Within the first half hour of trading, shares in the consumer credit firm were already up around 36% at 789p, more than making up for the 12% hit they suffered yesterday. Investors continued their manic buying spree well into the morning, at one point pushing the price up as high as 85% to 1075p.
Provident Financial’s share price rally is a spot of good fortune for the firm’s biggest shareholders, Neil Woodford (pictured) and Mark Barnett, who hold a combined 48.3% of the business.
The news will be less well received by Lansdowne Partners, AQR Capital, Legg Mason and GLG Partners, who have been aggressively shorting the stock. As at 26 February, 13.4% or £130m of the doorstep lender’s shares were being shorted, making Provident Financial the second most shorted stock after beleaguered high street retailer Debenhams. Hedge fund Lansdowne Partners held the largest short position of 3.25 million shares, according to data from Bloomberg.
The reversal of fortune comes as the firm finally provided investors with some clarity around its two ongoing FCA investigations.
In a separate announcement to its annual results, the group stated it would need to raise £331m to settle a string of fines, less than the £500m reported over the weekend. Majority shareholders Barnett of Invesco Perpetual and Woodford “are supportive of the group’s plans and the rights issue”, it noted.
The subprime lender also confirmed that it had resolved one of its ongoing investigations with the Financial Conduct Authority involving its subsidiary Vanquis Bank.
The credit card provider agreed to pay a fine of £1.98m for failing to disclose the full price of its add-on repayment option plan (ROP) and dole out £169m in compensation to affected customers.
The group provided some additional clarity on the second FCA probe into its car and financing unit Moneybarn, which it expects will cost an estimated £20m.
Elsewhere, the group reported that adjusted profit before tax had come in at £109.1m last year, down 67.3% from the £334.1m it generated in 2016.
It also posted a statutory loss of £123m for the full year, slightly worse than the £115m loss it predicted in its last trading update.
The group’s dividend remains suspended for the time being.
Commenting on the results new chief executive, Malcom Le May, was pleased with the initial progress made but stressed that the firm has further to go in rebuilding its trust with customers, regulators, shareholders and employees.
“When I became group CEO, I stated my key objective was to execute a turnaround of the group. Today we have made progress on that objective by agreeing a resolution with the FCA in relation to Vanquis Bank and we now have a clear view on the estimated cost of the FCA investigation of Moneybarn.
“To grow the business and deliver long-term sustainable returns to our shareholders, PFG needs to strengthen its balance sheet. Today we have announced a proposed rights issue to raise net proceeds of £300m which the board believes will allow the group to implement its strategy and restart paying a progressive dividend in 2019.
“The group’s turnaround is making progress, but the board and I realise there is still much to do to achieve a customer centric business delivering long-term sustainable returns to our shareholders.”
