Amigo Holdings PLC (LSE:AMGO) reported a profit for the past year, but said it “should not be taken as an indication of company performance or shareholder benefit”.
The £170mln profit is a result of the credit to the profit and loss statement after the recent High Court ruling in favour of the company’s scheme of arrangement to pay out compensation to customers who were mis-sold loans.
Amigo was insolvent before the ruling, before the complaints provision was replaced with a scheme provision of £167.9mln, resulting in a credit of £156.6mln to the P&L, with an adjusted profit after tax of £13.3mln and a shareholder equity position of £47.9mln.
“It's important to make clear,” said chief executive Gary Jennison, “that the shareholder equity we have reported today will be substantially absorbed by future costs of the scheme and administering the legacy portfolio, leaving working capital of circa £8mln.
“The success of the scheme and the ability of Amigo to lend in the future therefore remain dependent on a successful capital raise by May 2023 and FCA approval.”
He said the company is still talking to the Financial Conduct Authority on the terms of Amigo's return to lending, with proposals for a new guarantor loan as well as an unsecured loan product announced last month.
Under the terms of the “preferred” outcome under the new business scheme sanctioned by the High Court, Amigo will make a cash contribution of at least £97mln from internal resources, of which £60mln was paid into the scheme fund last month and another £37mln is due to be paid by 26 February next year.
A further contribution of at least £15mln has been committed, being part of the proceeds from a new equity and capital raise, Amigo said.
“As a company, we have learnt the lessons of the past. Our executive team has changed the culture of the company and we have developed new lending products built to serve the needs of a clearly defined set of customers, for whom having access to credit can lead to better long-term financial outcomes,” said Jennison.
“There are not enough providers left in the non-standard lending sector, and we believe it's vital that a fair and responsible offering exists to help the millions of adults in the UK who can't get a loan from a mainstream lender."