After a disastrous start to the week in which Provident Financial’s profit warning caused its share price to collapse and wiped £1.5bn off its market cap, the Neil Woodford favourite has rebounded strongly, recouping half of its share price losses.
Shares in the doorstep lender have been gradually climbing their way back over the week from Tuesday’s low of £4.50, gaining back 65% of their value by the end of trading on Thursday.
On Friday, the share price moved upward by an additional 20% to £8.99p per share, after the firm announced a management shakeup.
Chris Gillespie was appointed managing director of the troubled consumer credit business, replacing Andy Parkinson with immediate effect.
The firm added he would be supported by Luke Enock, now deputy managing director of the home credit business, and Greg Cant, director of corporate finance and development.
It also mentioned that it had initiated a review of its home credit business, which caused the firm a gigantic headache as it struggled to retain door-to-door agents, after switching up its business model.
Woodford, who is one of the biggest shareholders in the consumer credit firm alongside Invesco Perpetual’s equity income manager Mark Barnett, defended his holding amidst Tuesday’s sharp sell-off.
While he admitted he was “hugely disappointed” by the problems plaguing the consumer credit division, including an FCA probe into subsidiary Vanquis Bank, he boldly predicted that the business “will be around for many decades to come.”
Despite Provident Financial’s swift recovery over the week, Graham Spooner, investment research analyst at The Share Centre, predicts that the sub-prime lender will be the next stock to be ousted from the FTSE 100 index.
“It appears certain that provider of tailored credit products Provident Financial will be the latest candidate to be relegated from the FTSE 100 in next week’s third quarter reshuffle,” he said.
“The group, which was once regarded as the leading non-standard lender in the UK, also announced further problems at its Home Credit division, an investigation into Vanquis Bank and the resignation of the CEO. Moreover, the Provident highlighted that the dividend announced in July had also been cancelled.
“Unsurprisingly, all of this news hit the share price very hard, and with the share price down by over 75% since June, it may not come as any surprise to investors that it is in prime position for relegation,” he concluded.
