Wonga is considering scrapping its Newcastle United sponsorship deal and might never go back into TV advertising, after a major fall in profits last year.
The online payday lender had a meteoric rise powered by catchy adverts, but profits crashed last year.
It is paying customers £2.3m in compensation for sending debt collection letters from fictional lawyers, and is investing an additional £12m in better trained finance staff, helping pull profits down 53 per cent to £39.7m.
Revenues rose two per cent on the year to £314.7m, while operating costs shot up 56 per cent to £133.7m. New chairman Andy Haste wants to clean up the firm’s reputation, in part by stopping adverts to children. The TV adverts were pulled over the summer and might never return. And the lender is considering ending its football sponsorship deal, just two years into a four-year deal.
Newcastle United said it was not yet in talks with Wonga over any change to the contract, but the club has come to similar arrangements in the past – sponsor NTL sold its advertising setup to Northern Rock a decade ago, mid-way through a deal. Removing the adverts will slow the firm’s growth. Wonga said yesterday it will “be smaller and less profitable in the near term”.
Another part of the strategy is to focus on overseas growth – loan volumes rose 15 per cent last year, largely driven by foreign loans, with new units in Poland and Spain.