Provident Financial rebounds as it shakes up management

Provident Financial has taken "decisive action" to put itself on the road to recovery and its shares were leading the FTSE 100 higher this morning in response, says the Daily Telegraph.

The company announced a "shake-up" of management in its troubled home credit business, the key revenue driver the firm admitted earlier this week would make a hefty loss this year, of up to £120m.

Chris Gillespie, who ran the doorstep lending arm of the business successfully until his departure in 2013, has agreed to step back into the role, replacing Andy Parkinson.

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He has been tasked with "re-establishing relationships with customers, bringing collections back to a normal level, and stabilising the operation of the business".

Gillespie will be supported by two further appointments from within the company: Luke Enock, who works for Provident subsidiary Satsuma, and Greg Cant, director of corporate finance and development.

Manjit Wolstenholme, executive chair, said: "These are my first appointments and I intend to work closely with the new team on turning the home credit business around and to putting a plan in place to deliver good results for the company."

Having risen on Thursday as bargain-hunters eyed an opportunity, Provident shares leapt by 20 per cent in early trading this morning to a little over £9 at the time of writing.

Shore Capital analyst Gary Greenwood said: "We welcome this decisive action to try and stabilise and subsequently turnaround the home collected credit business."

The Financial Times says Shore has put a "buy" rating on Provident, believing that "the group remains viable and that the share price fall is materially overdone". It is targeting a price of £10 per share for the stock.

That will be good news for the likes of Neil Woodford, the star fund manager whose reputation took a hit when he upped his stake in Provident after a profit warning in June – but then lost £315m in the 66 per cent share price nosedive on Tuesday.

Since then, the shares doubled from an intraday trough of £4.50, but were still around 50 per cent down for this week as a whole and less than a third of the £32.50 they were trading at as recently as May.

Provident Financial's home credit business now valued at zero

24 August

Provident Financial's woes continued yesterday after its corporate broker said the flagship consumer credit business is now "worthless", reports The Times.

Analysts at JP Morgan Cazenove said in a sum-of-the-parts valuation of the group that "we give zero value" to home credit.

The unit is the engine room of Provident's revenues and was the cause of a share price collapse earlier this week, when bosses revealed that after making a profit of £115m last year it would generate a full-year loss for 2017 of up to £120m.

Provident's "doorstep" lending business is based on face-to-face lending to, and debt collection from, customers with a poor credit history.

It is in the midst of a "botched and costly restructuring" that included replacing self-employed agents with fewer customers services managers on the payroll, as well as an overhaul of software systems.

The net result has been a swath of missed appointments, an exodus of agents and a slump in debt collection rates from 90 per cent to just 57 per cent.

According to The Guardian the company is struggling to retain debt collection agents during its transition, as they are being poached by rivals and taking the most valuable clients with them.

Portia Patel, an analyst at Liberum and seller of the stock, told The Times she estimates Provident could be facing a funding shortfall of £73m by the end of next June, meaning it could have to raise new cash from shareholders.

There are also questions over why it did not reveal details of an FCA investigation into its Vanquis Bank credit card arm sooner, having suspended sales of affected products last April.

Chief executive Peter Crook has already stepped down and there are calls for "further management changes", says The Times.

For now at least the shares have stabilised, rising 19 per cent for the day at the time of writing to £7.85.

However, that is after one of the most precipitous drops in FTSE 100 history, of 66 per cent, on Tuesday and the share price is still more than 50 per cent down for the week so far.

Woodford loses millions in Provident crash

23 August

Star investment manager Neil Woodford remained defiant over his investment in the "subprime" lender Provident Financial after his fund lost more than £300m in its share price crash yesterday.

Provident admitted its flagship "doorstep" consumer credit business for households with a poor credit history would make a loss of up to £120m this year.

Last year the business made £115m and in June it said it expected to record a lower profit of £60m.

The latest downgrade was accompanied by the abrupt departure of Provident's chief executive Peter Crook and the announcement that its interim dividend would be scrapped.

Investors took fright and sold the stock liberally, sending it down 66 per cent to £5.89 and wiping £1.7bn from its market value.

City AM says the fall is one of the worst ever in FTSE 100 history, comparable to the 67 per cent drop for Royal Bank of Scotland in 2009 and the similar hit for the industrial equipment firm Ashtead in 2003 amid its accounting scandal.

Woodford's fund owned around 20 per cent of the business. It saw the value of its holding fall from £500m to £185m, says Interactive Investor.

But Woodford insists the multimillion pound losses he took on Provident are all of a short-term nature and that the company is still a good prospect for the long term.

"I believe Provident shares started the day undervalued, and have become even more so as a result of the market's reaction to today's news," he said.

Writing in the Evening Standard, Simon English says the shock drop is embarrassing for the fund manager, who just three weeks ago defended having held his stake despite the June downgrade, insisting that the dividend would be paid.

Woodford, who looks after billions of pounds of savings for investors and pensioners, has had a poor year so far. He has underperformed his peer group of active managers in four of the last five years.

He is known for his long-term outlook, however, and has outperformed in six of the last ten years and over the last decade as a whole.

Provident's crash wasn't bad news for everyone. Hedge funds had around eight per cent of the company's stock on loan to bet on a share price fall. They made around £135m by the close of trading yesterday.

Provident shares in freefall as it plunges into red

22 August

Shares in Britain's largest "doorstep" lender Provident Financial were in freefall this morning after it issued its second big downward profit revision in three months and its chief executive quit.

In June, the company said full-year profits in its flagship consumer credit business would almost halve to £60m from a previously-predicted £115m. This morning it forecast a huge swing of up to £180m to a sizeable loss.

Provident said in an update to the stock market that losses were "likely to be in the range of between £80m and £120m".

It added that chief executive Peter Crook has stepped down "with immediate effect". His role will be taken on by Manjit Wolstenholme who will become executive chairman.

Wolstenholme will also oversee a "thorough and rapid review of home credit's performance... to secure the turnaround of the business".

Provident's shares were down 59 per cent for the day at the time of writing to £7.17. They suffered a similarly large drop in June and are now less than a quarter of their recent peak of £32.04 reached at the end of April.

Problems in the home credit business, which is largely based on lending money and collecting repayments directly from borrowers with a poor credit history at their homes, stem from an overhaul of the business that began in February.

The company is replacing its 4,500 self-employed and mostly commissioned-remunerated agents with 2,500 "customer experience managers" on the payroll, says the Financial Times.

"Provident said not enough of its self-employed debt collectors had applied to become employed by the company," says the BBC, and that a "greater number of agents than normal had left".

As a result it has been "less effective at collecting money and selling new loans".

The company says that trading in its other divisions, which include Vanquis credit cards, Moneybarn car loans and the online installment loan provider Satsuma, is still "in line with expectations".

That's despite Provident confirming that Vanquis has agreed to suspend new sales of its "repayment option plan" product pending an investigation by the Financial Conduct Authority, says the FT.

Provident Financial has taken "decisive action" to put itself on the road to recovery and its shares were leading the FTSE 100 higher this morning in response, says the Daily Telegraph. http://www.telegraph.co.uk/business/2017/08/25/provident-financial-shares-bounce-back-management-shake-up/

The company announced a "shake-up" of management in its troubled home credit business, the key revenue driver the firm admitted earlier this week would make a hefty loss this year, of up to £120m.

Chris Gillespie, who ran the doorstep lending arm of the business successfully until his departure in 2013, has agreed to step back into the role, replacing Andy Parkinson.

He has been tasked with "re-establishing relationships with customers, bringing collections back to a normal level, and stabilising the operation of the business".

Gillespie will be supported by two further appointments from within the company: Luke Enock, who works for Provident subsidiary Satsuma, and Greg Cant, director of corporate finance and development.

Manjit Wolstenholme, executive chair, said: "These are my first appointments and I intend to work closely with the new team on turning the home credit business around and to putting a plan in place to deliver good results for the company."

Having risen on Thursday as bargain-hunters eyed an opportunity, Provident shares leapt by 20 per cent in early trading this morning to a little over £9 at the time of writing.

Shore Capital analyst Gary Greenwood said: "We welcome this decisive action to try and stabilise and subsequently turnaround the home collected credit business."

The Financial Times says https://www.ft.com/content/c52f0664-88e8-11e7-8bb1-5ba57d47eff7 Shore has put a "buy" rating on Provident, believing that "the group remains viable and that the share price fall is materially overdone". It is targeting a price of £10 per share for the stock.

That will be good news for the likes of Neil Woodford, the star fund manager whose reputation took a hit when he upped his stake in Provident after a profit warning in June – but then lost £315m in the 66 per cent share price nosedive on Tuesday.

Since then, the shares doubled from an intraday trough of £4.50, but were still around 50 per cent down for this week as a whole and less than a third of the £32.50 they were trading at as recently as May.