Provident shares up 12% on home credit hopes

Manjit Wolstenholme

Shares of troubled Bradford-based subprime lender Provident Financial rose about 12% on Friday after it reported progress with its home credit business recovery plan in a trading update for the period from July 1 to October 12, 2017.

“A home credit business recovery plan has been developed under new leadership to re-establish relationships with customers, stabilise the operation of the business and improve collections performance,” said Provident Financial.

“Progress to date is in line with the recovery plan and is consistent with the guidance provided on 22 August 2017 of a pre-exceptional loss for the Consumer Credit Division (CCD) in a range of between £80 million and £120 million for 2017 as a whole.”

On August 22, shares of Provident Financial plummeted more than 70% after it issued a second profit warning in roughly two months and said its CEO Peter Crook would leave the company and its dividend would be suspended.

The fall in the firm’s share price on August 22 wiped about £2 billion off its stock market value at that time.

Provident Financial has been experiencing major problems with its move from using self-employed agents to directly employed debt collection agents called CEMs or “customer experience managers.”

Collections performance in August was running at 57% versus 90% in 2016.

On August 25, Provident shares rebounded 20% as it re-hired former executive Chris Gillespie as managing director of its home credit business and made other management changes.

On Friday, Provident Financial said: “The changes made by management over recent weeks have prevented any further deterioration in performance and should provide the foundation for delivering the necessary improvement in customer service.

“Collections performance in September was 65%, up from 57% in August, whilst sales were approximately £6 million per week lower than the prior year compared with £9 million (lower) during August.

“Home credit receivables ended September at £316.3 million, down 33% from June 2017 (June 2017: £471.7m, September 2016: £489.2m).”

Provident Financial executive chairman Manjit Wolstenholme said: “Since the last update, we have moved quickly to appoint new leadership in home credit who have a deep understanding of the business and recognise the importance of the relationship between our front-line staff and our customers.

“A recovery plan has been developed and a number of actions have already been implemented to restructure the field organisation in order to provide the foundation for delivering the necessary improvement in customer service and financial performance.”