Loans lender Amigo swung to a loss last year as it awaits approval of a scheme to address compensation for indebted clients who compained about its practices
For the nine months to 31 December Amigo posted an after-tax loss of £86.8m.
Amigo’s revenue fell 36.9 per cent to £137.5m, which has been driven by the break in lending and payment holidays.
Shares are currently trading down four per cent to 11p and are down around 80 per cent on a year ago.
Amigo has had to provision millions of pounds to handle compensation payments caused by a large number of customer complaints and has been investigated by the financial regulator over how it assesses customer credit worthiness.
This has hampered Amigo’s ability to operate and it has warned that unless its proposed scheme for dealing with compensation payments is approved, it may not survive.
The lender provides loans to borrowers who struggle to obtain credit from mainstream lenders if a friend or family member can act as a guarantor for them.
Amigo is also reducing its workforce by 17 per cent, laying off around 70 employees.
To combat the soaring complaints and customer numbers falling by a third, the sub-prime lender has established a scheme to “provide certainty” to customers with a “fair complaint” against Amigo.
Amigo CEO Gary Jennison said: “When I started as CEO over five months ago, I knew we had to do something significant to deal with the complaints we were getting.
“Once the scheme has started going through the courts and we’ve agreed the go forward business model with the FCA, then we can turn our attention to lending. We’ve seen our customer base shrink by over 30 per cent over the last 12 months, as they’ve settled or finished their loans. We want to get Amigo back to life again.”
While complaints rose, the costs of the complaints increased 336.8 per cent.
The complaints scheme of arrangement, initiated at the end of January, is set to become effective in May and will protect around 300,000 current borrowers and guarantors.
“A successful scheme will provide certainty on the final complaints liability for all complaints on loans issued to date and will enable Amigo to focus on building a sustainable business for the long term,” Amigo said in a statement this morning.
Beginning the third quarter with a completely new board, Amigo’s profit before tax fell 252 per cent from 2019.
Despite this, it ended 2020 with £164.6m of cash.
The lender added: “Despite a material uncertainty surrounding going concern, the board considers that it currently has sufficient liquidity and other resources to continue to fund operations and support its customers.”