GVC Holdings (GVC) was one of my tips of the year in 2019 on these pages and - although a bit volatile - rewarded investors with a benchmark-busting total return. This year has also started off in a volatile fashion for the shares (thanks regulatory fears!) but the general direction of progress and travel has been positive and good – and I still like/own the share. Progress was apparent in full year numbers which continued to be driven by online and included a good trading update for the first couple of months of the year. Certainly you can highlight some issues. The physical retail estate acquired with the Ladbrokes business continues to decline, there were some impairments write-downs, I wish the company would chivvy net debt below x2 ebitda (although thanks for the 4%+ dividend) and there is naturally the risk of even tougher regulation. On the latter, I do agree with the company when it notes that 'over-regulation in the UK would result in customers moving to the black market'. A bit like the tobacco space, large cap gambling names realise the key is to play the game alongside governments and help create their tax revenues. Still hopeful of £10/share here.
I have accused Aviva (AV.) of being a bit dull historically but I do believe there is a back-to-basics turnaround story here and I do own the stock as detailed here, where I talked about the company's ability to fund its not unattractive dividend. The edging up of all the key ratios alongside dull but worthy observations including operating profit up 6%, a 3% rise in the full year dividend (now yielding 8%+) and 'in 2019, we increased customer numbers by 2% to 33.4 million, and improved customer satisfaction levels' are all absolutely fine. Stay on the horse for a return to the halcyon days of 4 quid plus a share (plus income naturally).
Now onto the main event: bad boy Amigo Holdings (AMGO) which I have accused of having a friendless strategy towards customers (especially) and investors for a couple of years now. Six weeks or so ago I noted that the company was looking for a new owner as the company founder was looking to exit, a perspective I described in the article as him concluding 'that this flawed and horrible business model is completely pointless...and that the game today is to try to get whatever money out he can possibly can' (even if the share had massively dumped in the last couple of years since it was floated).Well...assertions by the founder James Benamor in this stunning article make a bunch of allegations about shabby recent practice concluding with an observation that 'I have witnessed a company committing slow motion suicide, whilst playing out the script of Brewster’s Millions'.
Naturally it was all different back in the day when Benamor founded/ran the business. Whatever you say James...but I would be interested in knowing just why lending out at APRs of nearly 50% was ever a good business for customers who clearly should not be tapping credit at all. Anyhow...the company has punched out its own regulatory news response pushing back on all fronts. Don't you just love it when a company and its founder/largest shareholder fall out? The truth undoubtedly lays somewhere in the middle of the argument but some bigger truths are apparent here: Amigo is a horribly flawed business at multiple levels. I can understand how it managed to list, but I am struggling to see how professional fund managers really thought it was a business worth backing. The shares are at a new low and no doubt anyone mad enough to want to bid for parts of the business will be lowering their price appropriately.
Filed under: GVC Holdings, Aviva, Amigo Holdings, Tern, Woodford, gold, Finablr, OnTheMarket
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