Amigo Holdings PLC (lon:amgo)
Amigo – Replace The Board EGM

Amigo Holdings PLC Share Price
Grade:The Pink Grade - A Pure Slightly Informed Gamble, The Market Doesn't Like The Company But I Think That I Understand Why.
Title: Amigo – Replace The Board EGM
Company: AMGO - Amigo Holdings PLC
Share Price Then: 30p
Author: Ian Smith
Date: Fri 01 May 2020
Comments: Richmond Group Limited, the trading company of Amigo’s founder James Benamor has proposed an EGM believed to be for the purpose of replacing the CEO and chairman and possibly other directors.

James has been reported as believing that the current board is more interested in itself than the company and when I first read that I thought, yes I get that but you are a major shareholder so why just say it?

Richmond Group Limited has also notified the Company that it wishes for the Formal Sales Process to continue.

So a proposal to remove the board and look for buyers both makes sense and isn’t really a surprise.

I found it to be such good news that I did try and buy shares but found that I was only able to buy about £1K worth in 4 £250 chunks using my dealing platform, they do offer a service where you can buy at an unspecified price and I often use this with more liquid shares but it seemed too risky in this case.

Pre COVID 19 I thought that Amigo was a good buy for someone like Non Standard Finance or Provident, someone with an infrastructure relevant to high risk retail lending. Now I have to wonder if the bad debt numbers are going to increase to a point that makes the business unattractive.

How many of the loan guarantors are now in a positon of not being able to fulfil that obligation if required to do so?

The share price dropped at the end of August 2019 when the Q1 results seemed to show a big increase in bad debt provision up to 30% of income from 25% but it also said 94.1% of balances are fully up to date or within 31 days overdue down from 95.7% nowhere near as dramatic a change.

I though the results were okay but the management needed to get on top of the issue of bad debts and possibly going for loan growth over quality but the market disagreed.

The shares were floated at around 286p in June 2018 but seemed to be on a slight but consistent downward drop to 164p in Aug 2019 then settled at around 70p until COVID 19 collapsed many share prices.

So there is a lot of upside for a management team that is dedicated to selling the business and moving on.

I also consider the current price to be relatively safe for the short term as the board replacement seems to be a certainty unless there is some legal issue.

I am unclear on this but there does seem to be a question over whether or not the proposed chairman and CEO, Nick Makin and Sam Wells have the necessary FCA approval for the roles.

This has been highlighted by an Amigo board RNS announcement The FCA has made it clear that the 12 week rule does not apply in relation to RGL's proposed directors. Amigo understands that this position has been communicated by the FCA to RGL.

The 12 week rules is an exception to allow a non approved person to undertake activities that require approval where the absence of the approved person is temporary or reasonably unforeseen, and the appointment is for less than 12 consecutive weeks.

On a blog James says However, it is our understanding that it will not be necessary to wait for approval before they take up their interim roles.

Whether this is going to cause a delay or is just a bit of game playing is unclear as Sam is very experienced in the industry, an ex MD of Amigo!
Read Count/ID: 258/10129

Buy/No Buy In A Nutshell
NegativesA combination of making risky loans and an unwillingness to tell complainants and regulators that the borrower and guarantor has the majority of the responsibility as they asked for and accepted the loan
PositivesNew management could get much more aggressive with people complaining that they asked for and were given loans but they can't afford them.
Initial Review Price7p
Last Review Price13.26p
Last Review Date02-Sep-2020
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