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| Doorstep lender Provident's chief quits after profit warning | |
| (35 minutes later) | |
| Provident Financial’s stock market value has more than halved after the doorstep lender issued its second profit warning in two months, parted company with its chief executive and cancelled a dividend for shareholders. | Provident Financial’s stock market value has more than halved after the doorstep lender issued its second profit warning in two months, parted company with its chief executive and cancelled a dividend for shareholders. |
| The company, which joined the FTSE100 in December 2015, said it expected its core home credit division to make losses of up to £120m this year, having predicted a profit of £60m just two months ago. | The company, which joined the FTSE100 in December 2015, said it expected its core home credit division to make losses of up to £120m this year, having predicted a profit of £60m just two months ago. |
| The rapid deterioration in Provident’s performance comes after a failed attempt to overhaul its century-old business model by cutting staff numbers and ramping up its use of technology. | The rapid deterioration in Provident’s performance comes after a failed attempt to overhaul its century-old business model by cutting staff numbers and ramping up its use of technology. |
| Its chief executive, Peter Crook, who oversaw the change, has stepped down, with Manjit Wolstenholme taking on the role of executive chairman. The company will also cancel its interim dividend and “in all likelihood” the full-year payout in an attempt to conserve cash. | Its chief executive, Peter Crook, who oversaw the change, has stepped down, with Manjit Wolstenholme taking on the role of executive chairman. The company will also cancel its interim dividend and “in all likelihood” the full-year payout in an attempt to conserve cash. |
| Shares in the sub-prime lender have fallen 70% so far on Tuesday, from more than £17 to 448p, wiping nearly £2bn off its stock market value. | Shares in the sub-prime lender have fallen 70% so far on Tuesday, from more than £17 to 448p, wiping nearly £2bn off its stock market value. |
| Provident grew rapidly in the years after the financial crisis, stepping in to offer credit to people in financial difficulty who could not secure loans as banks became more wary of risky lending. | Provident grew rapidly in the years after the financial crisis, stepping in to offer credit to people in financial difficulty who could not secure loans as banks became more wary of risky lending. |
| But earlier this year it announced changes to its traditional business model of sending self-employed sales agents door to door, offering loans and collecting debts. | But earlier this year it announced changes to its traditional business model of sending self-employed sales agents door to door, offering loans and collecting debts. |
| In a move seen as part of the financial services industry’s attempt to embrace automation, Crook unveiled plans to do away with its 4,500 sales agents. | In a move seen as part of the financial services industry’s attempt to embrace automation, Crook unveiled plans to do away with its 4,500 sales agents. |
| It planned to replace them with 2,500 full-time “customer experience managers”, who would be connected to head office via iPads, their time managed more efficiently thanks to analytical software. | It planned to replace them with 2,500 full-time “customer experience managers”, who would be connected to head office via iPads, their time managed more efficiently thanks to analytical software. |
| But in a statement to the stock market, Provident said the software had presented some early issues, while the new operating model had “not allowed sufficient local autonomy”, leading to poor allocation of resources. | But in a statement to the stock market, Provident said the software had presented some early issues, while the new operating model had “not allowed sufficient local autonomy”, leading to poor allocation of resources. |
| The firm’s debt collection rate has fallen from 90% last year to 57% as a result, while sales are £9m a week lower. | The firm’s debt collection rate has fallen from 90% last year to 57% as a result, while sales are £9m a week lower. |
| “The primary objectives set for the third quarter of 2017 were to embed the new operating model and to progressively restore customer service and collections performance to acceptable levels in preparation for the seasonal peak in lending during the fourth quarter,” it said. | “The primary objectives set for the third quarter of 2017 were to embed the new operating model and to progressively restore customer service and collections performance to acceptable levels in preparation for the seasonal peak in lending during the fourth quarter,” it said. |
| “The rate of progress being made is too weak and the business is now falling a long way short of achieving these objectives.” | “The rate of progress being made is too weak and the business is now falling a long way short of achieving these objectives.” |
| Wolstenholme said: “I am very disappointed to have to announce the rapid deterioration in the outlook for the home credit business.” | Wolstenholme said: “I am very disappointed to have to announce the rapid deterioration in the outlook for the home credit business.” |
| Provident said it would begin a thorough and rapid review of its home credit division in an effort to turn it around. | Provident said it would begin a thorough and rapid review of its home credit division in an effort to turn it around. |
| The company also admitted that its Vanquis Bank division was being investigated by the Financial Conduct Authority over the sale of repayment option plans (ROP), a product that helps people freeze their credit card debt. | The company also admitted that its Vanquis Bank division was being investigated by the Financial Conduct Authority over the sale of repayment option plans (ROP), a product that helps people freeze their credit card debt. |
| The investigation relates to sales made between April 2014 and April 2016. Provident has agreed to suspend the sale of ROPs, which were worth £70m a year in revenues. | The investigation relates to sales made between April 2014 and April 2016. Provident has agreed to suspend the sale of ROPs, which were worth £70m a year in revenues. |
| Analysts at RBC Capital Markets called the string of negative announcements a “quadruple whammy” as Provident’s share price nosedived. | Analysts at RBC Capital Markets called the string of negative announcements a “quadruple whammy” as Provident’s share price nosedived. |
| “We expect ongoing substantial losses in the share price, and would not be buyers at any price,” they said, adding that its shares “are not investible until greater clarity is received, which may not be until next year at the earliest”. | “We expect ongoing substantial losses in the share price, and would not be buyers at any price,” they said, adding that its shares “are not investible until greater clarity is received, which may not be until next year at the earliest”. |