Memory jogger there. I was fortunate in passing the 11+ and if it wasn't for the 'provvie cheque' my parents couldn't have afforded the uniform. I'm not sure if they still operate the facility. More likely that your dad's old business has disappeared and parents buy from Tesco and Primark now. Probably not many now remember the 'provvie' and most know it as Moneybarn, Vanquis or Satsuma. PFG provided a social function back then by providing affordable loans. The world is far more cut-throat today and even the term 'door-step lender' sounds archaic. There is a lot of knowledge in the DNA of PFG and I don't see a need for a 'non-standard' lender disappearing but with everybody seemingly owning a smart phone the door step lender is going the same way as the gas street lighter and Woolworths. Transition is happening at such a pace nowadays but as they say, 'what doesn't kill you makes you stronger'. I think PFG has a good future and is probably one of the cleanest lenders out there.
I know Harlesden well. I used it as an alternative to the North Circular when going South of the river. Like you I never imagined I'd own shares in the Provvie.
My dad had a little shop in Harlesden North London, selling children's wear, and he took Provident vouchers from a few customers.
Do they still operate in this way or only money lenders now.
I know with dad he had to pay a commission from the gross amount he received, so Provident earned from the borrowers as well as the shops where they spent the money
never thought i would end up an investor in the company, directly and with Woodford
Hi FRTEB, I am definitely not 'gammon' but fit the age demographic so still shout at the television from time to time. I have been on both sides of the fence with PFG. As a child growing up on a council estate they saved my family's bacon a few times. My parents always repaid the loan and the Moneybarn borrowers will consist of various types of borrowers. In this litigious age there are always T&C which PFG have been more meticulous than most. I took out a Vanquis credit card not because I needed it but to see how the process worked. I received several phone calls and spent over an hour answering questions. What annoys me is the assumption that the evil money lender is taking advantage of innocent borrowers. A percentage of borrowers are feckless whilst others are actually criminal. Of course there is always one person or families whose personal situation is dire through no fault of their own and deserve sympathy and help but the 'nanny state' includes many who put themselves there with a combination of laziness and a feeling of entitlement. I get enraged about the NHS too.
Many sit on theirarses waiting for the benefits and carers to turn up. There are two in my family guilty of this but what is more concerning is that, if they want to die sooner, that is their choice but it should be conditional on them purposely not helping matters by, for example, excessive drinking, smoking, being overweight and not taking any form of exercise.
If PFG isn't there to lend a vacuum will be created and filled by far worse lenders imo.
I just looked at the share register. 72 percent is held by institutions holding more than 4 percent. Add in those below 4 percent and this is a company with strong institutional support who on balance aren't mugs.
The FCA daily shorts showed that as at last Friday the shorts (above half percent) were 5.44. I think they may be even lower as I am suspicious of the Lansdowne partners 2.19 which seems to have been forever and was taken out at c.£15 watched it go to £26, required short covering and eventually it became a winning bet. I wonder if it is in fact a hedge against another position (never underestimate derivative inventors) ?
PFG faced off the shorters back in 2010/11 when I first started investing in the company; it was at the time the most heavily shorted stock in the FTSE. A company that survived 2 World Wars is a bit more resilient than most. I also feel that even if the worse was to happen some US companies that specialise in turnarounds would make a move.
Last two paragraphs of the article (why do ii chop long posts?) :
" Admittedly, there is some regulatory uncertainty over Moneybarn, which is still under investigation by the FCA over the adequacy of creditworthiness assessments, as well as the treatment of customers in default or arrears with forbearance and due consideration, and the provision of information about termination processes. Management took a £20m provision against the expected cost of the investigation last year.
Provident has been through the wringer during the past 18 months, but it looks as though it is putting its house in order. Its balance sheet is sturdier, home credit collections are rebounding and loan growth is forecast to re-emerge at Vanquis. Whats more, management expects to reinstate dividends this year, after 2017s hiatus, and adopt a progressive dividend policy from 2019. According to Numis Securities' forecasts, the payout could hit 56.9p in 2020, equivalent to an 8.4 per cent yield. The shares' price-to-forecast earnings multiple also looks cheap by historic standards and, while far from a given, Numis's prediction of a recovery in return on equity from 13 per cent this year to 29 per cent by 2020 (driving EPS to 81.2p) points to the serious recovery potential on offer. "
A good article. Thanks for posting. I think that's a very good overall view of the business and future potential.
I hold a sizeable chunk of PFG - bought after the sp fell off a cliff, and I took up my full rights. I intend to hold long term as I think this is a solid recovery play and will see a significant revaluation upwards within the next 12 to 18 months along with a (stated) nominal dividend this year followed by a significant increase in divis next year and beyond. As per the article above, Numis are forecasting a dividend yield of 8+% by 2020. As an income seeker I think PFG is a very strong buy at these levels for those with a little patience.
2017 was an annus horribilis for Provident Financial (PFG), but we think the group has reached an inflection point. Following its rights issue earlier this year, which boosted its regulatory capital level, the sub-prime lenders balance sheet is in a more robust position. Home credit collections are steadily improving and expected to return to historic levels next year. Whats more, it has reached settlement with the Financial Conduct Authority over its sale of repayment option plans (ROP), removing a major source of uncertainty hanging over Vanquis Bank. The shares are trading at less than nine times blended consensus forecast earnings for 2019, a discount to its five-year historical average of 13 times. We reckon there's enough value on offer to risk buying into this high-profile recovery play.
The calamity that ensued when management decided to reorganise Provident Financial's home credit business torpedoed pre-tax profits last year and the balance sheet. Customer collections and sales nosedived when self-employed agents were replaced with full-time employees, which was partly because software used to schedule collections was chucking out inaccurate data. However, following a management overhaul, this business has been gradually improving its performance, which is being reflected in a rebound in collections. During the first quarter of this year, the headline collections performance was 70 per cent, up from 57 per cent in August 2017 and 65 per cent in September. Thats against an historically more normal rate of 90 per cent at December 2016.
The new management team expects the business to start to break even during the second half of this year and be profitable next year. Analysts at Shore Capital forecast pre-tax losses for the consumer credit division which also includes online lender Satsuma to narrow to £25.4m this year, from a hefty £119m in 2017, and turn to a pre-tax profit of £16.5m in 2019.
The sub-prime lender is now in a position to grow its loan book after it shored up the balance sheet by raising £300m in net proceeds from a rights issue in April. That capital was raised to cover costs associated with its ROP settlement with the FCA, which totalled £172m, including customer balance reductions and cash settlement. It also restored the groups common equity tier one ratio to back above its regulatory minimum, after it was dented by the losses associated with the consumer credit division last year. At the end of March its CET1 ratio stood at 29.8 per cent, above a regulatory minimum of 25.5 per cent, equivalent to about £120m in surplus capital. Thats consistent with historic levels, management says.
The outlook for Vanquis Bank also looks brighter this year. Not only has the group settled with the FCA over the sale of 'repayment option plans' (ROPs), removing a large amount of uncertainty over its prospects, but it has been making progress in growing customer numbers. They were up almost 8 per cent year on year to 1.72m during the first quarter. Meanwhile profits were a little ahead of management expectations with the annualised risk margin tracking ahead of full-year guidance. That built on an 11 per cent rise in customer numbers and 15 per cent growth in receivables last year.
However, analysts expect loan growth to be flat this year, partly due to tightening of underwriting standards and the impact of potential new FCA regulation on credit card customers in persistent debt, expected to be introduced this year. Management reckons this will affect future credit card application acceptance rates and its ability to offer credit-line increases. As a result, Shore Capital analysts expect Vanquiss pre-tax profits to decline slightly this year, but to rise steadily during the following two years, reaching a record high of £210m by 2020.
Admittedly, there is some regulatory uncertainty over Moneybarn, which is still under investigation by the FCA over the adequacy of creditworthiness assess
The recovery has already begun! Business is now steadily improving and in line with previous guidance. Sp up almost 8% as I type. I anticipate a steady but boring grind up in the sp over the coming months. A nominal dividend towards the end of this financial year before a return to a progressive dividend policy with 1.4x cover should see (late to the party) income seekers jumping onboard. IMHO now is the time to invest while the sp is still at relatively low levels - it's not hard to imagine the sp being double what it is now within a couple of years.
I hope you're right. We'll know over the next year whether Woodford has got his mojo back. I expect the share [PFG] to be in double figures within the year. He takes a fair amount of criticism but we know that's part of his job. He will be applauded eventually imo. I haven't any investment with him but have a fair amount with Fundsmith and it has proved a multi-bagger. Like Neil Woodford Terry Smith has his fans and detractors but both are better than me at this investing game. They seem to get more right than wrong over the years.
One of the signs of improvement will be this bulletin board having less traffic. I look forward to it. My best performing shares only have the occasional tumbleweed post.
Agree Davala. That's the type of percentages that North Korean elections provide. Allowing for inertia and some just not being able to afford to take up the issue was a resounding success imo. It is confirmed by the latest shorts; they're down to 6.25 per cent. The last time I looked a couple of days ago they were 9.89 per cent.
A late arrival on the shorter scene was Numeric Investors. Obviously their algos were telling them something and the quant guys thought it worth a punt. A pal of mine worked for Man dealing in futures. He wasn't the sharpest knife in the drawer but he probably knew more about the PFG world did than the quant guys. A certain guy, Nassim Nicholas Taleb, would probably have a wry comment about this. He understands black boxes but doesn't believe they're infallible. Neither do I.
Morgan Stanley have increased their stake. It's at times like this when they have to show holdings though not always on the day. It really is a time for professionals and I notice the newest shorter is Numeric Investors LLC part of Man group. These are quant equity managers and many have high foreheads and PhDs. They don't always get it right and neither do Man from my experience. PFGN closed at 3.67 and PFG 6.75.
Might be an uplift tomorrow. MS have 2.01 per cent out on loan - I don't have a problem with this as a different times they need to borrow stock and it is what oils the wheels. You can even have dealers from the same institution having opposite views and there are restrictions (Chinese walls) on releasing privileged information (although that doesn't stop people hunting it.)
Berenberg suggest 550 pence per share, whilst, an interesting write up on Motley Fool suggest a buy rating.
I am taking up my rights in the hope that future dividends will be paid. Good luck.
It brought back my thoughts that a bunch of IT people must have gone to Peter Crook and said: You know what Peter, this business is so 20th Century - have we got an idea for you! We should bring in a lovely new IT set-up which will cost millions but we will save lots more by getting rid of all those collection agent people who are both costly and awkward to manage.
Back to the future?
I dont hold shares directly - l suffered via whatshisname? Barnett? But we do have a fair few bonds having topped up when their prices slumped.
So we have a mutual interest in PFG recovering quickly.
The old network is for me a flawed business. it's so 20th Century as they say and with the FCA playing with their bull-workers it is very dangerous to have loose cannons visiting vulnerable people in their homes. They won't only be looking at PFG. It's also very labour intensive. I suppose the bet is whether the problems are in the price. It is the history and scale of PFG that keeps me invested. Never any guarantees but I think it will be a hard lesson learned. In this age the non-standard loan business needs a new approach and maybe we'll be the ones to do it. Whatever happens the borrowers with a patchy credit history and those who don't reach traditional criteria will still need finance at different times in their life. They won't go away.
I hope they don't rebuild the old network but a hybrid that protects us from regulatory attacks.
Berenberg cuts Provident Financial, the doorstep lender, to sell with a 550p target price. Its downgrade follows Providents launch last month of a £330m rights issue to bolster the balance sheet and repair its capital position. Although the capital raise substantially reduces balance sheet risk and restores capital ratios, we think there are risks to earnings emanating from: 1) the regulatory environment; 2) margin pressure in Vanquis [its credit card business]; and 3) execution risk from the home credit recovery plan. Additionally, as the business is targeting lower growth of 5-10 per cent per annum and return on assets of circa 10 per cent, it will command a lower valuation than it has done in the past.
I think 1. There has always been regulatory risk 2. Vanquis needs a breather as it grew faster than any other bank in its issue of new card customers. 3. Home credit is so 20th century but do we expect the borrowers with adverse credit ratings and the self-employed to disappear? who else will lend to them? That takes you back to point 1 and the regulatory environment. I'd suggest we are best placed in the industry after the FCA investigations.
We moved from 8.92 on 21 March to 6.71 on 22 March when the nil paid admission rights were credited. This is (for me) indicative of where we'll be on 10 April allowing for variables (news, FTSE etc...). The price seems to be holding although the shorts have again increased but this could easily be technical. Those still short could have arbitraged by selling the quoted shares and buying more nil paid which will eventually become one and the same. You could have the nil paid rising and the quotable falling. The technicalities are for the professionals who understand the settlement and can trade them. All imo as it is often a case of 'follow the leader' with the hedge funds. Once the transaction is complete we'll have a better understanding of the direction and analyst views. My wet finger in the air is £7 on 10 April but my glasses are rose tinted.
FX was so much simpler. I'm getting FRTEB's headache.
Just got this price from SelfTrade dealers £3.65 - 3.85
In old money that's around £9.22. In grey markets it's often the case that dealers don't like to show there hand so there will be a tighter price. My main worry was that from yesterday's one side quote the bid was £3.15 and the offer was purely a rope-a-dope price. Unless you get 2 sides you'll never know if it's 3.15-3.25 or 3.65-3.75. Unless there's radical news we'll need to wait until 9 April, or more likely a week or month ahead to get a more reliable market. Till then it's only for the professionals imo.
I should add that the market liked the rights issue and we saw most of the shorters head for the hills or reduce. However, once you throw in the rights price it acts as a kinda anchor to the spot price. I'm thinking that once the show of loyalty post 9 April countered by the quick profit takers we could see the beginning of a steady rise.
I was quoted £3.76 to sell 15 minutes ago. As it's fully underwritten there is a bid at £3.15. It's not really that surprising as there will always be sellers who want a guaranteed profit and we used to see it in privatisations. The bid is somewhere between £3.75 and £3.15. The dealers aren't usually in the business of driving trade away so the bid is relatively close to the offer (I'd imagine). If you torture any price long enough you can usually get it to where you want it (I do it with my blood pressure monitor) and I'm pretty happy with the level. Memory plays tricks and since the announcement of the rights issue the FTSE 100 is down some 4 per cent so you should factor that in too. In old money PFG is around £9 imo but there is a fair amount of wet finger in the air adjustment. The arbitragers and margin traders are clouding the issue and keeping the price down (not helped by overall market movements since February but we'll see what the blended price is on 9 April. Using £9 you would need to sell the nil paid rights at £3.21 using £6.73 the current price.
If anybody gets a firm bid on the nil paid please post.
24% fall ex rights price today 672p . rights 315p
17 for 24.
RNS .. 21 DEC 17 it price had been 588p 20 Dec 17 ....... 46% discount to 315.
it dropped to 475 .
It rebounded well ...... Woodford not so silly .
Well done FRTEB. All we need now is the price on the 10th April and how long is a piece of string. There will be technical traders arbitraging this now but it's also an opportunity for the really important buyers to (possibly) pick up decent size within the smokescreen.
Unlike some I still believe Neil Woodford is better at investing than me. His Patient Capital Trust (I'm not invested) jumped 11 per cent yesterday and I think the clue is 'Patient'. This is a company with problems for sure but it has a scale and understanding of this sector of the market that is unmatched imo. Unless the world has changed that much and a kinda Amazon can move in to take all the business then this company will be around for a long time yet.
i don't know how the price will react post rights etc.....
so very happy to bank a 10% short gain in the last 3 weeks.
i think there are biggish risks with the business,
once the FSA is involved i think there can be a long tail to the issues
and we know that there is political will to protect the consumer,
(think the recent gambling legislation)
especially when the 'costs' are very high.
so i think growth and 'excessive' margins will be held back for a few years....that sadi i dont have a view on the value of the business
and the chart is not currently giving very clear guidance for me
Dealings in New Ordinary Shares, nil paid, commence on the London Stock
8.00 a.m. on 22 March
*RNS Number : 0473G
Provident Financial PLC
27 February 2018
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