Member Info for Theborn

There is a distinct difference here though, being that Amigo was looking to continue trading if it had the scheme approved so the FCA could argue the shareholders were benefitting at the expense of the customers. This is different in that CCD is closing regardless, its just if the FCA oppose it then it is highly likely the customers will be worse off than if they don't oppose it - but no added benefit to the shareholders if approved or not.

In a letter, the FCA said it does not support the scheme, which it said was “inconsistent with the FCA's rules, principles and objectives”.

In this instance, however, the FCA said "the only likely alternative to a scheme is the insolvency of Provident Personal Credit Limited (PPC)".

As Provident was closing its consumer credit operation, there was no unfair benefit to shareholders at the expense of creditors added the FCA

It was that objection that prompted the regulator to go to court in May and block guaranteed loans group Amigo Loans’ attempt to set up a similar scheme.

Malcolm Le May, Provident’s chief executive, said: "Although the FCA has confirmed it does not support the Scheme and has summarised a number of concerns, I am pleased that the FCA has decided not to appear in Court to oppose the sanction of the Scheme.

See Peel Hunt today noting several significantly undervalued companies which would be prime takeover targets - Provident quite rightly on the list. This was undervalued prior to covid and has been significantly undervalued ever since. Closing of the loss making doorstep arm is be a huge plus. I'd like to see this >£6 in 12 months following the closure and some positive post-covid spending, rather than another takeover saga where an offer is made in significant premium to current share price (i.e. £4) but still well below the true value (i.e. >£5). Anyway, lets see what happens.

https://www.proactiveinvestors.co.uk/companies/news/954614/record-value-of-uk-companies-taken-over-in-2021-so-far---and-ma-set-to-continue-954614.html

If the creditors agree the scheme then there won't be more money put in.
If the creditors want to gamble and refuse the scheme in the hope of getting more money, then they may walk away with nothing.
Take Amigo as an example. Nearly 100% of creditors agreed their initial scheme rather than gambling on getting an extra 5-10%, which isn't worth the risk.

I think markets in general are down today so shouldn't read too much into it.
There is a misconception that FCA have more power than they have in this situation. They will probably try and hand down a fine to PFG after the fact (although I question if you can fine a wider group in respect of a legal entity which has been wound up as that's one of the main reasons businesses set up separate entities to insulate different segments of a business from a problem in another).
The FCA can complain to the Court but the key stakeholders in this are the Creditors, and if the Creditors are voting to accept a settlement then the Courts will be led by that - not the FCA shouting from the sidelines. It just needs to take its course.

https://www.proactiveinvestors.co.uk/companies/news/949084/regulator-will-try-to-block-amigo-loans-scheme-despite-creditor-approval-949084.html

Shore Capital notes that Provident Financial (LON:PFG) is currently pursuing a similar scheme to cap the cost of complaints against its Consumer Credit Division (CCD) to £50mln (plus a further £15mln in administration costs).

The PFG scheme has already won initial Court approval and will move to a creditor vote that is scheduled for 19 July, with a subsequent Court hearing on 30 July.

“In conclusion, we think both Amigo and Provident’s Schemes will ultimately receive both creditor and Court approval, despite any protestations from the FCA.

“This will help draw a line under the claims situation and allow these businesses to move forward.

“In Amigo’s case, we understand that it intends to continue operating in the guarantor lending space albeit with an updated product set and procedures to better reflect current regulation.

As noted above, regardless of the outcome of the Scheme, Provident has decided to discontinue operations in the high-cost credit market (including home credit) where CCD operates in order to focus its efforts on the larger mid-cost credit market.”

https://www.thisismoney.co.uk/money/markets/article-9532589/Loan-shark-route-borrowers-Provident-ends-doorstep-loans.html

www.theguardian.com/money/2021/mar/30/high-court-allows-troubled-amigo-loans-to-cap-compensation-payments

The Financial Conduct Authority has started an investigation into the home credit arm of Provident Financial (PFG) but Liberum says investors who take a long-term view will be ‘well rewarded’.

Analyst Gary Greenwood retained his ‘buy’ recommendation on the stock, after the doorstep lender said the regulator was investigating its home credit business over ‘affordability and sustainability of lending’ concerns.

The shares closed down 27.7%, or 72p, at 189p on Monday

However, Greenwood said despite the probe, the ‘valuation remains depressed in a historical context’ and ‘the prospects for the rest of the group remain strong’. Further, he expects ‘demand for its products to increase as a result of the pandemic’.

‘Ultimately, we believe that Provident remains a business that is capable of delivering a strong double-digit return on tangible equity in the medium term, which should eventually support a much higher valuation,’ he said.

‘We think that investors who are willing to look through the near-term issues could still be well rewarded in the long run.’

Completely agree - whilst FCA investigation element is unhelpful, I've personally been hoping for CCD wind-down or sale for a couple of years now. People unfamiliar with the Group still assume CCD is what the Group is built around, when in reality its now the smallest element. PFG no longer get any credit rating benefit from holding CCD (see Fitch updates), its massviely unprofitable, will continue to be laden with Regulatory scrutiny as a sector, and as a result must take up an overly significant amount of management time when compared with the larger, more successful and profitable parts of the Group. Disposing of CCD would be a significant anchor off the Group going forward, even if its a heavy cost in fines / redress at the moment.

Analyst Gary Greenwood at Shore capital said: "While underlying trading has been better than expected during the fourth quarter, the disappointing news around rising complaints and the FCA investigation is likely to weigh on the share price in the near-term.

"Nevertheless, we reflect that the valuation remains depressed in a historical context.... CCD aside, we believe that the prospects for the rest of the group remain strong and expect demand for its products to increase as a result of the pandemic."

Shrewd move by the CFO. After the share price has rocketed 50% this past week, he's made a cool c. £150 profit after dealing costs on his £500 investment.

And another extremely bullish article just published. Target price here implying in the £15 per share range:

https://www.valuewalk.com/manolete-partners-five-bagger-uk-micro-cap/?amp=1

Dyor etc

Couldn't have written it better myself...

https://seekingalpha.com/article/4407390-hidden-gem-investment-opportunity-manolete-partners

https://www.bloomberg.com/news/articles/2021-02-12/investors-vie-for-windfall-from-rejected-covid-insurance-claims

BBC Breakfast piece this morning quoting RSM who say insolvencies will double in 2021 vs prior years as govt support eases.

I did say earlier today this might happen.

Back to my earlier point on selling timing from CEO. As an insider, which Mano staff are, there are limited windows when you can actually deal in your own shares. So from 31 Dec until the trading update was released, CEO wouldn't have been able to sell even if he wanted to. Given the loan guaranteed by shares was repaid in early Jan, he was probably wanting to seek down 1m shares for a few weeks for personal reasons, and unfortunately for him, the price tanked more than even he'd have expected on the trading update. But he was committed to the sell instruction at that point.

If he said he won't sell for 3 months now, in 3 months time they'll be in the year end restricted period anyway, so until the full year results are out in July, again, he couldn't sell even if he wanted to. I suspect this means he'll be having conversations with the likes of Mithaq to agree another sale tranche immediately after full year results. Provided that's only another c. 1m shares and no subsequent ones after, I wouldn't be overly alarmed. Particularly if Mithaq take them off him.

If their year end is 31 March then employees can't trade shares from then until the results are announced to market anyway (so May usually). This might be what they are referring to.

I'm dismayed at this kalamity of PR. Trying to justify in my head why he'd time it now — lining up to retired? Allowing Saudis to take 25%+ so they can make a takeover bid?

The last week stinks from CEO. Seem to forget there are real shareholders here who have backed the company with their pension pots.

Worth reading the following:

https://www.moorethompson.co.uk/blogs/government-has-instructed-fraudulent-coronavirus-loan-applications-to-be-reported/

https://www.experian.co.uk/blogs/latest-thinking/identity-and-fraud/commercial-fraud-when-is-a-good-business-not-all-it-seems/

Any way I cut it, I can't see a scenario where there isn't a huge wave of corporate insolvency and litigation coming down the pipe in the very near future. This would be a extremely significant value accretive opportunity for Mano. The only uncertainty in my mind, is when will it happen? I'm holding Mano long term regardless but I do think at £2, it will look like a bargain in the future.

DYOR and this is just my view etc. GLA.

https://www.ftadviser.com/companies/2020/10/27/covid-loan-fraud-cases-reported-to-action-fraud/

£26bn of fraudulent finance taken out so far during the pandemic, which is likely a massive understatement. There will be thousands and thousands of companies who have taken advantage of HMRC and other government schemes during the pandemic. Once the dust settles, there will be years of claims and actions from HMRC / govt / Banks against those businesses and individuals.

In my view, the only unknown here is how long the government keeps up the artificial dam currently protecting many thousands of businesses from litigation. Once Tory govt is confident of vaccine efficacy across the population, the softly softly approach will end. Corporate handouts will stop, and recovery process will begin - and a major part of the recovery process will be seeking out the many corporates who have taken advantage of the pandemic.

Will the dam come down in March, April, June, August? Hard to say for sure, but Mano can feed on the current caseload in the meantime to realise more unrealised gains and would expect the business to already be planning how to take full advantage of the opportunity to come. Like many industries, corporate litigation is currently in a distorted reality which you'd expect to end at some stage this year, and when it does, I can only see the share price going one way.

DYOR etc.

These are taken directly from PFG's annual accounts and they often remind commentators of this in the results presentations. Worth keeping in mind given the current market panic / sentiment, particularly after positive results in Feb and the fitch downgrade which was linked more to performance pre-2019 as opposed to anything going forward:

The market is reasonably dynamic with 1.5 to 2 million consumers moving in and out of it each year
and it is often counter-cyclical with the number of consumers increasing during and immediately following a downturn
as prime lenders tighten their risk appetite. Provident Financial is the biggest provider of consumer finance in this market
and has 2.3 million customers.

Our customers are also typically less sensitive to changes in economic conditions as they are more used to
managing on tight budgets and they have lower levels of debt than prime customers. They are, therefore, often better
placed to manage a recession than prime customers which is why our businesses have proven to be resilient during a
downturn in economic conditions. Nevertheless, we have progressively tightened underwriting over the last two years
to alleviate the impact of any weakening in the UK economy.

Not sure wtf has happened today. 10% dip from nowhere still with strong buying and competition either up or flat. Hopefully holds low until dividend then goes on a run up to trading update. Crazy needless fall. Slightly annoying after some good consistent gains. You just can’t trust it.