28th Nov 2019 09:27
(Alliance News) - Amigo Holdings PLC shares were on the rise Thursday following its interim results showing a sharp rise in loan book, pushing revenue higher and resulting in increased dividends.
Shares in the sub-prime lender were up 15% in London on Thursday morning at 69.20 pence each.
Amigo provides loans to consumers in which payments are guaranteed by a friend or family member.
In the six months to September 30, Amigo recorded pretax profit of GBP42.3 million, down 13% on the GBP48.4 million reported the year before.
Profit was hurt by a 75% increase in total operating expenses, which grew to GBP40.7 million from GBP23.3 million. As a result, the lender's cost-to-income ratio worsened to 20.8% compared to 17.8% the year before.
Amigo said the rise in costs was in line with impairments and investment in the business.
"While the wider environment remains challenging with ongoing economic and political uncertainty, we continue to focus on addressing collections capacity issues. We are investing in both people and technology that will increase agent effectiveness," the lender explained.
Revenue was up 12% year-on-year at GBP145.4 million from GBP130.1 million.
Amigo's net loan book ended the period at GBP730.7 million, 8.8% higher than the GBP671.7 million seen at the same point a year earlier.
Chief Executive Hamish Paton said: "The first half of the financial year has demonstrated continued demand for our guarantor loan product with solid growth in customer numbers. We are making encouraging progress as we roll out the operational and strategic initiatives outlined in August. While it will take some time to see the full benefits, we are pleased with the positive start we have made."
The lender's total number of customers rose 18% to 222,800 from 188,900.
Amigo declared an interim dividend of 3.1 pence, more than 65% higher than last year's interim payout of 1.87p.
Looking ahead, the firm said: "Over the second quarter we have worked hard to address capacity constraints within the business with action plans initiated to drive further improvements. It will take time to see the full benefits of our actions, but we have made a good start in the first half.
"As a result, we have a strong and flexible balance sheet. Our guidance for the full year is unchanged for key operating metrics (net loan book growth, operating cost to income and impairments to revenue), dividend and gearing."
Separately, Amigo clarified its announcement from Wednesday on the outcome of the UK regulators looking into guarantor loans.
On Wednesday, Amigo said the review of guarantor loan products by the Financial Conduct Authority had not raised concerns, but did offer areas where "our customer journey could be enhanced".
Amigo was provided with the outcome from the Guarantor Understanding Multi Firm Work review undertaken by the UK Financial Conduct Authority. The review was intended to help the FCA "understand better" the role of the guarantor in the loan.
The review did, however, propose areas where customers could be better informed, Amigo said. These include providing more explanation of the key information given to providers and increasing the disclosure of the likelihood that guarantors could be asked to make payments.
Amigo believes the proposed changes will "not fundamentally alter the attractiveness of the guarantor loan product relative to higher cost alternatives for our borrowers".
On Thursday, the lender clarified the review was "not intended to examine the guarantor loan product itself nor the underlying business model at Amigo".
By Paul McGowan; [email protected]
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