The Courier & Advertiser (Perth and Perthshire Edition)
Millions wiped off lender’s value as it issues second profit warning of summer
Stock falls more than 66% as shareholders take fright after update
Hundreds of millions was wiped off the market value of Provident Financial yesterday as the lender warned of heavy losses following a period of “substantial under-performance.”
In the latest dire trading update, the FTSE 100 group said chief executive Peter Crook has decided to step down with immediate effect and Manjit Wolstenholme will assume the role of executive chairman.
As part of its 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 a full-time workforce.
However, the firm has been haemorrhaging money with sales down £9m per week compared to last year.
“The rate of progress being made is too weak and the business is now falling a long way short,” Provident Financial said in a statement.
“Collections performance and sales are both showing substantial underperformance against the comparable period in 2016.”
Provident’s collections performance is running at 57% versus 90% in 2016 and sales are £9m per week lower.
As a result, the firm said its preexceptional loss this year is likely to be in the range of £80m to £120m, a further deterioration from previous guidance.
As part of its turnaround effort, the company is carrying out a “thorough and rapid review” of its home credit unit.
To compound the misery, the firm revealed the Financial Conduct Authority (FCA) is investigating a repayment option plan (ROP) Provident offers through its Vanquis Bank arm.
It said: “The FCA indicated that it has concerns about the ROP product and is investigating the period from 1 April 2014 to 19 April 2016.
“Vanquis Bank agreed with the FCA to enter into a voluntary requirement to suspend all new sales of the ROP in April 2016 and to conduct a customer contact exercise, which has now been completed.”
Vanquis Bank has also agreed with the Prudential Regulation Authority (PRA) not to pay dividends without PRA consent pending the outcome of the FCA investigation.
“I am very disappointed to have to announce the rapid deterioration in the outlook for the home credit business.
“Protecting the group’s capital base through withdrawing the interim dividend, and in all likelihood the fullyear dividend, is the appropriate response to maintain the highly valuable franchises of Vanquis Bank, Moneybarn and Satsuma,” Ms Wolstenholme said.
Provident Financial shares closed down 1,155.5p at 589.5p.