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Provident Financial shares surge on recovery plan

Provident Financial shares surge on recovery plan

Shares in Provident Financial (PFG) have surged 16.9% to 921p after the embattled doorstep lender reassured investors its recovery plan was on track.

The lender did not narrow its estimate for losses from its home credit division, of between £80 million and £120 million.

But it said it had recruited 300 former self-employed agents back to the division as part of a move back towards a flexible working structure. The company encountered problems earlier in the year when it introduced 2,500 full-time 'customer experience managers' to replace 4,500 self-employed agents, which led to collections plummeting.

The group said that collections had now ticked up from 57% to 65% and has devolved more responsibility to regional managers.

'Things aren't getting any worse at Provident, and the company is pulling a U-turn on some of the problematic plan to streamline the home credit business,' said Laith Khalaf, senior analyst at Hargreaves Lansdown.

'The market clearly likes what is sees with the shares rising sharply. The stock is now trading at around double the lowest price it hit on that fateful day in August which precipitated its ejection from the FTSE 100.'

Jefferies analyst Phil Dobbin retained his 'hold' rating on the shares on the news.

'At this point Provident Financial is unable to narrow the range of outcomes for home collected credit. There has clearly been some progress in improving collection but there remains a huge amount of work to do.'

Peel Hunt analyst Mark Williamson was likewise cautious, moving his rating from 'under review' to 'hold'.

'There remain a number of uncertainties,' he said, adding that there was 'likely to be ongoing volatility in the share price'.

But Shore Capital analyst Gary Greenwood was more optimistic, giving the shares a fair value of £10 and rating them a 'buy'.

He said his valuation of the stock 'assumes that the group will remain viable and will not need to issue equity but does include a substantial haircut for tail risk associated with the ongoing Financial Conduct Authority investigation into historical sales of its repayment option plan product'.

Provident Financial was the biggest riser on the FTSE 250, followed by Ashmore (ASHM), as the emerging markets-focused fund manager posted an 11% rise in first quarter assets.

TalkTalk (TALK) was the biggest faller on the index, down 5.9% at 205.1p after a downgrade from analysts at Barclays.

The FTSE 100 meanwhile fell 27 points, or 0.4%, to 7,529, weighed down by a strong pound, up 0.3% against the dollar at $1.33, on reports the European Union could offer the UK a two-year transitional Brexit deal.

GKN (GKN) was the heaviest faller, down 7.8% at 325.3p after the engineering group warned on full-year profits, blaming disappointing aerospace trading.



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