28th Aug 2020 09:06
(Alliance News) - Amigo Holdings PLC on Friday posted a sharp drop in first-quarter earnings after granting payment holidays to borrowers, just one day after its disgruntled founder made his formal bid to return.
Shares in Amigo were up 18% at 14.10 pence in London in morning trading on Friday.
Guarantor loans provider Amigo, which has its headquarters in Bournemouth, reported a drop in first-quarter revenue which it said primarily reflected the effects of Covid-19 payment holidays that it granted to its borrowers. This revenue fall all but wiped out profit.
For the first quarter ended June 30, revenue was down 32% to GBP48.8 million from GBP71.5 million in the first quarter last year, and pretax profit tumbled to GBP1.4 million from GBP22.6 million.
The company attributed the performance to Covid-19-related payment holidays granted to 47,000 customers and a temporary pause in all new lending activity.
Its net loan book fell 24% to GBP553.1 million in the quarter from GBP728.4 million the year before.
"We are preparing to restart lending on a prudent basis by the end of 2020. However, until we do so, and until we have more clarity on the financial impact of Covid-19, the board considers it too early to issue guidance for this financial year. We have a strong cash position. Despite the special Covid-19 relief programme, cash collection has remained robust, and we are well-positioned to manage the challenges of the Covid-19 pandemic," Amigo said.
For the financial year ended March 2020, Amigo swung to a loss due to the costs of addressing customer complaints.
Since then, in July, it reached a voluntary agreement with the Financial Conduct Authority to resolve its complaints backlog, where all customer complaints are dealt with within eight weeks of being made, by October 30. It is on track to meet the deadline. The FCA has begun an investigation into the company's creditworthiness assessment, as announced June 1.
Amigo's complaints provisions is broadly unchanged from the amount reported in July 2020. with GBP8.5 million of the provision was used in the quarter and an incremental cost of GBP6.8 million was recognised in its income statement. The remaining provision on the balance sheet as at June 30 was GBP116.4 million.
Chief Financial Officer Nayan Kisnadwala said: "The whole team at Amigo is focused on addressing our legacy issues and building a sustainable business for the long term. Operationally we have turned a corner in our handling of complaints. We are on track to meet the agreement reached with the FCA to resolve our complaints backlog and continue to work with the FCA on its ongoing investigation. We have adequate liquidity and funding to support our ongoing business activity.
"We are updating our lending processes and policies to enable Amigo to restart lending in a prudent manner by the end of 2020."
After the London market close on Thursday, Amigo had said it received a general meeting requisition notice from Richmond Group for appointing James Benamor as a director of the company.
The notice also proposed removal of Kisnadwala, Interim Chair Roger Lovering and Chief Executive Glen Crawford as directors of Amigo and resolutions in relation to Amigo's unit Amigo Loans, the sub-prime lender noted.
Amigo said it is consulting with its advisors in relation to the resolutions.
On Friday last week, the Financial Times had reported that Benamor, founder of Amigo, was seeking to return as chief executive despite having recently offloaded much of his majority holding in the company.
In April, Benamor had called for the sub-prime lender's entire board to be ousted after saying the company is "committing slow motion suicide", but shareholders rejected Benamor's resolutions.
Amigo and Benamor settled their dispute in June, with Benamor deciding to sell his entire 61% stake in the company.
On Monday, Amigo hit back at Benamor, saying that he should not waste time or money in his bid to return.
By Anna Farley; [email protected]
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