Amigo issues fresh warning over future despite profit rise
Embattled subprime lender Amigo has issued yet another warning over its future despite a fifteen-fold rise in profit this quarter.
First quarter pre-tax profit at the firm jumped from £1.4m to £15m, it revealed this morning, a performance finance chief Mike Corcoran labelled “better than expected”.
It comes days after Amigo revealed it had made a £283.6m loss last year, primarily driven by £344.6m set aside for customers entitled to compensation as a result of its lending.
Because the firm is not currently lending, Corcoran said, it is cash generative, while its cost reduction programme has been “effective”.
However, “the overall net liability position reflects the remaining complaints provision on the balance sheet”, he added.
“A material uncertainty over the Group’s ability to continue as a going concern remains.”
Amigo has been struggling under the weight of a wave of customers complaints seeking compensation for being missold loans.
The lender had proposed a diluted plan – or scheme of arrangement – to repay creditors, which was dismissed in a High Court ruling in May this year. It warned in June that it is at risk of insolvency if payouts to eligible creditors and customer were not capped.
Amigo is preparing to present a fresh proposal to the FCA and the High Court in which it intends to resolve issues with its previous plan.
The High Court and City watchdog noted that Amigo’s previous proposal failed to outline any credible internal controls that would ensure customer complaints would be taken seriously.
The subprime lender had delayed the publication of its results after it received a letter from the FCA warning its new proposal is likely to be inadequate.