Neil Woodford suffers blow after Provident Financial shares plummet

Ivan Schwartz
August 23, 2017

The doorstop lender anticipates losses of between £80m and £120m on the back of a drop in debt collection rates - which are down to 57 per cent from 90 per cent past year - following a switch from self-employed sales agents to using a more tech-reliant full-time sales force.

Peter Crook stepped down with immediate effect after the sub-prime lender said it was on track for a full-year loss and would scrap its dividend.

BHP Billiton (BLT.L) rose 2.1 percent after the world's largest mining company reported a surge in underlying full-year profits and said it would exit its underperforming US shale oil and gas business.

Also in the announcement, the group announced that the FCA is investigating subsidiary Vanquis Bank's sales of Repayment Option Plans.

The company is undertaking "a thorough and rapid review of home credit's performance", and will not now pay the interim dividend it promised just a month ago. Peel Hunt cut Provident Financial plc to a "hold" rating and set a GBX 3,365 ($43.68) target price for the a report on Friday, May 12th.

Woodford said at the time the investment case for the company remained "very attractive".

Manjt Wolstenholme, who will take on the role of executive chairman, said: "My immediate priority is to lead the turnaround of the home credit business". Customers are also borrowing £9 million a week less. Probably not - this is more about management failings than a market-wide issue: "rivals are taking market share", he pointed out.

Provident Financial plc (LON PFG) opened at 1882.00 on Wednesday.

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Provident Financial said that given the news it would withdraw the 43.2p interim dividend declared in July and due to be paid in November and said a final dividend, which past year amounted to 91.4p, was "unlikely".

Vanquis Bank agreed with the Financial Conduct Authority to voluntarily suspend all new sales of the ROP previous year and to contact costumers, the company said.

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.

It said then it expected profits to be £60m at its consumer credit division. Protecting the group's capital base through withdrawing the interim dividend and in all likelihood the full-year dividend is the appropriate response to maintain the highly valuable franchises of Vanquis Bank, Moneybarn and Satsuma.

Greenwood said Crook's departure was unlikely to be the only one.

"We do not expect fund managers to get it right every time and I would point to the fact that Neil has shown an ability to pick enough winners to produce superior returns over the long term".

Having a price of 715.25GBX, Provident Financial PLC (LON:PFG) traded -55.59% lower on the day.

The manager also holds it in his recently launched £720m Woodford Income Focus fund, where it is the fifth largest holding, representing 3.4% of the portfolio.

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