Amigo Holdings PLC (lon:amgo)
Amigo – Annual Report, Smug And Insulting?

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 – Annual Report, Smug And Insulting?
Company: AMGO - Amigo Holdings PLC
Share Price Then: 6.34p
Author: Ian Smith
Date: Tue 21 Jul 2020
Comments: Just looking at the numbers, the loan book is back to the 2018 level £640m, down from £707m in 2019 with customers up from 170k in 2018 to 222k in 2020 and the company has started operations in Ireland. By the end of March 2020 they had 3,400 customers with £5.8m, so its just a distraction at the moment.

Where it all starts to go wrong is with revenue of £294mn and the cost of complaints at £126.8m with a provision for £117.5m more.

This is a staggering Impairment:revenue ratio at 38.5% (2019: 23.7%) and is really starting to put the Richmond Group’s comments into perspective.

Although nearly everyone who cared realised that the complaints costs would be high, even on the 8th June there was RNS saying the costs would be materially higher then £35m a previously announced figure, that’s was true it was materially higher.

Yet the annual report seems to be in part in denial about these issues.
These complaints do not represent a clearly identifiable cohort of lending; rather,each is assessed and, where complaints are upheld it is due to the particular circumstances of the case
In the year, we saw the FOS change its approach towards lending decision complaints, which lead to a much higher uphold rate on complaints referred to the FOS than we had previously experienced
More recently, claims management companies have emerged as the major source of complaints.

With a lot of new people it is easy to say it is an historic problem and for the many of the people dealing with the issue it is historic to them but it is not just history to shareholder.

Personally I believe that the company needs to more aggressive in its own defence, especially against claims companies otherwise every borrower will complain regardless of merit swamping an already over burdened business. Bill the claims companies for wasting company time for each frivolous complaint.

I still believe that there is a core of the business that is still profitable although it is very unclear if that core can survive.

As an lesson for me what is much harder to understand is why the share holders sided with the board against the Richmond Group, was it that RGL told the truth and were believed to be exaggerating or that the £20m sale was worth having or that simply they didn’t want to admit to the truth of the situation.

Or was it the James Benamor was seen as part of the problem and simply trying to pass the blame, Superdry has a similar spat between the founder and institutional investors about a year ago, in that case the board lost but we don’t yet know of the founder will revitalise the business.

At the time I did wonder if the RGL commitment to sell was as absolute as it was reported and if it was a bluff that went wrong but it has been happening. Although it is not clear who is buying them as there are no RNS of increased holdings.

So it is a share that will fall to a couple of pence and be worth buying for a recovery from the ashes?

Read Count/ID: 99/13161

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 Price17.8p
Last Review Date21-Aug-2020
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