Top UK Stocks: Amigo sees profit rise as it fights for survival

Amigo’s battle to stay afloat continues, Rio Tinto says it hasn’t yet paid any compensation over the destruction caused in Jukkan Gorge, British Airways considers launching a new short-haul unit at Gatwick, and Primary Health Properties makes an acquisition in Bury.

UK

Top News: Still touch-and-go for Amigo despite jump in profit

Amigo Holdings revealed a jump in profit in the first quarter of 2021 as it continued to collect repayments while new lending remains off the table, but warned it is still touch-and-go as it tries to make a comeback.

The company’s net loan book plummeted 47.8% year-on-year in the first quarter to £288.7 million. That fall was caused by the fact Amigo is not currently making any new loans to customers while it tries to strike a deal with regulators over how to address complaints about existing and historic loans and compensate customers. Amigo is known for providing loans to people who struggle to get credit from traditional lenders such as the banks, so long as they have an adequate guarantor.

That also saw revenue fall by over one-third to £32.5 million.

Although new business is on hold, the company has continued to collect repayments from existing loans and has not had to book any more provisions, which allowed the company to book a profit after tax of £16 million in quarter, up from £3 million last year.

‘The extremely challenging situation facing Amigo, resulting from the significant liability for compensation payments for historical lending, provides the context for our first quarter results. Within this context, the performance of the business in the first quarter has been better than anticipated,’ said chief financial officer Mike Corcoran.

‘As Amigo is not currently lending, the business is cash generative and our cost reduction programme has been effective. The level of collections remains robust with the impact of Covid-19 less than originally projected,’ he added.

Amigo said all payment holidays issued during the pandemic, which this time last year provided some breathing space for 42,000 people, have now ended.

Amigo ended June with £202.2 million in cash and net liabilities of £105.2 million. The current provision for complaints over prior loans sits at £338 million.

The first quarter earnings come just days after Amigo published its annual results for 2020 after having to delay them several times amid the evolving and complex situation. That revealed a 47% decline in its net loan book and a hefty £289.1 million loss after tax.

Amigo presented a scheme earlier this year that aimed to address the mounting complaints and partly compensate customers, but this was rejected by the regulator and the court, which has prompted Amigo to head back to the drawing board. Without an approved scheme that could pave the way for Amigo to start lending again, the company will become insolvent and collapse.

‘A material uncertainty over the group's ability to continue as a going concern remains,’ Amigo warned.

Where next for the Amigo share price?

After reaching a yearly high of 30.30p in May the Amigo share price fell sharply losing two thirds of its value. The share price has been trading in a holding channel since capped on the upside by 10p and on the lower side by 6.6p. 

The RSI is at 50 showing a neutral bias. Trades might be looking for a break out trade here. Buyers could look for a mover over 10p to enter a buy position, whilst sells could wait for a move below 6.6p to enter a sell position.  

Rio Tinto yet to pay compensation over Jukkan Gorge destruction

Rio Tinto has not yet paid any compensation to the Aboriginal groups that suffered last year when the miner destroyed ancient rock shelters while developing an iron ore mine in Western Australia, according to company officials.

The miner has been under fire since the event last year, which saw two rock shelters thought to be over 46,000 years old in the Jukkan Gorge in the Pilbara region destroyed by the company.

An interim report from a federal parliamentary inquiry was published in December that said Rio Tinto should pay restitution and compensation to the Puuti Kunti Kurrama and Pinikura people. The final report is expected to be released before the end of this year.

Rio Tinto has started work on restoring some of Jukkan Gorge and has agreed to review the way it operates near special sites and overhaul the agreements it has with landowners.

Speaking to a parliamentary inquiry, the head of Rio Tinto’s Australian operations Kellie Parker said the miner is committed to ‘doing the right thing’ regarding restitution payments, but said details were confidential at the request of the Pinikura people.

Reports suggest there is pressure for Rio Tinto to pay royalties to the Aboriginal groups, including back-payments, which is something the company has avoided doing where possible.

Rio Tinto shares were trading 1.1% higher this morning at 5364.0p.

British Airways considers launching new short-haul unit at Gatwick

British Airways, part of FTSE 100-listed International Consolidated Airlines Group (IAG), is considering launching a new short-haul subsidiary at London Gatwick Airport, according to the Wall Street Journal.

The move is part of a wider effort in the airline industry to capitalise on the speedier recovery in short-haul travel over long-haul, which is forecast to take longer to bounce back from the pandemic. The report suggested the new unit could help British Airways lower its cost base and compete better against the likes of easyJet and Ryanair in the intra-European market.

The details were thin, with British Airways confirming it was talking to unions about creating a new unit but stating it couldn’t provide further insight while the process continues. Getting unions on side is seen as key if a new unit is to be launched.

At the end of July, IAG, which owns a string of airlines including Aer Lingus and Iberia, said capacity was equal to just 21.9% of pre-pandemic levels in the second quarter of 2021. That was way below the 25% guided by the company and only a minor improvement from 19.6% reported in the first quarter.

IAG said capacity will ramp-up to around 45% of pre-pandemic levels in the third and fourth quarters of 2021, but warned this still remains highly uncertain due to the ever-changing rules for travellers.

IAG shares were trading 0.1% higher this morning at 162.1p.

Primary Health Properties buys Townside Primary Care Centre

Primary Health Properties has bought the Townside Primary Care Centre and an adjacent office building in Bury, Lancashire, for £40 million.

The property is a purpose-built primary care facility that is leased out to NHS Property Services and a pharmacy. The office building is also fully let and 90% of its income is secured against Bury Council.

‘The Primary Care Centre is a key component in the delivery of primary care in the area and serves approximately 22,300 patients, with a total of 17 General Practitioners located at the 3 GP practices located in the facility. The adjacent offices at 3 Knowsley Street are a key local government asset and operates as the main administrative offices for Bury Council,’ said managing director Harry Hyman.

This will mean Primary Health Properties now boasts a portfolio of 515 properties that have contracted rent roll of over £138 million. The combined weighted average unexpired lease term for the two buildings is 10.8 years and 91% of all income is secured against government-backed tenants.

‘We have a strong pipeline of opportunities in the UK and Ireland and are well positioned to continue to grow our portfolio and to support the healthcare systems in these markets through the provision of modern, primary care infrastructure,’ Hyman said.

Primary Health Properties shares were trading 0.1% lower in early trade this morning at 166.1p.

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