Amigo Holdings PLC (LON:AMGO), the leading provider of guarantor loans in the UK, today announced results for the three month period ended 30 June 2019. In the quarter Amigo saw customer numbers and revenue increase by 17.3% and 13.7% respectively. A rise in impairment and increased investment delivered adjusted profit after tax of £20.4m. The balance sheet has been further strengthened with a £100m increase in the securitisation facility and cash generation remains strong.
| Figures in £m, unless otherwise stated | Q1 2020 | Q1 2019 | Change % | |
| Number of customers1 | ‘000 | 210.3 | 179.3 | 17.3% |
| Revenue | 71.5 | 62.9 | 13.7% | |
| Net loan book2 | 728.4 | 638.2 | 14.1% | |
| Impairment:revenue ratio | 30.5% | 25.4% | 20.1% | |
| Cost:income ratio3 | 23.4% | 17.5% | 33.7% | |
| Adjusted profit after tax4 | 20.4 | 21.8 | (6.4%) | |
| Profit after tax | 18.1 | 12.3 | 47.2% | |
| EPS (basic, adjusted)5 | Pence | 4.3 | 5.5 | (21.8%) |
| Basic EPS | Pence | 3.8 | 3.1 | 22.6% |
| Net borrowings/adjusted tangible equity 6 | 1.8x | 2.5x | (28.0%) |
Financial Highlights
▪ Net loan book of £728.4m, a 14.1% increase year on year (Q1 FY19: £638.2m) driven by a 17.3% rise in customers. Net loan book as at Q4 FY19 was £707.6m
▪ Significant growth in revenue to £71.5m, an increase of 13.7% (Q1 FY19: £62.9m)
▪ Impairment:revenue ratio of 30.5% (Q1 FY19: 25.4%). The increase in impairments is due to operational challenges within collections, the impact of higher originations and the increased day 1 provisions and more cautious IFRS 9 assumptions around the economy
▪ 94.1% of balances are fully up to date or within 31 days overdue (Q1 FY19: 95.7%)
▪ Cost:income ratio increased to 23.4% due to accelerated investment and a provision for complaints (Q1 FY19: 17.5%)
▪ Adjusted profit after tax for the period was £20.4m (Q1 FY19: £21.8m)
▪ Net borrowings/adjusted tangible equity stayed within expectations at 1.8x (Q1 FY19 2.5x)
▪ £100m increase in securitisation facility in June 2019 further diversifying funding sources
▪ The available size of the revolving credit facility was reduced in May 2019 from £159.5m to £109.5m
▪ Reduced costs of funding from securitisation increase, additional bond repurchases of £28.0m at quarter end and a further £2.9m post quarter end
▪ Amigo Ireland achieved a net loan book approaching €2.3m as at 30 June 2019, having made its first loans to customers in February 2019
Hamish Paton, CEO of Amigo, commented:
“New customers continue to choose Amigo as we provide a valuable product that improves their lives by giving them fair and transparent access to credit – to buy a car, to put down a rental deposit or to consolidate expensive debts. Our guarantor loan product occupies a space in society that is making a real difference to the lives of our customers, many of whom cannot access credit from their bank or building society.
“Amigo is both a responsible and profitable lender. We are focused on our future returns and building a sustainable business for the long term. We are accelerating investment in our operations to enable continued delivery of best in class customer service and further enhancing credit and conduct policies.
“This positive action means that we are hitting the ground running ahead of what we recognise is a changing regulatory and economic landscape. By doing this, we are being proactive and pragmatic. We are focused on achieving the best customer outcomes – all with long-term returns as a key driver.”
Taking positive action
Responding to an evolving regulatory and economic environment, while recognising the continued strong demand for our product, we are taking the following positive action:
▪ New customer lending is being prioritised over relending to existing customers
▪ We have further enhanced and tightened our credit policy
▪ We are investing across key internal functions: operations, compliance and complaints
What does it mean?
▪ New customer numbers will continue to grow as strong demand persists for our guarantor loan product
▪ There will be an impact on repeat lending growth due to our enhanced credit policy, which will be noticeable from Q2 onwards
▪ Impairments are likely to remain at a higher level
▪ Cost:income ratio will rise slightly, albeit from a low base
▪ We have taken the decision to amend guidance for FY20 for (i) net loan book growth, (ii) impairment:revenue ratio and (iii) cost:income ratio:
o Net loan book growth: Broadly flat
o Impairment:revenue ratio: Low to mid 30s (%)
o Cost:income ratio: Low 20s (%)
o Dividend payout and net debt/tangible equity remain unchanged
Notes to summary financial table:
1Number of customers has been rebased and represents the number of accounts with a balance greater than zero, now exclusive of charged off accounts.
2Net loan book represents total outstanding loans less provision for impairment excluding deferred broker costs.
3The cost:income ratio is defined as operating expenses divided by revenue
4Adjusted profit is a non IFRS measure. Adjusted profit after tax for Q1 2020 is profit after tax plus impact on profit of the £28.0m bond buyback in the period (£0.5m), plus impact on profit of writing off previously capitalised fees relating to our prior revolving credit facility (£1.8m). Adjusted profit after tax for Q1 2019 is profit after tax plus shareholder loan note interest (£6.0m) and IPO costs and related financing (£3.9m) less incremental tax expense (£0.4m).
5This is a non-IFRS measure and the calculation is shown in note 7. Bond buyback costs are excluded as they are not underlying in nature. By excluding this item from the adjusted profit and EPS metrics, the Directors are of the opinion that these measures give a better understanding of the underlying performance of the business. The weighted average number of shares has increased by 18.7% since 30 June 2018 due to timing of shareholder loan note conversion to equity following the IPO, hence diluting adjusted basic earnings per share figures.
6Net borrowings defined as borrowings, less cash at bank and in hand. Adjusted tangible equity is defined as shareholder equity less intangible assets.
Results webcast and conference call
Amigo Holdings PLC will be hosting a live meeting and conference call today at 09:30 (BST). The live webcast can be accessed via our website at: https://www.amigoplc.com/investors/results-centre. A conference call is also available (Dial in: +44 20 3936 2999; Access code: 546634). There will be a facility to ask questions via both the webcast and conference call. A replay will be available on Amigo’s website after the event. The presentation pack for the webcast shows the reconciliation between the PLC results and Amigo Loans Group Limited (the ‘Bond Group’).
