Can Provident Financial get back on track?

After a summer of upheaval, will Provident Financial's under-pressure boss Peter Crook and his diminished band of doorstep collection agents be able to put the sub-prime lender on the road to recovery?

That's the question occupying investors, including star fund manager Neil Woodford, after last month's hefty profits warning triggered by a disastrous overhaul of the company's home credit division. Shares are currently at a 12-month low, having fallen further since the downgrade.

Crook remains confident that Provident is about to turn a new page, after completing the roll-out of the new business model in early July and pledging to increase focus on customer service and on improving collections.

But parts of the City still need convincing, with Liberum reiterating its conviction sell rating and saying there was nothing in Tuesday's half-year results to change its negative stance. The broker has a price target of £20.

As expected, the half-year results made for painful reading after adjusted profits dropped 22.6% to £115.3 million and basic earnings per share (EPS) fell 46.3% to 46.2p.

There was no cut to the dividend, which was maintained at 43.2p to reflect "medium-term growth opportunities". This will be of some comfort to shareholders who include Woodford Investment Management, which owns almost 20% of the former £4 billion business.

The pressure on Provident and Crook follows an overhaul of the Consumer Credit division, which has gone from being serviced by self-employed local agents to employing full-time customer experience staff. This cut agent numbers from 4,500 to about 2,500.

The resulting disruption impacted on the rate of collections, while it became harder to sell to existing customers and to keep them on the books.

Smaller rivals Non-Standard Finance and Morses Club, are both likely to have capitalised by picking up former Provident agents and taking market share in areas where Provident agencies have been vacated.

In June's profits warning, Provident said pre-exceptional profits at the Consumer Credit division will slump to around £60 million, from £115 million in 2016.

Provident said today that other parts of the business were performing well, with Vanquis Bank, car and van finance business Moneybarn and short-term loans operation Satsuma booking record volumes of new business.

Vanquis, which offers credit cards for people with poor credit history, grew profits to just over £100 million. The group said it continued to exercise "strong discipline around credit" and had not observed changes in customer behaviour in relation to either demand for credit or credit performance.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.