Amigo Loans warned on Monday that there was “materials uncertainty” over its capacity to proceed working, because the UK subprime lender grapples with rising buyer complaints, a regulatory investigation and the coronavirus disaster.
The corporate mentioned it was assured it had “enough liquidity” however cautioned that extra financing could be wanted if buyer complaints had been larger than anticipated for a chronic interval, or if the Monetary Conduct Authority compelled the group to hold out a serious remediation train.
This set of circumstances “symbolize a cloth uncertainty that will solid important doubt on the group and firm’s capacity to proceed as a going concern,” the lender mentioned.
Amigo, which has been beset by turmoil since itemizing on London’s inventory market in 2018, supplies guarantor loans, a sort of lending to individuals with weak credit score histories who’ve a buddy or member of the family that can step in if there’s a default.
UK regulators are investigating the way in which it assessed clients’ creditworthiness after Amigo’s founder and majority proprietor, James Benamor, accused it of knowingly finishing up irresponsible lending. Amigo has denied the accusations.
In an announcement on Monday, Amigo mentioned there have been “quite a lot of potential outcomes” from the investigation, together with a “important nice” or necessary back-book remediation train that might “moderately be anticipated to exhaust the group’s obtainable liquid sources.” The group added that such an train was “a potential final result, however not the most definitely final result”.
A compulsory remediation train would drive Amigo to undergo its historic loans and doubtlessly compensate clients.
Shares in Amigo dropped 20 per cent in morning buying and selling on Monday.
The warnings got here as Amigo printed its long-delayed outcomes for the 12 months to March 31, when the corporate slumped to a lack of £27m. That in contrast with a revenue of £89m within the earlier yr.
The decline was triggered largely by a £127m provision to take care of a surge in buyer complaints. Mortgage impairments as a proportion of income additionally jumped from 24 per cent to 39 per cent due to disruption brought on by the coronavirus pandemic.
The corporate’s dealing with of the complaints is central to the current battle between Amigo and Mr Benamor, who based the group in 2005. Mr Benamor was unsuccessful in an try to take away the corporate’s whole board however the dispute nonetheless led to the departure of its chairman and chief government.
On Monday Amigo introduced the appointment of Jonathan Roe as its new chairman. Mr Roe, a former funding banker and chairman of one in all Amigo’s rivals, will be part of the board subsequent month.
Mr Roe mentioned: “I’m becoming a member of a staff the place everybody shares a standard perception in Amigo’s enterprise and product, in addition to its capacity to serve its present and future clients’ wants.”
Earlier this month Amigo reappointed former chief Glen Crawford as chief government, a transfer that was welcomed by Mr Benamor.
Roger Lovering, appearing chairman, mentioned: “The final 12 months have been a difficult and troublesome interval . . . with the overall assembly now behind us and Glen Crawford reappointed as CEO, Amigo will transfer ahead with extra readability and a willpower to resolve the challenges we face.”