A Scottish-based payday lender saw its losses widen by 70per cent last year after it pulled out of short-term lending ahead of a feared clampdown on the sector.

Cheque Centre, based in Edinburgh but owned by Cincinatti-based CNG Financial Corp, made a pre-tax loss of £24million, up from £14m the previous year, according to the accounts just filed at Companies House.

Turnover was slashed by almost a quarter to £272m as the business made a tactical retreat from short-term lending, which had contributed 70 per cent of gross profit in 2013.

The discontinued part of the business lost £9.6m on turnover of £12m, down from £53m, despite cutting administration costs by a third on the previous year when the division booked a loss of £6m.

The accounts last year noted a continuing material uncertainty about its going concern status. In 2014 the US parent injected a further £4.7m of non-repayable capital following a massive £27.5m in 2013, and the directors say the company has adequate resources for the foreseeable future and is a going concern.

Cheque Centre provides “alternative retail financial services” such as cheque cashing, pawnbroking, foreign currency exchange, and the buying of gold and mobile phones. It also manages the business of sister company Cash Generator.

The directors say its market last year was subject to a sustained period of change and uncertainty as regulation transitioned to the Financial Conduct Authority. “Based on the proposed new regulation and the lack of visibility on an interest rate cap, the directors took the decision to withdraw from short-term lending on 31 March.”

The changes in product offering had prompted a review of the company’s estate and support functions and a restructuring programme. Three-quarters of its stores were closed, and headcount was reduced substantially, triggering an exceptional cost of £7.9m (compared with £2.7m in 2013). There was a further impairment charge of £231,000 (down from £5.1m) added to administration costs.

The directors say that in December 2014 the company submitted to the FCA its full licence application, which is still being reviewed.

It said the FCA had granted interim permissions on 27 March this year, enabling it to trade regulated products through its branch network. “The company has now resumed pawnbroking and has begun to roll out a short-term lending product”.

The Cheque Centre website currently advertises foreign currency exchange, cheque cashing and international money transfer, and the group was at one time operating over 30 shops in Scotland, with 12 Cash Generator outlets.

The report says the company’s main source of funding is an inter-company loan from immediate parent Cheque Centres Group which has a limit of £45m, and the group owed ultimate parent CNG £23m at the end of 2014. In April 2015, the directors of CNG Holdings had provided a letter of support underwriting the company’s liabilities for the subsequent 18 months.

Meanwhile the company has also “secured additional funding from CNG Holdings Inc to fund the roll-out of consumer lending in 2015 and 2016”.

The accounts show operating profit cut by 87per cent to £8.5m. The £7.9m of exceptional charges included £4m for onerous leases and £1.2m for store closures. Shareholder funds dropped from a £5.8m surplus to a £13.5m deficit.

Employee numbers were reduced from 1349 to 859. The bill for directors’ pay rose from £359,000 to £427,000 including a £50,000 pay-off, and the highest-paid took a 37per cent pay cut, from £293,000 to £184,000.