Member Info for Theborn

Earlier this week Chief Economist Simon French had the opportunity to interview Provident Financial CEO Malcolm Le May. Malcolm first joined the board as senior independent director in 2014, taking on the role of CEO in 2018. This followed a successful career in leadership roles at Barclays, UBS, ING Barings and Morley Fund Management.
Simon and Malcolm discuss PFG’s strategy, how Malcolm and his team have reshaped the business and how the story is insufficiently appreciated by the equity markets. The company is down almost 50% YTD and trading at just 5.5x PER estimates. The repositioning, which Malcolm touches on, towards lower risk customers suggests that the risk is being overstated materially. Legacy investigations from the FCA are now finished and the recovery element of the journey is now over. We believe the rating reflects the past and not the new lower risk business focussed on nearer-prime customers.

Without comment:

https://panmure.com/insights/meet-the-ceo-malcolm-le-may/

"The Bank of England said annual growth in credit card debt rise 13%, which was the most in 17 years."

So PFG should be showing at least 13% growth in their loan book just to tread water. Anything less is unacceptable.

This should be a super positive story for PFG and market sentiment:

https://www.bloomberg.com/news/articles/2022-08-30/boe-says-uk-credit-card-lending-and-mortgage-interest-rates-jump?srnd=premium-uk

"UK credit card borrowing rose at its strongest pace since 2005, and mortgage interest costs jumped to the highest in six years, indicating growing strain on household budgets."

To my earlier points on Bank of England statistical releases, coupled with this new story ----> lending sensible money to your target borrower base should be like selling ice to eskimos in the current climate. If the management had any form of confidence from the market this share price should be 50% up on the 220p pre-results rather than the 30% down.

Let's see in full year, but if they can't increase their lending and borrower base in the current market (which they hadn't in H1) then I'll personally be marching to Bradford to demand a change in managment. Utterly useless.

Says it all hxulcolrdoh. In any other walk of life if you are performing in the bottom 2.5 percentile you'd be holding a P45. Instead, these guys are getting paid a fortune and awarded share options to slap themselves on the back for this train wreck of value destruction.

I would suggest that when capital markets day is announced the active holders on this board look to attend and/or submit questions ahead of time.

In the meantime we should independently be contacting the PFG PR team to drive home the point the share performance is appalling and we demand more in terms of commincation on expectations.

PFG now trading below 3 on PE ratio and below 75% of Net Asset value.

Has to be a value trade in the long term. I'm just so p1ssed off with management for lack of clarity.

Someone mentioned this before, but when is this sacred Capital Markets Day?! These guys never have any dates in the financial calendar on the website. Useless bunch and taking shareholders as third class citizens.

Pure speculation but my guess is they are holding out for PRA approval on deposit funding before announcing CMD so at least they have something new to talk about.

I'd be buying if I had the liquidity to do so, which is probably saving me from myself. Unfortunately I piled in to pfg in mid-£2s when it looked very undervalued at that time.

Re market knowing something we don't - I highly, highly doubt that is the case. Thanks to the recent efforts of management this stock is now massively small-fry (with market cap of c.£400m and not even large enough to grace the FTSE250) meaning discussions of PFG in the corridoors of the city will not be happening. Most analysts can't even be bothered to cover it anymore.

It's an undervalued stock with management who are inept and managing market expectations.

I'm hoping for an announcement in Sept of PRA approval on funding deposit access, which should encourage some form of postive rerate given benefit on cost of capital; followed by a positive trading update in early October. But then I'm not even sure management could effecitvely communicate both those positives if their lives depended on it.

Hang in there all.

Share is a laughing stock. Still managed to plough a new low before EOD trading despite being up nearly 5% early on.

Heads need to roll soon.

I've posted previously about attempts to get a response from the company re guidance. All they said was 'we don't publish guidance, however we are aware of analyst projections so if we say we are 'in line with internal targets' that should be viewed positively to align with analyst expectations'

Then they publish results they are 'delighted with' and 'in line with management expectations' which are WAY OFF ANALYST EXPECTATIONS!! So you can't get any real sense or transparency from them even if you try.

Like I say, I think they take shareholders for fools.

Great observation.

Unfortunately there are so many similar ones to be made. Most days I run a comparison of PFG vs FTSE250 for 3, 6 and 12 months. Mkes me want to vomit how far they've fallen vs the broader index.

I genuinely think part of the reason the price is so low, and analysts are providing updated guidance, is because they are always so unclear with the financials. I think Management feel they are the smartest guys in the room and and they can constantly change accounting policy / bulk up provisions / make vague statements and analysts and shareholders won't ask questions.

There is clearly a profitable underlying business. If they were just honest and transparent when providing financial information and guidance (even if they miss target on occasion) then there would be a lot more trust and confidence in the integruty and ability of the team. I just don't trust them as things stand.

Mark my words - they've overprovisioned during first 6 months and they'll release some of these in second half to provide what they think shareholders we see as a bumper H2. When in reality it will eek them in just in the analyst full year range (probably lower end) and profess how delighted and fantastic they are. Big slaps on the back. Idiot shareholders will be none the wiser.

In the meantime we'll have lots of guff posted on their website about how they are investing int he local community, helping borrowers and MLM advocating numeracy by speaking to the odd primary school twice a year. Meanwhile, shareholder watch their life savings whittle away - continually treated like mugs.

Time for a change. ASAP.

Company Net Assets post dividend = >£600m
Current NAV per share valuation = £440m

Company Share price is trading at 73% of Balance Sheet Net Assets! (even stripping out Intangibles its 78%).

Most companies will trade a 100% of net assets + premium for future expectations = valuation many mulitple of Balance Sheet Value.

Market view the Management as delivering -27% of future premium, that's -27% of NEGATIVE VALUE DESTRUCTION!!

They should be ashamed.

P.S. - the above metric is the main reason I'm still holding as despite the uselessness of management this does feel significantly oversold and even as a base case should be 100% of Net assets which = £2.40 per share as a minimimum. Even allocating some value for future profits takes you >£3.

I'll hold and keep moaning.

I think you're crediting them with too much foresight and planning re share options and buying low. I'd love to be wrong.

Market flat. PFG down another 6%.
Management out.
Now.

Petr - agreed, and on the investor call the management glossed over this point alluding to 'expected increase'. Add this to the reshuffling of the accounts to move costs around so can't compare apples with apples from prior periods and you're left with the usual smoke-and-mirror act.

I'm frustrated I came back into this share as could have got out ok a few month back. I thought management might learn from past mistakes but turns out I'm wrong. Shame on me.

PFG will drop out the FTSE250 on next refresh. What a turd of a share.

I've reread the interms several times and I'm still aghast with the introduction that management are 'delighted' with their performance. This in light of undershooting market expectations and giving no clear guidance on what to expect in the future. Meanwhile they continually award themselves shares under their incentive plans.

Management should be ashamed and embarrased of how the market views their ability. Even since the wind down of troublesome doorstep business, and accepting general market downturn, they've massively undershot the market and sector. It's good someone except short sellers are "delighted" as longstanding shareholders are certainly not. Even analysts are unclear on what the company is doing / projecting following the last interims. Same old story depsite new management.

I expect they are hoping PRA to approve their request to use Vanquis deposits to fund the rest of the group. This would be a positive in reducing their cost of capital, but provides little value if management are incapable of implementing strategies to deploy it and increase their loan book and earnings. This is a sector where deployment has been growing steadily over the longer term, and the management themselves profess they're tapping into a larger, higher-quality, near-prime market space.....yet they can't grow their loan book! I'm the first to give credit for prudent underwriting but this now stinks of an excuse to disguise their inability to deliver as shareholders would expect.

Inflationary and recessionary enviroment should drive prime borrowers into near-prime space and borrow more. PFG themselves keep saying this. So growing their loan book within their risk parameters should be like selling ice to eskimos. But they are totally inept and can't do it. Baiting investors with a new version of doorstep business but providing no guidance on what this might add to the business doesn't help.

Praying for a white knight to swoop in and save them from themselves. Given the share price is STILL at a big discount to the asset value of their loan book and the fact they hold a banking license (which is of value to some investors, particulary as can given them access to cheaper funding) means I hold some hope this takeover scenario might happen. Until then, I'm too heavily invested to sell out.

Barrie - I fear your 175p stop loss will soon extract you from this clown car.

DYOR, above is my own personal view. Place no reliance etc etc

100% agree. He's had over four years to address this. I've been in this share average down since the day he arrived and has so far seen c.70% of the value erroded in that time.
My anger is less that they've undershot estimate (AGAIN), but have done their usual mix of incoherent reporting / reshuffling accounting polic to try and fool investors into thinking they've knocked the lights out. When they've done anything but.
I've just read today's BOE release on money and credit and £1.8bn of new credit was issued on credit cards in June, this has been rapidly trending upwards for months now, yet PFG are delighted in their uselessness at being unable to covert this into new customers for themselves.
All well and good shouting about how fantastic the marketing campaigns have been.....but marketing should be judged on bottom line, and once again, they've undershot and not added any value.
There is clearly value in this company - the fact it i trading well below its break-up valuation shows how attrocious the market sees the perfoamnce and expectations of the management, but gives me some comfort that as a value investment this still makes sense (and I hope a competitor sees this and looks to acquire them as that's the only was I see the share price going above my current average).
Barclays downgraded target yesterday from 410p to 370p - but still, that means they see 100% upside on this in the coming months if management can perform even half competently.
It wouldn't surprise me if we see a flush out of provisions at year end to save the day and scrap to low end of FY analyst guidance - I can't see them hitting it without that.

Hope so!

*trading update

Bango website notes interims will be published in July. Today is last biz day July. No sign. Hmm...

You're arguing with yourself bigpunt.
You've said earlier you thought the results presentation was unclear on important elements and kept cutting out. You're also saying the results are on the verge of a profit warning. Yet you back the management and trust them to deliver a greater return from the £mms they're investing - when they can't even manage a result presentation and are delighted with undershooting estimates. You can see from the share price honing in on sub 180p what the market thinks.

PS - a corporate broker is consulted on all elements of fundraising and market conditions for MA activity. Speaking from experience.