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On 27th Jan 2019, the shares of Amigo Holdings Plc crashed by 28.8 per cent to GBX 48.60, which was nearer to its 52-week low price. It is due to the fact that the UK subprime lender solicited a buyer after James Benamor, its founder, dismissed its chairman and chief executive officer.
Amigo Holding Plc is the United Kingdomâs biggest provider of loans which are guaranteed by a third party. It lends to borrowers with the worst credit scores and letting members of family or friends act as guarantors in case they are not able to pay back their loan instalments. It lends money at 49.9 per cent APR. It usually provides loans of £500 to £10,000, which must be repaid in one to five years.
The company stated that after the Benamorâs Richmond Group investment arm indicated that it was looking at selling approximately sixty-one per cent stake in the business, the company initiated a formal sale process after conducting a strategic review. For this, the Board has hired RBC Capital Markets as its financial adviser with the objective of a strategic review followed by a sale of parts of the business. However, the company did not receive any proposals for a takeover yet.
The company was worth at nearly £1.3 billion when it got listed on the London Stock Exchange in June 2018. But now, the value of its shares has declined drastically by almost 80 per cent due to immense scrutiny from UKâs regulator, the Financial Conduct Authority, and a worsening economic position. However, the company said that it remains confident in the strength of its approach to lending decisions. It further said that it is concerned about the chance of rising scrutiny on the company and a constant development in the approach of the Financial Ombudsman. In November 2019, the Financial Conduct Authority concluded its review of the sector for guarantor loans. It instructed the company that it had to more lucidly describe the risks to the family and friends of its customers when they are ready to perform the role of guarantors.
The ombudsman, which oversees the issues of consumer grievances about financial firms, has been blamed for stifling competition and targeting profits throughout the subprime lending sector by upholding an extremely high number of complaints. The FOS insists that it is confident in the way that they are handling these complaints.
The companyâs shares started declining in the year 2019, after the appointment of Hamish Paton, a new chief executive. Mr Paton said that he would revamp its lending model in reaction to the regulatory risks. The recommended changes consisted of investing to boost its collections and compliance operations, while cutting down on its dependence on repeat borrowers in favour of pursuing additional new customers. Â After then, Paton left the company in December 2019 and then Mr Benamor, who controls 61 per cent of Amigo, reaffirmed his control and returned to the board.
Amigo Holdings Plc stated that it would take other alternatives in addition to a complete sale, which may consist of disposal of portions of the group. However, the company is running most of its business in the UK, where the company offers only one product.
Amigo stated in a quick trading update that, its impairments and loan book expansion in the year 2019 for final three months were consistent with guidance provided earlier but struck a note of warning about the possible impacts of customer complaints.
AMGO â Share Price Performance
At the time of writing, on 28th January 2020 as at 08:17 AM (GMT), the stock of AMGO was trading at GBX 49.20 per share on the London Stock Exchange, an upside of 1.23 per cent or GBX 0.60 per share, versus previous dayâs closing price of GBX 48.60 per share.
The companyâs market capitalisation was reported at £231.01 million at the time of writing. The free float and shares outstanding of AMGO were reported at 123.22 million and 475.33 million, respectively.
AMGOâs share price of GBX 297.50 as on 11th Jun 2019 was its 1-year peak price, whereas the share price of GBX 36.05 as on 27th Jan 2020 was the 1-year low share price. The current share price was lower by 83.5 per cent from the 1-year high price, whereas it was higher by 36.47 per cent from the 1-year low price.
AMGO â Financial Performance
On 28th Nov 2019, the company declared the half-yearly results for the period ended on 30th Sept 2019.
The companyâs revenue stood at £145.4 million in the first six months of the financial year 2020 as compared to £130.1 million in the corresponding six months of the fiscal year 2019, an increase of 11.8 per cent. The Interest payable and funding facility fees stood at £17.2 million in the first six months of the financial year 2020 as compared to £18.2 million in the corresponding six months of the fiscal year 2019.
The Impairment of amounts receivable from customers stood at £45.2 million in the first six months of the financial year 2020 as compared to £30.3 million in the first six months of the fiscal year 2019, an increase of 49.2 per cent. The other operating expenses stood at £30.3 million in the first six months of the financial year 2020 as compared to loss of £23.3 million in the corresponding six months of the fiscal year 2019, an increase of 30.0 per cent.
The profit before tax decreased to £42.3 million in the first six months of the financial year 2020 as compared to £48.4 million in the first six months of the fiscal year 2019. In contrast, the profit and total comprehensive income to equity shareholders of the group decreased to £37.0 million in the first six months of the financial year 2020 as compared to £37.7 million in the corresponding six months of the fiscal year 2019.
The basic earnings per share decreased to 7.8 pence in the first six months of the financial year 2020 as compared to 8.6 pence per share in the first six months of the fiscal year 2019. The Diluted earnings per share decreased to 7.7 pence in the first six months of the fiscal year 2020 as compared to 8.6 pence per share in the first six months of the fiscal year 2019. The dividend per share increased to 10.55 pence per share in the first six months of the fiscal year 2020 as compared to 1.87 pence per share in the corresponding six months of the fiscal year 2019.
(Sources: LSE)
Amigo Holdings Plc
Amigo Holdings Plc (LON:AMGO) is a UKâs guarantor loan firm that provides sales financing services. The company trusts that each one is unique, and, behind every credit score, there is a real person who wants to be attended to. So, the company provides the loan to those people who unbale to borrow due to their poor credit histories.
