Amigo shares fall as impairment charges hit profit
Shares in Amigo fell more than nine per cent this morning after the lender reported a sharp drop in pre-tax profit and withdrew its guidance for the full year.
The figures
Net loan book rose 3.8 per cent year on year to £722.3m in the nine months to the end of December.
Revenue grew 8.5 per cent to £218m.
Pre-tax profit fell from £79m to £53.5m.
Dividend per share rose from 1.87p to 10.55p.
Why it’s interesting
The results come at a turbulent time for Amigo, which loans money to people with poor credit ratings.
Earlier this month the company revealed that it is exploring a sale, while it is also facing pressure from the Financial Conduct Authority over its business model as part of a crackdown on guarantor lenders.
Amigo suffered a sharp fall in profit over the nine-month period, which was largely due to higher impairment charges.
The firm’s impairment charges as a percentage of revenue was 31.5 per cent, up from 24.2 per cent the previous year.
Amigo blamed the increase on resource constraints within its collections division amid higher demand for its product. The company said it has since hired a new chief operating officer and will pump more resources into its collections team.
The company has also increased its provision for complaints to £18.7m, which is said related to estimated costs of customer complaints in the year and projected costs of future complaints on some higher risk historic loans.
Earlier this month Amigo said it had entered into non-disclosure agreements with several interested parties about a potential sale.
However, any investors hoping for an update on the sale were today disappointed, as Amigo simply said it remained in an offer period with its sale process ongoing.
The company said it was withdrawing its previous guidance for the financial year as it was considered no longer valid.
“While a number of variables could impact the final outcome, the lower risk appetite on new lending being trialled as part of the ongoing strategic review could result in a material reduction in future lending volumes and net loan book,” it said.
What Amigo said
Chief financial officer Nayan Kisnadwala said: “Our financial results over the last nine months have been within guidance across all key operating measures, excluding complaints.
“We have taken a cautious approach to complaints provisioning as we manage the evolving regulatory environment. We remain committed to delivering fair outcomes to our customers.”