Amigo Holdings PLC (LON:AMGO), which began trading on the London Stock Exchange in July, reported a 47% jump in first-quarter revenue on the back of growth in the loan book and customer numbers.
In the first set of results since floating in London with an initial market value of £1.3bn, the UK loans company said revenue rose to £62.9mln in the quarter ended June 30 from £42.9mln a year ago.
The net loan book grew to £638.2mln from £466.9mln as the number of customers rose to 194,000 from 140,000.
READ: Amigo Holdings scores a premium as trading begins after IPO values loans firm at over £1.3bn
Pre-tax profit increased to £17.0mln from £14.8mln last year.
“The continuing strong growth in our customer numbers, loan book and revenues reflect the increasing market penetration of our product and positions Amigo well for the future,” said chief executive Glen Crawford.
He added: “There is significant growth potential for Amigo in the UK and we already occupy an unrivalled first mover position as a guarantor lender in the UK mid cost credit space. We expect further strong growth in the demand for mid cost credit products which we are well positioned to meet.”
Amigo offers small loans of up to £10,000 on a term of one to five years at an annual interest rate of 49.9%.
Amigo 'exploited vulnerable customers', report claims
Its results come in the wake of an investigation by The Times that alleged Amigo was allowing customers to manipulate affordability checks and was pursuing “aggressive” court action against thousands who miss payments.
The report came two weeks after Amigo's initial public offering, wiping £140mln off its market value.
The Times interviewed more than a dozen former Amigo employees who claimed the company was exploiting vulnerable borrowers by encouraging them to lie about their finances to pass credit checks and then taking them to court when they fell behind payments.
Many of Amigo’s borrowers have a poor credit history and are required to enlist a guarantor on loans.
Customers who fall behind payments can reportedly face court proceedings after three months. The company is understood to have been taking legal action against as many as 12,000 people a year.
FCA investigates allegations against Amigo
The Financial Conduct Authority has said it would investigate the claims. “We are clear with firms that the support provided by the guarantor cannot be a substitute for affordable lending,” the regulator said.
Amigo has denied the claims, saying the “processes around both affordability and collections have been thoroughly audited during the FCA authorisation process”. Crawford said the company does not provide loans to individuals who are unable to repay them.
Shares in Amigo fell 3.6% to 269p in morning trading.
Numis downgrades Amigo but sees potential for 'significant growth'
Numis cut its rating on Amigo to 'add' from 'buy' and left its target price at 330p, saying it believes the lender's clients and guarantors are likely to be more exposed to recession than most.
The outlook for the UK economy remains uncertain as the government continues to negotiate with the European Union on Brexit.
Numis added: "Nevertheless, to lose money, Amigo needs both the borrower and the guarantor to default. Assuming they had the same probability of default (PD) and loss given default (LGD) (the guarantor PD and LGD would almost certainly be lower), a 20% default rate with a 75% LGD would generate Amigo just 20% of the impairment compared to a lender who just lent to one party."
The broker said with the guarantor loans market being just 0.2mln, there is the potential for significant growth.
"With 98% of people having seen an Amigo advert and 85% (presumably the target demographic) having seen ten or more adverts, we deem the market to be penetrated," it said.
"Amigo is targeting high teens growth, slowing to low teens. If this growth doesn't materialise, Amigo should pay substantial dividends, the earnings yield is 7.4% this year, increasing to 8.2% next year."