Amigo Loans cancels dividend over £35m complaints hit as sale falls through
Amigo Loans has said talks with a buyer have fallen through “given the current market environment”, as it warned of a £35m hit from a backlog of customer complaints.
The loan provider revealed last week that the Financial Conduct Authority (FCA) is investigating it over its creditworthiness assessment process and oversight.
Amigo reached a voluntary requirement deal with the FCA in late May to resolve a spike in complaints over 2020.
Today Amigo warned doing so will cost £35m, and this provision means it will not pay a final dividend for its financial year to the end of March.
“Whilst there is significant uncertainty about the eventual outcome, Amigo expects that the cost of clearing the backlog of complaints covered by the Voluntary Requirement will be at least £35m and could be materially higher,” it told investors.
Amigo has terminated its formal sales process after talks with a potential buyer fell through and said it would work with regulators and shareholders “to determine a clear path forward”.
The loan firm’s shares slumped six per cent to 16p on today’s announcement.
The company offers loans to people with poor credit ratings if they secure a guarantor who will pay the loan if they default.
It has also opened legal proceedings against shareholder Richmond Group. It has sought a High Court injunction to stop Richmond from voting to oust the board in a vote on 17 June, installing Sam Wells and Nick Makin as directors instead.
Chairman Stephan Wilcke has handed his notice to step down after the crunch annual general meeting, having said he would not stand for re-election last December.
“I have chosen to resign now to make it crystal clear to everyone that the assertions made by Richmond Group about the motivations of myself and the board as clinging to our seats for our own ends are completely false,” Wilcke said.
“The EGM vote is about the relationship agreement and compliance with regulatory obligations, and nothing else. I feel able to resign at this point in time as the two key matters keeping me on the board being the [formal sale process] and the relationship agreement dispute with Richmond Group are now settled.”