Wonga To Waive Dividend Despite Record Profit
Wonga, the financial services company which has found itself at the heart of the controversy over the payday lending industry, will on Tuesday announce that it made record profits of more than £1m-a-week last year.
Sky News understands that the privately-owned group will report annual earnings of roughly £65m for 2012, an increase of approximately 50% on the previous year, buoyed by a huge spurt in customer numbers and ongoing international expansion.
The results will reinforce Wonga's status as one of the UK's most successful technology companies, although they will also provide further ammunition for critics of the sector weeks after it became the target of a broadside from the Archbishop of Canterbury.
Errol Damelin, Wonga's founder and chief executive, will say on Tuesday that Wonga will maintain its record of eschewing a dividend and ploughing the company's earnings back into product development and a push into new markets.
Referring to the Church of England's desire to participate in the growing credit union movement, Dr Justin Welby said he had told Mr Damelin that he wanted to "compete [the company] out of existence".
The remarks sparked acute embarrassment for the Archbishop, however, when it emerged that the Church of England's pension fund was among the investors in one of Wonga's financial backers.
Wonga has sought to counter many of the criticisms levelled at payday lenders by pointing out that it only makes short-term loans to consumers and highlighting the fact that it only lends money to consumers who have been subjected to credit-checks. Customers can also repay loans early with no additional charge.
Dr Welby subsequently sought to clarify his remarks by praising Mr Damelin's track record as a businessman and denying that he was seeking to portray Wonga as an irresponsible company.
Earlier this year, the payday lending sector was referred to the Competition Commission amid political anger about the activities of some short-term lenders.
In 2014, the industry will come under the remit of the Financial Conduct Authority, and the City regulator will have powers allowing it to ban advertising and impose a cap on interest rates charged by lenders.
In remarks published on its website last month, Wonga said: "Since 2007 Wonga has responsibly lent over £2bn and we now have over a million customers.
"We've done that despite declining three quarters of all first loan applications and ensuring a principal default rate (money lent that we don't get back) of around 7%. This is comparable to other forms of short-term credit, such as credit cards.
"We work hard to lend only to the people who can pay us back, and our mainstream services for individuals and businesses are now available across three continents."
Wonga, which is planning to launch in Spain, declined to comment on its 2012 results ahead of Tuesday's announcement.
The record profits will fuel speculation that Wonga's management and shareholders will look to float the company on New York's Nasdaq technology stock exchange, although such a move is unlikely in the near term.