Provident Financial Group PLC (FPLPY, Financial) (FPLPF, Financial) is a British-based lender that actually sends collectors to the borrower's door. Provident has been doing business this way since the 1880s and is well-known in the U.K. and Ireland. Tweedy Browne (Trades, Portfolio) and Wintergreen Fund are major shareholders.
There are 147.2 million shares and the market cap is £4.354 billion. The dividend is £1.201 and the dividend yield is 4%. EPS for 2015 was £1.626 and the PE ratio is 18.2. Revenues were £538.6 million ($770.2 million), up 15.7%. It takes $1.43 to buy one pound.
The balance sheet shows £2 billion ($2.86 billion) in receivables, £17.5 million ($25 million) in shares of Visa (V, Financial), and £134.2 million ($191.9 million) in what the company calls a "liquid asset buffer." The liability side shows £865.2 million ($1.237 billion) in debt, £731 million ($1.045 billion) in customer deposits and £63 million ($90 million) in "other." Its gearing ratio is 2.2.
Vanquis Bank is its credit card division. The home loan division operates under the Provident banner. Satsuma does online loans, glo-guarantor loans and moneybarn vehicle financing. Provident's motto is "Providing credit to those would otherwise be financially excluded."
Vanquis Bank, the credit card issuer, contributed £183.7 million ($262.7 million) in earnings in 2015. The Consumer Credit Division, which includes Provident home loans and Satsuma, delivered £105.4 million ($150.7 million) and moneybarn £21.3 million ($30.5 million).
The average account balance on a Vanquis credit card is £881 ($1,259). This has grown from a little over £600 ($858) in 2010. The maximum credit available is £3,500 ($5,000). I find this impressive. Provident makes most of its money on credit cards for folks who do not qualify for traditional credit, and only 6.7% are impaired. Receivables on this division have grown from about £400 million ($572 million) to £1.2 billion ($1.7 billion) in five years.
An example from the company on a Satsuma loan is of a mother of five who needed to fix a clothes washer. Once she was approved, the money was in her account that day. Provident Loans is something that I have not heard of in modern times. Up to £1,000 ($1,430) is lent and an agent comes to the home once a week to collect. The fees are front loaded and the agent is paid on collections, not interest. Every week, 7,700 agents visit 900,000 customers. That's 117 customers per agent on average.
The new division glo is the same thing as Provident and Satsuma, but are larger loans that are guaranteed by family members.
Provident seems a little more reputable than a pay day lender. I don't quite know what it is, but management seems intent on helping folks out and not gouging them. I don't see a lot of news on the company but would like to find out more.
In the 2009 Annual Report, Provident lays out its investment thesis. The company does not undertake complicated financial strategies. Its impairment may be higher but is much easier to understand than the average financial company, as it is only individuals and families. Provident is not spread across the world and focuses on the U.K. and Ireland. It borrows long and lends short. The management team is effective (and seems to be). EPS seem hardly to have been affected by the financial crisis. They were 63.5 pence in 2007, 70.9 pence in 2008, 71.4 pence in 2009 and 77 pence in 2010. Provident is surprisingly resilient, even in a financial crisis.
Provident is an interesting company. It's not even close to your typical bank or financial outfit. They actually have people who knock on your door, every week, collecting what you owe them. And their pay is predicated upon Provident getting paid back. I'm surprised how well the company did in the downturn in 2008 to 2009. The stock is expensive but seems to have its own niche. I will continue to follow.
