LOAN company Amigo has reported a substantial loss after a rise in complaints and a probe by regulators prompted “material uncertainty” about its prospects as a going concern.

The Bournemouth-based made a £37.9million pre-tax loss after a £111m profit the year before, accounts for the financial year that ended on March 31 have revealed.

That was despite revenue rising from £270.7m to £294.2m and the number of customers growing from 201,000 to 222,000.

The year saw a substantial rise in complaints and the start of an investigation by the Financial Conduct Authority (FCA) into whether the company’s creditworthiness assessments complied with regulations.

The business lends money at 49.9 per cent annual percentage rate (APR) to borrowers with someone to guarantee their loans. New lending has been paused since March because of Covid-19.

Chief financial officer Nayan Kisnadwala said in his report: “During the course of the past year, a major issue has arisen around customer complaints with regards to past lending decisions.”

He said complaints had not been a “material issue” until the Financial Ombudsman Service changed its approach.

The change led to 94 per cent of complaints to the ombudsman being upheld in the last six months of 2019, whereas the “vast majority” had of decisions had gone in Amigo’s favour before.

“Claims management companies have emerged as the major source of complaints,” Mr Kisnadwala said.

Amigo set aside £117.5m for complaints as of March 31 but this is not intended to cover the final cost of all future complaints.

Its adjusted loss after tax was £26.9m, compared with a profit of £100m last year.

The report said: “Excluding the impact of complaints, adjusted profit after tax would be £75.8m (a 24.3 per cent decrease on prior year) driven by the increase in both impairment and operating expenses in the year.”

Acting chair Roger Lovering wrote: “The economic impact of Covid-19, a potential increase in the level of complaints received and the possible outcome of the FCA investigation have led to a material uncertainty surrounding going concern.”

But he said the board believed the company had enough cash to support the business.

“The long-term drivers of our business are unchanged, we have fantastic employees and a clear focus on the challenge and opportunities we face,” he reported.

Amigo’s founder quits – and launches attack on the company

The year was also marked by battles with Amigo’s founder James Benamor, whose company the Richmond Group remained the largest shareholder.

Mr Benamor began selling off his stake in the business after failing in a bid to have his own choices appointed to the board. Since the annual report and accounts were filed, he has threatened a fresh meeting of shareholders to install himself as chief executive of Amigo Holdings.

Amigo founder James Benamor wants to be boss of parent company

Mr Lovering wrote in his report: “It has been particularly saddening to have had a dispute with our largest shareholder, Richmond Group Limited, and founder, with much of this dispute played out in the public domain.”

Amigo founder James Benamor warned against bid to return as chief executive

He added: “As a board, we recognise the significant loss of shareholder value. Following the general meeting, with the resolutions rejected, we now have a way forward and will look to rebuild the board.”