PPI News - Shop Direct’s surprise £241 million PPI provision

PPI News – Shop Direct’s surprise £241 million PPI provision

Shop Direct’s surprise £241 million PPI provision

Online retailer Shop Direct has shocked its investors with a higher than normal penalty for PPI mis-selling, leading to a huge widening of losses.

Its full year results show that its losses widened from £24.7 million last year to £185.5 this year, caused partly by the need to set aside £241 million to pay out successful PPI claims.

Surge

The group – which includes online retailers Very and Littlewoods – blames the increase on a massive surge in complaints leading up to the August PPI deadline.

More than a quarter of a million new claims were submitted in August alone and the firm is now said to be ‘evaluating a number of funding alternatives to address the increased liability’.

Expected

An increase in claims had been expected after another online retailer, N Brown, added £30 million to its own PPI pot at the beginning of September.

But the size of the increase was bigger than the Shop Direct expected. In the lead up to the deadline it had been receiving around 40,000 cases a month, but found themselves swamped with a massive 276,000 in the last four weeks.

Investors

Shop Direct is financed by a series of bonds taken out by investors and the value of those bonds tumbled in 2018 when the firm announced the need for a £100 million addition to the PPI pot.

They fell a further 5% when the £242 million figure for this year was announced.

One investor said: “It makes you think that they need fresh equity to pay off the provision to get the accounts signed off.”

“A company spokesman said an equity injection was one of a number of options being considered.”

Read more about Shop Direct’s £100 Million additional funds for PPI in a related story here

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