Happy Friday 13th everyone!

I see very few updates on the RNS this morning that are of relevance to usual coverage here, so I thought I'd throw open the comments thread straight away for suggestions. Maybe there are stocks which could have been covered earlier in the week, which you'd like me to catch up on now? Let me know.

Best wishes,

Graham



Provident Financial (LON:PFG)

  • Share price: 869p (+10%)
  • No. of shares: 148 million
  • Market cap: £1,288 million

Trading Statement

One of the interesting stories which did come out today was this trading statement from Provident Financial.

Provident is a Yorkshire-based "doorstop lender" which also offers subprime credit cards, subprime vehicle finance, and short-term loans.

The share price crashed in August when it was revealed that changes it made to its sales force had effectively resulted in chaos, with both employees and customers jumping ship as a result.

Today's update has been well-received. I'll quickly summarise what it says:

  • Consumer credit division is still heading for an £80 million - £120 million loss before exceptions.

This is the problem division. A former MD has returned to head up this division, the operating model has been fixed to give back some of the flexibility which it had before the changes this, and headcount has been significantly increased again to help customers.

These are the key numbers:

Collections performance in September was 65%, up from 57% in August, whilst sales were approximately £6m per week lower than the prior year compared with £9m during August. Home credit receivables ended September at £316.3m, down 33% from June 2017 (June 2017: £471.7m, September 2016: £489.2m).

As you can see, it's a much smaller business now than it was last year: more than a third smaller!

While losses this year can be taken for granted, the question is whether and how long it might take to return to profitability. I would assume that returning to its former size is impossible in the short-term, but I would expect it to return to core profitability quickly, once the exceptional costs associated with hiring and firing staff, and the recent poor collections experience, are out of the way.

  • Satsuma (short-term loans) are up 28% over three months, and more than doubled compared to last year. Expected to produce a small loss this year, but…

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