The boss of Non-Standard Finance denied the doorstep lender was “on the brink” after it revealed the Covid crisis had sparked material uncertainty about whether it can continue as a going concern.
NSF could be forced to ask shareholders for fresh investment as the pandemic recession imperils its access to funding.
The company, which lends money at high interest rates to more than 100,000 consumers with poor credit ratings, temporarily halted lending during lockdown and only managed to start handing out money again last month.
John van Kuffeler, chief executive of NSF, said his company had suffered a difficult and disappointing 18 months but insisted an economic downturn was an opportunity to win more business as consumers struggle to access cash.
He said: “We are not on the brink. We are a highly experienced team who know exactly what to do and which levers to pull.”
Shares tumbled 28.6pc to 8.2p in afternoon trading, valuing the firm at just £26m.
It comes a year after NSF’s audacious attempt to take over Provident Financial, its much larger rival, which Mr van Kuffeler once ran.
The hostile bid, which failed after a bitter war of words between the two sides, cost NSF nearly £13m in fees for bankers and advisers, it reported on Thursday.
NSF increased revenues by £23m to £181m last year but the gains were wiped out by a £66m writedown of goodwill, which widened pre-tax losses to £76m compared to a £2m loss in 2018.
Mr van Kuffeler hit out at the Government’s lack of support for the sub-prime sector during the crisis. Lenders have been forced to give automatic payment holidays to customers on request but have had to continue repaying their own debts.
He said: “It’s manifestly unfair that we should have to show forbearance and we take all the strain, whereas there’s no pressure being applied by the Treasury or the FCA on those who actually fund our industry.”
NSF has breached covenants in its £200m funding agreement with private equity house Ares, meaning it cannot access new money under the deal. Ares has granted temporary relief until Monday.
Analysts at Goodbody predicted that Ares would withdraw the facility if the doorstep lender does not raise new money from shareholders or find a possible suitor to take over the company.
NSF was on the brink but the challenge posed by Covid-19 is “not necessarily an insurmountable one”, they said.
NSF said it had managed to collect debts at 86pc of the usual level during the pandemic despite the lockdown and financial pressures on customers. It had £60m in cash at the end of May compared to £14m at the start of the year.