* Recovery plan to stabilise operations in unit
* Still sees FY loss between 80-120 mln stg for home credit unit
* Shares jump over 18 pct (Adds analyst quotes, rivals, share movement)
Oct 13 (Reuters) - British subprime lender Provident Financial Plc set out a recovery plan for its home credit business, which is set to post a 2017 loss of up to 120 million pounds ($159 million) as it grapples with a staff shortage.
Provident's shares jumped 18.5 percent on Friday after it said it would move from two UK home credit divisions to four units, employing more regional managers and at least 300 part-time staff who used to work as self-employed agents.
This would help "re-establish relationships with customers (and) stabilise the operation of the business", it said.
Provident has run into trouble after trying to reorganise its door-to-door lending business by ending its model of using self-employed agents as debt collectors and replacing them with directly employed staff.
The company, which gives loans to people who do not meet lending criteria of mainstream banks, has been unable to recruit 2,500 employees to replace its 5,000 agents, leading to uncollected debt, a sales slump and the departure of its chief executive.
The company's shares, which have slumped over 70 percent since its June warning, were top London midcap gainers on Friday. (http://bit.ly/2y9eOmJ)
"Things aren't getting any worse at Provident.. The share price showing some relief...is natural, but there's still a long rocky road ahead," Hargreaves Lansdown senior analyst Laith Khalaf said.
The company did provide an outlook for the group's performance as a whole in the year, beyond confirming a loss of 80-120 million pounds for the home credit business.
Analysts expect pretax profit of 130.6 million pounds in 2017, according to Thomson Reuters I/B/E/S. Provident reported pretax profit of 343.9 million pounds in 2016.
The home credit unit's collections performance - which measures the percentage of due loan payments it recoups - in September was 65 percent, up from 57 percent in August. Liberum analyst Portia Patel said that performance was at the bottom of the 65-75 percent range they had forecast.
"Can they recover the business to where it was? Most definitely not... The fact is good agents have gone to competitors and they've taken the good customers with them," Patel told Reuters ahead of results.
Provident faces a host of other challenges to recover beyond filling staff gaps: The group is seeking a new CEO, its banking unit is facing a probe by Britain's financial watchdog and its credit rating is on the bring of being downgraded to junk, analysts say.
That's despite the UK subprime market as a whole performing relatively well, with Provident's rivals benefiting from its problems.
Morses Club has forecast a jump in profits and customer numbers after recruiting dozens of Provident agents, while Non-Standard Finance told Reuters that the lender had taken on about 438 agents and about 80 managers from Provident.
"The home credit market has... worked in the same way for hundreds of years, and then Provident have come along and broken that model," Peel Hunt analyst Stuart Duncan said ahead of the update.
"The sector has been thrown up in the air and the largest participant in that market is shedding market share to some of the others are taking full advantage of their self-inflicted wounds." ($1 = 0.7534 pounds)
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Rachel Armstrong)