£1.7bn wiped off Provident’s value as shares plunge

Chief executive exits as doorstep lender scraps dividend and issues another profit warning

SHARES in Provident Financial plunged 66pc yesterday as the subprime lender issued its second profit warning in two months, scrapped its dividend and announced the exit of its chief executive Peter Crook “with immediate effect”.

Just a month after Mr Crook had told investors Provident was on the “road to recovery”, the FTSE 100 company warned in trading update yesterday that it could make losses of between £80m and £120m in its home credit business this year after it recently changed the way it collected loans.

That compares to a £60m profit forecast announced just three months ago, when the Bradford-based group alerted shareholders that profits in the division were expected to halve from £115m in 2016.

It also revealed yesterday that its credit card unit Vanquis has been under investigation by the Financial Conduct Authority over one of its products since April 2016.

Shares in Provident dropped £11.56 to close at 589.5p yesterday, wiping £1.7bn off its market value, which was left at just £874m.

Provident was set up in 1880 to provide affordable credit to poor families in Yorkshire, and its home credit business relies on agents to knock on customers’ doors and offer them loans or collect repayments. The problems stem from a rejig of the company’s door-todoor salesforce earlier this year, when it was left with fewer loan collectors than expected after deciding to employ 2,500 full-time agents who visit homes to make new loans or collect repayments, instead of 3,800 part-timers.

The shift saw its debt collection rates drop from 90pc a year ago to 57pc, with sales around £9m per week lower than the comparative weeks in 2016.

Manjit Wolstenholme, who has assumed the role of executive chairman, will be responsible for fixing a unit in “rapid deterioration.” Ms Wolstenholme told The Daily

Telegraph that she would now review every part of the home credit business to find out why its change in debt collectors was executed so badly.

“My job is to get the announcement out there and crack on. It’s just a matter of knuckling down,” she said.

“There’s no-holds barred on what we’re looking at here.”

Investors were also told that they would not be receiving the half-year dividend they were promised onlya month ago, with a full-year payout unlikely.

As the shares plunged, losses among the company’s top investors were huge [see box].

Star fund manager Neil Woodford saw his 18pc holding fall £309m in value to £157m, although he issued a bullish outlook saying that while he was “hugely disappointed” he believed things would “ultimately get back on track”.

“This business has been around for more than a century and I believe it will be around for many decades to come,” he said.

The company said that performance in its other units – Vanquis Bank, Moneybarn and Satsuma – remained in line with internal plans.

RBC Europe analyst Peter Lenardos said the “quadruple whammy” of bad news – a fresh profit warning, no dividend, an FCA investigation and the chief executive departure – led him to believe the shares “are not investible until greater clarity is received, which may not be until next year at the earliest”. James Quinn: Page 30