Amigo reassures on liquidity after profit falls

Amigo Holdings said it had enough liquidity to survive as the troubled guarantor lender reported a sharp fall in first-quarter profit.

Profit after tax for the three months to the end of June dropped 81% to £3m from a year earlier as revenue fell 32% to £48.8m. Pretax profit fell to £1.4m from £22.6m.

The company stopped new lending in March because of the Covid-19 crisis. It said it was preparing to restart lending by the end of 2020.

Amigo, which makes loans backed by the borrower's family or friends, has been in crisis for the past year after a regulatory crackdown and rising customer complaints threatened its future. The company, which is under investigation by the City regulator, put itself up for sale in January but scrapped the plan as complaints mounted.

The company said it was on track to meet the timetable agreed with the Financial Conduct Authority for dealing with complaints and that its provision for complaints was broadly unchanged at £116.4m. The company set aside £18.5m for bad debts compared with £21.8m a year earlier.

Shares of Amigo rose 14.5% to 13.74p at 09:12 BST. The shares are worth less than 10% of their value a year ago.

Amigo said said cash collection was solid at 86% of pre-coronavirus expectations. At the end of the quarter the company had £170.5m of equity and at the end of July it had more than £145m of unrestricted cash.

"The economic impact of Covid-19, a potential increase in the level of complaints received and the possible outcome of the FCA investigation have led to a material uncertainty surrounding going concern," the company said. "Despite this, the board considers there to be adequate liquidity to support our business."

Amigo has been involved in a public battle with its founder and former boss James Benamor, who has accused it of "slow motion suicide". The company has rebuffed Benamor's attempts to rejoin the board and install himself as chief executive.

The company is the biggest provider of guarantor loans with repayments backed by the borrower's friends or family. It charges a representative interest rate of 49.9% on loans between £500 and £10,000.