Peter Crook, the long-time chief executive officer of sub-prime motor finance lender Moneybarn’s parent company Provident Financial has stepped down from his role with immediate effect, with profits falling and an FCA investigation ongoing.
The company has revealed plans to withdraw its interim dividend, declared on 25 July 2017, and said a full year dividend is unlikely, in order to protect its companies, including Moneybarn.
There is no suggestion the problems are in any way related to the car finance lender – which was described as ‘highly valuable,’ and in line with internal plans.
Problems have emerged from two other areas of the business: Vanquis Bank and Provident’s home credit trading.
It is the latter which has really hurt Provident’s bottom line. On July 6 the company moved from using self-employed agents to full-time Customer Experience Managers (CEMs). The move was announced in January, and between the two months, it had experienced operational disruption.
Specifically, the company wrote: “The impact of higher than expected agent attrition and reduced agent effectiveness on collections performance and sales resulted in the announcement on 20 June 2017 that forecast pre-exceptional profits from CCD would be reduced to around £60m.”
Collections performance is running at 57%, compared to 90% in 2016, with sales running £9m per week lower than comparative weeks in 2016. According to Provident, the extent of this underperformance and the elongated period of time required to return the performance of the business to acceptable levels invalidates previous guidance. The pre-exceptional loss of the business is now likely to be in a range of between £80m and £120m.
Seperately, Vanquis Bank is currently under investigation by the Financial Conduct Authority (FCA) for a repayment option plan (ROP) ancillary product.
The FCA has indicated it has concerns about the ROP product and is investigating the period from 1 April 2014 to 19 April 2016.
Due to the investigation, Vanquis suspended all new sales of the ROP in April 2016,and said it is co-operating with the investigation.
Prior to this, the ROP product contributed approximately £70m annually.
With Crook stepping down, Manjit Wolstenholme has assumed the role of executive chairman.
Wolstenholme said: “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.”