Amigo Holdings PLC (LSE:AMGO) turned a profit in the latest quarter after it left the amount it had set aside for settling customer complaints little changed.
The controversial money lender said in its fiscal first-quarter (April-June) results that the provision for settling complaints had been left broadly unchanged from the end of the previous fiscal year at £338mln.
The number of customers slumped 41% to 118,000 from 199,000 a year earlier and the net loan book tumbled to £288.7mln from £553.1mln, reflecting the company’s pause in sanctioning new loans.
Revenue was down by a third at £32.5mln from £48.8mln in the corresponding quarter of 2020 but profit before tax surged to £16.0mln from £3.0mln.
The group had £201.2mln of cash and cash equivalents at the end of June, up from £142.5mln a year earlier. Net liabilities stood at £105.2mln, versus net assets 12 months earlier of £170.5mln.
"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,” said Mike Corcoran, the chief financial officer of Amigo.
“Within this context, the performance of the business in the first quarter has been better than anticipated. As Amigo is not currently lending, the business is cash generative and our cost reduction programme has been effective. The level of collections remains robust with the impact of Covid-19 less than originally projected,” he revealed.
“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 the group's ability to continue as a going concern remains,” he acknowledged.
Amigo Loans warns of collapse as it allocates £345m for compensation claims @ScotsFinancial https://t.co/hJ8fV5KVMZ
— Mike McNulty ????????????????????????????????????????????????????✊ (@bankaudits1) August 25, 2021
£11,859
Amount a borrower typically pays back on a £5,000 Amigo loan over five years.
In one case reported to Debt Camel, Amigo is said to have granted a loan to a borrower whose guarantor had mild learning difficulties and no income other than benefits. https://t.co/2LtN3y1Yth
— PC McArdle (@PCMcArdle) August 25, 2021