Troubled subprime lender Provident Financial has revealed that it will book losses of up to £120 million at its home credit business and it won’t be paying a dividend this year.
On the flip side the Bradford-based firm, which makes short-term loans at high interest rates to people in financial difficulty, has claimed that it is making progress with a turnaround plan.
Shares climbed by more than 16 per cent on Friday morning, painting a more optimistic picture than in August when the company lost two-thirds of its stock market value in a day following a terrible trading update.
Troubled subprime lender Provident Financial has revealed that it will book losses of up to £120 million at its home credit business and it won’t be paying a dividend this year
Provident said a management shake-up at the firm’s consumer credit business announced last month has ‘prevented any further deterioration in performance’.
Indeed, the group’s collections performance in September was 65 per cent, up from 57 per cent in August, whilst sales were only £6 million per week lower than last year, compared with £9 million during August.
Home credit receivables in the month stood at £316.3 million, down 33 per cent from June 2017 and down from £489.2 million in September 2016.
It comes after a brutal few months for the firm which saw a string of profit warnings and a management reshuffle.
In February, Provident launched a shake-up which saw it axe 4,500 freelance debt collectors with plans to replace them with 2,500 permanent staff.
But few workers wanted to go full-time, leaving the company with a severe shortage of staff to collect loans.
The company said on Friday that it will now move from having two UK divisions to four at its home credit business, increasing the number of regional managers, and re-employing at least 300 part-time staff who used to work as self-employed agents.
The Bradford-based firm makes short-term loans at high interest rates to people in financial difficulty
This should help it ‘re-establish relationships with customers, stabilise the operation of the business and improve collections performance,’ it told Reuters in a statement.
Manjit Wolstenholme, who took on the role of executive chairman after boss Peter Crook quit earlier this year, removed Andy Parkinson as managing director of the division as part of a review.
He was replaced by Chris Gillespie, whose efforts are providing the ‘foundation for delivering the necessary improvement in customer service’ as part of Provident’s recovery plan.
Ms Wolstenholme said: ‘Since the last update, we have moved quickly to appoint new leadership in home credit who have a deep understanding of the business and recognise the importance of the relationship between our front-line staff and our customers.
‘A recovery plan has been developed and a number of actions have already been implemented to restructure the field organisation in order to provide the foundation for delivering the necessary improvement in customer service and financial performance.’
She also confirmed that the hunt for a new chief executive is under way.
As part of turnaround efforts, Provident, which has around 2.5 million customers, launched a new home credit model in July with the aim of moving from self-employed door-to-door agents to full-time ‘customer experience managers’.
But the lender confirmed on Friday that its pre-exceptional loss this year is likely to be in the range of £80 million to £120 million.
To compound matters, the Financial Conduct Authority is investigating a ‘Repayment Option Plan’ Provident offers through its Vanquis Bank arm.