(Alliance News) - Amigo Holdings PLC on Thursday reported revenue growth in the first nine months of financial 2019 due a rise in loan book and said that it is continuing its sale process.
Shares in the sub-prime lender were down 9.5% in London on Thursday at 49.50 pence each.
Amigo provides loans to consumers, payments for which are guaranteed by a borrower's friend or family member.
In the nine months to December 31, Amigo generated GBP218.0 million in revenue, 8.5% higher than the GBP201.0 million generated in the same period the year before.
At December 31, Amigo's loan book stood at GBP722.3 million, up 3.8% from GBP695.7 million at the same point the year prior.
The lender recorded an 18% rise in customer numbers at the end of 2019, rising to 232,100 from 196,700 at the same point in 2018.
Pretax profit for the period, however, slipped 32% to GBP53.5 million from GBP79.0 million.
Amigo's total operating expenses doubled to GBP71.8 million from GBP35.9 million, which includes a 41% rise in customer receivables impairments of GBP68.7 million and a GBP26.6 million charge related to the "significant political, regulatory and customer attention" Amigo faced during the period.
"The increase in provision is largely a result of our review of Financial Ombudsman Service cases throughout the sector and the application of a higher upheld rate assumption in our analysis," Amigo explained.
As a result, the subprime lender's operating cost-to-income ratio worsened to 20.7% in the period from 17.8%.
Chief Executive Officer Nayan Kisnadwala added: "Our financial results over the last nine months have been within guidance across all key operating measures, excluding complaints. We have taken a cautious approach to complaints provisioning as we manage the evolving regulatory environment. We remain committed to delivering fair outcomes to our customers."
Amigo launched a strategic review and formal sale process at the end of January.
As part of this ongoing process, Amigo said it has been "trialling a more restrictive approach" to new and repeat lending. The lender said this will lower its overall risk appetite.
"We continue to optimise our credit-worthiness assessments and, while this will mean more in-depth checks for some of our borrowers, we strive to find the right balance between providing an easy, non-intrusive customer experience and minimising risk for our borrowers, guarantors and ourselves," Amigo said.
As a result, Amigo has discontinued loans under GBP1,000.
Amigo continued: "While there is a high degree of variability around the outcome of the trial lending policy because of a number of variables including the impact on our broker channel, customer drop-out rates and open banking success, it could result in materially lower future lending volumes, impacting net loan book growth."
Kisnadwala added: "Amigo remains in an Offer Period, under the Takeover Code, with our Strategic Review and Formal Sale Process ongoing. We will provide a further update to the market when we are able to do so."
By Paul McGowan; paulmcgowan@alliancenews.com
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Amigo (AMGO)