Shares have plummeted as the Group issues its second profit warning in 3 months.
Companies: Vanquis Banking Group PLC
Doorstep lender Provident Financial (LON: PFG) has seen almost half its share price wiped off in early morning trading today as the Group issues its second profit warning since June and CEO Peter Crook stands down as a result.
The trading statement details the poor performance Provident has experienced this year after it changed its home credit operating model.
Collections performance is currently running at 57% versus 90% in 2016 and sales at £9m per week lower than comparative weeks in 2016. The Group now expects the pre-exceptional loss of the business to be in the range of £80m to £120m.
"The impact of higher than expected agent attrition and reduced agent effectiveness on collections performance and sales" is said to be the cause.
As a result of the poor performance, the interim dividend, expected soon, will no longer be issued, and they say a year-end dividend is "unlikely".
Today's trading statement will only exacerbate the fact that Provident's subsidiary company Vanquis Bank is currently under investigation by the FCA regarding its repayment option plan and has agreed to suspend all sales. The company is still awaiting the outcome of the investigation.
Executive Chairman Manjit Wolstenholme had this to say regarding the statement...
"I am very disappointed to have to announce the rapid deterioration in the outlook for the home credit business. Protecting the group's capital base through withdrawing the interim dividend and in all likelihood the full-year dividend is the appropriate response to maintain the highly valuable franchises of Vanquis Bank, Moneybarn and Satsuma. My immediate priority is to lead the turnaround of the home credit business."
The company has been trading steady for the 5 years to 2016 with share prices following the growth charts for revenue, operating profit, and net profit. The shares grew 200% in the 3 years to 2016, and they currently trade at a PE ratio on par with the industry median - around 10x.