Provident Financial PLC (LON:PFG) said its chief executive Peter Crook is stepping down and that it is withdrawing its interim dividend to protect its capital base during an investigation into its Vanquis Bank subsidiary.
The lender, which provides credit to those who fail to meet the loan criteria of mainstream banks, also issued its second profit warning in two months, blaming a “rapid deterioration” in the trading performance of its home credit business.
The news sent its share price tumbling 50.41% to 854p in early trading.
Provident’s Vanquis Bank is being investigated by the Financial Conduct Authority over its repayment option plan.
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Full year dividend unlikely
“In view of the substantial deterioration in the trading performance of the home credit business, together with the uncertainty created by the FCA’s investigation at Vanquis Bank, the board has determined that the group must protect its capital base and financial flexibility by withdrawing the interim dividend declared on 25 July 2017 and indicate that a full year dividend is unlikely,” chair Manjit Wolstenholme said.
In response, the group has kicked off a review of its home credit performance to support the turnaround of the business.
As part of its restructuring of the business, the group has been struggling to switch from using self-employed debt collection agents to its own employees, the company said in a trading statement.
Provident said its collections performance and sales have showed “substantial underperformance” compared to 2016.
Debt collection rates have fallen to 57% from 90% last year and Provident now expects the pre-exceptional loss for the business to be in a range of £80mln to £120mln.
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Weak progress in turnaround efforts
The company was aiming to restore customer service and collections performance in the third quarter but said the rate of progress was “too weak” and the business is falling a “long way short” of achieving its objectives.
In the circumstances, Crook has decided to resign as chief executive with immediate effect, the group said.
"I am very disappointed to have to announce the rapid deterioration in the outlook for the home credit business,” Wolstenholme said.
“My immediate priority is to lead the turnaround of the home credit business."