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June 8, 2007 3:00 am
Provident Financial, the doorstep lender, is to inject £70m of additional capital into its international operations as part of a planned demerger.
The home credit company is spinning off its overseas business into a separate listed company, which offers consumer credit in emerging markets such as Mexico, Poland and Hungary.
Provident shareholders will receive one share in the new International Personal Finance (IPF) business for every one they own. The international business is seen as faster growing and more capital intensive than Provident's more mature UK operations.
The overseas business already operates in six countries and is considering moving into emerging markets such as Russia, India and Ukraine.
IPF, which will be chaired by Christopher Rodrigues, a former chief executive of Bradford & Bingley, said it wanted to increase profit from central European markets by 50 per cent to about £95m and to develop existing markets such as Romania and Mexico.
It plans to invest more than £15m in emerging markets this year and also test an operation in Russia, which may include the acquisition of a small bank for up to £5m.
Analysts gave a mixed reaction. Saurabh Mukherjea, analyst at Clear Capital, called the details "underwhelming". "We still struggle to see how this demerger benefits Provident's shareholders," he said. "They are not getting a one-off return of capital at the point of the demerger because of the need to pump capital into IPF's balance sheet."
The shares fell 1p to 779p.
Provident said it would cut £3m of costs a year after the demerger, owing to corporate overheads.
Provident UK, whose rump business after the demerger will be headed by Peter Crook, the former Barclaycard executive, told analysts yesterday that there was an increasing opportunity for its UK operations.
It said there had been growth in the UK subprime market, which targets customers with patchy credit records.
An extraordinary meeting will be held on July 13 to seek shareholder approval for the demerger.
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