In its quarterly results for the three-month period to 30 June 2021 Amigo Holdings (AMGO ) said the performance of the business in the first quarter has been “better than anticipated.”
The UK provider of guarantor loans said its pre-tax profit over the period had significantly improved following a pause in lending which resulted in Amigo becoming cash generative.
With no additional complaints provision recognised in the quarter, the Company reported statutory profit after tax for the period at £16.0m compared to £3m reported back in 1Q21.
Amigo informed investors that the provision for settling complaints had been left broadly unchanged from the year-end at £338 million. Meanwhile, Amigo said key judgements regarding future volumes, uphold rates and average redress had also remained in line.
‘In response to the significant uncertainty surrounding the Covid-19 pandemic, a pause period was initially negotiated in respect of the securitisation facility in April 2020,’ it said.
The Company’s pause in lending led to a 41% drop in customer numbers from 118,000 from 199,000 during 1Q21 as well as a 48% reduction in the net loan book to £288.7m from £553.1m in 1Q21 which caused revenue to fall 33% to £32.5m from £48.8m in 1Q21.
Net borrowings fell to £56.2m at 30 June 2021 driven by ‘resilient collections’ of £79m (1Q21: £121.3m) with no loan originations in the period (1Q21: £0.4m). As a result, unrestricted cash and cash equivalents as at 30 June 2021 was £201.2m (1Q21: £145.2m).
Commenting on the Q1 results, Mike Corcoran, CFO of Amigo, said: "The extremely challenging situation facing Amigo, resulting from the significant liability for compensation payments for historical lending, provides the context for our first quarter results."
Shares in Amigo Holdings were trading 4.63% higher at 8.127p following the announcement.
Within this context, Amigo’s performance 1Q22 was “better than anticipated”. Corcoran said the Company’s cost reduction programme has been effective while the level of collections “remains robust with the impact of Covid-19 less than originally projected.”
He added that: “Our current estimate of the potential liability for claims redress was reflected in the recently issued full year results. With no additional complaints provision recognised in the quarter, Amigo generated profits before tax of £15.0 million in the period.
The overall net liability position reflects the remaining complaints provision on the balance sheet. A material uncertainty over Amigo’s ability to continue as a going concern remains."
Amigo explained that this uncertainty remains in respect of future customer behaviour ‘as payment holidays unwind and government support measures are fully withdrawn.’
Addressing shareholders, the Company said the continuation of Amigo as a business is dependent on the Group’s successful pursuit of a Scheme, its ability to raise capital in the future to further support new lending and a satisfactory resolution of the FCA investigation.
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