A string of regulatory scandals and restructuring costs pushed Britain's biggest payday lender deeply into the red in 2014, it will announce next week. Sky News can reveal that Wonga Group will disclose in the coming days that it lost approximately £35m last year, ending a long run of profitability for a company which has become the target of sustained criticism by opponents of the short-term lending sector. Sources said on Saturday (Shenzhen: 002291.SZ - news) that Wonga, which sponsors Newcastle United and Blackpool football clubs, would also disclose that revenues slumped by about one-third last year, from £314.7m to just over £215m. The figures will underline the scale of the challenge confronting Wonga as it attempts to secure approval from the City regulator for a new licence as part of a broader overhaul of the industry. The Financial Conduct Authority (FCA) has estimated that the vast majority of the roughly 400 payday lenders operating in Britain will go out of business following the introduction in January of a price cap on loan and repayment charges.

The loss of about £35m that will be announced by Wonga next week compares to a profit of just under £40m in 2013, which itself represented a 53% decline on its earnings during the previous year. Under a management team recruited last year, Wonga is drawing up plans to diversify its business away from its core short-term loan products. However, some analysts have expressed scepticism that the company will be able to resuscitate its brand in the wake of a series of reputation-battering scandals. Last year, it was forced by the FCA to pay more than £2.5m in compensation to 45,000 customers who were sent letters purporting to be from law firms but which in fact did not exist. A near-£20m charge to cover the cost of compensation, as well as legal and administrative costs related to the issue, was taken in its annual results for 2014. More recently, Wonga has announced plans to halve its UK workforce with the loss of 325 jobs. Explaining the cull, Andy Haste, Wonga's chairman, said: "Our focus is on creating a business that meets the demand for short-term credit sustainably and responsibly, resulting in good customer outcomes. "We've already made significant changes, including appointing a new leadership team, implementing a new risk decision engine and tightening our lending criteria......Read more here