Amigo Holdings PLC (lon:amgo)
AMGO – JB Still Seems To See Himself As The Good Guy

Amigo Holdings PLC Financials

ItemCurrent PeriodPrevious Period
Year20192018
Period12 Months12 Months
Revenue£294m£270m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA
Statutory Profit(£27m)£89m
Adjusted Profit
Total Debt
Net Debt
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: AMGO – JB Still Seems To See Himself As The Good Guy
Company: AMGO - Amigo Holdings PLC
Share Price Then: 12p
Author: Ian Smith
Date: Mon 14 Sep 2020
Comments: The latest RNS from the Amigo board is sad, on one hand they clearly have a duty to point out facts, they are correct that Richmond can only buy 20% (as Amigo are a “Non Directive Firm”) without FCA approval and further regulatory approval will be needed for Gary Jennison and Jonathan Roe

But they have a problem in that Glen Crawford also requires regulatory approval and we are told that he is critical to the company.

Looking at the CVs of GJ and JR it seems that their approval or not is just as likely as GC’s but the language of the RNS seems to try and suggest otherwise.

The RNS also goes on to say that if JB is appointed as a director, the board may not appoint him CEO, again this is a fact, but what does it say about the board?

That they are not going to follow the shareholders’ clearly expressed wishes for the direction of the company? Of course the shareholders may not vote for JB as a director and wish to continue on the current path.

On the other hand JB is on twitter telling everyone how he can solve the problems and how he cares for the small shareholders, despite trashing the share price by selling his stake on a fixed schedule and how he is the good guy.

Apologies for the price drop at the end there. That was our broker shaking the last of the crumbs out of the bottom of our box of Amigo shares.

Who is he apologising to, the people who bought in a 275p at the float in Jun 2018, 164p when the company’s problems started to become apparent in Aug 2019 and 80p by the end of Aug 2019 when the implications of these problems became clear.

No, it seems that he is apologising to those who bought in at 6p-12p hoping to make a quick profit.

It is interesting that the JB didn’t address the 20% controlling interest threshold in his tweets about buying 29%, is he assuming that approval will happen quickly and almost automatically?

I don’t see this, approving a group of individuals as directors doesn’t necessarily mean that that a related but separate legal entity, RGL, would be waved through as an owner with a controlling interest.

Especially when that entity recently appears to have dumped its 60% shareholding to get out of a Relationship Agreement and then wants to buy the many of those shares back at a massively deflated market price.

This omission could simply have been because it is too complex a subject for a tweet or it could be that it is not seen as a real issue. As there has been time to address this outside of twitter it seems more likely that it is not being explained as it is not regarded as an issue.

Even a 19.9% holding is close to a an effective controlling interest especially if most of the remaining shares are in the hands of retail investors.

Given that Amigo are going to be in a quite “complicated” discussions with the regulators this is worrying especially as JB has made comments stating that he wants to move Amigo funds outside of the regulated credit market.

JB is still trying to sell himself as the good guy despite all the recent shenanigans but don’t forget that Amigo offer loans at 49%APR to people with a guarantor for that loan.

My worry is that all of this indicates someone who doesn’t like to have his actions scrutinised and deemed unfair, which is going to be a problem in financial services, don’t forget Amigo brought in Hamish Paton from Brighthouse.
Read Count: 85

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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Share Commentaries, their purpose.

Previous Commentaries On Amigo Holdings PLC
Date Share Price Author Commentary
Fri 28 Aug 202012pIan Smith

Amigo – The Board 2 – 1 Richmond Group (Their Strategy Becomes Clear)



I have been really struggling to understand the RG position but JB’s recent tweet makes sense of it.

I will soon pass another irrevocable order to our brokers. This time, a buy order, for 29% of Amigo, to be purchased at any price up to 20p per share, in the days immediately following my appointment

So the sell off frees him from the Share Holder agreement that prevented him from exerting control.

For convenience let’s say he sold his shares at 8p per share on average, he buys almost half of them back (29% of Amigo) at 20p giving him almost effective control of the company.

If you believe that the company has any value then 20/8= 2.5, times 20p = 50p share would see RG even financially on the recent transactions but with a share holding half of what it was, if the share price were to rise to 70p then RG would be almost financially even at a 60p per share valuation.

As an example Imagine that you had 100 shares at 50p each or £50 worth, which was the share price pre the covid dip that affected many companies. A genuine free market value of the shares is hard to determine, not least because of the RH sell off.

Num Bank
Position Shares Balance

Starting 100 £0.00
Sell at 8p 0 £8.00
Buy Back 20p 100 -£12.00
Sell at 50p 0 £38.00
Or
Sell at 70p 0 £58.00
Or
Sell at 100p 0 £88.00
Or
Sell at 120p 0 £108.00

So yes there is a definite loss in this approach in comparison with doing nothing, but it is not a ridiculous loss if the prize is regaining control of your company.

It seems reasonable to assume that the 29% purchase limit is there to avoid hitting the point where he would have to offer to purchase the whole company.

So this does beg the question were any of the shares sold, sold with any form of gentlemen’s agreement that they can be bought back at the price they were sold at plus a reasonable profit?

Don’t like what I’m offering? Vote for me and sell the shares you bought from me, back to me (at a good profit).

Which is probably an attractive offer to people buying the big sell off speculatively although long term holders would want to stay invested as it is a terrible price for them.

If this was the plan since being rejected for a board position a few months back then it does seem to be one that has a good chance of success, the plan gets carried not because the share holders believe in it, but because it is a good deal for the new share holders.

Clearly only half of the new shareholders will be able to sell directly, but the open market price would probably exceed 20p at least during the time it takes to work out if JB can lead a recovery.

So this just leaves the language of the recent tweets, does it actually mean anything or was it just part of the plan, as one of the risks of the sell off is that the shares would be bought by the Amigo Board or Board friendly people.

Is there any chance of the company recovering? Closing Amigo as it currently stands as it has been regulated out of business is a sort of admission that they were doing something wrong but maybe that doesn’t matter, taking the funds and using them to lend on the purchase of products directly seems to be the preferred future.

I was looking at Studio recently, they seem to be using the mail order catalogue model of selling product at close to full price along with almost guaranteed credit, eBay have a credit facility so there would be a market for such a service.

It will be interesting to see if the Amigo board makes a complaint about market manipulation, because if the above is correct then RG sold its shares with the intention of buying them back and the main reason for doing so was to alter the way that the company is governed. That RG lost money in the short term may just be a cost especially as in the long term that is loss could easily be recovered.

The Q1 2020 results don’t contain anything of real significance to anyone who has been following the company, and so far the response to the GM request is The Company is consulting with its regulators and its advisors so I expect the maximum allowed delays before the meeting occurs rather than let's get it done.
Mon 24 Aug 202013.7pIan Smith

AMIGO – Another Comment From James Benamor



Over the weekend James Benamor has published another blog article calling for him to be CEO and how he can save the company and some Trump type language aimed at the FOS, FCA, various directors/ex directors and even some of the customers.

What confuses me is why, from JB’s Twitter

About Glen saying that he would leave It’s unfortunate that, when forced to choose a position he publicly chose ‘against’. But in my opinion, the chances that Glen would actually resign if this proposal was voted in are roughly 0%

Shareholders have given a strong message that they want me to return to the company. Last week the market showed that it valued Amigo with me much higher than Amigo without me.

Didn’t shareholders just speak forcing Richmond’s share sale, if you vote against me I will sell my shares and given the volume of shares recently sold who knows what is going to affect the price.

By the 21 Aug 2020 Richmond Group were down to a 14.66% holding, does he believe that those shares are now in the hands of people who will vote him in or is this just vanity posting and posturing?

Whilst I am sympathetic to the view that the regulators may be ignoring the fact that the borrower and guarantor did ask for the loan and passing the blame onto Amigo does seem unreasonable, the language of the blog is odd.

Amigo is a brand that stands for a mission: to fight the unfairness of exclusion that comes from an industry that judges customers on their credit history alone

The U.K. regulator’s actions have supported fraud by consumers against lenders,

Which does seem at odds with a 49% interest rate for a guaranteed loan, the rate was clear when the loans were issued so there is no issue there.

Private investors, some with a few hundred shares, others who have most of their life savings in Amigo, have been left in the dark by the previous board.

Of course declaring that Richmond Group would be dumping 60% of the company’s shares onto the market at 1% per day was in the best interests of who? I can’t even see it as being in Richmond’s interest, surely some private deals could have been reached.

There is a trading update due this Friday but I am not sure if there is anything new to disclose other than an update on the FOS/FCA discussions.
Wed 19 Aug 20200pIan Smith

Amigo – Is It About To Double, 10p To 20p?



Richmond Group are now down to 16% so in another 3 weeks they will have sold all of their holdings.

Another extension of the securitisation facility performance trigger waiver had been granted until 18th December

The groups funding comes from two sources, a third source an RCF has been cancelled as it is no longer needed as no new loans are being made.
Senior secured notes due 2024 – £234m
Securitisation due 2022-2026- £300m (reduced to £250m)

The Securitisation funding is primarily a legal manoeuvre, AMGO Funding (No. 1) Ltd, is a special purpose entity created for the purpose of funding the lending but its liabilities and assets are ultimately owned by Amigo.

New drawings were to stop in 2022 and it was to be repaid by 2026. A waiver on the terms of this funding has been agreed until December 2020, this means that no new funds can be drawn but also that the performance clause which COVID could well trigger will not be applied.
However this waiver also requires that this facility must be restructured.

Early Amortisation is the penalty for not being able to restructure the facility this mean no new funds from the facility and the balance to be repaid starting then not 2022.

The terms of this performance trigger isn’t easy to find nor exactly what the terms of Early Amortisation are.

Amigo have used £199m of the £250m facility and it appears that all repayments from loans made using this loan facility are being used to reduce this balance.

The company is still not lending but the last report said 220,000 borrowers and < 10% of repayments made by guarantors. So we can’t forget those who are repaying their loans, a loan book of £643m and almost £300m of repayments.

Surely we must be close to the point where COVID can no longer be the reason for not lending, is everybody just killing time until some better understanding of the FCA view on the sufficiency of Amigo’s credit check is known.

Q1 results are due soon and they will clearly show no new lending and some reduction in the value of the loan book but if you look at some of the costs for 2019-2020 and consider them for the first half of 2020-2021
Advertising and marketing £14.5m
Employee costs £18.0m
Print, post and stationary £3.5m
Credit scoring costs £3.2m

Advertising and credit check should surely drop to close to zero, print and post down as no new applications are being sent, but the employees cost is unclear. There may have been some Job Retention revenue and as there are no new applications to process a drop possibly offset by an increase for more staff to cover complaints.

So who has been buying all these shares Richmond have been selling,
Hargreaves Lansdown Stockbrokers Ltd (10.8%) and Glen Crawford (6%) seem to be some of them.

So we are still in the position of is the company winding down, collecting repayments and repaying its debt or is it about to emerge with a vengeance after the credit check investigation?
COVID is clearly a worry as we are yet to see the real level of redundancies and a lot will depend on how strong the guarantors’ are.

Yet the company has £145m of cash and at 10p per share the market cap is around £50m and up until a couple of years ago a very good business model.

A model that is surely going to be in even more demand over the next year.
Tue 21 Jul 20206.34pIan Smith

Amigo – Annual Report, Smug And Insulting?



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?

Thu 09 Jul 202013pIan Smith

AMGO - Reappointment Of Glen Crawford



Glen Crawford has been reappointed CEO, so is this good or bad news?

The group has over £100 million in cash, were reporting possible £35m impairments for bad loans and then significantly more than that.

A new CEO could mean a more aggressive approach on these complaints, I am still confused by the problem, person A takes out a loan person B guarantees it and it is the loan companies fault for not checking hard enough that it was affordable.

That is 2 people on the borrowing side who thought that the borrower could afford it, I understand that the borrower may have been desperate and guarantor naive in believing the borrower but who guarantees loans for strangers?

It would have to have been for a close friend or relative.

Even if the whole £100m were needed to resolve this issue, there were still £700m of loans outstanding in March 2019 at 49%.

Glen was originally a lawyer and a founder Cabot Financial a debt collection agency and from the article at the time an appoint of choice for James Benamor as Amigo was still private at the time.

Not much has been said about his objectives, is it possible that the objective is to fix the misspelling issue and continue to operate? There is certainly going to be a demand over the next few years.

Glen stepped down in April 2019 and the FCA investigation covers loans from November 2018 onwards, so was he part of an over aggressive expansion of the loan book, hence part of the problem or does he have a unique insight into both the problem and the future.

With the Richmond Group continuing its sell off, down to 46.6% today is their sell off still on? The sale of 1% of the company every date has been reported as irrevocable and there are no circumstances in which these instructions can be cancelled or amended.

If these instructions really are irrevocable then it won’t be long before Richmomd’s holdings become a non issue.

With Hamish Patton ex CEO joining Provident as the MD of Consumer Credit with the full inside knowledge of the situation at Amigo and the similarities between Provident and Amigo if there isn’t an offer/another offer then Amigo may be in a worse situation then we think even now.
Fri 03 Jul 20200pIan Smith

Amigo – Now Seen As Genuine Public Company?



Starting yesterday, Thursday, there appears to be some sort of recovery in the Share Price, meaning that it is now at a “total disaster level” for anyone who has held them for more than a few days, rather than a “Oh well there are heading to zero level”.

The 20p offer was formally withdrawn and a trading update says that there may be more than the £35milion costs associated with the miss-selling, we have to wait for the 2019 results due on or before the 23 July.

This trading update also stated that the company had a £136million cash balance which equates to a share price of around 20p, in other words the old offer price.

With The Richmond Group now apparently committed to its sell off of 1% per day and having passed below 50%, the company can now be considered as no longer owned by one person who would block a sale at 20p.

Given that the board appears to have the support of the majority of the investment funds that held most of the shares that were not Richmond’s we can look at the numbers alone.

A while back I was valuing the shares at around 70p based on the value of the loans plus cash so I think that a sale of the company at 20p would be disappointing. Whether this price was simply one to force the issue of who controls the company and 30p or more would be offered now is unknown.
Mon 29 Jun 20206.1pIan Smith

Amigo – Richmond Are Carrying Out Their Sales Threat.



Well, I got that completely wrong and even with hindsight I still don’t understand what is happening.

I had assumed that Richmond had the handful of private equity people on his side which was clearly not the case with only a trivial number of votes against the board.

Looking at the RNS announcements, 1% of shares in Amigo are being sold by Richmond Group, but it is not obvious where they are going as there are no RNS announcements of increased shareholding by whoever is buying them?

Is this still some sort of bluff, the hope being that whoever offered 20p a share is seeing the amount of the company they can buy diminishing so they need to come up with a better offer quickly? Or are Richmond convinced that the company is close to worthless so are after whatever they can get?

Clearly the number of complaints is increasing and it is hard to understand how aggressively the company will defend itself which is worrying.

Whilst the small number of private shareholders are being hammered here, they’ve lost so much they may think might as well stay in possibly down to zero. What is going on in private between the board, the Private Equity people and Richmond as so much value has been lost.
Wed 17 Jun 202012pIan Smith

Amigo – The Board 2 – 0 Richmond Group



The Amigo board have seen off the challenge with roughly 91% voting against the Richmond group motions to remove and replace the board.

The Richmond Group said that if this happened it would put its shares on the open market over the next three months, so will they?

If this does happen then someone who was interested in the company is going to be quite happy to buy them at a price that is even lower the 20p per share offer recently rejected.

Looking at it now the market cap is around £60m.

So does this mean that the small shareholders will have 3 months of a depressed share price and then nothing, or a new owner or group of owners and the option to stay and see what happens?

Clearly if the board was willing to sell at 20p then there must be issues that were not well disclosed, but if a new board has the confidence of a new owner then there might still be value.

Especially if the new management adopts the attitude of look both the borrower and guarantor looked at the agreement and signed it, you can’t blame us to the extent that even the amount borrowed doesn’t have to be repaid.

Towards the end of today around about 10 million shares have been traded against an average of 1.5 million, so it may be retail panic or it may be Richmond getting out.
Fri 05 Jun 202019.5pIan Smith

Amigo - The Board 1 – 0 Richmond Group



The board has managed to use the Relationship Agreement to block Richmond Group voting them off the board.

Depending upon which side you are on this is a victory for the small share holder who will not be made irrelevant by Richmond’s large share holding or a disaster as it will allow the current board to “give away the company and keep the gravy train running for them”

So who are the 40% of share holders that will vote? There seems to be a handful investment funds that own about 30% of the company so really the decision is down to a very small number of people not investing their own money.

I would be surprised to see them vote to keep the board on unless a substantially better offer for the company is made before the EGM, it is hard to see a worse offer and if the FCA investigation worries them they as still not going to lose much more than they already have.
Thu 21 May 202022pIan Smith

Amigo – EGM Notification Was Really Disappointing



On April 29 Richmond Group Ltd (RGL), the trading company of the company’s founder and 60% share holder requested an EGM to proposer the removal of the board and its replacement with directors selected by RGL.

The primary reason for this seems to be explained in a blog on the 4th of March.…..Within one year of my stepping down from the board, the most efficient company in the FTSE 250 had become a cash cow for consultants, lawyers and suits, all of whom had an interest in keeping the gravy train running for as long as possible, but no interest in the company being honest with shareholders or customers about the situation it was in…...

On the 20th of May Amigo published details of EGM to be held on the 17th June, it may be worth noting that the 20th of May was legally the last day that such an announcement must by.

This mean that around 7 weeks will have passed between receiving the EGM request and it taking place.

If you believe James Benamor and his…keeping the gravy train running… argument then this may be significant.

The EGM notice was quite clear in stating that the board recommends that share holders vote against its removal and it give its reasons. Yet these reasons were not that the board was doing a great job but were mostly fear and doubt.

Interestingly one of their strongest arguments, that the proposed directors do not have FCA approval for the proposed role has been weakened by the 7 weeks between the request for the EGM and its occurrence. It is quite likely that if approval is going to be granted it will have been granted.

What is critical to me is that RGL have a 60% share holding, so if their nominated directors are appointed what will be the effect on the other 40% of share holders. It may be possible that some deal that benefits RGL at the expense of others could be arranged but is that likely?

Given that the desire to sell the business has been public knowledge for a while it may be that long term share-holders may find themselves forced to sell at a lower price than they paid.

Those whose bought at the float and as late as Aug 2019 will have most bought at between 150p and 300p, and if a sale was agreed by RGL + some other shareholders it will probably be at a lot less than this, given the current price of 22p.

If such a sale were to happen it would hardly be either a surprise or any sign of bad faith.

The other option seems to be to allow the existing board to remain or appoint its own successor’s and pretty much carry on as they are doing now.
Fri 01 May 202030pIan Smith

Amigo – Replace The Board EGM



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!
Tue 31 Mar 202014.8pIan Smith

Amigo – Does BrightHouse’s Closure Also Spell The End Of Amigo?



Amigo has recently said they are suspending new loans to all but key workers. Taken at face value this sort of makes sense as making credit worthiness predictions has to be difficult if you have no idea about the effects of the government’s COVID-19 measures.

But does it indicate anything else?

Recently there has been a big spat between the founder James Benamor and the board, the basis of this seem to be that the board has set in place a policy to make loans that Amigo knows are unaffordable and does not care, simply using the business to get money while the “going is good”.

Of course the board denies this.

It is possible to see this no new lending as the start of winding the business down either to nothing or to a loan book of known good and bad loans to be sold.

The confusing bit for me is that Benamor is still believed to own 61% of Amigo’s shares, so he stands to lose a lot.

Brighthouse, the store that sell goods at very high interest rates has just gone into administration and many of the payday lenders have gone as well. Although Amigo’s model is different they all share the same very high cost of borrowing and a regulator who seems to be starting to side with the borrowers.

At 15p it seems pretty clear that nobody is sweeping up any dirt cheap shares on offer prior to making an offer for the business.

The only saving grace that Amigo has is that it has the ability to file with credit reference agencies non payment records against the guarantor if they are required to make payments and don’t.
Wed 29 Jan 202051pIan Smith

Amigo Loans – Is It An Example Of Looking Fair Better On The Outside?



I have liked Amigo Loans since it went public in Jun 2018, yet I have also seen that I seem to be in the minority and today, Mon 27 Jan Richmond Group, the majority share holder, has stated their desire to sell.

I did have shares in Accuma an IVA specialist years ago when IVAs seemed to be a booming business and like that sector it may be that the Guaranteed Loan business was always going to have a short life time too.

Once it became popular the “It is someone else’s fault brigade” has got stuck into the company saying that the Borrowers didn’t understand what they were borrowing and the Guarantors didn’t realise that they would actually be expected to pay if the repayments weren’t being made.

I am quite willing to believe that there are some genuine cases where procedures were not followed correctly and the need to make sales overrode everything else, but in such volumes that the business is no longer worth owning?

So why is it up for sale, is it the future is rocky or is it that it is now an established big business which needs managers and procedures and customer complaints departments and this is simply not of interest to Richmond Group?

Looking at the half year to Sept 2019 report key headline numbers were

Net loan book of £730.7m, an 8.8% increase year on year

Impairment:revenue ratio up 7.8ppts to 31.1% (H1 FY19: 23.3%), Yes on £145m of revenue Amigo booked £45m of impairments.

Cost:income ratio, ex-complaints, increased to 20.8% (H1 FY19: 17.8%) 28.0% including complaints provision

Statutory profit after tax 1.9% lower than prior year at £37.0m Adjusted profit after tax of £35.8m, 24.2% below prior year

So I have a suspicion that it a combination of both.

If I were Provident, Morses, NSF etc would I want either the business or the loan book?

The total loan book is about £730m.

If we assume that these loans have a year to run on average then there is roughly £360m in interest and £730 of capital to be repaid, call it £1bn for convenience.

Being very back of an envelope, if we accept the 30% impairment ratio then that means roughly £300m of impairments and 28% cost ratio then that is around another £280m meaning that the debt may be worth around £420m.

Clearly if you are running the business down then there will be no need to advertise so the operating costs should be much lower, but it is easy to see that fees associated with the transaction could wipe put much of these savings.

That equates to a share price of a bit under 100p.

Buying at today’s price of around 50p doesn’t look too attractive to me for the business if you are intending to lay off staff and integrate with an existing operation.

Selling the loan book, winding up Amigo and returning funds to share holders at anywhere between 25p-50p does seem like a credible option.

In this case operational costs could be lower to the purchaser as they already have a collection operation, but these savings may easily be lost in the cost of integrating the business.

Equally impairments may be lower If handled by an existing team, or not as that team needs to be scaled up.

Being neutral, 50% APR for a guaranteed loan seems steep and as guarantors have decent credit ratings, they may be more used to complaining.

The real question is as complaining risks ruining the guarantor’s credit score where will the impairments end up if you run the book down and pursue debt?

Especially if the debt is pursued under the Amigo name and the book owner has no concerns over negative publicity.
Tue 10 Sep 201972pIan Smith

Amigo Loans – I Am Sure That Everyone Else Is Wrong!



A few weeks ago Amigo Loans, one of the big players in the guaranteed loans market, announced its first quarter results and this sent the shares down by about 50%.

This seems to be a result of an increase in expected bad debt up from 25% of the revenue to 30%, whilst this seems horribly high some of this may be a result of accounting changes, accepting bad debt earlier than in the past.

Added to this there are strong concerns that the regulators are going to hit this industry now after Payday Loans and Doorstep Lending.

In particular persistent debt caused by repeat loans and top ups, about 12% of Amigo borrowers have had two or more tops ups.

The other area, loans having to be repaid by the guarantor have remained broadly steady during the last year at just under 10%,

So I went looking at review sites to see what the unhappy customers are saying and there seem to be three types of complaint.

On a blog called Debt Camel there was this question.
I agreed to be the guarantor for a loan for a friend, but he lied to me and couldn’t pay it. Amigo were very difficult, wanting me to stop paying other debts so I could pay them, and got a CCJ. Is it too late for me to complain and ask to be removed as the guarantor?

Which seems to be typical of many complaints by the guarantor, they didn’t really think that they would have to pay. It does appear that Amigo gets into contact with the guarantor very quickly after payments are missed rather than waiting say a year and letting the debt become unmanageable.

The other main complaint is the Amigo ask too many questions before considering a loan and turn some people down, although a few people seem to complain that they or someone else was lent money too easily!

There are also the normal complaints that all financial organisations get; They want me to pay the money back.

The complaints seem to be a combination of what you might expect but to me also suggest that Amigo are very much on top of missed payments.

Given the nature of the business debt has a different meaning to most businesses, the money is borrowed to be lent and the amount out on loan is up to £728.4m from £638.2m and the plan is not to increase this.

So when I consider the above, what look like good numbers and a P/E of about 3.6 I am struggling to see what it is that concerns others so much.

I have looked at Funding Circle and see loses and It’s almost as if people like to invest in companies that are losing money but promise big profits in the future.