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Troubled Provident Financial relegated from FTSE 100 as builder enters

by: Paloma Kubiak
  • 31/08/2017
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Doorstep lender Provident Financial has been booted out of the UK’s leading index just a week after revealing it expected to make significant losses and suffering a share price crash.

In the latest quarterly reshuffle of the largest companies listed on the London Stock Exchange, Provident Financial and Royal Mail have been demoted to the FTSE 250, with property developer Berkeley Group being re-introduced.

The downgrade comes just over a week after Provident Financial announced it expected to make a loss of between £80m and £120m following a significant fall in sales and loan collections in 2017.

The doorstep lender saw its share price crash by 65% at closing on the day it made the announcement and it has since recovered some of its value, however not enough to remain in the top 100.

Graham Spooner, investment research analyst at The Share Centre, said the news was no surprise.

He said: “Investors are likely to have seen Provident Financial plastered over the news over the last few weeks as it issued another profit warning. The group, which was once regarded as the leading non-standard lender in the UK, also announced further problems at its Home Credit division, an investigation into Vanquis Bank and the resignation of the CEO.

“Moreover, Provident highlighted that the dividend announced in July had also been cancelled. Unsurprisingly, all of this news hit the share price very hard, and with the share price down by over 70% since June, it may not come as any surprise to investors that it has been relegated.”


Rebuilding business

Housebuilder Berkeley Group has bounced back to the UK’s largest index a year to the date since it was relegated. Its shares dropped 30% after the EU referendum last year as concerns hit the sector, but Spooner said faith had obviously been restored.

“Courtesy of greater cash flow and an improving sentiment for house builders, the shares have rallied and are now trading at better than pre-Brexit levels. Furthermore, investors recognise that the yield is attractive and a special dividend programme has undoubtedly attracted some positive attention.”

The FTSE reshuffle will come into effect from 18 September.

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