Provident restores dividend as doorstep lender fights takeover bid from Non Standard Finance

Provident Financial has restored its dividend after implementing a turnaround plan, the doorstep lender announced today as it fights off a takeover bid from rival Non Standard Finance.

The figures

Shares were up more than three per cent as the company announced that adjusted profit before tax increased by 82.3 per cent to £153.5m.

Statutory profit before tax rose 161.3 per cent to £90.7m in 2018, from a loss of £147.9m the previous year, Provident said in its full-year results to the end of December last year.

Earnings per share were 25.2p, and increase of 133.5 per cent after suffering a loss of 75.3p in 2017.

Provident announced a dividend of 10p per share, after it cancelled last year’s dividend for the first time in the company’s history following a botched restructuring of its home credit division.

Why it’s interesting

Provident Financial is in the middle of fighting a takeover offer from Non Standard Finance, which it branded “strategically and financially flawed” earlier this week.

The company used its financial results, which were delayed by two weeks, to reiterate its opposition to the news, saying the proposed deal undervalues the group and would threaten Provident’s turnaround plans.

“The Board believe that as well as undervaluing the Group and its prospects, the offer presents significant operational and execution risks due to the changing regulatory environment, NSF's track record of value destruction and NSF's limited experience across the full breadth of the Group's businesses,” the company said.

What Provident Financial said

Malcolm Le May, chief executive, said: "Today's results are testament to the immense progress that the Group has made over the past 18 months, having delivered adjusted profit before tax growth of 82.3 per cent in 2018. I am very pleased to announce that, in line with our commitment at the time of the rights issue, the Board have declared a nominal dividend of 10.0p per share for 2018.

"We have delivered against each of the objectives we set ourselves for 2018 and have strengthened our relationship with our customers, regulators and other stakeholders. We aim to build on the considerable momentum within the Group in 2019 and beyond, with a focus on delivering attractive and sustainable returns to our shareholders as we execute on our strategy.

"We continue to believe that the offer made by NSF is not in the interests of all shareholders."

What analysts said

Canaccord Genuity analyst Portia Patel said shareholders should accept the offer from NSF.

In a note this morning she said: “We do not see NSF's offer as ideal. We have a number of concerns and questions regarding the proposal and it certainly carries risk, one of which is capital strength, as it is for Provident as a standalone entity.

“However, we think it is unlikely that there will be a competing offer for Provident, either in part or whole and therefore would recommend that shareholders accept the NSF offer and benefit from the potential upside that exists.”