Provident shares take another tumble

Shares in credit lender Provident Financial took another hit after the group said its'‹ '‹'‹'‹consumer credit division will report a loss of around £120m - at the top end of former guidance.

Provident Financial is 'engaged in a dialogue' with the FCA

The Bradford-based firm’s shares fell over 8​ per cent ​to 841p ​after the former FTSE 100 firm said it had ​won back fewer doorstep customers than it had hoped for during the fourth quarter. ​​The​ group’s shares​ have fallen almost 70 per​ ​cent since ​last ​June.​

The sub-prime lender has suffered from a botched reorganisation of its door-to-door lending business that led to a profit warning, the departure of its CEO, and ​the​ share price plunge. Britain’s financial watchdog has also launched two probes into Provident’s lending practices.

Sign up to our Business newsletter

Sign up to our Business newsletter

​Provident first warned about problems at its door-to-door lending operation in late June after a ​badly executed reorganisation led to a shortage of staff. It said in August the situation had deteriorated and the business would lose between ​£​80​m​ and ​£​120​m in 2017. The doorstep lending business account​s​ for ​£​115​m of the consumer credit division’s loss.

​​Provident said the home credit business w​ill​ cut an unspecified number of jobs at its central support functions as it looks to cut costs.

The consumer credit division accounted for 44 per​ ​cent of Provident’s revenue in 2016.

Analysts expect group pre​-​tax profit of between £106m and £​12​8m in 2017, ​a far cry from the ​£​34​4m reported in 2016.​

​Provident ​is facing a Financial Conduct Authority (FCA) investigation into the Repayment Option Plan offered by Provident’s Vanquis Bank and an investigation into Moneybarn, its car and van financing arm.

The firm said customer service improvements have led to a rise in active ​home credit ​customers numbers from 500,000 in September to 530,000.

​​Interim executive chairman Malcolm Le May said: “I am pleased to report that good progress has been made towards restoring customer service in the home credit business and that we are engaged in a dialogue with the FCA with a view to reaching a resolution of the regulatory investigations at Vanquis Bank and Moneybarn.

“In addition, we continue to make progress in the search for a new group chief executive.”

He added that Provident’s priorities in 2018 are to rebuild trust with customers, regulators, shareholders and employees.​

​Analyst​ Stuart Duncan at Peel Hunt said: “Home credit made some progress in its recovery plan, with collections performance steadily improving in ​the fourth quarter​, active customer numbers up 6​ per cent ​to 530,000 and receivables up 11​ per cent​ (from September) to £350m as at the end of December.

“December is the peak period for lending and receivables were down 38​ per cent​ from December 2016, reflecting the disruption and change in model. Despite improved collections, impairments remain at the more adverse end of previous guidance and is expected to result in a 2017 pre​-​exceptional loss of £115m.“​

Liberum analyst Portia Patel said there was still a way to go towards repairing the business.

​​“The balance sheet still appears stretched​,” she said.

“​In the absence of resolution on the strength of the balance sheet, the FCA’s investigation on ROP and the search for a new CEO, our negative stance is unchanged,” said ​Ms ​Patel, who rates Provident as a “​s​ell.”

Rival Birstall-based Morses Club has gained from Provident’s woes after ​it ​recruit​ed​ hundreds of ​Provident’s​ agents and t​ook on ​its ​customers.