YP75: Trading conditions stay tough as uncertainty rules in markets

The past week had seen global markets suffer some of their sharpest falls in many months as investors became increasingly concerned over Greek contagion and the European government debt crisis. The announcement of strong US job numbers and news that the German Parliament approved its share of the Greek bailout failed to ease investors' fears.
By The Newsroom
Published 11th May 2010, 13:43 BST
Updated 11th May 2010, 13:44 BST

Back in the UK, the election remained at the forefront of many investors' minds as the result the markets did not want see, happened. Following a lack of a majority for any of the parties, a widely anticipated hung parliament was declared and many investors now fear this result may affect the Government's ability to tackle UK debt and maintain its sovereign rating.

Despite trading conditions remaining tough, Bradford based Provident Financial believes its plans to deliver good quality growth in 2010 are on target. The company, which is involved in the provision of personal credit products for consumers in the UK's non-standard lending market, said that household incomes in the home credit market remain under pressure – however, the group's liquidity and balance sheet are robust. Investors can take encouragement from the fact that ongoing conditions are consistent with management assumptions and focus remains on tight underwriting standards and margins. The company has announced the Consumer Credit division is trading in line with plans and the year-on-year rate of new customer growth has remained around 5 per cent during the first quarter. In addition Vanquis Bank, another of the group's business divisions, operating in the credit card market, has also performed well and continued to show robust growth in the volume of card applications during the first quarter.

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Another financial services company that continues to battle the tough market conditions is the door-to-door lender Cattles. Staff at the troubled lender face the prospect of further redundancies following an announcement from the company that it intends to close 18 Welcome Financial Services branches across the UK. The company were unable to find a viable business plan that would allow its Welcome Financial Services division to continue lending and as a result its sole purpose remains the collection of existing customers loans. Management remained focused on winding down the groups loan book and expect the cost base to contract in conjunction with its smaller loan book.

Elsewhere, structural steel and engineering company Billington Holdings announced that an agreement has been reached for the sale of Dosco Holdings Ltd. German based SMT Scharf, the market leader for railbound railways systems in the mining sector, will pay 1.8m for the acquisition. Dosco is involved in the manufacture and supply of underground mining machines and is regarded as one of Billington's non-core businesses. The management team at Billington continues to move the company's focus towards developing its core businesses and as a result view the sale of Dosco Holdings Ltd as very positive for the company.

Edward RH Marsden, Assistant Investment Manager at Brewin Dolphin, Leeds

Related topics:ParliamentGovernmentProvident FinancialInvestors