 plunged 19 percent on Wednesday, after warning investors its doorstep lending division plan had dented profits.){kind=link}
Shares in Provident Financial (LON:PFG) plunged 19 percent on Wednesday, after the group warned investors that the reconfiguration of its doorstep lending division had dented profits.
The U.K-based lender revealed that its plan to replace self-employed debt collection agents with ones employed by the company had had an adverse impact upon profits.
The move led to 450 vacancies for the role, and a vacancy rate of 12 percent after receiving less applications than initially anticipated.
As a consequence, debt collection has been “weaker” and in turn, group sales have fallen.
Despite initial projections of a shortfall around £15 million for the first few months of the year as a result of the action, shortfall is now expected to be in the region of £40 million, after a slower-than-expected May.
In a statement, the company said that the business had “experienced higher operational disruption than planned due to reduced agent effectiveness through the period of transition.”
The company had noted recent evidence of stabilisation during the course of June, with debt collection expected to pick up from July onwards.
Similarly, in a conference call to analysts, chief executive Peter Crook acknowledged the lapse in judgement. He said:
“We didn’t get it right. The incentives we had in place and the other management actions and communications that were there, were not sufficient to retain the number of agents that we anticipated.”
Mr Crook said he was “disappointed” about the results, which saw “higher than expected operational disruption”.
Looking ahead, he added:
“Nonetheless, the strategic rationale for the change remains strong and I am confident that it will deliver the substantial benefits previously communicated.”
Provident Financial is a sub-prime lender which has been in operation since 2008. The company operates from Bradford, West Yorkshire and focuses on credit cards, home collected credit, online loans and consumer car finance.
It has been listed on the London Stock Exchange as of 1962, and is part of the FTSE 100 Index.
Shares in Provident Financial are currently down 17.35 percent amid the disappointing news, as of 13.22PM (GMT).