InvestmentsFeb 22 2019

Woodford boosted by Provident Financial bid

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Woodford boosted by Provident Financial bid

Investors in Neil Woodford's £6.6bn Woodford Equity Income fund have had a boost as the fourth largest investment in the mandate, Provident Financial, has received a takeover bid.

Provident Financial accounts for 4.39 per cent of the capital in the Woodford fund, and is also held in other mandates run by the fund manager.

But the sub-prime lender has issued three profit warnings in the past year and a half, and has been the subject of investigation by the Financial Conduct Authority. Its Vanquis credit card business was fined almost £2m last year for failing to tell customers the cost of a payment protection insurance-type add-on.

The shares have risen 15 per cent in the hours since the takeover bid was announced, but even at the present £5.91 level, are considerably below the £7.17 level at which they traded a year ago. The shares have more than halved since mid-2017.

The takeover attempt for Provident Financial has come from Non Standard Finance, a business set up by a former chief executive of Provident Financial, and which operates in the same market as Provident.

Mr Woodford’s funds are also significant shareholders in Non Standard Finance, although it is not among the ten largest investments in the income fund.

The takeover bid values Provident Financial at £1.3bn.

The board of Provident meanwhile has told its shareholders "to take no action" in respect of the NSF offer, which it called unsolicited. It will issue a response to the bid shortly.

Mr Woodford's fund is the absolute worst performer of the 218 funds in the IA UK All Companies sector over the past three years, having lost five per cent compared with an average gain of 27 per cent for the sector average in that time period.

Darius Mcdermott, managing director at Chelsea Financial Services and a long time backer of Mr Woodford's funds, said: "Neil is a manager with a very long-term track record, and all managers have bad periods of performance, but the track record he has over time means we are very happy to have clients invested in his funds.

"He is someone who thinks long-term and isn't afraid to hold on even if share prices fall."