Purpose & progress Provident Financial plc 2019 preliminary - PowerPoint PPT Presentation

Purpose & progress Provident Financial plc 2019 preliminary results

I N T R O D U C T I O N Today’s presentation Highlights and operational progress Malcolm Le May Financial review Simon Thomas Malcolm Le May - CEO Strategy and outlook Malcolm Le May Questions Glossary of definitions Contacts Simon Thomas - CFO 1 Provident Financial plc - 2019 preliminary results

Highlights and operational progress Malcolm Le May Chief Executive Officer 2

H I G H L I G H T S A N D O P E R A T I O N A L P R O G R E S S Continued good operational and financial recovery of the group Group adjusted profit before tax • Group adjusted profit before tax up 1.6% to £162.6m £162.6m (+1.6%) • Continued strengthening of regulatory relationships and positive progress on delivering cultural change Final dividend per share • FCA investigations at Vanquis Bank and Moneybarn both 16p (+60%) now complete • Strategic initiatives well underway to deliver the group’s ‘Vision for the Future’ and medium -term financial targets Total dividend per share 25p (+150%) • Agreement of a £275m bilateral securitisation facility in early January 2020 to fund Moneybarn’s business flows • Funding headroom to mid-2022 • Regulatory capital headroom of c.£90m at 1 January 2020 • Final dividend of 16p per share, up 60% • Total dividend per share of 25p per share, up 150% and representing dividend cover of 1.9 times 3 Provident Financial plc - 2019 preliminary results

H I G H L I G H T S A N D O P E R A T I O N A L P R O G R E S S Operational progress – Vanquis Bank New customer bookings (‘000) Strengthened management team under the • 500 437 leadership of Neil Chandler 369 366 400 Higher minimum payments and recommended • payments in response to CCMS measures on 300 persistent debt 200 Continued development of distribution channels • and data driven decisioning maintained volumes 100 despite tighter underwriting - 2017 2018 2019 Changes to interest and fee structures • Successful introduction of chatbot to automate • Risk-adjusted margin(%) customer SMS conversations 50 Increased focus on cost efficiency • 45 Revenue yield 40 ROP refund programme completed and FCA has • 35 30.9% confirmed the programme is now closed 30 26.2% 25 20 Impairment 15 rate 10 5 - 2017 2018 2019 4 Provident Financial plc - 2019 preliminary results

H I G H L I G H T S A N D O P E R A T I O N A L P R O G R E S S Operational progress – Moneybarn Receivables (£m) Continued strong growth and development of the • 600 proposition 502 500 416 Underwriting tightened in Q4 2019 and collections • 400 334 processes strengthened 300 FCA investigation into affordability, forbearance and • termination options completed 200 100 Securitisation of receivables book • - Moved into new premises to support future growth • 2017 2018 2019 Adjusted PBT (£m) 35 30.9 28.1 30 21.9 25 20 15 10 5 - 2017 2018 2019 5 Provident Financial plc - 2019 preliminary results

H I G H L I G H T S A N D O P E R A T I O N A L P R O G R E S S Operational progress – CCD Revised sales processes following implementation Adjusted loss before tax (£m) • of high-cost credit review 2017 2018 2019 - Enhanced performance management and variable • (20) pay rolled out (20.8) (40) • Successful test of Provident Direct (38.7) (60) Headcount reductions and ongoing cost reduction • programme (80) (100) Introduction of card readers to enhance collections • (106.3) (120) Satsuma customer onboarding processes being • enhanced following dialogue with FCA Headcount Constructive dialogue with FOS in respect of • 5,000 irresponsible lending claims 4,300 3,700 4,000 Working with HMRC on their industry review of • 2,800 self-employed status of agents 3,000 2,000 1,000 - 2017 2018 2019 6 Provident Financial plc - 2019 preliminary results

Financial review Simon Thomas Chief Financial Officer 7

F I N A N C I A L R E V I E W Group results Year ended 31 December 2019 019 2018 Change • Restatement of 2018 comparatives for (restated 1 ) three changes in accounting treatment: Adjusted profit/(loss) before tax £m £m % – Directly attributable deferred Vanquis Bank 173. 3.5 190.9 (9.1) acquisition costs in Vanquis Bank (increase in 2018 profits of £6.6m) Moneybarn 30.9 0.9 28.1 10.0 – Recognition of revenue on credit CCD (20.8 (2 0.8) (38.7) 46.3 impaired receivables and treatment of directly attributable acquisition costs in Central costs (21. (2 1.0) (20.2) (4.0) Moneybarn (no impact on profits) Adju djusted ed profi ofit be before e tax 162.6 .6 160.1 1.6 • Significant reduction in net exceptional Amortisation of acquired intangibles (7 (7.5) (7.5) - charges (see slide 9) • Cost income ratio broadly flat despite Exceptional items (2 (26.3 .3) (55.3) 52.4 7.5% reduction in group costs – mainly Stat atutory profi ofit be before e tax 128.8 .8 97.3 32.4 reflects moderation in revenue yield at Vanquis Bank (target cost income ratio of Cost income ratio 42 42.8% 42.3% 38% by 2022) Return on assets 7.9% 7.7% • Expected ROE reduction due to timing of dividend payments and progression to Return on equity 18.2 8.2% 19.1% target dividend cover of 1.4x (ROE expected to be in target range of 20%- Adjusted basic earnings per share 47.3 47 .3p 48.7p (2.9) 25% in 2021) Dividend per share 25.0p 10.0p 150.0 • Modest adjusted EPS reduction reflects impact of rights issue shares in April 2018 Dividend cover 1.9x 4.9x 1 2018 comparatives have been restated for: (i) the change in treatment of directly attributable acquisition costs in Vanquis Bank following a refresh of contractual terms with affiliates in 2019 – this has resulted in a £6.6m increase in 2018 profit before tax, a benefit of £10.5m to 2019 profit before tax and is expected to result in a reduction of approximate ly £6m in 2020 profit before tax compared with previous plans; and (ii) the changes in recognition of revenue on credit impaired receivables and treatment of directly attributable acquisition costs in Moneybarn which have resulted in a reduction in revenue, impairment and administration and operating costs but have had no impact on Moneybarn’s profits 8 Provident Financial plc - 2019 preliminary results

F I N A N C I A L R E V I E W Exceptional items Year ended 31 December Charge/(credit) 2019 019 2018 £m £m Bid defence costs associated with NSF’s unsolicited offer for the group 23 23.8 - Restructuring costs, primarily in respect of the ongoing turnaround of CCD 19.3 .3 29.9 Release of provisions in respect of ROP refund programme (14.2 (1 .2) - Release of provisions in respect of Moneybarn FCA investigation (2 (2.6) - Premium and fees paid on the redemption of senior bonds - 18.5 Pension charges in respect of the equalisation of Guaranteed Minimum Pensions - 6.9 Net excep Ne eptional l charges es 26.3 .3 55.3 • Provision releases comprise: – £14.2m in respect of ROP following completion of the refund programme and a re -evaluation of the necessary provision (remaining provision of £11.7m at 31 December 2019) – £2.6m in respect of Moneybarn FCA investigation following receipt of the final notice (remaining provision of £2.8m at 31 December 2019 in respect of the fine) 9 Provident Financial plc - 2019 preliminary results