, who has extensive experience in credit card services and was CEO of a major dual-regulated UK bank and Group Managing Director of the holding company of a major international banking group;

· led the Provident Board in founding Vanquis Bank and oversaw the Bank's growth as it anchored itself as a key market participant; and

· have chaired FTSE 100 companies.

· In addition to its operational expertise, and in contrast to the assertions made by Provident in the Provident Circular, the NSF Board has extensive experience of overseeing and successfully implementing large transactions[4] and of raising finance.[5]

· The NSF Board, having managed a number of regulated companies in the sector over the past four years, has not seen any of these businesses become subject to regulatory sanction whereas, over the same period, each of Provident's three divisions has incurred some form of regulatory reprimand, be it fines, customer restitution, regulatory investigation or special supervisory measures.

· The Provident proposition: On 23 March 2019, Provident announced the appointment of two Non-Executive Directors, Graham Lindsay and Robert East, to the Provident Board. Whilst they purport to bring sector experience, these appointments appear to be reactive to the NSF Offer and do not, in the view of the NSF Board, add the much-needed operational expertise required to restore shareholder value.

· Graham Lindsay joined Wonga UK to "improve the business and deliver change" from his role as Responsible Business Director at a mainstream UK bank. Yet, less than three years after joining, he was a member of the board at Wonga that oversaw the business's administration following its inability to cope with the level of customer redress claims in 2018.

· Robert East is a director of Welcome Finance, a business no longer taking new loan applications due to the demise of its owner, Cattles. Robert East was appointed to lead the Cattles restructuring but subsequently, as the Provident Circular states, presided as Chief Executive over the company's wind down in 2016, when it was voluntarily liquidated.

· The NSF Board seeks to fix and de-risk Provident, as well as unlock substantial value, to ensure a better future for Provident, its customers, employees and shareholders. Provident does not, in the NSF Board's view, need the addition of individuals to its board whose recent experiences have involved the final stages of corporate failures in the sector. Provident needs the clear and decisive leadership of the highly experienced NSF Board and senior management team which has the clear vision and successful operational experience to deliver growth and restore shareholder value.

· Vanquis Bank - Having been without a permanent Vanquis CEO since November 2018, the NSF Board believes the Provident Board has only been stirred into action by the announcement of our Offer:

· The Provident Board reactively announced that the search for a new managing director and chairman for Vanquis was complete 12 days after the announcement of our Offer, yet it took a further 19 days for the Provident Board to finally share the identities of those individuals.

· The Provident proposition: Provident has now announced that Neil Chandler and Robert East will join Vanquis as Managing Director and Chairman, respectively. Neil Chandler's most recent experience was as divisional CEO of Shop Direct, where he was responsible for financial services and Group IT and oversaw a repayment plan to provide customer redress for mis-selling insurance products with financial provisions of over £240 million[6] and a delayed IT implementation. The NSF Board believes that Provident Shareholders will find the appointment of Neil Chandler to such a significant role to be unconvincing.

· Our plan: As announced in our Rule 2.7 announcement, following Completion, subject to the receipt of relevant regulatory approvals, NSF intends to appoint a new Chairman and CEO to the Vanquis board to re-energise growth and oversee a refresh of Vanquis's product offering.

· Niall Booker, a Non-Executive Director of NSF, has agreed, subject to the receipt of relevant regulatory approvals, to join Vanquis as Chairman, bringing with him his considerable banking experience, having been CEO of two banks and a number of HSBC businesses and, in these roles, having dealt successfully with challenging situations (including managing HSBC's US sub-prime card business successfully through the financial crisis and overseeing the initial recapitalisation of the Co-Operative Bank following the announcement of its £1.5 billion capital shortfall in June 2013). Niall's strong credit card experience includes overseeing the consumer lending firm, Household International, a division of HSBC North America, in his role as both COO and CEO. Having managed the business successfully through the financial crisis, he then sold it to Capital One. Given this experience, Niall is, in the view of the NSF Board, considerably better suited to the role of Vanquis Chairman than Robert East, who was involved in the final stages of the collapse of a consumer finance company only three years ago.

· Home credit - The introduction of experienced leadership with a proven track record will enable the effective cultural transformation of Provident's home credit business. This will ensure Provident can distance itself from the disappointing results of the recent past, address the failed transformation and effectively restore a business culture which is focused on delivering good customer outcomes.

· Subject to approval by the FCA, it is expected that the current CEO of Loans at Home, Davie Thompson, CFO, Jono Gillespie and Chief Risk Officer, Paul Gill (who have 60 years of combined experience in the home credit sector), will in due course lead the home credit business of the Enlarged NSF Group. John van Kuffeler is expected to become Chairman of the division.

· The strengthened management of the home credit business of the Enlarged NSF Group will introduce best-in-class regulatory practices with a view to further improving the business's relationships with regulators and restoring the confidence of customers. All material changes would only be implemented following consultation with, and receipt of any required approval from, the FCA.

(2) Revitalise Provident through the implementation of a clear transformation plan

Unlike the Provident management which, in its own words, "maybe wandered off the path" and has a track record for poor execution of its own plans, the NSF Board has a strong track record of implementing sustainable and lasting change. The key areas will be:

· Focusing on four core divisions - The Enlarged NSF Group will focus on credit cards, home credit, branch-based lending and guarantor loans, each of which is a market-leading business with exposure to profitable segments of the non-standard finance sector and capable of delivering highly attractive returns.

· Re-energising growth at Vanquis - Following completion and receipt of appropriate regulatory approval, the new Chairman of Vanquis, Niall Booker, will oversee a refreshed Vanquis product offering and focus on re-energising growth including through its core non-standard credit card product.

· Cross-selling of products across the enlarged customer base - The Enlarged NSF Group will look to take full advantage of the cross-selling opportunities between the businesses of the Enlarged NSF Group and to capitalise on the expanded customer base (subject always to compliance with any applicable regulatory restrictions and any required regulatory consent). Such opportunities shall include focusing on cross-selling the Everyday Loans unsecured loan products, and the products of NSF's Guarantor Loans Division, to Vanquis customers (who are of a similar demographic to NSF's branch-based lending and guarantor loans customers and who are not currently offered such products by Provident). The NSF Board considers that this will provide a more suitable, flexible and, ultimately, popular offering to Vanquis customers than Provident's current cross-selling proposition.

· Improving the performance of Provident's home credit business - In addition to improving the cost efficiency of the business that again saw its cost to income ratio increase in 2018, the NSF Board intends, subject to consultation with and the agreement of the FCA, to introduce variable pay based on a balanced scorecard (including both (i) elements related directly to customer outcomes and (ii) malus provisions), putting the customer at the heart of the business and maintaining a clear focus on good customer outcomes. The NSF Board recognises the changes being made by Provident in this area, but considers that it has a considerably stronger track record of implementing positive change than the Provident Board and is therefore, in its view, best placed to make sustainable and well-executed changes to this business.

· Realising synergies - The NSF Board expects the transformation plan to generate synergies and sustainable shareholder returns for the Enlarged NSF Group (subject always to any applicable regulatory consent or agreement) including, in the NSF Board's view:

· Operational cost synergies - By removing duplicated functions across the Enlarged NSF Group and achieving greater operational efficiencies, in particular, reducing the size of Provident's central costs and the cost base of Provident's home credit business.

· Reduced funding costs - By leveraging, contrary to assertions in the Provident Circular, the enhanced scale of the Enlarged NSF Group to secure wholesale funding at similar levels to those currently available to Provident, in particular, through the successful implementation of the NSF Board's transformation plan to restore profitability and growth. In addition, access to deposit funding through Vanquis could provide an opportunity for further savings on funding costs. However, as the NSF Board regards this as a long-term target and recognises that PRA approval would be required to achieve it, NSF's plans are not based on access by the wider group's businesses to deposit funding through Vanquis.

· Revenue synergies - By taking advantage of cross-selling opportunities from introducing Everyday Loans' and the NSF Guarantor Loans Division's products to Vanquis's 1.8 million customers, synergies which the NSF Board believes align more naturally with the Provident customer base than the opportunities that could be generated by Provident's proposed collaborations between Vanquis and Satsuma or Moneybarn (opportunities which do not appear to have been taken advantage of to date).

· Simplifying the structure of the Enlarged NSF Group - The NSF Board continues to consider the sale of Moneybarn and the sale or closure of the loss-making Satsuma business to be key elements of the transformation plan to create value for shareholders because vehicle finance and high cost credit are non-core to its future strategy. Satsuma offers high-cost short-term credit products (with APRs of up to 1575 per cent.) which are, in the view of the NSF Board, aggressively priced. The NSF Board firmly believes that the existing Satsuma customer base would be better served by the Enlarged NSF Group's lower cost APR products. The NSF Board continues to expect to return sale proceeds to shareholders of the Enlarged NSF Group, subject to the outcome of discussions with lenders. The NSF Board also continues to firmly believe that, outside the Enlarged NSF Group, Loans At Home will continue to be a viable, well-managed, standalone business in the established home credit market.

(3) Implement lasting change by improving Provident's culture and working closely with regulators

The NSF Board will focus on positive customer outcomes, working closely with regulators to successfully implement change across the Provident businesses.

· Provident's regulatory mismanagement -- By any measure, Provident's recent regulatory record has been poor and numerous regulatory issues and restrictions still exist within the group:

· Bungled execution of the move to a new operating model in the home credit business in 2017 which was principally aimed, in the Provident Board's own words, at delivering "a more efficient and effective business" but instead resulted in unprecedented agent attrition and vacancies and compromised positive customer outcomes;

· Failed implementation of the recovery plan put in place for this self-inflicted problem, further compounding the issue in the home credit business;

· Serious failings in the selling of Vanquis's ROP product, which affected at least 1.3 million customers and led to settlement with the FCA in 2017 at a total cost of £172.1 million (comprising regulatory fines and the cost of the redress scheme). The redress scheme relating to this failure was only announced as being complete on 23 March 2019;

· Failure of customer/product affordability assessments in the Moneybarn division, leading to an FCA investigation which remains ongoing, and has led to a £20 million provision being made in Provident's accounts;

· The FCA placing Provident under enhanced supervision, which is ongoing;

· The CBI subjecting Provident to a risk mitigation programme, which is ongoing;

· Ongoing restrictions over the use of deposits, and payment of dividends, by Vanquis, as agreed with the PRA;

· Continued indications of poor culture within Provident: the ASA labelled one of Provident's pre-Christmas advertising campaigns as "irresponsible"; the same advertising campaign led to the Chair of the House of Commons Business Select Committee writing to the FCA to express concern about the "cynical tactic" employed by Provident; and

· Hardly any wonder that the "tone from the top" consistently hits the wrong note when Provident's current CEO has held a senior board-level role through the entirety of this shambolic period, initially as Senior Independent Director, then as Executive Chairman and now as CEO.

· Provident lacks key operational experience - The Provident Board continues to show, in the view of the NSF Board, a lack of understanding of how to successfully operate businesses in the non-standard finance sector. Provident recently announced a trial for the remote collection of home credit payments (via continuous payment authority) instead of those collections being made by customer experience managers in customers' homes. The NSF Board firmly believes that what the Provident Board dubs a "product enhancement" is in fact a drive to cut costs and fails to recognise the fundamental importance of a weekly visit to the home which allows the collection to be made but also provides invaluable intelligence regarding the customer's prevailing circumstances. The NSF Board believes that Provident's proposal does not focus on good customer outcomes and could have a negative impact on the business's impairment levels.

· Provident does not meet the industry standard for a good and healthy culture - While Provident may have taken steps, including recently launching a group-wide cultural 'blueprint', to address the deficiencies within its culture, Provident has set out little of substance regarding these changes. The NSF Board believes that Provident continues not to achieve the basic standards required to have a healthy culture in a consumer credit business and that:

· had Provident had a healthy culture, customer outcomes and financial performance would have been significantly better: the series of regulatory sanctions incurred by Provident demonstrates compromised customer outcomes and has impacted financial performance; and

· had Provident successfully restored its culture, recent exits at all levels of the business, including recent senior departures, and the unprecedented agent attrition following the failed home credit transformation, would not have occurred. Provident has had to deploy extensive employee capacity to the home credit recovery plan and ROP refund scheme, thereby not allowing employees, over recent years, to focus on the core business.

· An NSF regulatory record of which we are proud - In sharp contrast to the significant regulatory problems overseen by the Provident Board, NSF's operational performance has been achieved with a clean regulatory record built on an unrelenting commitment to good customer outcomes, a strong management and what the NSF Board believes are open and positive relationships with the regulators based on:

· The fact that NSF has never encountered any significant regulatory issue in any of its three divisions;

· NSF has worked on building a constructive relationship with the FCA over the past four years, owning four entities at the time they received FCA authorisation and being approved in a previous change of control process;

· The NSF Group's focus on strong values based on positive stakeholder outcomes, which the NSF Board has developed by focusing on: the well-being of its staff and self-employed agents; clear stakeholder communications; appropriate staff incentives; investment in recruitment; and training and engagement with the communities in which the businesses operate; and

· The NSF Board's belief that positive culture comes from the top and from history in the sector, which puts the NSF leadership, with its strong regulatory track record in the non-standard finance sector, in the best position to turn-around Provident's cultural shortcomings.

NSF welcomes the further work that the FCA is carrying out to understand affordability issues and lending practices in the guarantor loans segment. The NSF Board firmly believes in the aspects of NSF's underwriting process which distinguish the NSF Guarantor Loans Division from the wider market and in its responsible approach to guarantor loans, which together drive best practice and are focused on good customer outcomes. NSF has provided further detail on this in the Appendix to this announcement.

· Successfully implementing change - The prolonged period of regulatory mismanagement overseen by the Provident Board has led to poor outcomes for customers and the destruction of shareholder value - Provident Shareholders will judge whether the required business transformation can be best delivered under the stewardship of the experienced NSF Board or the current Provident Board which claims to have a clear plan but which has produced little evidence to suggest it is capable of implementing any meaningful change.

(4) Address Provident's lack of leadership, governance and vision to drive improved financial performance

In addition to the problems described above, the Offer intends to address:

· Provident's ineffective leadership and inadequate governance - In the view of the NSF Board, the Provident Board is incapable of identifying, let alone reversing, Provident's current problems given that these problems have been overseen by Provident's current CEO, Malcolm Le May, initially as Senior Independent Director, then Executive Chairman and now as CEO and given that the current board members, most of whom are new to Provident, have insufficient collective experience in the non-standard finance sector:

· Despite Provident's announcement on 23 March 2019, Malcolm Le May continues to lead a board with little successful operational experience across the divisions of the Provident Group;

· The Provident Board recently cited the appointment of Malcolm Le May as CEO as the achievement of a key priority, praising his "regulatory understanding" and "turn-around and leadership skills" - given his oversight of the three profit warnings and significant regulatory failings at Provident in recent years, the NSF Board believes the evidence suggests otherwise;

· By June 2019, save for the current Senior Independent Director, Malcolm Le May will be the only member of the Provident Board with over nine months' experience on the Provident Board. In contrast, the NSF Board has over 30 years' prior experience on the Provident Board and includes the former Chairman and CEO and Deputy Chairman of Provident;

· The recent departure of the Provident CRO, and the announcement that the Provident General Counsel and Company Secretary will step down at the end of March, are the latest in a series of senior departures, creating a disruptive impact on the Provident business and further delaying the necessary turn-around;

· Following its announcement on 23 March 2019, even with the additions of Robert East and Graham Lindsay, Provident continues to be under leadership which, in the opinion of the NSF Board, does not have sufficient successful sector experience required to manage a non-standard finance group and turn-around the fortunes of Provident; and

· The NSF Board notes with interest the appointment of Evercore as financial adviser to the Non-Executive Directors of Provident. Shareholders may wonder why the Non-Executive Directors of the Provident Board feel the need to receive separate financial advice to the executive members of the Provident Board, including Malcolm Le May.

· Provident's disappointing financial performance - Provident's financial performance has been woeful and there can be no certainty that the Provident Board will be able to restore, or fulfil, a sustainable dividend policy:

· Financial performance - Commenting on its results for the year ended 31 December 2018, Provident reported the "immense progress" it had made over the past 18 months, despite:

· Issuing three profit warnings in this period, most recently just over two months ago, on 15 January 2019; and

· The results showing: a decline in total customer numbers; statutory profit before tax in 2016 of £343.9 million reduced by 74 per cent. to £90.7 million in 2018; a failure to effectively address the size of the home credit cost base; the Consumer Credit Division and Satsuma continuing to be loss-making; and high and rising central costs.[7] 

The NSF Board does not regard delivering at the "lower end of the range of market expectations" as progress and does not regard a 74 per cent. reduction in statutory profit before tax as a cause for celebration.

· Dividends - Provident's self-inflicted problems led to a suspension of dividend payments in 2017. This suspension is effectively still in place (with only a nominal final dividend of 10 pence being possible for 2018). Given Provident's ongoing problems, including the sluggish adjusted PBT growth[8] in Provident's two profitable divisions, Vanquis and Moneybarn, and the lack of clarity over when, and to what extent, the Consumer Credit Division will return to profitability, the NSF Board believes that there can be no certainty as to when Provident would again be able to pay meaningful dividends on a sustainable basis. In contrast, the NSF Board continues to intend that, subject to discussions with the PRA in respect of the restrictions currently imposed on the payment of dividends from the Vanquis business, future dividend payments to shareholders of the Enlarged NSF Group will, over time, reflect NSF's stated policy of paying out at least 50 per cent. of normalised post-tax earnings. NSF also intends to distribute to shareholders of the Enlarged NSF Group any excess capital arising from the expected improvement of Provident's capital efficiency and the proceeds of any sale of Moneybarn and/or Satsuma, subject to the outcome of discussions with lenders to the Enlarged NSF Group.

· Provident's lack of a strategic vision for future financial, operational and regulatory success - having spent 2018 patching-up some of the self-inflicted problems of the past, the Provident Board recently described 2018 as a "successful year" of "excellent progress" delivering against a series of objectives designed solely to fight the fires of the past.

· Not all of these fires have been put out: against a backdrop of ongoing regulatory issues and restrictions imposed by or agreed with the PRA, CBI and FCA, the Provident Board's publicly stated objectives for 2019 reflect a poor understanding of what is truly needed to fix Provident's ongoing problems, with no single objective designed to address ongoing regulatory issues and scant sign of any real ambition for generating meaningful shareholder value over the coming years.

· Whilst Provident's performance in 2018 may be seen by the Provident Board as progress, particularly when judging itself against its catastrophic 2017, we believe this, and its underwhelming vision for 2019, again exemplify a board and management team which, in its own words, "lost its way". In contrast, NSF has a transformation plan that we firmly believe will lead to a better future for Provident, its customers, employees and shareholders with real ambition to unlock shareholder value in the years to come.

The NSF Board urges Provident Shareholders to accept the Offer without delay; the time for change is now.

Enquiries:

Non-Standard Finance plcPeter Reynolds, Director, IR and Communications T: +44 20 3869 9020

Ondra LLP (Financial Adviser to NSF)

Deutsche Bank, London Branch (Financial Adviser to NSF)

Maitland/AMO (Public Relations Adviser to NSF)

Shore Capital (Corporate Broker to NSF)

Further Information

Capitalised terms used but not defined in this announcement have the meanings set out in the announcement of the Offer on 22 February 2019.

This announcement is not intended to and does not constitute or form part of any offer to exchange or subscribe for or any invitation to exchange or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Offer or otherwise. The Offer is being made solely pursuant to the terms of the Offer Document, which contains the full terms and conditions of the Offer. Any decision in respect of, or other response to, the Offer should be made only on the basis of the information contained in the Offer Document.

The contents of this announcement are not to be construed as legal, business, financial or tax advice.

This announcement does not constitute a prospectus or prospectus equivalent document.

Overseas Jurisdictions

The information contained herein is not for release, distribution or publication, directly or indirectly, in or into the United States, Canada, New Zealand, Japan or any other Restricted Jurisdiction where applicable laws prohibit its release, distribution or publication. The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe any applicable requirements. Any failure to comply with the applicable requirements may constitute a violation of the applicable securities laws. This announcement has been prepared for the purpose of complying with English law and the City Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.

Copies of this announcement and any formal documentation relating to the Offer are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from the United States or any other Restricted Jurisdiction and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send it in or into or from the United States or any other Restricted Jurisdiction. Unless otherwise determined by NSF and permitted by applicable law and regulation, the Offer may not be made directly or indirectly, in or into, or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of the United States or any other Restricted Jurisdiction and the Offer may not be capable of acceptance by any such use, means, instrumentality or facilities.

Notice to US investors in Provident:

The Offer is being made for the securities of a UK company and is subject to UK procedural and disclosure requirements, which are different from certain of those of the United States.

For purposes of the US Securities Exchange Act of 1934, as amended (the "US Exchange Act"): the Offer will be made pursuant to Section 14(e) and Regulation 14E under the Exchange Act benefitting from the exemptions available to "Tier II" tender offers. Accordingly, the Offer will be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that may be different from those applicable under US domestic tender offer procedures and law, and certain rules applicable to tender offers made into the United States, including rules promulgated under Section 14(d) of the US Exchange Act, do not apply.

In accordance with, and to the extent permitted by, the Code, normal UK market practice and Rule 14e-5 under the US Exchange Act, the Financial Advisers and their respective affiliates may continue to act as exempt principal traders in Provident Shares on the London Stock Exchange and will engage in certain other purchasing activities consistent with their respective normal and usual practice and applicable law, including Rule 14e-5 under the US Exchange Act. To the extent required to be disclosed in accordance with applicable regulatory requirements, information about any such purchases will be disclosed to the Panel by no later than 12 noon on the next "business day", as such term is defined in the Code, and will be available from any Regulatory Information Service, including the Regulatory News Service on the London Stock Exchange website, www.londonstockexchange.com, and will also be available on NSF's website www.nsfgroupplc.com. To the extent that such information is required to be publicly disclosed in the United Kingdom in accordance with applicable regulatory requirements, this information will, as applicable, also be publicly disclosed in the United States.

For purposes of the US Securities Act of 1933, as amended (the "US Securities Act"): this document does not constitute a public offer of securities in the United States or an offer to the public in the United States to acquire or exchange securities. The New NSF Shares have not been, and will not be, registered under the US Securities Act, and may not be offered, sold or resold except in transactions exempt from, or not subject to, the registration requirements of the US Securities Act. The New NSF Shares have not been, and will not be, registered under the relevant securities laws of any other Restricted Jurisdiction and the relevant clearances have not been, and will not be, obtained from any securities commission of any Restricted Jurisdiction and no prospectus in relation to the New NSF Shares has been or will be lodged with, or registered by, any such securities commission. Accordingly, the New NSF Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold, delivered or transferred, directly or indirectly, in or into any Restricted Jurisdiction if to do so would constitute (or result in the Offer constituting) a violation of relevant laws or require registration thereof.

Important Notices relating to Financial Advisers

Ondra LLP, which is regulated in the United Kingdom by the FCA, is acting as financial adviser to NSF and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters set out in this announcement and will not be responsible to anyone other than NSF for providing the protections afforded to clients of Ondra LLP nor for providing advice in relation to any matter referred to herein.

Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank) and, in the United Kingdom, by the PRA. It is subject to supervision by the European Central Bank and by BaFin, Germany's Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the PRA and FCA. Neither Deutsche Bank nor any of its subsidiaries, branches or affiliates will be responsible to any person other than NSF for providing any of the protections afforded to clients of Deutsche Bank nor for providing advice in relation to any matters referred to in this announcement. Neither Deutsche Bank nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Deutsche Bank in connection with this announcement, any statement contained herein, or otherwise. Deutsche Bank is acting as financial adviser to NSF and no other person in connection with the contents of this announcement.

Shore Capital, which is authorised and regulated in the United Kingdom by the FCA, acts as broker to NSF and will not regard any other person as its client and will not be responsible to anyone other than NSF for providing the protections afforded to clients of Shore Capital nor for providing advice in relation to any matter referred to herein. Neither Shore Capital nor any of its subsidiaries, associates, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Shore Capital in connection with this document, any statement contained herein, or otherwise.

Forward-Looking Statements

This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and business of Provident and certain plans and objectives of NSF with respect thereto. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', 'hope', 'aims', 'continue', 'will', 'may', 'should', 'would', 'could', or, in each case, their negative or other words of similar meaning. They appear in a number of places throughout the announcement and include statements regarding the intentions, beliefs or current expectations of the NSF and the NSF Board. These statements are based on assumptions and assessments made by NSF in light of its experience and its perception of historical trends, current conditions, future developments and other factors it believes appropriate. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this document could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and you are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this document. NSF does not assume any obligation to update or correct the information contained in this document (whether as a result of new information, future events or otherwise), except as required by applicable law.

There are several factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. No statement in this announcement is intended as a profit forecast or profit estimate and no statement in this presentation should be interpreted as such.

The forward-looking statements contained in this announcement speak only as at the date of this announcement. Except as required by the FCA, the London Stock Exchange or applicable law (including as may be required by FCA's Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules), NSF and its directors expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement, whether as a result of any change in events, conditions or circumstances or otherwise on which any such statement is based.

Ondra LLP and Deutsche Bank (and their respective affiliates) expressly disclaim any obligation or undertaking to update, review or revise any forward-looking statement contained in this announcement whether as a result of new information, future developments or otherwise.

Publication on website

A copy of this announcement will be made available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on NSF's website at www.nsfgroupplc.com no later than 12 noon (London time) on the Business Day following this announcement. For the avoidance of doubt, the content of this website is not incorporated by reference into, and does not form part of, this announcement.

AppendixGuarantor Loans

NSF welcomes the further work that the FCA is carrying out in the guarantor loans segment. NSF firmly believes in a responsible approach to all of its customers, including those seeking guarantor loans, and is focused on driving best practice through a clear focus on good customer outcomes.

NSF makes the following observations in relation to the areas of the guarantor loan segment into which the FCA has indicated it is looking:

· Collections from guarantors: The proportion of the total collections coming from guarantors in NSF's Guarantor Loans Division remained stable at below 7 per cent. in each of the last two financial years, which we believe compares favourably with the wider market.

· Repeat lending: Top-up lending in NSF's Guarantor Loans Division (i.e. lending to customers who are already an existing borrower) was at 18 per cent. of volume of new cash for its last financial year, which again we believe compares favourably with the wider market, reflecting NSF's focus on growth through new customer acquisition rather than additional lending to existing customers already indebted to NSF. In addition, where top-up loans are made, NSF makes full assessments afresh (of both borrower and guarantor) as if that customer were new to the product.

· Affordability and lending process: NSF's Guarantor Loans Division follows a rigorous set of procedures in which creditworthiness and affordability are assessed using a number of systems and manual processes. Personal contact with both borrower and guarantor is a requirement in 100 per cent. of cases. A detailed script is completed with guarantors in which their responsibilities are clearly explained and they have to confirm their understanding of a number of 'control' questions thereby providing NSF with the assurance that they understand their responsibilities as a guarantor. All calls are recorded as part of the underwriting process. The guarantor has no less than nine opportunities to withdraw from the process and funds are ultimately advanced into the guarantor's loan account, providing the guarantor with enhanced responsibility and control.

The underwriting and affordability process deployed by NSF's Guarantor Loans Division distinguishes it from the wider guarantor loans market and, in the view of the NSF Board, produces better customer outcomes through:

· broadening customer choice by offering a product suited to the particular circumstances of certain customers, at a lower APR than would be available to them were they to seek to borrow without the presence of a guarantor;

· providing the customer with the opportunity to rebuild or start to build their credit histories, facilitating their advancement to borrowing from prime or near-prime sources of credit in the future; and

· ensuring both the customer and guarantor are fully appraised of the terms of the loan and the responsibilities involved in repaying it.