Jefferies downgrades Provident Financial after profit warning, slashes price target

Michele Maatouk WebFG News | 31 Aug, 2017 09:13 | | |

Finance, graph
  • 915.00
  • 1.67%15.00
  • Max: 920.50
  • Min: 883.00
  • Volume: 1,214,290
  • MM 200 : n/a
17:17 17/11/17
  • 7,380.68
  • -0.08%-6.26
  • Max: 7,406.53
  • Min: 7,356.16
  • Volume: 0
  • MM 200 : n/a
17:30 17/11/17
  • 10,618.83
  • 0.27%28.99
  • Max: 10,667.53
  • Min: 10,564.62
  • Volume: 0
  • MM 200 : n/a
17:18 17/11/17
  • 4,102.67
  • -0.12%-4.73
  • Max: 4,116.61
  • Min: 4,089.64
  • Volume: 0
  • MM 200 : n/a
17:18 17/11/17
  • 4,051.78
  • -0.11%-4.62
  • Max: 4,065.06
  • Min: 4,039.36
  • Volume: 0
  • MM 200 : n/a
17:25 17/11/17

Jefferies downgraded Provident Financial to 'hold' from 'buy' and slashed the price target to 940p from 3,478p following the subprime lender's profit warning last week.

Provident issued its second profit warning in two months last week, withdrew its dividend, announced the departure of its CEO and revealed an FCA investigation into Vanquis Bank, as it transitioned to a fully-employed agent model.

Jefferies said in a note that its and management's confidence that the home credit operation could achieve medium-term pre-tax profit of £150m+ post the change to its operational model "proved to be woefully optimistic".

The bank cut its consumer credit division pre-tax profit estimate from £60.5m to a loss of £110.2m, against a guided range of an £80m to £120m loss. It downgraded its pre-tax profit estimates for the group by 59% for 2017 and by 50% for 2018, saying that the company's woes have been exacerbated by the announced FCA investigation overhang at Vanquis Bank.

"We already know that trading at home credit has deteriorated post the introduction of its new full-time employed model. The company has quickly brought back into the business its experienced former MD. We will require a fuller explanation of the turnaround plan in home credit and a clear timetable to resolve the FCA investigation.

"In our opinion the group should not operate without an experienced CEO for long; to us the current CFO, Andrew Fisher, appears to have grasped the gravity of PFG's current position and should fill the CEO position, even if in an interim capacity."

At 0910 BST, the shares were down 2.4% to 870.97p.

More news

17 Nov Europe close: Stocks slip going into the weekend

Stocks reversed early gains as investors opted to play it safe going into the weekend and the euro edged a tad higher on the back of the political gyrations on Capitol Hill.

17 Nov Europe open: Stocks start slightly higher, analysts wary

Stocks have started the morning trading slightly higher, tracking overnight gains on Wall Street but analysts are worried about buying into Thursday's bounce.

17 Nov London close: Stocks finish week on down note

London's top flight index slipped on Friday, but managed to finish well-off its lows of the session despite renewed Brexit angst as the pound gave back early gains.

17 Nov Kingfisher gets RBC upgrade as 'reasons to be cheerful' in France

DIY retailer Kingfisher has more "reasons to be cheerful" thanks to an improving French outlook, analysts at RBC Capital Markets said on Friday, while clothes seller Supergroup remains "compelling" but its shares have gained a lot in recent weeks.

17 Nov NAV on the rise as Alpha Real Estate Trust turns focus to build-to-rent market

Real estate investment group Alpha Real Trust saw its net asset value (NAV) rise in its first half of trading as it moved to make further investments in build-to-rent projects.

17 Nov Pacific Industrial & Logistics completes sale of Bedford asset

Industrial and logistics-focussed real estate investment trust Pacific Industrial & Logistics has completed the sale of an asset located at Hammond Road, Bedford, for a total consideration of £5.8m, it announced on Friday.

17 Nov DP Poland cuts ribbon on 50th Polish Domino's store

DP Poland, which holds the exclusive master franchise for the Domino’s Pizza brand in Poland, celebrated the opening of its 50th location in the country on Friday.

17 Nov Mercia Technologies makes new investment into Aston EyeTech

National investment group Mercia Technologies has made a new direct investment into Aston EyeTech - a spinout from Aston University, Birmingham - which has developed a range of proprietary hardware and software products in ocular care, it announced on Friday.

17 Nov SimiGon receives final approval for $2m Israeli Air Force order

Modelling, simulation and training solutions provider SimiGon has now received final regulatory approval for a $2m purchase order received from the Israeli Air Force, initially announced on 20 June 2016, it confirmed on Friday.

17 Nov Agriterra losses grow after 'subdued' interest in corn products

Agricultural investment group Agriterra saw losses widen in the first half of its trading year as subdued demand for its maize flour products slashed revenues by more than a third.