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Provident Financial profit warning

Nicholas Hyett | 22 August 2017 | A A A
Provident Financial profit warning

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Provident Financial plc Ordinary 20 8/11p

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Provident Financial today issued a second profit warning in as many months, as disruption in the core Home Credit division continued and the FCA opened an investigation into Vanquis Bank's Repayment Option Plan.

CEO Peter Crook has stepped down with immediate effect, with Chairman Manjit Wolstenholme stepping into the role of Executive Chairman.

The interim dividend announced on the 25 July has been cancelled in order to preserve capital, and a full year payment is unlikely.

Home Credit

Provident now expects the Home Credit division to make a loss of £80-£120m for the year, compared to a £60m profit expected in June. The division delivered profits of £115.2m last year, 33.5% of the group total.

This follows a restructuring of the Home Credit model, introduced on the 6 July, which has seen it move from using self-employed agents to service customers to employing full-time Customer Experience Managers.

The transition to this new approach has resulted in the loss of more agents than expected and reduced effectiveness on collections and sales. As a result collections are currently running at 57%, versus 90% in 2016, and sales are around £9m per week lower than the comparative period in 2016.

A "thorough and rapid review" of the business is underway.

FCA investigation

Also in the update, the group announced that the FCA is investigating subsidiary Vanquis Bank's sales of Repayment Option Plans. This product contributes revenues of around £70m per annum for the division.

Pending the outcome of the investigation, Vanquis has agreed not to pay any dividends to its parent group.

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