29th Nov 2021 10:30
(Alliance News) - Shares plunged in Amigo Holdings PLC on Monday despite swinging to an interim profit, as the company warned that the sanctioning of a new scheme for addressing historic complaints has become "increasingly urgent".
Shares in the London-based guarantor loans provider were 24% lower at 8.09 pence on Monday in London.
For the six months ended September 30, Amigo posted a pretax profit of GBP2.1 million, swinging from a loss of GBP62.6 million the same period a year before, mostly due to a plunge in the complaints expense to GBP5.3 million from GBP93.7 million, after booking a provision for GBP344.3 million.
However, due to not being able to perform any new lending, revenue dropped 39% year-on-year to GBP56.5 million from GBP92.3 million, as the net loan book dropped 54% to GBP224.1 million from GBP485.2 million.
In addition, customer numbers declined 42% to 102,000 from 176,000.
In September, Amigo said it had submitted a revised scheme proposal, incorporating feedback from the Independent Customers' Committee, along with its future business plan to the Financial Conduct Authority and the ICC.
The scheme was proposed by the company to settle claims following probes from UK regulators into mis-sold loans and the way that Amigo dealt with customer complaints.
Concerning its current state, Amigo said the approval of a new scheme for address its complaints is subject to key milestones such as a second successful creditor vote and being sanctioned by the High Court.
"At this point, the board does not consider there to be enough certainty to account for claims redress on the basis that a scheme will be sanctioned," the company stated. In order to support its future business, Amigo will be proposing an equity raise.
In addition, Amigo considers the sanctioning of a scheme to be urgent, otherwise it will have to file for administration or take another insolvency process.
"We're pleased to be providing a meaningful update on our progress towards a new scheme as we recognise it has been a long wait for all stakeholders. Clearly, it has taken much longer than we had hoped but it is critical that we get this right to achieve the fairest outcome for all creditors by ensuring we have listened carefully to their views and fully addressed the concerns raised by the High Court and the regulator last May," said Chief Executive Officer Gary Jennison.
"We have noted on many occasions, we are an insolvent business so there are no easy paths if we want to avoid administration and the only other options are for a managed wind-down or insolvency, both of which are worse outcomes for shareholders and customers. The Court was clear that any future scheme must address the balance between creditor and shareholder outcomes to be successful and the equity raise achieves that and provides the capital to fund a future business that can prosper," Jennison added.
By Dayo Laniyan; [email protected]
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