NSF.L Regulatory News (NSF)

Hardman & Co Research: Trading update: understand the accounting

NSF has issued a trading update highlighting a 4%-5% reduction in consensus estimates due to softer trading in 3Q (primarily lower loan volumes in guarantor loans, a market which has been affected by adverse press coverage) and a 6%-8% reduction associated with a step change in provisioning policy. The latter highlights yet again the importance of understanding the assumptions in provisioning. For the same arrears, a higher assumed probability of downside has increased provisions. This reflects the known cyclicality inherent in IFRS9. A downgrade is unwelcome, but it does not reflect current customer deterioration, only the Board's cautious approach. After today's reduction's, we still forecast 2021 adjusted profits at 2x the level of 2018.

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About Hardman & Co: For the past 21 years Hardman has been producing specialist research designed to improve investors' understanding of companies, sectors, industries and investment securities. Our analysts are highly experienced in their sectors, and have often been highly rated by professional investors for their knowledge. Our focus is to raise companies' profiles across the UK and abroad with outstanding research, investor engagement programmes and advisory services. Some of our notes have been commissioned by the company which is the subject of the note; this is clearly stated in the disclaimer where this is the case.

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