42 2GM Tuesday July 21 2020 | the times
Business
Cloud has silver lining for
IBM despite slide in sales
James HurleyThe coronavirus pandemic has pro-
vided an extra boost for IBM’s shift
away from its traditional computer
products and towards the cloud.
Although its second-quarter sales fell
by 5.4 per cent to $18.1 billion, the figure
published in its latest results last night
was above Wall Street’s predictions of a
drop to $17.7 billion.
In particular, there were signs that
that Covid-19 lockdowns had encour-
aged its clients to switch to online host-
ing. Revenue from its high-margin
cloud, or online-hosting, business rose
by 30 per cent to $6.3 billion in the three
months to the end of June.
James Kavanaugh, IBM’s chief
financial officer, said: “As we got into
the latter half of the second quarter, we
saw a marked inflection in clients’
acceleration to digital transformation... You saw that play out in our cloud
performance, which was up very
nicely.”
However, areas such as applications
development and consulting were hit
hard by the coronavirus turmoil as
clients cut or delayed spending on dis-
cretionary projects.
IBM, incorporated in 1911, makes
computer hardware and software. It is
headquartered in New York, has
operations in 170 countries and is worth
about $112 billion. It has been trying to
refocus its business on software,
artificial intelligence and cloud com-
puting amid declining demand for its
personal computers and servers. The
company’s cloud division was run pre-
viously by Arvind Krishna, who took
over as chief executive in April.
Shares in the company rose by as
much as 6 per cent to $135 in after-
hours trading last night.
Britain’s biggest guarantor lender says
that there is “material uncertainty”
over its ability to continue as a going
concern after it was hit by a rise in cus-
tomer complaints, a regulatory investi-
gation and the Covid-19 pandemic.
Amigo Holdings sounded the warn-
Amigo admits survival is in
doubt as complaints pile up
ing yesterday in its annual results,
which showed that the sub-prime len-
der had fallen to a £37.9 million pre-tax
loss in the 12 months to the end of
March from a £111 million profit a year
earlier.
Its shares promptly tumbled by
28 per cent, or 2¾p, to 7p, valuing the
business at about £35 million. Amigohad a market capitalisation of £1.3 bil-
lion when it was listed in July 2018 at
275p-a-share.
The Bournemouth-based business
was set up in 2005 by James Benamor,
43, and focuses on borrowers who have
difficulty securing loans. It lends up to
£10,000 at annual interest rates of
49.9 per cent. The loans are guaranteedby another individual, usually a relative
or friend of the borrower, who is liable
if repayments are missed.
Amigo has been locked in a bitter
feud with Mr Benamor this year that
has resulted in both its chairman and
and chief executive leaving the busi-
ness. Jonathan Roe, 64, was appointed
as chairman yesterday.
The dispute has weighed on Amigo’s
share price, as has mounting scrutiny of
the guarantor loans industry by the
Financial Conduct Authority. Last
month the watchdog started an investi-
gation into the way in which the lender
assesses the creditworthiness of its
customers.
Amigo also has been affected by a
surge in complaints from borrowers
about its high-interest loans, an issue
that has been exacerbated by a tougher
stance taken by the Financial Ombuds-
man Service, the body that seeks to
resolve disputes between companies
and their customers.
The cost of dealing with these com-
plaints amounted to £126.8 million
during its past financial year, pushing
Amigo to a loss. The lender warned that
it “would need to source additional
financing to maintain adequate liqui-
dity and continue to operate” if high
levels of complaints persisted for more
than 12 months.
The economic fallout from the
coronavirus outbreak, which is expec-
ted to result in an increase in bad loans,
has weighed further. Amigo said that
impairments as a percentage of reve-
nues had increased to 38.5 per cent
from 23.7 per cent a year earlier.
“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 surround-
ing going concern,” it said.
The regulator’s inquiry could result
in “the imposition of a significant fine
and/or the requirement to perform a
mandatory back-book remediation
exercise”, Amigo said.
It cautioned that while remediation
was not considered the most likely
outcome by its directors, such an exer-
cise “could reasonably be expected to
exhaust the group’s available liquid
resources”.Ben Martin Senior City Correspondent
A
department store in the
heart of Scotland’s capital
could be converted into a
hotel and rooftop bar with
views of Edinburgh Castle (Greig
Cameron writes).
Legal & General wants to invest
more than £50 million in an
overhaul of Debenhams on PrincesEdinburgh
ready to
raise the bar