Shares in troubled credit firm Provident Financial leapt 12 per cent after the company released a trading statement to update the market on its recovery plan.
Analysts said the Bradford-based company is pulling a U-turn and giving responsibility back to regional managers and re-hiring 300 previously self-employed doorstep lending agents.
Provident reiterated its guidance that 2017 losses from its Consumer Credit Division would range between £80m and £120m.
Executive chairman Manjit Wolstenholme said: “Since the last update, we have moved quickly to appoint new leadership in home credit who have a deep understanding of the business and recognise the importance of the relationship between our front-line staff and our customers.
“A recovery plan has been developed and a number of actions have already been implemented to restructure the field organisation in order to provide the foundation for delivering the necessary improvement in customer service and financial performance.”
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Things aren’t getting any worse at Provident and the company is pulling a U-turn on some of the problematic plan to streamline the home credit business.
“This is resulting in devolvement of responsibilities back to regional managers, and the re-engagement of 300 previously self-employed doorstep lending agents.
“The market clearly likes what it sees with the shares rising sharply. The stock is now trading at around double the lowest price it hit on that fateful day in August which precipitated its ejection from the FTSE 100.“
However he warned there are still reasons to be cautious.
“Companies in recovery can go one of two ways, and the rewards, or losses, are usually high,” he said.
“Provident still doesn’t have a CEO, and the financial watchdog is investigating sales of its Repayment Option Plan to Vanquis Bank customers, a product which looks a lot like PPI.
“Meanwhile the group’s credit rating is teetering on the edge of being downgraded to junk, a step down which would limit the availability of creditors, and push up the price of borrowing. The share price showing some relief in these circumstances is natural, but there’s still a long rocky road ahead for Provident.”
The shares closed up 98p at 887p.
Provident said a management shake up at the firm’s consumer credit business announced last month has prevented any further deterioration in performance.
The group’s collections performance in September was 65 per cent, up from 57 per cent in August Sales were £6m per week lower than last year, compared with a weekly fall of£9m during August.
Analyst Portia Patel at Liberum said: “The collections percentage in September improved to 65 per cent, from 57 per cent in August, which is the bottom of the 65 to 75 per cent range we were expecting.
“It remains our view that Home Collected Credit is permanently damaged and today’s statement reinforces our opinion that Moneybarn has been lending aggressively at the top of the cycle.
“The greatest value is clearly in Vanquis, but we are genuinely concerned about underwriting quality and today’s statement suggests that our concern is not misplaced.
“We note with interest that the statement does not refer to Vanquis and Moneybarn ‘trading in-line with expectations‘.
“We believe the balance sheet needs strengthening and that is before accounting for a yet unquantifiable potential liability for ROP. In conjunction with regulatory concerns, there is far too much risk to justify buying the shares now in our view. We reiterate our ‘sell’ conviction.”