Doorstep lender Provident Financial expects to post a £120m loss at its consumer credit business after struggling to win back customers following a botched reorganisation of the 130-year-old business last year.

The company, which specialises in lending to people in financial difficulty, blamed a “lower than expected rate of reconnection” in the fourth quarter.

The shares fell 5% in early trading on Tuesday and were later down 3.8% at 885p.

The reorganisation, which involved replacing 4,500 self-employed collection agents with 2,500 full-time “customer experience managers” (CEMs) resulted in two profit warnings last summer, a share price plunge and the departure of the chief executive.

The CEMs were given iPads but were sent to the wrong addresses, or the correct addresses at the wrong time, and were unable to make sales or collect payments. The firm decided to hire collection agents again in October after axing them earlier in the year.

Provident warned in August that the door-to-door lending operation would lose between £80m and £120m in 2017. It noted on Tuesday that debt collection rates had improved and customer numbers at the division went up to 530,000 from 500,000 in September.

The firm plans to reduce costs by cutting support jobs. This is thought to affect tens of jobs rather than hundreds.

Provident’s credit card business, Vanquis Bank, and its car finance division, Moneybarn, are under investigation by the financial watchdog.

The Canaccord analyst Bill Barnard said: “While we would regard Provident’s trading update as positive on a go-forward basis – there is more of a home credit business than we thought there might be – there are still a number of bridges to be crossed.”

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