TIDMPFG
RNS Number : 3219G
Provident Financial PLC
16 March 2020
16 March 2020
Provident Financial plc ('Company')
Publication of Annual Report and Financial Statements and Notice
of 2020 Annual General Meeting
The Company has today published the following documents:
- 2019 Annual Report and Financial Statements
- Notice of 2020 Annual General Meeting ('AGM')
In compliance with LR 9.6.1R, the 2019 Annual Report and
Financial Statements and Notice of 2020 AGM have been submitted to
the UK Listing Authority via the National Storage Mechanism and
will shortly be available to the public for inspection at
www.morningstar.co.uk/uk/NSM. These documents will also be
available on the Group's website from today at:
www.providentfinancial.com/investors/results-reports-and-presentations.
The Company has also published today its 2019 Corporate
Responsibility Report, which can be found on the Corporate
Responsibility page of the Group's website:
www.providentfinancial.com/corporate-responsibility.
Annual General Meeting
The AGM will be held at 3.00pm on 7 May 2020 at the Company's
offices at No.1 Godwin Street Bradford BD1 2SU.
The Board is closely monitoring the evolving outbreak of
Coronavirus (COVID-19). The health and wellbeing of our employees,
shareholders and the wider community in which we operate is of
paramount importance to the Board. However, the Board also
recognises that the AGM is an important event for shareholders and
the Company and is keen to ensure that shareholders are able to
exercise their right to vote and participate.
We therefore currently plan to hold the AGM at 3.00pm on 7 May
2020, but given the evolving situation and the potential risks of
aiding the spread of Coronavirus (COVID-19) through public
gatherings, and the possibility of the UK Government imposing
restrictions on travel and public gatherings, the Board encourages
shareholders to vote on all resolutions by completing and
submitting an online proxy appointment form in accordance with
point 6 of the Explanatory Notes to the Notice of the Meeting (set
out on pages 7 to 9).
Shareholders are encouraged to submit a proxy appointment, even
if they intend to attend the meeting in person, as their personal
circumstances and the wider situation may change and it may not be
appropriate or possible at the time to attend the meeting in
person. In any event, in order to secure the safety of those
attending may need to impose additional safety related measures,
which could include the exclusion of individuals who have visited
high risk areas or have had contact with individuals who have the
Coronavirus (COVID-19), or the possible adjournment of the meeting
to another date.
We will keep the situation under review and recommend that
shareholders should continue to monitor the Company's website and
announcements for any updates in relation to the AGM.
Additional information
A condensed set of the Company's financial statements and
information on important events that have occurred during the
financial year and their impact on the financial statements were
included in The Company's results statement (RNS announcement dated
27 February 2020 ("Preliminary results for the year ended 31
December 2019")). That information, together with the information
set out below constitutes the material required by DTR 6.3.5R. This
announcement is not a substitute for reading the 2019 Annual Report
and Financial Statements in its entirety. Page, note and section
references below refer to the corresponding pages and/or
notes/section in the 2019 Annual Report and Financial
Statements
Contact: David Whincup, (0)1274 351 344
Appendix
Principal risks
A description of the principal risks and uncertainties that the
Company faces is extracted from pages 46 to 52 of the 2019 Annual
Report and Financial Statements.
Principal risks are risks which are inherent to the Group's
strategy and business model and have formally been articulated as
part of the Group's RAF. Principal risk categories and associated
risk appetite statements are reviewed and approved by the Board on
an annual basis, effectively defining the Group's overall risk
appetite.
P1. Credit risk
----------------------------- ------------------------------------------------------------------ ------
Description Mitigating activities Stable
The risk of unexpected * Credit risk appetite established in all divisions,
credit losses arising with metrics included in the Group risk appetite to
through either adverse ensure focus.
macroeconomic factors
or parties with whom
the Group has contracted * The Group operates credit scoring methodologies led
fail to meet their by credit specialists in all of its businesses and
financial obligations. these are well maintained and monitored on a regular
basis.
* The credit scoring methodologies are supported by
clearly defined credit policies to restrict certain
types of lending, credit scoring methodologies and
also manual underwriting support processes in many
parts of the business, particularly home credit.
* The Group operates in the non-standard lending sector
and as such credit default levels are higher, but all
indicators confirm the risk profile is within
expected ranges.
* Each division has reviewed its respective credit
profiles and has undertaken selective tightening to
ensure any higher than desired risk segments have
been addressed.
* Macroeconomic downturn risks are assessed through
stress testing as part of the ICAAP processes and
these confirm the Group can comfortably withstand the
impact of a material stress, as defined by the PRA.
* The Group is reliant upon third-party data from
credit bureaus and, as such, is dependent upon the
accuracy of this data.
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P2. Capital risk
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Description Mitigating activities Stable
The risk that the * Capital risk appetite established at Group and
Group has insufficient Vanquis Bank level, with thresholds reported to and
capital to either monitored by Group and Vanquis Bank boards.
meet regulatory requirements
or to sustain the
long-term viability * The ICAAP process has confirmed that the Group is
of the business. projected to have sufficient capital resources even
under a severe stress environment.
* Vanquis Bank has undertaken its own ICAAP process
with this ring-fenced from the Group.
* The resolution of the FCA investigation into ROP at
Vanquis Bank has now been completed.
* The FCA investigation into forbearance and
termination options at Moneybarn has now been
finalised. The specific customer remediation
activities have been completed and were within
existing provisions.
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P3. Liquidity and
funding risk
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Description Mitigating activities Stable
The risk that the * Liquidity and funding risk appetite established at
Group has insufficient Group and Vanquis Bank level, with thresholds
liquidity to meet reported to and monitored by Group and Vanquis Bank
its obligations as boards.
they fall due, or
is unable to maintain
sufficient funding * The Group seeks to maintain a secure funding
for its future needs. structure by:
o maintaining borrowing facilities to
fund growth and contractual maturities
outside of Vanquis Bank over the next
12 months; and
o maintaining diversified funding sources.
* During the year, the Group refinanced the revolving
credit facility.
* Good progress has been made to establish alternative
funding sources, including the signing of the
bilateral facility with NatWest Markets to securitise
Moneybarn receivables.
* In addition, Vanquis Bank accepts retail deposits and,
in line with its regulatory requirements, maintains
liquid resources to meet certain stress events as
stipulated within its Internal Liquidity Adequacy
Assessment Process (ILAAP). The Group and Vanquis
Bank also monitor and report their liquidity coverage
ratios (LCR) on a consolidated and individual basis
to the PRA.
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P4. Operational risk
--------------------------- ------------------------------------------------------------------- ------
Description Mitigating activities Stable
The risk of loss resulting * Each division has its own operational risk frameworks
from inadequate or in place which include risk identification,
failed internal processes, assessment and control remediation.
people and systems
or from external events.
Operational risk more * Risk registers are in place across the Group with
broadly covers a wide primary focus on future embedding of control
range of different self-assessment across the divisions which are at
categories including various levels of maturity.
specific event risk,
fraud, IT/systems
risk, business continuity, * The 3LOD model throughout the Group ensures there are
AML, etc. clear lines of accountability between management who
own the risks, oversight by the risk function and
independent assurance provided by Internal Audit.
* The CCD recovery plan has been delivered with focus
now on continued embedding of the new control
framework.
* Given the importance of the outsource arrangements,
the supplier management framework is being further
developed to drive greater consistency and improved
oversight in how we manage our suppliers.
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P5. Information and data security risk
---------------------------------------------------------------------------------------------------- -----------
Description Mitigating activities Stable
Sensitive data faces * Established a Group data privacy governance framework
the threat of misappropriation at Group and divisional level, with regular metrics
or misuse. Failure to ensure ongoing focus on personal data privacy
to identify or prevent risks.
a major security-related
threat or attack,
or react immediately * Appointed a Group Data Protection Officer to ensure
and effectively, could alignment of data management policies (including
adversely affect the compliance with article 38 of GDPR and mandatory
trust of our current requirements of article 39).
or future customers
in the services we
provide, our reputation * Embedded key processes and procedures to manage
and our operational privacy by design tools, data breach management and
or financial performance. correct consent capture where required.
* Agreed standard Group-wide Data Retention Policy.
-------------------------------- ------------------------------------------------------------------ -----------
P6. Regulatory risk
-------------------------------- ------------------------------------------------------------------ -----------
Description Mitigating activities Improving
The risk that the * The Group operates in a highly regulated environment
Group is exposed to and in an industry sector where customers are
financial loss, fines, potentially more vulnerable and need careful
censure or enforcement management.
action due to failing
to comply with regulations
(including handbooks, * We remain mindful that the regulatory landscape is
codes of conduct, continually evolving and regularly assess our risks
financial crime, etc.). through horizon scanning and regulatory impact
assessment across the Group.
* At all levels, the Group has worked hard to build and
maintain positive relationships with our key
regulators including the PRA, FCA, CBI and FOS. Any
regulatory actions are managed and monitored closely
to ensure these are delivered fully and within the
spirit of any feedback received.
* All regulatory interactions are recorded and tracked,
with regular reporting through our executive and
Board Committees to ensure consistency and read
across through a Group lens.
* The Group engages with regulatory authorities and
industry bodies on forthcoming regulatory changes,
market reviews and investigations, ensuring
programmes are established to deliver new regulation
and legislation.
* Financial crime improvement programme has been
initiated in Vanquis Bank to further enhance
onboarding and transaction monitoring controls
through new systems and upgraded operating model.
-------------------------------- ------------------------------------------------------------------ -----------
P7. Conduct risk
-------------------------------- -------------------------------------------------------------------- ---------
Description Mitigating activities Stable
The risk of customer * Conduct risk appetite established at Group and
detriment due to poor divisional level, with metrics included in the Group
design, distribution risk appetite to ensure ongoing focus.
and execution of products
and services or other
activities which could * Conduct policies and procedures in place at a
lead to unfair customer divisional level to ensure appropriate controls and
outcomes or regulatory processes that deliver fair customer outcomes.
censure.
* Cultural transformation initiated through launch of
the Group Blueprint centred around our customer
purpose and colleague behaviours.
* Newly formed Customer, Culture and Ethics Committee
to provide specific oversight on embedding of Group
Blueprint and how we deliver the Group's
customer-focused purpose.
* Review of responsible lending processes and outcomes
across all our divisions to provide assurance to the
Board on our past and current affordability processes
and outcomes.
* Enhanced complaints management through effectively
responding to, and learning from, root causes of
complaint volumes and FOS change rates.
* Monitoring and testing of customer outcomes to ensure
the Group delivers fair outcomes for customers whilst
making continuous improvements to products, services
and processes.
* Ongoing review of product governance to ensure
existing products or changes continue to meet the
needs of our customers.
-------------------------------- -------------------------------------------------------------------- ---------
P8. Business resilience
risk
-------------------------------- -------------------------------------------------------------------- ---------
Description Mitigating activities Stable
The risk of unexpected * Business resilience risk appetite established at
outages around key Group and divisional level, with metrics included in
critical business the Group risk appetite to ensure ongoing focus.
activities resulting
in potential poor
customer outcomes, * Overall accountability for business continuity
regulatory sanction, management, business resilience and crisis management
reputational damage now resides with the Group Chief Information Officer
and financial loss. (CIO).
* Detailed assessments are being completed across the
divisions on current business continuity and
resilience capabilities, alongside robustness of IT
legacy systems.
* Based on the above, detailed continuity plans, impact
assessments and testing arrangements will be
completed in 2020.
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P9. People risk
-------------------------------- -------------------------------------------------------------------- ---------
Description Mitigating activities Stable
The risk that the * A new Cultural Blueprint has been developed and is
Group fails to provide being embedded across the organisation.
an appropriate colleague
and customer-centric
culture, supported * A Group Head of Human Resources has recently been
by robust reward and recruited to lead our people strategy across our
wellbeing policies combined businesses.
and processes; effective
leadership to manage
colleague resources; * Priority focus is around development of leadership
effective talent and strength, alongside future succession planning,
succession management; diversity performance, retention and engagement.
and robust controls
to ensure all colleague-related
requirements are met. * Balanced scorecards are being rolled out for all
leadership roles which provide appropriate incentives
between financial and non-financial objectives.
-------------------------------- -------------------------------------------------------------------- ---------
P10. Model risk
-------------------------------- -------------------------------------------------------------------- ---------
Description Mitigating activities Stable
The risk of financial * Model risk appetite established at Group and
losses where models divisional level, with metrics included in the Group
fail to perform as risk appetite to ensure ongoing focus.
expected due to poor
governance (including
design and operation). * New Model Risk Policy developed within the bank,
(Within the context which is currently being amended for roll-out Group
of PFG this includes wide.
credit acquisition,
underwriting, financial
and regulatory reporting * Model inventories are being developed at Group and
and capital management.) divisional level to enable prioritised focus on
independent validation of these models which could
have critical impact on business activities.
-------------------------------- -------------------------------------------------------------------- ---------
Strategic and emerging risks
Strategic and emerging risks are risks which are largely
unknown; however, over a longer period of time they could affect
the Group's overall strategy and cause the same impact as principal
risk. Strategic and emerging risks are reviewed and monitored on a
regular basis at the GERC and GRC.
E1. Threats to our sector and business plans
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Description Mitigating activities Stable
There is a risk that * The Group continues to lobby its regulators (the FCA,
the non-standard credit PRA, CBI and FOS) and other key stakeholders so that
sector in which we it is taking an active and positive role in
operate will continue influencing future changes aligned to our Group
to face considerable Blueprint.
macroeconomic, regulatory
and political challenges
resulting in a material * The Group is working closely with its main
effect on the Group's shareholders to improve their understanding of the
costs of compliance changing regulatory environment and its impact on
(investment and run future revenue streams and profitability.
rate) and its future
revenue streams (e.g.
through reduced credit * The Group is driving a number of changes to pricing
interest, increase models, product strategies and processes as a
in impairments, operating pre-emptive move to likely changes in the regulatory
restrictions and price environment, e.g. the Gambling Commission credit card
capping). payments and Satsuma manual affordability checks.
* Through our improved horizon scanning we continue to
monitor forthcoming regulatory changes so that these
are planned for accordingly.
* We have evaluated the potential impacts of Brexit and
believe this to be small across each of our
divisions.
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E2. Risk governance
and culture
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Description Mitigating activities Stable
There is a risk that * The Consumer Credit Division has made extensive
the Group's culture progress in addressing control issues underpinned by
and supporting risk process risk and control self-assessment.
governance arrangements
inhibit effective
enterprise risk oversight, * Vanquis Bank has conducted an enterprise-wide review
potentially resulting of all operational areas to determine any specific
in poor risk management vulnerabilities and has already commenced a programme
practices and of control enhancement.
control failures.
* A new GERC has been established which provides more
focused discussions on the major risks we face as an
organisation including the effectiveness of any
remedial action plans.
* Led by the Group CRO, the Group has started working
on greater risk harmonisation initially to move to a
single risk appetite framework, risk measurement and
reporting at Group level.
* Work has commenced on further simplification of our
risk management framework (RMF) and risk operating
model.
--------------------------- ------------------------------------------------------------------ ------
E3. Responsible lending and affordability
--------------------------------------------------------------------------------------------- ------
Description Mitigating activities Stable
There is a risk that * The Group affordability programme has been completed
the FCA will identify and outcomes shared with the FCA.
PFG or its divisions
as non-compliant with
responsible lending * Closer engagement with the FOS related to its
rules, or the FOS interpretation of regulatory rules around responsible
may identify 'precedent lending. Meetings with the FOS were held to better
cases' that could understand its assessment of sustainable borrowing
lead to widespread with a view to building that into our complaints
remedial activities review.
as well as a significant
increase in the level
of complaints related * We are continuing to review the root cause analysis
to irresponsible lending of complaints to enable us to implement enhanced
by CMCs. customer facing processes, thus avoiding unnecessary
FOS referrals.
* We are continually reviewing our affordability
assessments to ensure these remain aligned with our
customers' circumstances and any ongoing changes
prescribed by the FCA.
* In this respect, we have recently updated our
customer journeys and affordability checks in
Satsuma. This is in response to recently issued
guidance across the high-cost short-term credit
sector from the FCA on the use of automated bureau
checks (TAC codes) for corroborating customer income.
* A contingent liability is included in the financial
statements which states that if the Group was to be
unsuccessful in defending certain irresponsible
lending complaints, it may lead to a material
increase in the cost of settling such complaints.
------------------------- ------------------------------------------------------------------ ------
E4. Challenge to agent self-employed status
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Description Mitigating activities Stable
The Group has been, * In July 2017, the Group changed the operating model
and may continue to of its home credit business in the UK from a
be, subject to claims self-employed agent model to an employed workforce so
brought against it as to take direct control of all aspects of the
by either former agents customer relationship. In the ROI the Group continues
or tax authorities to operate a self-employed agent operating model.
challenging the historic
employment status
of the Group's home * Policies and procedures were in place in the UK up to
credit agents in the the transition to the new operating model in 2017 and
UK and the employment continue to be in place in the ROI which seek to
status of agents in ensure that the relationship between the business and
the Republic of Ireland the agents it engages is such that self-employed
(ROI), particularly status is maintained. Compliance with policies has
given recent employment been routinely evidenced and tested.
status cases reported
in the media.
Were the Group to * To date the Group has successfully defended
be unsuccessful in historical employment status claims brought against
defending such claims, it by former agents in the UK and employment status
it may be required claims brought by agents in the ROI. The Group has
to make payments to also previously agreed the self-employed status of
former agents as well agents with the tax authorities in the UK and the
as being liable to ROI.
pay additional taxes,
in particular employer's
national insurance * It is understood from discussions with HMRC that it
contributions to the has started undertaking an industry-wide review of
relevant authorities. the self-employed status of agents in the UK.
* The Group's discussions with HMRC, which are focusing
on the period from when the FCA took over
responsibility for the regulation of consumer credit
in April 2014 to the change of operating model in
July 2017, remain in the initial fact finding stages.
The Group is working positively and collaboratively
with HMRC and HMRC expects that the review could
continue for another year.
------------------------- ------------------------------------------------------------------ ------
E5. Home credit recovery - financial performance UK
---------------------------------------------------------------------------------------------- ------
Description Mitigating activities Stable
There is a risk that * The plan to breakeven has been developed and has been
the UK business may broken down into a number of workstreams which
fail to grow in line include cost optimisation, customer growth and
with expectations effective collections.
(both home credit
and Satsuma) and the
cost base may become * Programme plans presented to the Group Board with
misaligned to the governance plan in place to monitor progress with
level of business, regular review points.
resulting in sub-optimal
performance.
* Balanced scorecard and incentives introduced in field
to optimise CEM collection performance and agreed
with the FCA.
* Provident Direct being trialled in the field to
automate collections alongside enhancements through
continuous payment authorities (CPA) and card
payments.
------------------------- ------------------------------------------------------------------- ------
E6. Vanquis Bank -
persistent debt
------------------------- ------------------------------------------------------------------- ------
Description Mitigating activities Stable
There is a risk that * An increase to the monthly minimum payment due (MPD)
low levels of customer as a percentage of principal balance.
engagement with Vanquis
Bank's Persistent
Debt (PD) strategy * The introduction of a recommended payment amount to
could lead to adverse encourage customers to pay an amount higher than the
customer and commercial MPD.
outcomes.
* Ongoing monthly communications (in addition to the
mandatory communications that are sent at months 18
and 27 of the customer's PD journey) outlining what
the customer needs to do to exit and remain out of
PD.
* To mitigate the risk of customers not engaging with
Vanquis Bank following the PD intervention point
(from March 2020), management is implementing a
communication strategy to continue to encourage the
customers potentially affected to engage and enter a
pay-down plan.
* While aiming to avoid a 'blanket suspension of cards',
our strategy is to prevent further spend where our
risk factors clearly indicate that this is the best
outcome for our customers who are in PD.
------------------------- ------------------------------------------------------------------- ------
Responsibilities statement
The Directors' responsibilities statement is extracted from page
144 of the 2019 Annual Report and Financial Statements.
Each of the directors listed below confirms that, to the best of
their knowledge, the Group financial statements, which have been
prepared in accordance with IFRS as adopted by the EU, give a true
and fair view of the assets, liabilities, financial position and
profit of the Group, the Company and the undertakings included in
the consolidation taken as a whole, and that the Strategic Report
contained in this Annual Report and Financial Statements 2019
includes a fair review of the development and performance of the
business and the position of the Company and Group, and the
undertakings included in the consolidation taken as a whole, and a
description of the principal risks and uncertainties they face.
Patrick Snowball Chairman
Malcolm Le May Chief Executive Officer
------------------------
Simon Thomas Chief Finance Officer
------------------------
Andrea Blance Senior Independent
Director
------------------------
Angela Knight Non-Executive Director
------------------------
Elizabeth Chambers Non-Executive Director
------------------------
Paul Hewitt Non-Executive Director
------------------------
Graham Lindsay Non-Executive Director
------------------------
Robert East Non-Executive Director
------------------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ACSUNVSRROUOAAR
(END) Dow Jones Newswires
March 16, 2020 10:56 ET (14:56 GMT)
Provident Financial (LSE:PFG)
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