(Adds CEO, finance director comments, share movement)
By Noor Zainab Hussain
June 21 (Reuters) - British subprime lender Provident Financial Plc said that a fall in the number of debt collection agents at its home credit division will weigh on profits for the rest of the financial year, sending its shares sharply lower
The company said a reorganisation of the business had led to a rise in the number of agents leaving, with the recent vacancy rate hitting 12 percent, twice the level anticipated.
The company, which provides credit to people who do not meet the lending criteria of mainstream banks, is ending its practice of using self-employed collection agents and employing them instead. However the rate of applications by its current agents has fallen short of expectations.
“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,” CEO Peter Crook told analysts on Wednesday.
Shares in the lender plunged 20 percent on Wednesday morning, making the stock the biggest loser on London’s blue-chip index.
The unfilled jobs were in the lender’s UK business, Finance Director Andrew Fisher said on the analyst call, adding there were about 450 vacancies. It is aiming to employ a total of 2,500 in total.
“When you are going through a period of 4-5 months when essentially most of the work force is on notice and you’re having to re-recruit much of your workforce into new positions within a new structure, it creates an air of uncertainty across the organisation,” Fisher said.
Operational disruption had led to more uncollected home credit and hit sales penetration and customer retention, Provident Financial said.
The lender said the shortfall in the unit’s contribution to profit was estimated to be about 40 million pounds ($50 million) in the first half of the year, up from the 15 million pound hit the company forecast in April.
Provident Financial said recent collections performance had “deteriorated”, particularly in May. June collections were “stabilising”, with performance expected to normalise next month.
This operational disruption on collections and sales is forecast to reduce 2017 pre-exceptional profits from the consumer credit division to around 60 million pounds, from 115 million pounds a year earlier.
Crooke said the company expects things to be back to “normal” by the fourth quarter.
“We don’t have a credit quality issue, we have an issue whereby we haven’t collected on customers in the normal disciplined, diligent,” he said. ($1 = 0.7918 pounds) (Reporting by Noor Zainab Hussain in Bengaluru; Editing by Amrutha Gayathri)