Provident Financial PLC – Decent Performance Under the Challenging Scenario, with Strong Capital and Liquidity Positions

FTSE-250 listed Provident Financial PLC (LON: PFG) is a consumer lending company, which is operating as a specialist lender and serves approximately 2.3 million customers with approximately 4,865 employees.

Q1 FY20 Trading Update (for the period from 1 January to 30 April 2020)
On 27^th May 2020, the Group announced a trading statement covering the period from 1 January to 30 April 2020, with operational adaptations to Coronavirus are underpinned by robust capital and liquidity positions.The Group’s capital and liquidity positions stayed strong, with surplus above the minimum regulatory requirement of approximately GBP 190 million  and regulatory capital of approximately GBP 710 million, reflecting a CET1 ratio of around 33.4 per cent. Including Vanquis Bank, Total Group liquidity stood at approximately GBP 1.2 billion. Vanquis Bank adapted well in the unprecedented challenges of Covid-19. Consumer Credit Division business and its clients have also adapted well in light of the Covid-19 crisis.

Share Price Performance

1-Year Chart as at May-29-2020, before the market close (Source: Refinitiv, Thomson Reuters)

On 29th May 2020, before the market close (at 8:51 AM GMT+1), Provident Financial PLC’s shares were trading at GBX 197.80 and were up by 5.27 per cent versus the previous day closing price. Stock 52 weeks High and Low are GBX 543.71/GBX 126.87.

From the technical standpoint, its shares were trading well above its short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further.

Valuation Methodology
 

Valuation Metrics

(Source: LSE)

As on 30^th April 2020, the Price to Book multiple of PFG was 0.7x and the same multiple was lower as compared with the Financial Services industry. It is reflecting that the company is trading at a lower multiple as compared to its peers.

Growth Catalysts
During January and February, the new business volumes remained strong in Moneybarn division, while it was also consistent with 2019 growth trends. The Company has most diverse and the strongest funding options in the sector.

Conclusion
In an unprecedented crisis, the Company has adapted quickly and efficiently. The Group had a resilient performance in the first quarter of 2020 and financial year 2019 despite the regulatory headwinds. In the near-term, the Company is likely to get affected by the prevailing economic and geopolitical risk uncertainties. As previously announced on 27^th March, PFG has slashed dividend for 2019 and adopted measures to reduce discretionary spending. However, liquidity and capital positions stay robust. The Company witnessed a robust balance sheet and generating attractive returns for the shareholders over the medium-term. Moreover, Provident Financial has sizeable opportunity to grow customers and market share further.

Based on the decent growth prospects, which are supported by valuation done using the above method, we have given a “HOLD” recommendation at the closing price of GBX 187.90 (as on 28th May 2020).

British Land Company PLC - Unprecedented Challenges Hovering Amid COVID-19 Outbreak

FTSE 100 listed British Land Company PLC (LON: BLND) is a property development and investment company, which manages a portfolio of around GBP 14.80 billion of assets under management.

On 29^th July 2020, the Group will hold its Annual General Meeting.

Financial Highlights (for the year ended 31^st March 2020)

(Source: Final Results, Company Website)

On 27^th May 2020, the Company provided the full-year results for the year ended 31^st March 2020 - proactively supporting the customers to protect long term value; decrease in total portfolio of 10.1 per cent in value. Impact of Covid-19 chaos, which arose in the last quarter of 2020 primarily impacted the balance sheet valuations.Underlying earnings per share reduced by 6.3 per cent to 32.7 pence as compared with the prior year, reflecting dip in underlying profit by 10 per cent. EPRA NAV (Net Asset Value per share) decreased by 14.5 per cent to 774 pence in FY20 against the previous year (FY19: 905 pence). Debt value remained low, with LTV (Loan to Value Ratio) stood at 34 per cent and weighted average interest rate decreased to 2.5 per cent. As earlier announced, dividends are temporarily suspended. As a result, the dividend per share for FY20 was down by 48%.

Share Price Performance

1-Year Chart as at May-29-2020, before the market close (Source: Refinitiv, Thomson Reuters)

On 29th May 2020, before the market close (at 8:55 AM GMT+1), British Land Company PLC’s shares were trading at GBX 408.90 and were up by 2.95 per cent versus the previous day closing price. Stock 52 weeks High and Low are GBX 649.40/GBX 309.40.

From the technical standpoint, its shares were trading well below its short-term support level of 20-day simple moving average prices, which reflects a downtrend in the stock.

Valuation Methodology
 

Key Risks
The future interest rate movements and the UK economic climate present risks and opportunities in financing and property markets dynamics.

Conclusion
The Group witnessed operating environment and outlook highly uncertain.BLND delivering a net-zero carbon portfolio by 2030. In the short term, British Land is anticipating the office segment market to be more cautious. The Company’s financial position is decent with lower debt, having access to GBP 1.3 billion of undrawn facilities and cash, and significant covenant headroom. Moreover, the retail segment appears to be challenging, with no sign of improvement in the near term. Overall, the Group is facing several challenges and operating with a decent performance to tackle short term uncertainties.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the current market price of GBX 410.70 (as on 29th May 2020, before the market close at 8:37 AM GMT+1), while we look for any upcoming catalysts in the near term.
 
*All forecasted figures and Peers information has been taken from Refinitiv, Thomson Reuters.

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