Provident Financial saw its share price topple by an additional 11% to 715p on Wednesday morning as markets digested comments that a rights issue looks “increasingly likely” owing to the doorstep lender’s cashflow woes. Over the past two days, its shares have depreciated around 22%.
Fears of a fresh call for capital were sparked yesterday when Gary Greenwood, an analyst at Shore Capital, weighed in on the subprime lender’s latest set of results.
“Although we think the group will avoid breaching debt covenants in a redress scenario, we now think an equity raise to replenish resources is increasingly likely, with a redemption of dividend payments also delayed.”
Wednesday also brought bad news for Utilitywise, an independent utility cost management consultancy, which is about 18% owned by Woodford.
Shares in the firm were down nearly 18% to 38p at the time of writing, as it informed shareholders that its full year profits might be affected by accounting issues.
Utilitywise switched to a new accounting policy back in August after discovering there were issues with its historic methodology of assessing revenue recognition.
In its final results out on Wednesday, it said: “The cumulative impact of the non-cash accounting adjustments, across all historic financial years, is expected to have a material negative impact on Group equity as at 31 July 2017.
“It is not yet known whether there will be a material impact on the profit of the Group for FY17, due to the requirement to finalise the split between FY17 and earlier years.”
By his own admission, Woodford had a “painful” 2017, as a number of his equity darlings, from Provident Financial to Purplebricks, Allied Minds and Prothena, ran into severe difficulties, ranging from profit warnings, Financial Conduct Authority probes and delayed drug tests.
His fund was the worst performer in the Investment Association’s UK Equity Income sector, delivering returns of -0.1% against the sector average 10.4%.
The lacklustre performance of the fund prompted many long-time backers of the heavyweight manager to lose patience and pull their investments from his flagship equity income fund.
Assets under management in the income fund have dropped off considerably last year, with the fund shrinking from £8.72bn at the end of October to £8.17bn in early December. His fund’s AUM currently stands at £8.09bn.
According to Morningstar data, the LF Woodford Equity Income Fund was one of a small handful of mega funds that dragged down the UK equity income sector’s net flows, resulting in 18 consecutive months of outflows.
Commenting on Woodford’s “annus horriblis,” Mitchell Fraser-Jones, Woodford’s head of investment communications, reflected: “We acknowledge that performance has been disappointing recently but we understand the reasons why and are not complacent about the journey ahead.
“With over 30 years’ investment experience, however, and a tried and tested approach, we are confident that the fund is very well-positioned to deliver the attractive and positive long-term returns going forward, to which investors have become accustomed over a very long period of time,” he added.
