Suffering shareholders in guarantor loans firm Amigo Loans (AMGO) are offered some respite today as first half results and clarification on the latest regulatory intervention by the Financial Conduct Authority prompt a 16% advance to 69.6p.

Probably the most important factor in today’s performance is the fact guidance for full year performance is left unchanged for ‘key metrics’ – including growth in the net loan book, operating cost to income and impairments to revenue – as well as dividends and gearing.

The numbers themselves aren’t great but nor were they expected to be. The company reporting a fall in first-half profit on increased impairment charges.

For the six-month period ended 30 September 2019, pre-tax profit fell to £42.3m from £48.4m year-on-year and revenue increased to £145.4m from £130.1m.

The net loan book increased 8.8% to £730.7m, underpinned by strong customer growth of 17.9%

But strong top line growth was offset by the combination of increasing impairment charges, provisions for customer complaints and investment in people and operations.

Shore Capital analyst Gary Greenwood says: ‘The shares appear very cheap on headline metrics and the group is trying to signal that the operational issues raised by the FCA can be dealt with. Furthermore, management notes that the FCA does not have any fundamental issues with the company’s operating model or product.

‘The complaints situation in particular will require ongoing monitoring as we have seen how this has developed into a serious issue for some other operators in the sector which has subsequently been forced out of business (although we are not currently suggesting this is likely to happen for Amigo).’


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Issue Date: 28 Nov 2019