BrightHouse has suffered a steep drop in full-year profits after new regulations surrounding its business model impacted earnings.

The rent-to-own retailer posted a 79.1% slump in EBITA before exceptional items to £11.7m in its 2016/17 financial year.

The business, which allows shoppers to pay for goods in weekly instalments with annual interest rates of up to 99.9%, said lower numbers of customer sign-ups and a consequent decline in the number of customers signing contracts had dented its bottom line.

Revenues across the year fell 13.6% to £320.1m, while the value of its contract portfolio tumbled 27.9% to £403.8m.

As previously reported, BrightHouse made changes to its customer sign-up process to include more detailed assessments of income and expenditure before contracts could be signed.

In a Companies House filing last October, BrightHouse chairman Henry Staunton said the changes it had made were “proving to be onerous and time-consuming for our customers and colleagues.”

As a result, BrightHouse warned that trading in the first two months of its current financial year had also suffered.

Revenues in the first two months of its current financial year fell 22% to £45.7m, leaving it £900,000 behind plan.

BrightHouse recorded a pre-exceptional EBITDA loss of £100,000, which it said it was also behind plan by approximately £1.4m.

‘Challenging period’

The retailer said this was driven by a £2.2m shortfall attributable to the absence of late fees and the related “higher cost of bad debt.”

BrightHouse said it remains in discussions with the FCA about re-introducing late fees and expects them to return later this year.

It admitted that its business plan for 2017/18 had assumed that late fees would be re-introduced from the start of April 2017, contributing an estimated £6.5m of revenue and EBITDA over the full year.

BrightHouse said that further delays would result in “a greater proportion” of late fees being lost, further hindering its bottom line.

The retailer shuttered 29 of its 312 shops last year as it faced into what it called a “challenging” period.