Amigo’s future still ‘uncertain’ despite making a profit at the start of a new year

THE future of Bournemouth-based lender Amigo remains uncertain despite a profit at the start of this financial year.

Days after revealing a “dreadful” loss of £283.6million for the year that ended in March 2021, the company said it had made a £15m from April to June this year.

The turnaround came because the company had added the potential £338m cost of settling mis-selling complaints to the 2020-21 accounts.

It has warned it will go into administration unless it can come up with a scheme to cap compensation in mis-selling cases. Its previous proposal for a scheme was vetoed by the High Court after objections from the Financial Conduct Authority.

The business has always offered loans at 49.9 per cent annual percentage rate (APR) to borrowers who can find a friend or relative to guarantee the payments, although it stopped lending last year.

Amigo still had net liabilities of £105m as of June 30.

It reduced staff numbers from around 300 to 220 earlier this year.

Mike Corcoran, chief financial officer of Amigo, said: “The extremely challenging situation facing Amigo, resulting from the significant liability for compensation payments for historical lending, provides the context for our first quarter results.

“Within this context, the performance of the business in the first quarter has been better than anticipated. As Amigo is not currently lending, the business is cash generative and our cost reduction programme has been effective.

“The level of collections remains robust with the impact of Covid-19 less than originally projected.”

But he added: “A material uncertainty over the group’s ability to continue as a going concern remains.”

Amigo chief executive Gary Jennison told the Daily Echo earlier this week that the current situation was “very difficult” for staff.

“There’s a very real risk of insolvency, as the results have shown, with the scale of the losses that we’ve made,” he said.

“People can see the company is in a very parlous situation which is exactly why we need the courts to approve the scheme next time.”

But he spoke of his hope that the company could continue as a more “customer-centric” business, potentially lending money to people without a guarantor and offering lower interest rates to those who paid on time.

Bournemouth Echo | News