Provident Financial's shares tumble on profit warning
Source - SMW
Provident Financial shares were down heavily on Wednesday after the subprime lender warned after the market's close on Tuesday that its consumer credit division would see profits almost halved in 2017.
The company said the migration to a more efficient and effective home credit field organisation, which involved employing Customer Experience Managers (CEMs) to serve customers rather than using self-employed agents, together with streamlining the field management structure, was nearing completion.
"The recruitment of approximately 2500 full time CEMs is now virtually complete, the necessary training will be completed shortly and the testing of the core routing and scheduling software to support the switch over to the new operating model in early July is at an advanced stage," it said.
Provident said there had been no change to the underlying credit quality of the home credit receivables book since the announcement of the reorganisation on 31 January 2017.
"However, the business has experienced higher operational disruption than planned due to reduced agent effectiveness through the period of transition.
"In particular, the business has been running with an increasing number of vacant agencies due to attrition. Recent vacancy levels have been 12% which is more than double the rate anticipated."
Provident said the impact of higher operational disruption on collections performance and sales was seen reducing the 2017 pre-exceptional profits from the Consumer Credit Division to about £60m, from £115m.
"The one-off exceptional charge of approximately £20m in respect of redundancy, retention and training costs remains in line with previous guidance and will be reflected in the first half results," it said.
CEO Peter Crook said:
"I am disappointed to report higher than expected operational disruption from the migration of the home credit business to a new operating model.
"Nonetheless, the strategic rationale for the change remains strong and I am confident that it will deliver the substantial benefits previously communicated."
At 9:00am: (LON:PFG) Provident Financial PLC share price was -455p at 2410p