Provident Financial expects to make a loss in its doorstep lending business of £80m-£120m this year
Provident Financial has launched a plan to stabilise its doorstep lending business, including hiring 300 part-time debt collection agents, after a botched restructuring this year led to two profit warnings.
The Bradford-based subprime lender confirmed on Friday that it expected to make a loss in its doorstep lending business of between £80m and £120m this year. It also said it had dropped its full-year dividend, something hinted at in its August profits warning.
The Bradford-based company said it had developed a recovery plan, focusing on re-establishing relations with customers.
Provident ran into trouble this year after attempting to reorganise its doorstep business, eliminating 4,500 self-employed debt collection agents and creating 2,500 new positions on the payroll.
However, in June the company said its self-employed agents were quitting the business at a faster rate than expected, causing a slump in its debt collection rate and new sales to fall.
Provident said it would recruit at least 300 part-time collection agents, primarily from the previously self-employed workforce, to “accelerate reconnection with customers”, among other measures.
Collections performance improved in September, at 65 per cent, up from 57 per cent in August. Sales were approximately £6m per week lower than the prior year compared with £9m during August. Home credit receivables were £316.3m at the end of September, down 33 per cent from June.
Manjit Wolstenholme, executive chairman, said: “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.”
Shares in Provident rose as much as 15 per cent after the news on Friday morning.
Provident admitted in August that attempts to restore collection rates were too weak and the business was falling “a long way short” of achieving its objective of embedding the new operating model.
As a result, chief executive Peter Crook stepped down as the company issued its second profit warning in three months and scrapped its interim dividend.
Provident said on Friday that the board had appointed an independent agency to conduct a search for a new chief executive.
The group’s credit card business under its Vanquis Bank brand has fared better. It has seen 13 per cent year-on-year growth in customer numbers and 14 per cent in receivables.
However, Vanquis was fined £75,000 this week by the Information Commissioner’s Office for sending out around 870,000 spam text messages and 620,000 emails to promote its credit cards.
Additional reporting by John Murray Brown in London