Doorstep lender Provident Financial slumps 60% on profit alert

Shares (Berlin: DI6.BE - news) in doorstep lender Provident Financial (Other OTC: FPLPF - news) have collapsed by 60% after it warned of a "rapid deterioration" in its consumer credit business and cancelled its dividend.

Chief (Taiwan OTC: 3345.TWO - news) executive Peter Crook has stepped down with immediate effect as the group alerted investors to a downgrade of up to £180m in expected annual earnings.

It was the latest profit warning from Provident over the impact of a restructuring plan - following an earlier alert in June.

The group also said it was facing an investigation by the Financial Conduct Authority (FCA) into a repayment option plan from its Vanquis Bank operation - a product that offers, for a fee, the option for customers to have a break from monthly repayments.

Provident said that in view of both developments it was withdrawing a half-year dividend announced only last month and warning shareholders were unlikely to receive a full-year payout.

Shares fell 60% in early trading, wiping more than £1.5bn off the group's market value.

Provident had already said in June that profits from its consumer credit division were likely to fall to around £60m after changes to the way it operates.

The restructuring involves using full time staff to deal with customers rather than self-employed agents - but resulted in many leaving and a deterioration in collections and sales.

Provident aimed to restore performance to "acceptable levels" but progress has been weak and it is "now falling a long way short of achieving these objectives".

The consumer credit business is now expected to post a loss of between £80m and £120m.

Provident said that, in the circumstances, Mr Crook had decided to step down with immediate effect.

Manjt Wolstenholme, who will take on the role of executive chairman, said: "My immediate priority is to lead the turnaround of the home credit business."

Provident has 1.6 million customers in the UK, offering credit limits of £250 to £4,000.

It provides credit to people who do not meet the loan criteria of mainstream banks.

Even (Taiwan OTC: 6436.TWO - news) before the latest profit warning, it had become the target of short-selling by hedge funds - who were effectively betting against the shares.