The controversial moneylender Amigo (AMGO) announced first quarter (April-June) results this morning that showed a sharp increase in profit.
The group announced a £15 million pre-tax profit in the first quarter of the year, up from £1.4 million a year earlier.
This announcement comes rapidly on the heels of an earlier announcement this week reporting a significant loss for the last financial year. Shares in the group were trading 3.4% higher at 8.18p.
However these results are not truly representative of the company’s situation because the company is no longer lending but continues to collect repayments. Moreover, Amigo booked a £284 million loss to last year’s accounts, which flatters the first quarter numbers.
FIGHTING FOR SURVIVAL
Today’s results will be overshadowed by its announcement that “a material uncertainty over the group’s ability to continue as a growing concern remains”.
The curtailment of lending is reflected in the 47.8% year on year decline in the loan book to £288.7 million. Revenue also declined sharply by over 35% to £32.5 million.
The High Court rejected a rescue plan that was put forward by the lender in May. This would have limited compensation payments to customers who were mis-sold loans.
Amigo has estimated that customer claims could reach £338 million. Critically the company does not have the financial resources to make good on these claims.
In an attempt to avoid financial collapse, Amigo is trying to negotiate a compromise agreement with both the FCA and its customers. Amigo has fervently maintained that a scheme of arrangement, whereby all customers would receive at least some compensation is the most advantageous option.
If a deal is not agreed, Amigo will not be able to resume lending and it will be forced into administration.
