Revelling in the misfortune of others is unseemly, but bosses at Non-Standard Finance (NSF) will be hard-pressed to avoid a private smile or two this weekend.
The doorstep lender is reaping the rewards of the travails of its much larger rival, Provident Financial.
Last week, the Provvy’s share price collapsed by 66% when it ditched its dividend after announcing problems with collecting its loans and a regulatory investigation into its Vanquis Bank division.
John van Kuffeler, the chairman of NSF, has wasted little time capitalising. As the former chief executive and chairman of Provident, he had poached 353 Provvy debt collectors by end of July and has set his sights on hundreds more. In the coming months, NSF, the third-ranked home credit lender, will ramp up an already aggressive push into the home credit business.
Investors are already piling in. NSF’s stock jumped by 10% to 72p in the three days after Provident’s woes became public.
NSF has three businesses: home credit; a lender called Everyday Loans; and TrustTwo, a business that recently expanded through the acquisition of a sub-prime bank, George Banco, and offers loans to people who have a guarantor.
Results are encouraging. In the half-year to June 30, NSF’s revenues increased by 16% to £52m, profits increased by 26% to £5.4m and the interim dividend ballooned by 67% to 50p. The top brass are hoping to pay out half their profits in dividends.
This will be welcome news, as the home credit business is expected to see profits increase by 16% this year and 50% next year.
The beauty of NSF, a two- year-old London-based business, is that it is sticking with a tried and tested business model. Door-to-door lending has withstood recessions, world wars and the 2008 financial crisis. Unlike Provident, NSF has no plans to change its self-employed collection “agents” to full-time salaried staff.
This flexibility means NSF agents can choose their own hours and earn commission for every loan they make.
As with any financial services company, the threat of unexpected regulation is always lurking in the shadows. Yet analysts claim the Financial Conduct Authority is “perfectly comfortable” with NSF’s business plan.
Van Kuffeler will reveal more at an investor day in November. He is expected to detail how George Banco will help boost its profits. The focus is more likely to be on his ability to take a greater share of Provident’s business.
For now, it’s a buy.
