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Amigo shares set to slump amid liquidity concerns and falling profit

The subprime lender could see its shares come under renewed pressure as investors grow concerned about its ability to weather the economic fallout from Covid-19 due to liquidity issues and falling profits.

  • Amigo shares up 4% on Thursday, but concerns remain over its long-term health
  • The subprime lender reassured investors it has enough liquidity to offset falling profits
  • Covid-19, rising complaints and the ongoing FCA investigation all threaten Amigo

Amigo are up 6% on Thursday, but there are concerns about the company over the long-term, with it reassuring investors that it has enough liquidity to survive a significant decline in profits.

In its first quarter (Q1) results at the end of August, the subprime lender recorded a 81% decline in profit to £3 million for the three months to the end of June. Revenues meanwhile fell 32% to £48.8 million.

‘The whole team at Amigo is focused on addressing our legacy issues and building a sustainable business for the long term. Operationally we have turned a corner in our handling of complaints,’ Amigo CFO Nayan Kisnadwala said.

‘We are on track to meet the agreement reached with the FCA to resolve our complaints backlog and continue to work with the FCA on its ongoing investigation.’

‘We have adequate liquidity and funding to support our ongoing business activity,’ he added.

Amigo closed at 11p per share on Thursday, with the stock down 83% year-to-date.

Amigo warns of ‘material uncertainty’ over its ability to operate

The mounting cost of rising customer complaints, fuelled by the coronavirus pandemic, forced Amigo to put the majority of its new lending on hold earlier this year and in July the company warned that there was ‘material uncertainty’ over its ability to operate.

There has also been increased regulatory focus on the guarantor loan sector over the last 18 months, with the Financial Conduct Authority (FCA) recently announcing that it will review Amigo’s creditworthiness.

‘At this stage it is too early to say what the outcome of the investigation will be, but we welcome the opportunity to better understand the regulator’s approach over this period,’ the company said.

Amigo management urges founder to not attempt shake-up proposal

Adding to the troubled subprime lender’s woes is the return of its founder, James Benamor, who has threatened to call a shareholder vote to approve his plan to return as group CEO and handle its international expansion efforts.

Benamor published his proposal via a blog post, with him wishing to retain current Amigo CEO Glen Crawford as head of the company’s FCA-regulated UK operations.

The management team at Amigo have urged Benamor to drop his shake-up plans, with Crawford set to resign if its founder re-joins the company.

‘Mr Crawford and the board are…equally aligned in their unanimous rejection of the views and proposals put forward by Mr Benamor,’ Amigo said in a statement.

‘The board therefore urges Mr Benamor not to waste further time and expense for either Richmond Group or Amigo in seeking to bring his proposals to a shareholder vote.’

How to trade stocks with IG

Looking to trade Amigo Loans and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs and spread bets in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Amigo Holdings PLC’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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