‘It will take time to repair our reputation,’ Wonga chairman Andy Haste said today as the firm reported an abysmal set of results for 2014. That may be an understatement. Ever since taking the job in July, former RSA Insurance boss Haste has made it clear that the new Wonga would be ‘smaller and less profitable’ than it had been in its heyday, and he’s proving quite right.
The firm lost £37m last year, confirming leaked reports yesterday. In some measure, this reflects written-off debt and compensation payments that were already public, but far more worrying for Wonga’s investors – who have never taken a dividend – is the fall in the top line. Revenues fell 31% to £217m as the business' customer numbers fell 42% from 2013.
Though the firm’s muddied image and the fact that it pulled its TV adverts can’t have helped, the main reason for this fall is Wonga’s own measures to become more responsible in deciding who should have access to short-term credit. In an effort to appease the FCA, which took over as the industry regulator last year, Wonga has souped up its affordability criteria.
It’s also been publicly contrite about its practices before the new management team joined. ‘There is an important role in society’ for payday lenders, Haste said, ‘but only if they put their customers first and lend responsibly. Regrettably, that has not always been the case at Wonga.’
Will that be enough to convince the FCA to grant Wonga permission to continue trading? Haste et al will certainly hope so, but there’ll be a wait of up to 12 months before they find out. Its investors will be just as interested in whether it can return to profitability, in the event it does survive under the new regulatory framework.
Wonga has identified cost-cutting as an important way to balance the books as it shrinks, and the firm recently halved its UK-facing staff. But what of the other essential need identified by Haste, ‘to reduce the almost exclusive reliance on one product at one price’?
So far, the only indication of Wonga’s intention in this regard come from its finance chief Paul Miles. ‘We will look to launch new products,’ he said. Well that’s alright then.
While we try and guess what those products might be, we should ready ourselves for ‘another tough year’, Miles said. Anyone hoping for a return to profits and puppets may be disappointed.