Investments  

Woodford says 'clouds have lifted' over investment

Woodford says 'clouds have lifted' over investment

Neil Woodford has asserted that "clouds have lifted" over Provident Financial, a significant holding in his fund and a stock that has fallen in value by almost two-thirds in a year.

Provident Financial is the 13th largest holding in the fund, an investment of just more than 2 per cent of the capital in the £7.1bn mandate.

The shares have fallen in value from £29 to £10 over the past year as the company issued a profit warning, raised new capital, and tangled with the regulator.

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But the share price soared yesterday (27 February) from £5 to £10 as there appeared to be greater clarity about the regulatory outlook.

Mr Woodford said: "We have seen full year results from Provident Financial, accompanied by an encouraging trading update, resolution of the company's outstanding regulatory matters and a rights issue to raise £300m of additional capital.

"This brings closure on a number of uncertainties which have weighed on the company's share price since last summer."

He added the recovery of Provident Financial's home collected credit business remains on track, with customer numbers already above the level that he had anticipated and collection rates continuing to improve.

Mr Woodford said: "This has been a painful chapter in the history of Provident Financial. Having said that though, throughout this difficult period, which started in the summer of last year, we have remained focused on the fundamental value of the business.

"Our thorough analysis pointed unequivocally to a completely disproportionate stock market reaction to these events.

"We can now look forward to this company returning to normal through the remainder of this year and into 2019 with a stronger balance sheet, an investment grade credit rating, a 10 per cent return on assets and in excess of a 25 per cent return on equity.

"A nominal dividend will be paid in 2018. Looking forward, we expect the business to establish an industry-leading working relationship with the regulator and to rebuild its reputation as the premier company in this significant and under-served part of the credit market."

He said the clouds are "lifting" about the investment case for the shares.  

Laith Khalaf, senior analyst at Hargreaves Lansdown, said many UK shares have fallen in price partly because the UK market has been a "pariah" for international investors, and this has created an opportunity in some UK shares.

david.thorpe@ft.com