Complaints costs skyrocket, revenues plunge at risk lender Amigo
Costs have jumped as revenues have plummeted in recent months at risk lender Amigo Loans (AMGO.L).
Guarantor lender Amigo Loans said in a first quarter update on Friday that revenue fell 31.7% to £ 48.8million in the three months to the end of June.
The number of customers fell by 5.2% and the net loan portfolio contracted by 24%. The company halted most new loans in March in response to the COVID-19 crisis.
Amigo granted 47,000 payment holidays during the period due to COVID-19, costing him £ 16million.
The cost of complaints rose 240% to £ 6.8million, while provisions for future complaint costs rose from £ 1.8million last year to £ 116.4million sterling.
Rising costs and falling revenues resulted in an 83.4% collapse in quarterly profits, which fell to just £ 3million.
The performance reflects the challenges posed by COVID-19 as well as increased control of Amigo by regulators. Last October, Amigo reached an agreement with the Financial Conduct Authority (FCA) to deal with a backlog of complaints. FCA has also launched an investigation into Amigo’s credit valuation practices. Amigo said this probe was still in its infancy but was cooperating fully.
READ MORE: Risk lender Amigo under surveillance
“The entire Amigo team is focused on solving our legacy issues and building a long-term sustainable business,” CFO Nayan V. Kisnadwala said in a statement.
“Operationally, we have taken a step forward in our handling of complaints. We are on track to meet the agreement with the FCA to resolve our backlog of complaints and continue to work with the FCA on its ongoing investigation. We have adequate liquidity and funding to support our ongoing business activity. “
Amigo said he had £ 145million in cash on his balance sheet at the end of July.
The company said it plans to start lending again by the end of 2020, but said it was too early to offer financial advice.
In addition to growing regulatory issues, Amigo has faced an activist campaign from its founder. James Benamor, who resigned as chief executive in 2016, first publicly expressed his concerns about the way the company was being run. in a blog post in March. He claimed the company “committed slow-motion suicide” by failing to contain recent changes made by UK regulators.
Benamor failed in his attempt to oust the entire Amigo board in June and promised to sell his entire stake. Amigo’s chairman and chief executive both left shortly after the vote, having previously pledged to leave.
On Thursday, Benamor said in a blog post he called for another shareholder vote to oust V. Kisnadwala and his reappointment as chief executive. As a sign of confidence in the company, Benamor has pledged to buy “29% of Amigo, buy back at any price up to 20 pence per share” within days of his appointment as CEO . Amigo shares were trading around 14.5 pence on Friday.
“I make it easier for investors to choose: do you like what I’m fighting for? Vote for me, ”Benamor wrote. “Don’t you like what I’m suggesting?” Vote for me and sell me the shares you bought from me (at a good profit).
Shares of the company jumped 25% in London on Friday. However, the stock remains down nearly 80% from its January 2020 levels.
Former Amigo CEO Glen Crawford is set to join the company but is awaiting full regulatory approval. Earlier this week, Amigo said Crawford’s appointment was based on the fact that Benamor was not involved in the business.
“In the event that Mr. Benamor chooses to request a general meeting for shareholders to vote on his proposals, and if he succeeds in obtaining shareholder approval for his proposals, the board of directors has agreed with Mr. Crawford that he can terminate his employment contract immediately, ” said Amigo.
Benamor, who has worked with Crawford in the past, said his comments were “hurtful” but wrote in his blog post: “I don’t feel any bitterness towards Glen for his comments and I will be very happy to work with him at the future.