PFG.L Regulatory News (PFG)

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29 April 2019

Non-Standard Finance plc ("NSF")

Offer for Provident Financial plc ("Provident")

Our plan for a brighter future

· We are working towards a brighter future for Provident: NSF has the management expertise and clear plan to revitalise Provident and unlock substantial value for the benefit of customers, employees and shareholders of both Provident and NSF.

· NSF has discussed its plans with the FCA and PRA and expects that the associated conditions to the Offer will be satisfied by 5 June 2019.

· NSF has received FCA change of control approval when required in the past.[1] All of NSF's business divisions are fully FCA-authorised and under NSF's ownership have never been the subject of any sanction, fine or special supervision by any regulator.

· NSF intends that Provident Shareholders retain the full benefit of the final dividend declared by Provident in respect of the 2018 financial year and, consequently, will not exercise its right to reduce the number of New NSF Shares that Provident Shareholders receive.

· NSF has already received acceptances from shareholders holding over 50 per cent. of Provident's Shares, further details of which are set out below.

· In view of our strong confidence in our ability to complete the Offer, the NSF Board has decided to set 15 May 2019 as the revised closing date of the Offer and the last date on which the Offer can be declared unconditional as to acceptances. NSF will not be extending this deadline. NSF expects the Offer to become or be declared wholly unconditional by 5 June 2019.

· The NSF Board urges Provident Shareholders to accept our Offer without delay and, in any event, by 1.00 p.m. on 15 May 2019, being the last date on which the Offer can be declared unconditional as to acceptances, so we can start to implement our transformation plan for the benefit of customers, employees and shareholders.

The NSF Board continues to believe firmly that its plan is the right one for Provident, given NSF's view that:

· the industrial logic for combining Provident and NSF under the NSF Board and management team is compelling;

· the NSF Board and management team have a deep understanding of this business and this sector and are well placed to execute the detailed transformation plan to revitalise Provident (subject to any required regulatory consultation or approvals);

· the Offer and transformation plan will, amongst many other things, enable NSF to improve the product offering to, and outcomes for, Provident's customers and restore Provident's culture for the benefit of its employees and customers; and

· the Offer and transformation plan will help to unlock substantial shareholder value and deliver greater benefits for shareholders than either Provident or NSF could achieve on their own.

This announcement contains a letter from John van Kuffeler, the NSF Group Chief Executive, highlighting the merits of NSF's Offer and detailing NSF's vision for a brighter future for Provident.

Commenting on today's announcement, John van Kuffeler, NSF's Group Chief Executive said:

"Our Offer and transformation plan for Provident is compelling and will benefit customers and employees as well as unlock substantial value for shareholders. It represents a clear alternative to the status quo offered by the Provident Board and, having already received acceptances from shareholders holding over 50 per cent. of Provident's shares, we urge all remaining Provident shareholders to accept our Offer without delay."

Letter from John van Kuffeler, NSF's Group Chief Executive

7 Turnberry Park Road

Gildersome, Morley

Leeds LS27 7LE

United Kingdom

29 April 2019

Dear Shareholder,

There has been much said and written since we launched our Offer for Provident some nine weeks ago. As we approach the final stages of this process, now feels like the right moment to remind those of you who have not already accepted our Offer why I and the NSF Board believe strongly that you should do so.

As a Board we care passionately about Provident, its customers, employees and shareholders. I and many of my NSF colleagues spent a significant proportion of our careers building Provident into a hugely successful company and it has been most upsetting to watch its recent significant decline. However, we know that significant potential lies within Provident and therefore have developed a detailed transformation plan that we believe will improve outcomes for customers, restore Provident's culture so that employees can once again be proud of their place of work and unlock substantial value for shareholders.

OUR PLAN FOR A BRIGHTER FUTURE FOR PROVIDENT

In our Offer Document of 9 March 2019, we set out in detail the steps that we will take to turn around Provident's fortunes and unlock substantial value: following Completion, the NSF Board intends to transform Provident's culture, improve customer outcomes, sell or close non-core and non-performing assets, cut costs, realise synergies and return capital to shareholders as follows:

· Retain the NSF Board to oversee the Enlarged NSF Group - 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 Board will continue to draw on its expertise and experience in its oversight of the Enlarged NSF Group.

· Focus the Enlarged NSF Group on four divisions:

· credit cards

· home credit

· branch-based lending

· guarantor loans

each of which is a market-leading business with exposure to a profitable segment of the non-standard finance sector and which is capable of delivering highly attractive returns.

· Implement a transformation plan to revitalise the performance of Provident's core businesses - this is expected to be achieved, following appropriate consultation with (and having received any necessary approvals from) regulators, by implementing the following initiatives across Provident's businesses within the Enlarged NSF Group:

· the appointment of strengthened management teams:

· Vanquis - appoint Niall Booker as Chairman, followed by further senior management appointments from a group of pre-selected candidates in due course; and

· Consumer Credit Division - appoint John van Kuffeler as Chairman, Davie Thompson as CEO, Jono Gillespie as CFO and Paul Gill as Chief Risk Officer;

· the execution of revised business strategies in both Vanquis and the Consumer Credit Division including an optimised product offering and tighter control of operational costs;

· ensure a complementary product range is offered and take advantage of cross-selling opportunities across the enlarged customer base; and

· the restoration of Provident's culture, enhancing the focus on the delivery of good customer outcomes.

· Realise operational cost synergies - NSF believes that there is potential scope for cost savings at both central head office as well as within the Consumer Credit Division.

· Central costs - in combining two listed companies, NSF believes that it should be possible to remove duplicated functions across the Enlarged NSF Group and achieve significant operational efficiencies. In particular, NSF will seek to reverse Provident's central cost base inflation which grew to £20.2 million in 2018 (from a central cost base of £12.8 million in 2017).[2]

· Consumer Credit Division - the NSF Board believes that the costs in the Consumer Credit Division are too high, as evidenced by its cost to income ratio of 71.5 per cent. for the year ended 31 December 2018 compared to, despite its smaller size, the considerably lower ratio of Loans at Home, that for the same period was 57.1 per cent.[3] 

· Reduce funding costs - following Completion, the NSF Board expects to leverage the enhanced scale of the Enlarged NSF Group to secure funding at a similar cost to that currently available to Provident.

· Realise revenue synergies - given the complementary product offerings of Vanquis, Everyday Loans and NSF's Guarantor Loans Division, NSF believes there are cross-selling opportunities and possibilities for improved customer outcomes from introducing loan products from Everyday Loans and NSF's Guarantor Loans Division to Vanquis' base of 1.8 million customers, a high proportion of whom, when surveyed, have previously expressed an interest in a personal loan.

· Simplify the structure of the Enlarged NSF Group to unlock shareholder value - the NSF Board intends to simplify the structure of the Enlarged NSF Group in order to create value for its shareholders: 

· The Demerger of NSF's home credit business, Loans at Home - although the timing and structure of the Demerger remain subject to further consideration, including by the CMA, it is expected that the Demerger would take place following Completion and that Loans at Home would be admitted to trading either on the Main Market (with a standard listing) or on AIM. It is therefore expected that, as a result of the Demerger, in addition to holding New NSF Shares, Provident Shareholders who participate in the Transaction will benefit from holding shares in the newly-listed Loans at Home. The NSF Board considers that Loans at Home is, and will continue to be, a viable, well-managed, independent, standalone business. As the Demerger remains subject to review by the CMA, NSF reserves the right to change its strategic plans with respect to Loans at Home.

· The sale of Moneybarn and the sale or closure of Satsuma - as noted below, NSF views both businesses as non-core to the future strategy of the Enlarged NSF Group:

· Moneybarn is Provident's vehicle finance business and is a leader in the provision of vehicle finance for the non-standard credit market. Based on its own experience, the NSF Board believes car finance is a highly cyclical lending activity. As a result, such businesses do not meet our strict strategic criteria of being able to deliver consistent profit performance through the economic cycle. We have therefore announced our intention to sell Moneybarn in a competitive auction process, to be launched following Completion. NSF has already received several expressions of interest and is therefore confident of being able to return value to shareholders (subject to discussions with pension trustees and lenders to the Enlarged NSF Group).

· Satsuma is Provident's short-term unsecured loans business. For the reasons outlined below, Satsuma is a product that we consider to be unattractive and incapable of delivering good customer outcomes. It has also been loss-making since its inception and, despite statements by the Provident Board dating back to 2015 conveying its expectation and aim that Satsuma would soon move into profitability, this has failed to materialise. The NSF Board intends to sell Satsuma or to close it, running-off its loan book in an orderly fashion following Completion.

· Dividend policy - given Provident's recent financial performance and operational shortcomings, the NSF Board will need to review the dividend policy of the Enlarged NSF Group shortly following Completion. However the NSF Board intends that future dividend payments to shareholders of the Enlarged NSF Group will, over time, reflect its stated policy of paying out to shareholders at least 50 per cent. of normalised post-tax earnings. This will be subject, amongst other things, to discussions with and the agreement of the PRA in respect of the restrictions currently imposed on the payment of dividends by Vanquis.

· Potential for capital return - 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 regulators, pension trustees and lenders to the Enlarged NSF Group. NSF's final dividend for the financial year ended 31 December 2018 of 2.00 pence per NSF Share is expected to be paid on 7 June 2019 to existing NSF Shareholders with a record date of 24 May 2019.

· Restore the confidence of regulators - the NSF Board expects its transformation plan will over time restore the confidence of regulators in the management of both Provident and Vanquis, a process that NSF believes should then lead to the possibility of releasing excess capital from the Provident Group.

· Transfer NSF to a premium listing - the NSF Board will apply to the FCA to transfer NSF's current listing on the Official List under the Listing Rules from a standard listing to a premium listing as soon as practicable following Completion. A separate announcement will be made regarding the transfer in due course.

This is a comprehensive plan that has been developed carefully, drawing upon our considerable experience and knowledge of Provident and the non-standard finance sector and has been shaped to address the concerns of, and to benefit, all stakeholders.

We expand below on why we believe that our Offer will benefit key stakeholders and how our plan compares with their recent experience at Provident.

IMPROVING OUTCOMES FOR CUSTOMERS

Since its inception in 2015, NSF has been committed to the delivery of good customer outcomes - not just because our regulators require it but because it makes good business sense and also because our staff and representatives expect it. Our philosophy is founded upon the principle of lending 'a helping, but firm hand' - in other words, providing credit that meets a customer's need but ensuring that the customer can afford it and that we can lend responsibly.

It is estimated that 10-12 million UK adults either cannot or are unwilling to borrow from mainstream banks. Many are on low or variable incomes, have little or no credit history or have impaired credit records. However, like the rest of society they still need access to credit so as to be able to help manage the peaks and troughs in their income and expenditure.

NSF has established a portfolio of businesses with the right products, the right infrastructure and the right culture to be able to provide credit in a highly regulated and responsible way to this large and underserved segment of the UK population. Each of our three business divisions is fully-authorised by the FCA and, since becoming part of NSF, has not been the subject of any regulatory intervention or sanction.

This is in sharp contrast with Provident, which remains under enhanced supervision and where all three business divisions have been subject to regulatory investigation, fines and/or other enforcement measures following a series of failings that have impacted its customers.

In all three divisions of Provident, we intend to take a series of steps that we strongly believe will be good for customers. These steps are summarised below:

Vanquis - under the leadership of Niall Booker as Chairman, working with and subject to the approval of regulators, where relevant, we plan to:

· concentrate on serving the core sub-prime Vanquis customer base where the market potential remains large;

· introduce suitable Vanquis customers, who may be interested in a term loan, to the face-to-face lending product suite of NSF's Everyday Loans business. Our well-invested infrastructure and proven track record of meeting the needs of thousands of credit-impaired consumers across the UK will ensure that such customers are able to get the right credit solution for their particular circumstances, delivered face-to-face through one of our branches;

· introduce suitable Vanquis customers to the proven suite of products provided by our Guarantor Loans Division where we consider a guarantor loan will be a more appropriate solution for customers' requirements and deliver better customer outcomes;

· close Vanquis' lending pilot, which in our view will no longer be required following the introduction of Everyday Loans and Guarantor Loans Division products. This will remove the need to continue funding what we believe is a sub-scale and loss-making product and an unnecessary distraction from Vanquis' core activity of non-standard credit cards; and

· working with and subject to the approval of the regulators, introduce a new variant of the Repayment Option Plan product to the extent that it provides better value and better outcomes to customers than Vanquis' forbearance procedures.

Consumer Credit Division ("CCD") - we also plan to take a number of steps in CCD that we believe will improve the overall service to customers.

First, in home credit, working with and subject to the approval of the regulators, we plan to:

· introduce more flexible working hours for our customer-facing representatives so that they can more easily fit in with the desired collection times requested by their customers - for example, our own experience is that few, if any, customers want to arrange a collection or to take out a new loan first thing on a Monday morning - greater flexibility will make it easier for the customer and for staff to arrange the best time for them to meet at the customer's home;

· reintroduce face-to-face underwriting by company representatives - given their relationship, frequent contact and detailed knowledge of the customer's circumstances, each of which is in addition to any online credit analysis provided by an automated system, they are much better placed to make a well-informed decision about: (i) whether they should lend or not, thereby providing an additional safeguard to the lending process; and (ii) whether or not customer forbearance should be applied. This is in contrast to the approach taken by Provident which appears to believe that the purpose of its customer-facing representatives is merely to collect repayments or to lend the amount specified by the loan management system;

· reverse any planned move to trial remote-only collection as proposed by Provident ('Provident Direct') as we believe in the fundamental importance of the weekly visit and face-to-face collections that have underpinned the longevity and sustainability of the home credit model for over 100 years; and

· gradually reduce the volume of longer-term lending - home credit was always designed to enable customers to smooth the peaks and troughs in their expenditure through an annual cycle and not to run for periods of more than one year, other than in exceptional circumstances. We believe that over time the proportion of Provident's home credit loan book that is made up of loans of more than one year has increased with the result that many customers are repaying over much longer periods than we believe is appropriate. These longer-term loans are likely to have the highest total cost of credit, due to their term. By shifting customers onto shorter-term loans, a change we have already effected successfully at Loans at Home, customers will end up paying a lower total cost for their credit, leaving more money in their pockets.

Second, we fully expect that we will either sell or close the Satsuma business. As well as having lost money every year since its launch in 2013, we also have a number of issues with the Satsuma product offering:

· we believe that Satsuma's high APR products are not aligned with our focus on good customer outcomes and are likely to have contributed to the sharp spike in complaints to the Financial Ombudsman Service about Provident Personal Credit;[4] and 

· we believe that instead of taking out a Satsuma loan, customers would be better served by using lower APR home credit products, allowing them to make meaningful savings both in terms of regular repayments and also in the total cost of credit.

Moneybarn - as set out above, the NSF Board believes car finance is a highly cyclical lending activity. As a result, such businesses do not meet our strict strategic criteria of being able to deliver consistent profit performance through the economic cycle. We have therefore announced our intention to sell Moneybarn.

In addition, we believe that, with Moneybarn having been the subject of a lengthy FCA investigation and an expectation that it will be required to pay up to £20 million in customer redress, a new owner for the business will be better placed than the Provident Board to drive the business forward, ensure the delivery of good customer outcomes and deliver value for shareholders. As part of any sale we will ensure that any customer restitution/redress programme required by or agreed with the FCA has either been completed before sale or will be met by the purchaser after completion, pursuant to a legally binding commitment given as part of any transaction.

How have customers fared under Provident?

· Customers have been let down on numerous occasions in recent years, including as recently as Christmas 2018 - Provident has been the subject of fines, regulatory sanction and investigation regarding the treatment of customers across all three of its businesses:

· Provident Personal Credit was fined for sending nearly one million nuisance texts;

· Vanquis was fined for sending over half a million spam texts and half a million spam emails;

· Provident Personal Credit's Christmas 2018 advertising campaign was banned as it 'targeted vulnerable consumers and was irresponsible';

· CCD had to institute a recovery plan to 're-establish relationships with customers' and address the highly damaging execution of the move to a new operating model;

· Vanquis was fined for mis-selling its ROP product affecting at least 1.3 million customers; and

· Moneybarn's processes for customer affordability assessments and its treatment of customers in financial difficulties have been investigated.

· In contrast, none of NSF's businesses has, under our ownership, been fined, subjected to regulatory sanction or placed under investigation by any regulator.

· There is worrying evidence that this could continue into the future - Provident continues to demonstrate a lack of focus on good customer outcomes:

· Provident continues to offer high-cost credit products through Satsuma. At APRs of up to 1,575 per cent., for amounts under £1,000, over time periods of less than a year, such products have the potential to jeopardise good customer outcomes, as payday loans have done elsewhere for thousands of consumers in the recent past.

· Complaints to the Financial Ombudsman Service about Provident Personal Credit have increased dramatically, with the number of new complaints growing by over 2,500 per cent. since December 2013.[5]

· The Provident Board appears to be learning on the job and at customers' expense - the Provident Board recently noted that it has 'learned that good governance, adherence to regulatory best practice and putting the customer at the forefront' are fundamental. To NSF these points are self-evident.

RESTORING PROVIDENT'S CULTURE FOR THE BENEFIT OF EMPLOYEES

As I said in my letter to Provident staff on 22 February 2019, the recent past has proven to be a very difficult period for staff. As well as having to deal with the aftermath of what was a poorly conceived and executed change to Provident's home credit business, staff were also faced with regulatory investigations in all three divisions resulting in fines and customer redress and the Provident Group being placed under enhanced supervision. Combined with poor business performance, I am sure this has prompted many to be concerned about the future of their employer and the outlook for their own job prospects.

The NSF Board believes that one of the root causes of many of Provident's problems was a culture that had become more focused on profit than good customer outcomes, increasing pressure on staff to meet increasingly challenging targets and putting undue risk into business performance.

In my 22 years at Provident, first as CEO and then Chairman, I met staff on my regular visits around the group and sought to foster a culture of openness and clear feedback, where staff and management enjoyed their work and customers were well-served and looked after properly. By the end of my tenure, I was incredibly proud of the values and culture that had been established, both of which I believe underpinned the business' success.

Unsurprisingly, as a Board we have instilled the same approach at NSF, the benefits of which can be seen in our strong operating performance since our IPO in 2015. I believe that through our transformation plan we can fix Provident's problems whilst at the same time restoring the same values throughout Provident.

Many current Provident employees know me and have seen my leadership and cultural approach first-hand. For those who do not know me, I am a firm believer in leading from the front and, together with my fellow NSF Board members, insist on spending time out in the business, meeting regional management, staff and customers in order to ensure that what we can read in board reports is reflective of what is actually going on at the coalface. It also provides an invaluable source of feedback on how the organisation is faring and where there may be issues or concerns that are impacting our people or our customers.

Such an approach has served me well throughout my career and I believe it is one that has been lacking at Provident since I left in 2013.

However, in my letter of 22 February 2019 to staff and in the spirit of openness, I also made clear that there would need to be changes to the Provident business, some areas of which had grown out of proportion to the business as a whole. Whilst these changes will be difficult for some, I am convinced that our transformation plan will be welcomed by the vast majority of Provident staff who I am sure want nothing more than for their company to perform once again to its full potential.

How have employees fared under Provident?

We believe that Provident's culture has been allowed to drift as evidenced by:

· A significant loss of senior employees, especially from Vanquis - over half of Vanquis' senior management team highlighted at the group's capital markets day in April 2017, have since left the business:

· Director Credit Cards and IT left in February 2018;

· Commercial Director of Loans left in March 2018;

· HR Director left in September 2018;

· Managing Director left in October 2018; and

· Legal and Compliance Director left in April 2019.

· Rewards for staff have been impacted by poor financial performance - Provident's poor performance in 2017 and 2018 has reduced incentives and bonus arrangements as a result of the business performing below expectations[6], despite such underperformance not being due to the fault of most staff within the Provident businesses. Many employees are also holders of Provident Shares and/or share options and so have seen the value of their holdings reduce significantly.

· Deployment of employees to deal with redress and recovery - Provident has had to deploy extensive employee capacity to the home credit recovery plan and ROP refund scheme, thereby preventing such employees, over recent years, from being able to focus on the core business.

UNLOCKING SUBSTANTIAL VALUE FOR SHAREHOLDERS

The key benefits of our Offer and transformation plan for shareholders include:

· establishing the Enlarged NSF Group as a leading non-standard finance provider, with a presence in four profitable segments so that it can meet the evolving needs of customers across a range of different product categories in a growing sector;

· bringing the combined business under the leadership of the highly-experienced NSF management team that has a history of creating shareholder value in the UK non-standard finance sector;

· delivering more attractive and sustainable shareholder returns than each of Provident and NSF might achieve on their own;

· delivering growth and improving profitability prospects through the execution of NSF's transformation plan that will:

· combine Provident's two mature businesses with NSF's two fast growing businesses, to stimulate growth in revenues and profits;

· revitalise the performance of Provident's core businesses;

· realise operational synergies;

· reduce funding costs;

· realise revenue synergies through cross-selling NSF's Everyday Loans and Guarantor Loans Division products to Vanquis' 1.8 million customers; and

· create the opportunity for capital returns over time;

· simplifying the business portfolio through the sale of Moneybarn, the proposed demerger of Loans at Home and the sale or closure of Satsuma; and

· offering a broad product range to NSF and Provident customers to take full advantage of cross-selling opportunities.

We believe these benefits to be a compelling alternative to a continuation of the status quo offered by the Provident Board that has little or no experience of the non-standard finance sector and has already overseen a third profit warning issued in January 2019.

How have shareholders fared under Provident?

Poor operating performance as a result of many of the issues outlined above has meant that Provident Shareholders have experienced significant erosion of value since 2016, when statutory profit before tax was £343.9 million; in 2018 it was £90.7 million, a decline of 74 per cent.[7]

IF OUR PLAN IS SO GOOD, WHY IS THE PROVIDENT BOARD ADVISING SHAREHOLDERS TO TAKE NO ACTION?

The Provident Board lacks relevant experience of the non-standard finance sector

The NSF Board believes firmly that, whilst well-intentioned, due to its lack of relevant operational experience of the non-standard finance sector the Provident Board is either unwilling or unable to confront the strategic challenges facing the company. As a result:

· the Provident Board appears to have become overly focused on digital channels as being the key to profitable growth, regardless of Provident's own experience and the poor profit performance of similar business models. Whilst technology can be a great enabler and may work well for many prime lending models, the NSF Board believes that for non-standard finance it can never replace either the value of longstanding customer relationships or, when providing term loans direct (i.e. without the presence of a guarantor), face-to-face contact. Examples include:

· the Provident Board's plan to shift Provident's home credit business to a new operating model resulted in the move away from the valued personal interaction between self-employed agent and customer, to one where customer-facing representatives had more customers to look after and so were forced to spend less time with each customer - this was fundamentally flawed, almost breaking a business that had never made a loss between 1880 and 2016;

· Satsuma is a remote-only lending and collections business and, despite charging APRs of up to 1,575 per cent., has lost money every year since it was launched in 2013. Lending small sums through digital channels carries significant credit risk and is also exposed to significant risk of identity fraud which is why many companies operating similar business models have continued to sustain significant losses. Provident is now trialling the issue of larger, longer-term loans by Satsuma which experience suggests will not improve the profitability of the business; and

· 'Provident Direct' is Provident's latest product innovation - effectively replicating the home credit model but then offering almost all, or certainly a large majority of customers, the opportunity to repay entirely using continuous payment authority ("CPA") i.e. remotely, rather than receiving the weekly visit from a member of staff. This misunderstands, in our view, the true value of the weekly visit that is a key feature of home credit - it allows both the collection to be made but also provides an up-to-date understanding of what is happening in the household as well as helping to sustain a strong and lasting relationship with the customer. We predict that such a CPA model will produce increased levels of impairment and will weaken the relationship with customers;

· the Provident Board appears to be committed to large IT-related infrastructure projects such as the 'Provident Knowledge Universe' that we believe are undue distractions to the core operations of the group. Whilst the costs of such projects are unknown, there appears to be little or no benefit to the group's financial performance and, based on its experience, the NSF Board believes that such projects tend to be expensive, require significant management resource and result in limited group-wide benefits;

· the Provident Board appears to be committed to maintaining its current strategy, a course that we believe was proved untenable by the latest profit warning in January 2019; and

· the Provident Board appears to be focused on criticising certain of its major shareholders rather than acknowledging their desire to accept our Offer. These shareholders, which have been loyal owners of Provident for many years and also subscribed a significant proportion of the £300 million of additional equity injected to recapitalise the company in 2018, have also owned shares in NSF and so have been able to assess the merits of both management teams and their respective strategic visions first-hand. Based on that considerable experience, they have chosen the NSF Board as the right team, with the right strategy to manage and lead the combined group.

The Provident Board has also challenged:

· the attractions of the guarantor loans sector;

· the viability of Loans at Home as a separate business;

· our plan to sell Moneybarn;

· who will lead Vanquis; and

· how a letter from the FCA might affect our plans.

Each of these issues is addressed below:

The attractions of the guarantor loans sector

· Despite having twice tried to enter the guarantor loans market, the Provident Board has sought to question the attractions of NSF's guarantor loans business. The NSF Board believes that guarantor loans offer an attractive alternative to non-standard finance customers who have little or no credit history and who would otherwise be forced to seek credit at much higher rates of interest than are available with the presence of a guarantor. The popularity of guarantor loans as a product is reflected by the strong growth in business volumes in recent years.

· Since NSF acquired George Banco in 2017, the NSF Guarantor Loans Division has increased profitability whilst continuing to focus on the delivery of good customer outcomes. In 2018, it grew normalised operating profit by 178 per cent.[8] while ensuring that levels of repeat lending and collections from guarantors have remained low. The NSF Board believes that the implementation of the Division's plans, as set out in the 2018 full-year results announcement on 8 March 2019, will keep delivering attractive returns for shareholders whilst continuing to deliver good customer outcomes.

· As well as continuing to operate profitably, the NSF Board believes the Division will be able to take advantage of continued strong demand for guarantor loans as well as the significant opportunities to cross-sell guarantor loans to a proportion of the 1.8 million Vanquis customers following completion of the Offer.

· Given our passion and commitment to ensure that all of our lending and collecting is performed to the very highest standards, we follow a rigorous suite of processes and procedures that have been developed over a number of years, each designed to ensure we continue to deliver a great service for our customers, as evidenced by low levels of complaints and high customer satisfaction rates.

· The FCA has raised some concerns over both affordability of borrowers and the levels of repeat borrowing in the wider guarantor lending industry. In the case of our own business, in addition to meeting the high standards referred to above, the proportion of repayments being made by guarantors has remained steady at less than seven per cent. in both 2017 and 2018, and so we believe there is no evidence of this increasing and we remain highly confident in the strength of our processes on assessing affordability. As for repeat lending, in 2018 approximately 18 per cent. of new lending was to existing customers. As the average length of loans is around three years, this indicates a healthy proportion of our customers are coming back to us, endorsing the quality of the service that we are providing. We therefore welcome the FCA's interest in the guarantor loans segment and look forward to engaging with them as they conduct any further review.

The viability of Loans at Home as a separate business

· The Provident Board has sought to discredit the viability of Loans at Home as a separate business. Given its strong market position as the UK's third largest provider of home credit, outside the Enlarged NSF Group, Loans at Home will continue to be both viable and well-managed as a standalone business. In the year ended 31 December 2018, Loans at Home generated an operating profit of £6.7 million, up from £3.1 million in 2017 and profit before tax of £4.3 million, up from £1.8 million in 2017.

· As it is proposed to demerge Loans at Home on a debt-free basis with sufficient working capital for its peak trading period, Loans at Home will have minimal interest costs.

· Loans at Home will be led by Mike Palmer as CEO. He has extensive home credit experience from his time at Loans at Home, where he has been Chief Operating Officer but also from his considerable and highly relevant experience at Provident Personal Credit where he spent over 10 years, latterly leading a team of over 13,000 people across 300 locations with an annual turnover in excess of £700 million.

· Under Mike's leadership, the standalone Loans at Home business will have a strong management team able to emulate the success of other companies of a similar size and business activity which have successfully maximised value in a public markets context. For example, since listing on AIM in May 2016, Morses Club plc has increased in market value by over 60 per cent.

· NSF continues to have discussions with the CMA, which began several weeks prior to the announcement of the Offer, in relation to obtaining the Antitrust Approval and clearance for the Offer. As the Demerger therefore remains subject to review by the CMA, NSF reserves the right to change its strategic plans with respect to Loans at Home.

Our plan to sell Moneybarn

· The Provident Board has sought to discredit NSF's plans to sell Moneybarn and return proceeds to shareholders. The driving force behind the sale of Moneybarn is strategy, not a desire to cash-in on a business sale of one of the non-standard vehicle finance market leaders.

· The analysis performed by the NSF Board regarding the capital structure of the Enlarged NSF Group following Completion, including the impact of the sale of Moneybarn and the opportunity for capital returns, has been carried out based on conservative assumptions given the lack of access NSF has had to Provident's non-public information.

· For this reason, the NSF Board, at this time, is not able to give further detailed information. However, the NSF Board firmly believes that the combination of the successful businesses of the Enlarged NSF Group following Completion would counteract any impact to potential funding, ratings, balance sheet or earnings, which the Provident Board infers would be negatively affected following the sale of Moneybarn. The NSF Board also expects there to be a reduction in overall group debt as a result of the sale of Moneybarn.

Who will lead Vanquis?

· The NSF Board has identified a number of potential candidates for the role of CEO of Vanquis. Whilst that appointment process continues, it is expected that, at Completion, and subject to regulatory approval, Niall Booker will be appointed Chairman of Vanquis, a role for which, in the view of the NSF Board, he is eminently well-qualified.

How a letter from the FCA might affect our plans

· As NSF has always made it clear that any plans would be implemented only after significant engagement with regulators and receipt of any requisite regulatory approvals, the contents of the FCA letter of 6 March 2019 had been already factored into our plans.

PROVIDENT FINAL DIVIDEND ADJUSTMENT

NSF confirms that it will not exercise the right (set out in the Offer Document) to reduce the number of New NSF Shares that Provident Shareholders receive to take account of the final dividend in respect of the 2018 financial year declared by Provident following the announcement of our Offer.

OFFER TIMETABLE

The timetable under the City Code has been extended by the Panel pursuant to its announcement dated 15 April 2019, such that there is currently no set deadline for the last date on which the Offer must be declared unconditional as to acceptances. Notwithstanding that extension, and in view of our strong confidence in our ability to complete the Offer, the NSF Board has decided to set 15 May 2019 as the revised closing date of the Offer and the last date on which the Offer can be declared unconditional as to acceptances. NSF will not be extending this deadline. Accordingly, our Offer will remain open for acceptance until 1.00 p.m. on 15 May 2019. NSF expects the Offer to become or be declared wholly unconditional by no later than 5 June 2019 (or such later date as may be agreed with the Panel).

Our Offer is compelling and we urge all Provident shareholders to join us as we build a brighter future for Provident.

We saw the need for change in January 2018. Despite our firm belief in the irrefutable industrial logic of putting the two companies together and the strength of our management team, our approach was turned down flat. Following Provident's third profit warning in January 2019, it is now clearer than ever that there is a need for change and the time for change is now.

We therefore urge Provident shareholders to accept our Offer without delay so we can start to implement our transformation plan for the benefit of customers, employees and shareholders.

Yours faithfully,

John van KuffelerGroup Chief Executive & FounderNon-Standard Finance plc

Enquiries:

Level of acceptances:

As at 3.00 p.m. on 26 April 2019, being the last Business Day prior to the date of this announcement, NSF had received valid acceptances in respect of a total of 129,912,009 Provident Shares, representing, in aggregate, 51.3 per cent. of Provident's issued share capital (the "Acceptances"). Each of the Acceptances may be counted by NSF towards the satisfaction of the 'Acceptance condition' (i.e. condition (A) of Part A of Appendix I of the Offer Document dated 9 March 2019) (the "Acceptance Condition"). Of the Acceptances, no acceptance had been received from persons acting in concert with NSF.

NSF had, at the time of the Acceptances, received (i) irrevocable undertakings and (ii) letters of intent to accept the Offer from Woodford Investment Management Limited, Invesco Asset Management Limited and Marathon Asset Management LLP in respect of 125,097,841 Provident Shares (made up of 75,985,191 Provident Shares subject to irrevocable undertakings and 49,112,650 Provident Shares subject to letters of intent) representing, in aggregate, 49.4 per cent. of Provident's issued share capital. Of the Acceptances, acceptances have been received in respect of all of the Provident Shares to which the irrevocable undertakings and the letters of intent relate.

As at 5.00 p.m. on 25 April 2019 (being the latest practicable date prior to the date of this announcement), neither NSF nor any persons acting in concert with NSF had: (i) any interest in, or any right to subscribe for, any relevant securities of Provident; (ii) any short positions (whether conditional or absolute and whether in money or otherwise), including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery of any relevant securities of Provident; (iii) borrowed or lent any relevant securities of Provident, save for any borrowed Provident Shares that have been on-lent or sold; or (iv) save as set out above, received any outstanding irrevocable commitment or letter of intent in respect of any relevant securities of Provident.

Further Information

Capitalised terms used but not defined in this announcement have the meanings set out in the Offer Document dated 9 March 2019.

All references to time in this document are to London time.

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 will be 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 City 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 City 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.