Provident concerned at low household income

 a lender to low-income households, reported a 4 per cent rise in first-half profits, but warned its customers were being squeezed by pay cuts and working fewer hours.

The company specialises in lending relatively small sums – typically £400 – to poorer customers on an unsecured basis, with repayments picked up by an agent from the borrower’s home.
Its annual repayment rates, which tend to be 189 per cent or 254 per cent on its most popular product, have attracted criticism from Barnardo’s, the children’s charity.

Provident says its fee structure is transparent and does not penalise borrowers for missed payments, adding that home collection is costly.

In the first half of 2009, the group said its pre-tax profit was £53.1m, up from £51.3m in the first half of 2008. The bulk of its profit came from its doorstep lending, although the contribution from its Vanquis credit card business almost doubled to £5m. Sales rose 8 per cent to £401.2m.

Bad debt impairments were equivalent to 31 per cent of sales, marginally up from 30 per cent in the prior year. An interim dividend of 25.4p has been declared, unchanged from the previous year.

Peter Crook, chief executive, told the Financial Times that he felt unemployment “could easily get to 3m or so”. However, he said “under-employment” – workers being forced to work fewer hours or take pay cuts – was perhaps a bigger issue, eating into the income of poorer households.

Mr Crook said the group had taken a cautious approach to new lending, with about 70 per cent of doorstep loan requests and 83 per cent of credit card requests being declined. Provident shares yesterday fell 7 per cent or 60½p to 794½p.