Provident Financial PLC (LON:PFG) shares jumped as it said it has replaced the managing director of its struggling home credit business after the company had nearly £1.7bn wiped off its market value on another profit warning.
Andy Parkinson has been replaced by Chris Gillespie as managing director of the Consumer Credit division, responsible for its second profit warning in two months.
Gillepsie previously held the same role at the firm - which specialises in lending to people in financial difficulty - but left in 2013 to become chief executive of Amigo Loans.
Parkinson had been appointed to the position on an acting basis following the departure of Mark Stevens in June.
Shares shot up 15.11% to 861p in morning trading, rebounding from a slump on Tuesday when the company announced that chief executive Peter Crook was stepping down and that it was cancelling its interim dividend to protect its capital base following a “substantial deterioration” in the trading performance of the home credit business and in light of a Financial Conduct Authority investigation into its Vanquis Bank over its repayment option plan.
In the announcement, the group also said it had kicked off a review into the home credit arm and that it was unlikely to pay a final dividend.
READ: Provident Financial chief executive resigns as it cancels interim dividend and issues profit warning
Gillespie tasked with turnaround of Consumer Credit division
The review has led the company’s decision to shake-up its management structure.
Provident said Gillespie will return to his former position with immediate effect, with a focus on re-establishing relationships with customers, bringing collections back to a normal level, and stabilising the operations of the business.
Executive chair Manjit Wolstenholme said: “My review of the business is ongoing as we move towards stabilising the Provident home credit business and improving the service to our customers. These are my first appointments and I intend to work closely with the new team on turning the home credit business around and to putting a plan in place to deliver good results for the company."
Analysts welcome new management at Provident Financial
READ: Triple blue chip broker downgrade for Provident Financial after Tuesday’s profit warning
Shore Capital repeated a 'buy' rating, saying that it welcomes the group's decision to try to stabilise and turnaround the home credit business.
"To have found an experienced industry executive that was willing to take on the role so quickly is a small positive surprise after the week’s earlier disappointments," said ShoreCap's Gary Greenwood. "We look forward to hearing more about the group’s plans to turn the division around in due course, which we think will not be easy to deliver."
Numis also applauded the move, reiterating a 'buy' rating. The broker said it considers Provident Financial a "great business with a first class track record" and believes the home credit division is an operational problem that Gillespie should be able to resolve.
"We have always had a high opinion of Chris and believe that with a plan involving bonus payments relating to getting customers to return to payment the home credit business could be quickly returned to a more normal state," Numis said.
The broker added: "Provident is a high-margin, high ROE (return on equity), short duration, low risk lender that has remained consistently profitable for over 135 years. High ROE businesses tend to be lower risk with the ability to internally fund stronger growth while returning more of their profit to shareholders."