As stated on 25 February 2019, the Board of Provident Financial plc, (LON:PFG) continues to believe strongly that the Offer is not in the best interests of Provident’s shareholders and should be firmly rejected. The Board believes it has a clear plan to maximise value for all Provident shareholders by executing its strategy to deliver growth and attractive returns through its complementary, synergistic and industry leading businesses. 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 Provident’s businesses. In addition, the Offer has major strategic flaws and appears to be based upon a misguided view that the regulatory approach to Provident would be different if the Group was owned by NSF. The Board is committed to maximising value for all Provident shareholders and will explore all appropriate alternatives to achieve that objective.
Summary
Provident announces the following recent developments ahead of its preliminary results for the year, which will be announced on 13 March 2019.
1. The Board believes that Provident has substantially resolved all material outstanding regulatory issues with the FCA and has completed the search for a new Managing Director and a new Chairman for Vanquis
· Vanquis Bank: Repayment Option Plan (“ROP”) refund programme over 99% implemented within the previously announced financial provision for refunds and balance reductions and agreed timetable with the FCA;
· Moneybarn: Significant progress with the FCA on the redress to be paid to resolve the issues arising from the investigation into affordability, forbearance and termination options achieved within the previously announced financial provisions;
· CCD: Agreement by the FCA to the implementation of enhanced performance management of our Customer Experience Managers (“CEMs”) and the reintroduction of an element of performance related variable pay which is a key tool as part of the plan to return the business to run-rate profitability, and further actions to reduce the cost base; and
· Vanquis Bank: Agreement to appoint a Managing Director to join our team in April and we expect to announce the appointment of a new Chairman shortly, both with significant relevant retail banking and consumer finance experience, subject to regulatory approvals.
2. The Group has a clear strategy to deliver attractive and sustainable shareholder returns
· Having stabilised the Group during 2018, the management team is in the process of developing and implementing a number of planned growth and efficiency initiatives across each of the Group’s divisions. The Board believes these, in combination with the Group’s strong sector-leading positions in each of its businesses, will further underpin the Group’s ability to deliver attractive and sustainable shareholder returns; and
· The Board is also committed to continuing to evolve the Group’s digital proposition, while remaining at the forefront of regulatory compliance.
3. We believe that NSF’s unsolicited Offer for Provident has significant flaws and would have long-lasting detrimental consequences for the Group’s shareholders and customers
· The Group’s largest single business, Vanquis, is a regulated bank. The Board believes that NSF’s management has limited banking and credit card experience;
· The Board believes that the sale of Moneybarn is strategically and financially flawed. Firstly, it would significantly impact the dividend trajectory for the Group, is unlikely to result in any meaningful one-off capital return to shareholders, and at this point in the economic cycle is not value maximising for shareholders. Secondly, the Board is also of the view that the proposed sale of Moneybarn fails to recognise the strong financial performance of the business and its synergistic benefits with Vanquis. Thirdly, the Board believes a sale would have negative consequences for the Group’s funding profile, and that NSF has failed to take into account the significance of Moneybarn’s role as an important guarantor to the Group’s funding facilities and bonds; and
· The Board believes the existing CCD management has successfully stabilised the business and is better positioned to lead the business going forward than NSF, which has not been running under the same operating and regulatory model.
4. NSF has an acquisition history of value destruction and its Offer presents significant risk
· NSF’s share price has fallen on average 20% since its acquisitions and its share price has fallen 30% since it announced the issuance of new shares to acquire Everyday Loans;
· The execution risk of a hostile offer of this size and scale is significantly greater than any transaction NSF has undertaken to date; and
· Consequently the nil premium Offer, entirely in NSF shares, presents significant value risk to all Provident shareholders.
