Big Management Shakeup at Subprime Lender Amigo Holdings Plc

Summary

• Amigo Holdings Plc, which was valued at £3 billion at the time of its IPO in June 2018, has now lost its value to nearly one-twentieth.
• Three key management personnel who have been at the helm of affairs are now set to step down, and Mr Gary Jennison, the former CEO of Secure Trust Bank Plc is set to take command of the company.
• At the beginning of the year, the company had put itself for sale, but the current board is trying to restructure the company

In yet another major shakeup in the management of British Subprime lender Amigo Holdings plc, the board of the company made major changes in its top functionaries ahead of its AGM of 29 September 2020. As many as three critical management positions in the company have been vacated, and the appointment of Mr Gary Jennison, the former CEO of Secure Trust Bank is still pending FCA’s approval. It is thus highly likely that the company would go through a period of no management oversight. It has also been made clear by the board that there is no intention on their part to make Mr James Benamor, the CEO of the company and that he will only be a director in the company. It is to be noted that The shares of the company had lost significant value over the past two years from £1.3 billion when it was listed on the London Stock Exchange in June of 2018 till now when its market capitalisation is close to £59.00 million.

The Board’s proposals before the shareholders of the company at the AGM

The proposals that the board is putting before the shareholders for voting on 29 September 2020 mostly involve massive changes that have been brought into the management. James Benamor would now be joining as a director in the company. Nayan Kisnadwala the current CFO and a director in the company is being removed from both positions; no new appointments have been made so far. Other than that Roger Lovering has also been removed as director and Gary Jennison, Richard Price and Jonathan Roe have been appointed as directors. Glen Crawford, a current director though has been re-nominated for a director’s position in the company, but he has expressed his desire not to re-join the company.

The above changes, however, are subject to the approval of the shareholders and the consent of the FCA. There has been quite a disagreement among the top management personnel of the company which has often been sighted as the reason of the poor performance of the company. Since the IPO of the company, there have been quite a few management reshufflings that have taken place over the two-and-a-half-year period.

The Deteriorating Performance of The Company and The Pandemic Effect

Amigo Holdings has a lot of thorny issues in hand as it goes into this year’s AGM. The company has a long list of customer complaint backlog that it must take care of. There is also uncertainty regarding how much more customer complains might flow in and how much provisioning the company might have to create to adequately cover them. Other than that the COVID-19 payment holiday that nearly 40,000 of Amigo Holdings customers have availed is also taking a heavy toll on the margins of the company. It is also particularly worrying that the end of the government furloughing scheme in October will hit the company hard. Most of the company’s clients are small and mid-sized lenders who foresee a chance of losing their jobs once the scheme ends. In general, the sub-prime credit offtake has also been sluggish since the pandemic broke in the country, as people are now curtailing most of their non-essential expenditures and are focusing instead on repaying any existing debts. All the above issues are extremely critical and could have a telling impact on the company’s ability to continue as a going concern and requires an urgent strategic review of its business model and practices.

Is the company really open for acquisition?

At the beginning of the year, the company had put itself for sale. The Richmond Group, the largest shareholders of the company, had also expressly stated its willingness to sell off its 60.66 per cent holding in the company. Though the management of the company at that time was confident that the company's business was going strong, the largest shareholders stance that it wants to sell off its entire stake gave out a wrong signal to investors that everything was not ok at the company. The sell-off exercise though did not materialise then, and currently, the board of the company is trying to restructure the company.

The share price performance of Amigo Holdings Plc (YTD)

Amigo Holdings Plc (LON:AMGO) – The company is based out of Bournemouth in the United Kingdom. It is a consumer finance company and is one of the largest providers of guarantor loan and sales financing services in the country through its subsidiaries.

(Source- Thomson Reuters)

The shares of Amigo Holdings Plc have been on the downslide on the LSE since the starting of 2020, except for a minor uptick in month of May when the lockdown was reopened after nearly six weeks. On 2 January 2020, the shares of the company were trading at GBX 70.70 per share after which it hit a minor low of GBX 48.60 per share on 27 January 2020. Thereafter the shares cooled down and hit a low of GBX 12.50 per share on 17 March 2020, after moving sideways for a month and a half, the shares started climbing again, to peak on 01 May 2020 at GBX 30.50 per share. The shares of the company were trading at GBX 12.58 per share on 29 September 2020 (8.19 AM GMT+1), gaining 2.47 per cent over the previous day’s close.