TIDMAMGO
RNS Number : 8033T
Amigo Holdings PLC
29 November 2021
29 November 2021
Amigo Holdings PLC
Interim results for the six months ended 30 September 2021
Amigo Holdings PLC, (Amigo), announces results for the six-month
period ended 30 September 2021.
Headlines
-- Following the Court not sanctioning the original proposed
Scheme of Arrangement ("Scheme") in May 2021, the Board continues
to pursue a new Scheme to address the complaints liability and
provide a solution for customers with a valid complaint.
-- An independent Customer Committee ("ICC") was set up in
response to the recommendations of the judge at Amigo's High Court
Scheme sanction hearing to ensure the voice of customers is heard.
On 28 September 2021, Amigo submitted a new Scheme proposal, along
with its future business plan, to the Financial Conduct Authority
("FCA") and the ICC. A revised offer, which incorporates two Scheme
options, was submitted to the ICC on 12 November. The Board's view
is that a Scheme that is contingent on a continuing business will
provide creditors with more value and a more certain outcome.
-- While neither of our proposed Schemes is expected to satisfy
the liability owed to redress creditors with valid claims in full,
the contribution to the new Scheme will be significantly increased.
This is, in large part, due to improved collections relative to the
assumptions made for the first Scheme, in December 2020, when the
impact of Covid-19 remained highly uncertain, as well as the
delayed implementation of balance adjustments on the loan book.
Amigo will be proposing an equity raise alongside the Scheme to
support the future business. This is likely to result in material
dilution which will lead to existing shareholders owning a much
smaller proportion of the group if they do not take up their
rights. The Board is also considering an early part repayment or
repurchase of the senior secured notes.
-- The next step will be to issue the Practice Statement Letter
("PSL") to relevant creditors explaining the options for a second
Scheme. The Court process will then begin, which is estimated to
take at least four months.
-- As noted previously, the sanctioning of a new Scheme is
increasingly urgent. Without an approved Scheme, Amigo expects to
have to file for administration or other insolvency process.
Financial headlines
Figures in GBPm, unless otherwise H1 2022 H1 2021 Change %
stated
Number of customers(1) '000 102.0 176.0 (42.0)
Net loan book(2*) 224.1 485.2 (53.8)
Revenue 56.5 92.3 (38.8)
Impairment coverage % 22.5 14.0 60.7
Complaints provision (balance sheet) (344.3) (159.1) 116.4
Complaints cost (income statement) (5.3) (93.7) (94.3)
Profit/(loss) before tax 2.1 (62.6) 103.4
Profit/(loss) after tax(3) 3.3 (67.9) 104.9
Adjusted profit/(loss) after tax(4*) 2.0 (58.1) 103.4
Basic EPS Pence 0.7 (14.3) 104.9
EPS (Basic, adjusted)(5*) Pence 0.4 (12.2) 103.3
Net borrowings(6*) 2.1 (265.5) (100.8)
Net borrowings/Gross loan book(7*) % (0.7) 47.1 (101.5)
------------------------------------- ----- ------- ------- --------
The approval of an alternative Scheme remains subject to
reaching key milestones including a second successful creditor vote
and approval by the High Court at a sanction hearing. At this
point, the Board does not consider there to be enough certainty to
account for claims redress on the basis that a Scheme will be
sanctioned. In considering the presentation of the interim results,
the Board has concluded that the amount recognised for complaints
redress should continue to be included on the basis that known and
expected future complaints are settled in full. The Board has
concluded there is a material uncertainty over going concern (see
note 1 to the financial statements for further information).
Despite this, the Board considers that it remains appropriate to
prepare these financial statements on a going concern basis, as the
continued pursuit of a Scheme provides a realistic alternative to
insolvency.
-- Net loan book reduction of 53.8% to GBP224.1m (H1 2021:
GBP485.2m) due to the runoff of the back book and the continued
pause in new lending throughout the period.
-- Revenue reduction of 38.8% to GBP56.5m (H1 2021: GBP92.3m).
-- Complaints provision broadly unchanged from year end at
GBP344.3m (FY 2021: GBP344.6m; H1 2021: GBP159.1m). Application of
incremental compensatory interest accrued in the period is
partially offset by an increase in the estimated portion of known
and potential complaint customers charging off the loan book due to
the passage of time. Complaints cost in the period of GBP5.3m (H1
2021: GBP93.7m).
-- Underlying collection levels continue to be better than
modelled within the first Scheme projections in December 2020.
However, impairment coverage has increased to 22.5% (H1 2021:
14.0%), driven by a reforecast of expected credit losses to reflect
an increasing trend in the level of arrears observed in the period,
predominantly but not exclusively, from customers exiting Covid-19
payment holidays.
-- Reported statutory profit before tax for the six months to 30
September 2021 was GBP2.1m (H1 2021: loss of GBP62.6m).
-- GBP234.5m of unrestricted cash and cash equivalents as at 30
September 2021 (H1 2021: GBP134.2m) reflects continued strong cash
generation; current unrestricted cash balance of over GBP260m.
-- Net liabilities of GBP117.6m as at 30 September 2021 (H1 2021: net assets GBP99.6m).
-- Net borrowings of GBP2.1m at 30 September 2021 (HY 2021:
(GBP265.5m)) driven by continued collections while originations
remained suspended. This has allowed the repayment of the
securitisation facility.
-- Final Covid-19 payment holidays were implemented prior to the
start of the period, in March 2021 and had all concluded by the end
of July 2021. There were therefore no associated modification
losses recognised in the period. Alternative forbearance measures
continue to be offered to customers experiencing financial
difficulty.
*Detailed definitions and calculations of Amigo's alternative
performance measures (APMs) can be found in the APM section of
these condensed financial statements.
Gary Jennison, CEO of Amigo, said:
"We're pleased to be providing a meaningful update on our
progress towards a new Scheme as we recognise it has been a long
wait for all stakeholders. Clearly, it has taken much longer than
we had hoped but it is critical that we get this right to achieve
the fairest outcome for all creditors by ensuring we have listened
carefully to their views and fully addressed the concerns raised by
the High Court and the regulator last May. We're incredibly
grateful for the commitment shown by the Independent Customer
Committee over many months alongside the ongoing constructive
engagement with the FCA. There's no doubt they have been
instrumental in helping us to reach a better position for creditors
and we hope to return to the Court with a Scheme they can support
next year.
"The creditor committee made it clear they wanted a Scheme that
offers the certainty of a cash-based payment, delivered quickly,
and this is reflected in the revised offer we are outlining here
today. We're pleased the New Business Scheme, contingent on new
lending restarting and a successful equity raise, will offer a
markedly better cash contribution compared to the original Scheme
developed a year ago. Obviously a lot has changed in the last
twelve months and the increased contribution is largely driven by
the clarity we now have around our future business model and the
level of collections and impairments. Fortunately for customers the
impact of Covid has been far less severe than we, and the market,
thought when forecasts were made in the eye of the storm. Also, a
further 12 months of collections on loans makes a considerable
difference to the risk of balance adjustments. The development of a
clear future business plan and new product proposition, as well as
the better collections performance, has enabled us to consider both
an equity raise and an earlier partial repayment or repurchase of
our senior secured notes which would reduce the future interest
payable."
"The likelihood of a potential material dilution for
shareholders is a difficult but necessary consequence of our
situation. We have noted on many occasions, we are an insolvent
business so there are no easy paths if we want to avoid
administration and the only other options are for a managed
wind-down or insolvency, both of which are worse outcomes for
shareholders and customers. The Court was clear that any future
Scheme must address the balance between creditor and shareholder
outcomes to be successful and the equity raise achieves that and
provides the capital to fund a future business that can prosper. We
really hope as many existing shareholders as possible will invest
in what we believe is a great new lending proposition, which aims
to address the growing and pressing need in the market for a
mid-cost product that helps customers progress to mainstream
financial inclusion."
Analyst, investor and bondholder conference call and webcast
Amigo will be hosting a live webcast for investors and
bondholders today at 09:30 (London time) which will be available
at: https://www.amigoplc.com/investors/results-centre . A
conference call is also available for those unable to join the
webcast (Dial in: + 44 20 3936 2999; Access code: 907435). A replay
will be available on Amigo's website after the event. The
presentation pack for the webcast shows the reconciliation between
the PLC results and Amigo Loans Group Limited (the 'Bond
Group').
Investor video
There is an investor video available to view here , with an
update from Amigo's CEO, Gary Jennison.
Notes to summary financial table:
(1) Number of customers represents the number of accounts with a
balance greater than zero, exclusive of charged off accounts.
(2) Net loan book represents total outstanding loans less
provision for impairment excluding deferred broker costs.
(3) Profit/(Loss) after tax otherwise known as profit/(loss) and
total comprehensive income to equity shareholders of the Group as
per the financial statements.
(4) Adjusted profit/(loss) after tax excludes items due to their
exceptional nature including: senior secured note, RCF fees,
securitisation facility fees write off, tax provision release, tax
asset write off, tax refund due and strategic review and formal
sale process costs. None are business-as-usual transactions. Hence,
removing these items is deemed to give a view of underlying
profit/(loss) adjusting for non-business-as-usual items within the
financial year.
(5) Adjusted basic (loss)/earnings per share is a non-IFRS
measure and the calculation is shown in note 8. Adjustments to
(loss)/earnings are described in footnote 4 above.
(6) Net borrowings is defined as borrowings less unamortised
fees and unrestricted cash and cash equivalents.
(7) Net borrowings/gross loan book. Net borrowings over gross
loan book: this measure shows if the borrowings' year-on-year
movement is in line with loan book growth.
Contacts:
Amigo
Mike Corcoran, Chief Financial Officer
Kate Patrick, Head Investor Relations investors@amigo.me
Lansons
amigoloans@lansons.com
Tom Baldock 07860 101715
Laura Hastings 07768 790752
About Amigo Loans
Amigo is a public limited company registered in England and
Wales with registered number 10024479. The Amigo Shares are listed
on the Official List of the London Stock Exchange. Amigo is a
leading provider of guarantor loans in the UK and offers access to
mid--cost credit to those who are unable to borrow from traditional
lenders due to their credit histories. The guarantor loan concept
introduces a second individual to the lending relationship,
typically a family member or friend with a stronger credit profile
than the borrower. This individual acts as guarantor, undertaking
to make loan payments if the borrower does not. Amigo was founded
in 2005 and has grown to become the UK's largest provider of
guarantor loans. In the process, Amigo's guarantor loan product has
allowed borrowers to rebuild their credit scores and improve their
ability to access credit from mainstream financial service
providers in the future. Amigo is a mid--cost provider which
currently has only one simple and transparent product -- a
guarantor loan at a representative APR of 49.9 per cent. Amigo
Loans Ltd and Amigo Management Services Ltd are authorised and
regulated in the UK by the Financial Conduct Authority.
Forward looking statements
This report contains certain forward-looking statements. These
include statements regarding Amigo Holdings PLC's intentions,
beliefs or current expectations and those of our officers,
Directors and employees concerning, amongst other things, our
financial condition, results of operations, liquidity, prospects,
growth, strategies, and the business we operate. These statements
and forecasts involve risk, uncertainty and assumptions because
they relate to events and depend upon circumstances that will or
may occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from
those expressed or implied by these forward-looking statements.
These forward-looking statements are made only as at the date of
this announcement. Nothing in this announcement should be construed
as a profit forecast. Except as required by law, Amigo Holdings PLC
has no obligation to update the forward-looking statements or to
correct any inaccuracies therein.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014. The
person responsible for this announcement is Roger Bennett, Company
Secretary.
Chief Executive's Statement
Performance
Whilst we remain unable to restart new lending, the demand for
mid-cost, non-prime financial products is strong with our brand
continuing to attract significant numbers of potential customers to
our website despite no promotional activity for over 18 months.
Amigo's pause in lending, which has continued throughout the
six-month period to 30 September 2021, led to a 42.0% decline in
customer numbers and a 53.8% reduction in the net loan book.
Revenue fell by 38.8% compared to the prior year period, primarily
driven by the reduction in the loan book.
While underlying collection levels have continued to be better
than modelled under our first Scheme projections back in December
2020, we have seen an increasing trend in the level of arrears in
the period, predominantly but not exclusively from customers
exiting Covid-19 payment holidays and have recognised this in the
provision for impairment. The complaints provision and associated
cost as at 30 September 2021 were GBP344.3m and GBP5.3m
respectively. This resulted in a statutory profit before tax for
the six-month period of GBP2.1m (H1 2021: loss of GBP62.6m) and
statutory profit after tax of GBP3.3m owing to a GBP1.2m tax credit
in the period.
I continue to be extremely proud of the extensive support we
have been able to provide throughout the Covid-19 pandemic to over
66,000 customers. While the Covid-19 payment holidays have all now
concluded, we continue to assist customers experiencing financial
difficulty with alternative forbearance measures.
Scheme of Arrangement
Following the Court not sanctioning Amigo's original proposed
Scheme of Arrangement in May 2021, the Board continues to pursue a
new Scheme to address the complaints liability. We have worked hard
to address the concerns highlighted by the Judge at the sanction
hearing, including forming an Independent Customer Committee to
ensure the voice of the customer is heard and to provide redress
creditors with the opportunity to help shape a new Scheme.
Multiple options have been developed and on 28 September 2021,
Amigo submitted a draft new Scheme proposal, along with its future
business plan, to the FCA and the ICC. On 12 November 2021, Amigo
submitted a revised offer to the ICC. The offer incorporates two
options which reflect the feedback received from the ICC that their
preference is for a cash-based payment rather than one that
comprises either a share in future profits or a transfer of equity
to creditors. The first, the 'New Business Scheme' is contingent on
new lending restarting and Amigo completing a successful equity
raise. Any such equity raise is likely to result in material
dilution which will lead to existing shareholders owning a much
smaller proportion of the group if they do not take up their
rights. The second is a managed wind down of the Amigo Loans Ltd
business under a Scheme framework. It is the Board's view that the
New Business Scheme will provide redress creditors with more value
and a more certain outcome. Both options will be submitted to the
Court for sanction at the same time. If the judge does not sanction
the New Business Scheme, the judge will then be asked to sanction
the wind down Scheme at the same hearing.
While neither of our proposed Schemes is expected to satisfy the
liability owed to redress creditors with valid claims in full, the
proposed contribution to the new Scheme will be significantly
increased from that of the original Scheme. This is a result of the
divergence between what we projected to happen to the business in
December 2020, when the first Scheme was proposed, and what is
currently the case. The impact of the Covid-19 pandemic has been
far less severe than anticipated and we are in a much better
position relative to what was projected in terms of impairment and
its impact on collections. The delayed implementation of balance
adjustments on the loan book has also meant that we have continued
to collect on accounts throughout the year, and this is modelled to
continue until the Scheme Effective Date. The development of a
clear future business plan and new product proposition, as well as
the better collections performance, has enabled us to consider both
an equity raise and an earlier repayment or repurchase of the
senior secured notes ("bonds"). A part redemption of the bonds is
expected to deliver significant savings on the future interest
payable. The bonds become callable at par in January 2022. An
ongoing focus on managing operating costs is a further but less
significant contributing factor.
Whilst the process has taken considerably longer than we had
anticipated, it is critical that we get this right to achieve the
fairest outcome for our customers and to satisfy the High Court and
our regulator that we have addressed their concerns. The ICC has
been fully engaged and I am confident we are doing all that we can
to ensure our customers are well informed and have the assistance
they need to understand the different options and what each means
for them. The FCA has also appointed independent financial advisors
to assess the Scheme options and we have provided further
information to them. In addition, as time passes, certain financial
elements of the Scheme require recalculation.
Once the FCA has completed its review and we have final
agreement from the ICC, we will issue the PSL to the relevant
creditors. The legal process will then begin.
A Court hearing will be required to convene a creditor meeting
where creditors will have the opportunity to vote on the proposed
Scheme options followed by a second hearing to sanction the elected
Scheme to proceed. While timing will largely be dictated by the
Court, we expect the Court process to take at least four
months.
The proposed equity raise will impact our shareholders, most
notably through a material dilution of their holding and will lead
to existing shareholders owning a much smaller proportion of the
group if they do not take up their rights. However, without an
approved Scheme to address the significant liability that has
arisen from historical lending, Amigo has an insolvent balance
sheet and faces administration. Therefore, the Board has concluded
that there is a material uncertainty over going concern (see note 1
to the financial statements for further information). Despite
reporting a small profit for the period, the Group had net
liabilities of GBP117.6m as at 30 September 2021.
Strategy and future business plan
Our purpose is to provide financial inclusion to those who are
unable to access credit through mainstream lenders. We are
committed to building a truly customer-centric firm focused on
strong conduct rules and strong adherence to conduct risk
principles. Our immediate and urgent priority is to secure and
implement a new Scheme to provide an equitable resolution for those
customers with valid complaints. To help support and further fund
the Scheme, it is important that Amigo is able to return to lending
as soon as possible.
Customer-centric lending proposition
Our new lending proposition is well progressed. The new
proposition is designed to address the pressing need in the market
for a mid-cost product that can underwrite customers in the
non-prime sector and through incentive, flexibility and adaptation
be a vital contributor to the customer's progress to mainstream
financial inclusion. We plan to offer a revised guarantor loan
product and a non-guarantor unsecured loan which will feature both
an annual payment holiday and dynamic price reductions over the
term. We have been working with a panel of experts to test the
product features, customer journeys and content for our target
customers and I am very excited about the final result. However,
significant hurdles remain before we can return to lending,
including the securing of Court approval for the new Scheme and FCA
permission as well as further funding to the support the future
business.
As part of the future business plan, originations are planned to
begin shortly after the Scheme is sanctioned and are forecast to
increase gradually to reach approximately GBP300m a year by the
beginning of year two, with an annualised rate of growth of 5%
targeted from the beginning of year three onwards. Depending on
credit losses and early settlement assumptions, a gross loan book
of GBP400m could be achieved by the end of year four. This scale of
business will require a combination of debt and equity capital of
up to GBP300m. Monthly collections are expected to be around 5.5%
of the gross loan book in the first year, gradually increasing to
around 8.5% in year four. With the APR on the new products
differing to the current single guarantor product, and including
dynamic price reductions, the targeted blended yield is 34%.
While credit losses on future products cannot be known, run-rate
losses may be similar to, or somewhat better than, the historic
performance of Amigo's best performing risk segments.
Impairment:revenue has been modelled in the low 20% range. With
consideration given to stronger governance, deeper underwrites, and
a full customer-centric approach, the future business may have a
higher cost:income ratio than before, in the low 30% range in
steady state, which we will look to offset with better cost
management and lower credit losses, among other measures. An
average upfront cash payment of acquisition costs has been modelled
at around 5% of originations.
Operational efficiency
We continue to embed Lean Six Sigma throughout our processes to
drive productivity and efficiency improvements. This works by
removing waste and variation, sharing best practice and empowering
teams to continuously raise the bar. Our trained people are driving
projects in specific business areas to improve our customer journey
and support our teams.
Conduct and risk framework
Integral to our strategy is how we consider and act upon risks.
We have embedded the FCA's conduct rules in our values and ways of
working and have taken many steps to ensure the issues of the past
are not repeated. When we return to lending, it will be with
enhanced affordability assessments, tightened eligibility criteria
and wide-spread use of Open Banking. In addition, we have increased
reporting, monitoring and risk identification. We are confident
that a robust conduct and risk framework is in place to ensure we
meet our regulatory obligations and provide the right care to our
customers, focused on individual customer needs and positive
customer outcomes.
Our people
The first six months of the financial year to 30 September 2021
has been a period in which our people and our business have
demonstrated substantial resilience. But the ongoing material
uncertainty around Amigo's ability to continue as a going concern
is having an impact on our people and, over the six-month period,
we have seen some reduction in our workforce in addition to the
redundancy programme completed in the first quarter. However, we
have worked hard to incentivise and motivate our teams and I
continue to be impressed and encouraged by the commitment of our
people to rebuild Amigo as a business we can all be proud of. I
would like to wholeheartedly thank all our people for their
continued hard work and ongoing commitment to always putting our
customers first.
Regulatory Update
Throughout the Scheme process we have continued to engage openly
and productively with the FCA both on our intentions for the Scheme
and our future lending proposition. We also continue to assist with
the ongoing enforcement investigation into our creditworthiness
processes, and governance of those processes, from November 2018
and into complaints handling from May 2020.
The FCA confirmed in July 2021 that it would not expect to
authorise a return to lending by Amigo until after the sanctioning
of a new Scheme, by the High Court, including on the grounds that
Amigo would need to demonstrate its financial viability and ability
to meet its regulatory obligations and threshold conditions.
Board
On 19 July 2021, Amigo announced that under the senior managers
and certification regime, the FCA has approved Mike Corcoran as
Chief Financial Officer and Michael Bartholomeusz as Chair of the
Risk Committee.
Summary and Outlook
The Board remains committed to pursuing a solution that enables
Amigo to satisfy its obligations to all stakeholders in the most
equitable way possible and to returning to providing the
opportunity for financial inclusion to the many in society who are
locked out of finance by mainstream providers.
Our cash position remained strong at GBP234.5m as at 30
September 2021 with current unrestricted cash of over GBP260m.
However, Amigo continues to operate within significant financial
constraints, with new lending suspended and a substantial
complaints liability. As a result, without an approved Scheme, the
value of Amigo's assets is less than the amount of its liabilities
and material uncertainty remains regarding Amigo's ability to
continue as a going concern (see note 1 to the financial
statements) .
With the Board actively pursuing a new Scheme, the Directors
consider that it remains appropriate to prepare the financial
statements on a going concern basis. Our future lending proposition
represents an innovative new customer offering, focused on customer
needs and positive outcomes, underpinned by robust lending policies
and processes. However, the continuation of Amigo as a business is
dependent on a successful Scheme outcome, satisfactory resolution
of the FCA investigations and our ability to raise both debt and
equity capital to support the future business.
Financial review
In the first six months to 30 September 2021, the net loan book
reduced by 53.8% to GBP224.1m. Revenue fell by 38.8% year on year
to GBP56.5m, reflecting the pause in lending and loan book
reduction. Customer numbers reduced by 42.0% compared to the prior
year to 102,000. An uplift in the provision for impairment and a
complaints cost of GBP5.3m in the period led to a statutory profit
before tax for the six months to 30 September 2021 of GBP2.1m (H1
2021: loss of GBP62.6m) and a statutory profit after tax of GBP3.3m
(H1 2021: loss of GBP67.9m). Adjusting for non-recurring items
defined in note 4 of the summary financial table, adjusted profit
after tax was GBP2.0m (H1 2021 adjusted loss of GBP58.1m).
Impairment
The impairment charge as a percentage of revenue was 45.8% for
the first half of the financial year (H1 2021: 21.1%). The coverage
ratio (as a percentage of the gross loan book) has increased to
22.5% (H1 2021: 14.0%) which has, in part, contributed to the
higher impairment as a percentage of revenue. The increase to the
coverage ratio is driven by a reforecast of expected credit losses
reflecting an increasing trend in the level of arrears observed in
the period, predominantly but not exclusively, from customers
exiting Covid-19 payment holidays.
Whilst unemployment trends are favourable, inflationary
headwinds may have a significant impact on our customer base.
Significant uncertainty remains in respect of future customer
behaviour as government support measures are fully withdrawn and as
the Amigo Scheme process continues. Further details on the
impairment provision and other key judgements and estimates in the
IFRS 9 impairment model are set out in note 2 to the financial
statements.
Complaints
The Group's original proposal for a Scheme of Arrangement was
not sanctioned following the High Court hearing held on 19 May 2021
despite receiving the support of over 95% of creditors who voted.
Subsequently, the Board continues to pursue a new Scheme. The
approval of an alternative Scheme remains subject to reaching the
key milestones of a second successful creditor vote and High Court
sanctioning. At this point, the Board does not consider there to be
enough certainty to account for claims redress on the basis that a
Scheme will be sanctioned.
Consequently, claims redress is accounted for on the basis that
known and future complaints are settled in full, subject to an
applied uphold rate. This has resulted in a complaints provision of
GBP344.3m as at 30 September 2021. A credit to the provision
recognised in the period due to the lower number of live loans at
30 September 2021, driven both by settlements and by customer
accounts being charged off, was offset by the addition of
compensatory interest that has accrued as time has passed. A
complaints cost of GBP5.3m has been recognised in the period as a
result.
Tax
Whilst the six months ended 30 September 2021 were profitable,
no tax charge has been recognised on profits as the Group has
sufficient deferred tax assets in respect of prior year losses. A
tax credit of GBP1.2m was applied in the period reflecting the
release of a historic tax liability.
Funding
The extension of the securitisation facility performance trigger
waiver period, first negotiated in response to the Covid-19
pandemic, expired on 24 September 2021 and the securitisation
facility was fully repaid in the period. In light of the Group's
immediate funding needs and current unrestricted cash balance, the
Board does not expect the need to operate the securitisation
facility in the near term. The Board intends to keep the
securitisation structure in place to provide more diversity for
future funding options. All rights, obligations and liabilities of
the Lead Arranger, Facility Agent and Senior Noteholder, as defined
in the securitisation Facility Documents, have been assumed by
Amigo.
Net borrowings were GBP2.1m at 30 September 2021 (H1 FY 2021:
(GBP265.5m)) as the loan book continued to be collected while
originations remained suspended. Consequently, unrestricted cash
and cash equivalents as at 30 September 2021 increased to GBP234.5m
(H1 FY 2021: GBP134.2m).
Going concern
The Board has concluded there is a material uncertainty over
going concern. In determining the appropriate basis of preparation
for these interim financial statements, the Board has assessed the
Group and Company's ability to continue as a going concern for a
period of at least twelve months from the date of approval of these
financial statements. Despite material uncertainties, the financial
statements are prepared on a going concern basis which the
Directors believe to be appropriate for the reasons set out in the
Going Concern statement included in note 1 to the financial
statements.
Principal risks and uncertainties
Amigo's business performance is subject to a number of risks and
uncertainties that could materially impact its success. Amigo puts
significant effort into continually improving the way that it
monitors and acts on risks to ensure control, enhance performance
and deliver better customer outcomes. The Board recognises that
opportunities and risks go hand in hand and so it puts time into
understanding which risks are the right ones to take or avoid at
any given time. This section takes a closer look at the risks that
Amigo faces on an ongoing basis.
This has been a difficult period for Amigo with its risk profile
increasing as a result of internal and external drivers. Whilst
controls continue to operate as intended, the survival of our
business is dependent upon the approval of a Scheme of Arrangement
by the UK Courts, the restart of lending and the resolution of the
outstanding FCA enforcement action.
The principal risks and uncertainties are consistent with those
set out in pages 30 to 38 of the annual report and accounts 2021,
which is available on the Company website.
All principal risks and uncertainties are summarised below.
Credit risk
The risk that a counterparty fails to meet its debt obligations
in full and on time. It includes the calculated risks that Amigo
assumes by lending money to a customer and not receiving the owed
principal and interest. This includes:
-- Credit acquisition risk: this risk is inherent to loan
origination and is tied to the credit analysis, where the Group
verifies the customer's capacity, character, cash flow, collateral
(when applies) and conditions to repay the requested loan. A
failure in credit acquisition might result in issues such as very
high delinquency levels, complaints and regulator fines.
-- Credit operation risk (collections/fraud): this risk is
related to the actions taken after the customer fails to make one
or more payments. Our ability and capacity to react to loan
delinquency are primarily controlled through customer contact. A
failure on collections/fraud actions could lead to unexpected
credit losses affecting the Company's profitability.
-- Concentration risk: credit concentrations are viewed as any
exposure where the potential losses are large relative to the
Company's capital, its total assets or, where adequate measures
exist, the Company's overall risk level. Relatively large losses
may reflect not only large exposures, but also the potential for
unusually high percentage losses when in potential default.
The macroeconomic environment over the last two years has been
unprecedented, primarily due to the impact of Covid-19. The low
interest rate environment, reduced business productivity and
closures as well as employee furloughing and redundancy during the
period, have had the effect of increasing demand for credit whilst
firms have tightened their lending policies across the financial
services sector. This has had a significant impact upon the number
of customers requiring forbearance measures and has affected our
credit risk profile.
Amigo has offered a number of relief measures to customers
suffering financial distress, both at the Group's initiative and
following regulatory guidance. As customers have now reached the
end of payment holidays, we are working with them to identify the
appropriate next steps given their personal circumstances. Despite
some increase in arrears from customers exiting payment holidays,
regular cash collections during the period have been at 82% of
pre-Covid-19 projections.
Conduct risk
Conduct risks can arise at each stage of the customer journey
within the Amigo proposition, from product design through to sales
and post-sales servicing. Inappropriate lending practices and
decisions could potentially result in unaffordable debt for Amigo
customers and poor conduct post-sale and could potentially lead to
vulnerable customers and/or those experiencing financial difficulty
not being identified and treated fairly. This includes the risks of
unaffordable lending decisions, a lack of clear customer
expectations and exacerbating persistent debt.
Covid-19 has increased conduct risk as customers have had their
finances disrupted and the regulator has deployed many changes at
short notice in response. Amigo has mitigated this risk by
following regulatory guidance, offering payment holidays where
required and seeking to better understand customer circumstances
and needs.
Amigo has faced a significant volume of complaints and FOS
referrals, driven by dissatisfaction with historical lending
decisions. This has challenged and inhibited both operational and
financial resilience in the period. Whilst all complaints have been
individually assessed, the firm took the difficult but necessary
decision to propose a Scheme of Arrangement to customers. We
believe that this is the best way to ensure that customers receive
fair and equitable redress in the circumstances.
Regulatory and political risk
The risk that the regulatory or political environment will
change in a way adverse to our business. This may be explicit
changes in regulation or legislation or changes in interpretation.
At a minimum, the impact would be the operational burden of
adapting to changing regulation. But where we fail (or have failed)
to adapt to changes, the impact can extend to regulatory action,
potentially including investigation, fines or even loss of
authorisation to operate. It includes regulation or legislation
specific to our product, applying to financial services more
generally, or not specific to our business at all.
There was a lot of regulatory activity during the prior
financial year, including an ongoing FCA investigation into whether
Amigo's creditworthiness assessment process was compliant with
regulatory requirements. The investigation scope was subsequently
amended in March 2021 to include aspects of complaint handling
through this last year. Amigo continues to support the resolution
of this investigation.
Amigo entered into two Voluntary Requirements (VReqs) with the
FCA in the prior financial year:
-- The first relates to customer complaints. On 27 May 2020,
Amigo announced it had agreed to work through a backlog of
complaints principally arising in 2020. Subsequently, on 3 July
2020, we announced that an amended version of the VReq, covering a
higher volume of complaints, had been agreed. Under the terms of
the amended VReq Amigo agreed to reach a position by 30 October
2020 where all complaints are dealt with appropriately within eight
weeks.
At 30 October 2020, Amigo had reviewed and reached a decision on
all of the complaints included within the VReq but had not issued
the final responses to customers on 2,517 of those complaints,
primarily for reasons beyond Amigo's control. The intention is to
address these complaints within the Scheme framework if
sanctioned.
-- The second VReq relates to the transfer of assets and was
announced on 19 October 2020. This Asset VReq means that prior
approval by the FCA will be required to permit the transfer of
assets outside of the Group in certain circumstances, including
discretionary cash payments to the Directors of the Company and
dividends to shareholders. The Asset VReq does not impact the
day-to-day running of Amigo or its ability to continue to pay down
debt.
The FCA opposed Amigo's proposed Scheme of Arrangement at the
previous sanction hearing. As a result of regulatory concerns
relating to the investigation, Scheme and Vreq, Amigo maintains
close and continuous contact with the FCA.
Operational risk
The risk of a loss or negative impact due to inadequate or
failed internal policies, processes or systems or from external
events. Major examples include data security and cyber risk, system
availability, legal risk and failures of process execution. Other
examples can include the risk of financial reporting errors, key
supplier failure, internal fraud, external fraud, Amigo's product
being used for money laundering, or an error in the business'
decisioning models.
Amigo's operational risk includes the risk that it does not have
the human capacity and capability to deliver on its strategy. This
may leave the Company unable to properly service its customers,
leading to customer harm and loss of profitability. It may also
result in the Company being less able to perform key functions.
While Amigo has adapted well to the challenges of Covid-19 and
remote working, the operational risk environment remains elevated,
with reduced in-person interaction and greater reliance on
individuals' home internet service. The continuing rapid pace of
change in the business, driven both by Covid-19 and business model
challenges, also heightens the risk environment, though the
business has a long history of rapid adaptation.
The continuing uncertainty around Amigo's future has kept risk
in this area a key focus for the Board. Despite this, Amigo has
continued to improve the breadth and depth of its senior
management, adding "bench strength" and improving succession
planning.
Strategic and competitive risk
The risk that Amigo fails to achieve its objectives, either due
to actively poor decisions or a failure to adapt to changes in the
competitive environment, leading to reduced revenue, increased
expenses or lost opportunities. This includes the risk of new
competitors and the risks in entering a new geography.
The wider market continues to evolve, with some competitors
having left the space and brokers finding their business models
disrupted. Socio-economic conditions continue to generate
significant demand for responsible consumer credit solutions.
Treasury risk
The risk arising from the core actions of the Treasury function.
A failure to properly manage liquidity could lead to the Company
requiring more expensive funding, reducing profitability, or even
being unable to meet its obligations as they fall due.
The decision to stop lending has left the business cash
generative, but this is significantly offset by Covid-19 and the
requirement for extensive forbearance measures and compounded by
the requirement to pay cash redress on complaints, necessitating a
Scheme of Arrangement. The pause in lending has allowed Amigo to
conserve cash, and the liquidity position is good under baseline
forecasts assuming a new Scheme progresses. Amigo has no material
foreign exchange exposure.
Responsibility statement of the directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the UK;
-- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
Michael Corcoran
Director
29 November 2021
INDEPENT REVIEW REPORT TO THE MEMBERS OF AMIGO HOLDINGS PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2021 which comprises Condensed
Consolidated Statement of Comprehensive Income, Condensed
Consolidated Statement of Financial Position, Condensed
Consolidated Statement of Changes in Equity and Consolidated Cash
flows and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2021 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted for
use in the UK and the Disclosure Guidance and Transparency ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Material uncertainty related to going concern
We draw attention to note 1 to the interim report which
indicates that the ability of the Group to continue as a going
concern is significantly impacted by the severity of the complaints
position and the possibility of further action by the Financial
Conduct Authority. The Board continues to consider a number of
options which it considers represent realistic alternatives to
liquidation including a new scheme of arrangement which would
require positive creditor vote and court approval. These events and
conditions, along with the other matters explained in note 1,
constitute a material uncertainty that may cast significant doubt
on the Group's ability to continue as a going concern. Our opinion
is not modified in respect of this matter.
Emphasis of matter
We draw attention to notes 2.3.2 and 14 to the interim report
concerning the provision for customer complaints. As explained in
those notes, the complaints provision of GBP344m has been estimated
assuming that no scheme is implemented, as there is not sufficient
objective evidence that the future approval of an alternative
Scheme of Arrangement will occur.
The total amount that will ultimately be paid by the Group in
relation to obligations arising from customer complaints is subject
to significant uncertainty and the ultimate cost will be dependent
on several factors, including whether the Company can implement a
Scheme of Arrangement to limit the overall liability to
complainants. Note 2.3.2 discloses the range of reasonably possible
outcomes in respect of this uncertainty.
Our opinion is not modified in respect of this matter.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the latest annual financial statements
of the Group were prepared in accordance with International
Financial Reporting Standards as adopted by the UK and in
accordance with International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006. The directors are responsible for preparing the condensed set
of financial statements included in the half-yearly financial
report in accordance with IAS 34 adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Nicholas Edmonds
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square London
E14 5GL
29 November 2021
Condensed consolidated statement of comprehensive income
for the 6 months to 30 September 2021
6 months 6 months Year to
ended ended
30 Sep 30 Sep 31-Mar-21
21 20
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
---------------------------------------------------- ----- --------- --------- ---------
Revenue 3 56.5 92.3 170.8
Interest payable and funding facility fees 4 (9.8) (15.6) (27.5)
Interest receivable 0.1 - 0.1
Impairment of amounts receivable from customers1 (25.9) (19.5) (60.7)
---------------------------------------------------- ----- --------- --------- ---------
Administrative and other operating expenses (13.5) (22.5) (44.5)
Complaints expense 14 (5.3) (93.7) (318.8)
---------------------------------------------------- ----- --------- --------- ---------
Total operating expenses (18.8) (116.2) (363.3)
Strategic review, formal sale process and related
financing costs 6 - (3.6) (3.0)
---------------------------------------------------- ----- --------- --------- ---------
Profit/(loss) before tax 2.1 (62.6) (283.6)
Tax credit/(charge) on profit/(loss) 7 1.2 (5.3) (5.5)
---------------------------------------------------- ----- --------- --------- ---------
Profit/(loss) and total comprehensive income/(loss)
attributable to equity shareholders of the Group
2 3.3 (67.9) (289.1)
---------------------------------------------------- ----- --------- --------- ---------
The profit/(loss) is derived from continuing activities.
Profit/(loss) per share
---------------------------------------- --- ------ ------
Basic profit/(loss) per share (pence) 80.7 (14.3) (60.8)
Diluted profit/(loss) per share (pence) 80.7 (14.2) (60.8)
---------------------------------------- --- ------ ------
Dividends per share(3) (pence) - - -
---------------------------------------- --- ------ ------
The accompanying notes form part of these financial
statements.
1 This line item includes reversals of impairment losses or
impairment gains, determined in accordance with IFRS 9. In the
period, GBPnil of previously recognised impairment gains were
reversed primarily due to the recognition of the expected cost to
repurchase charged off loans previously sold to a third party (H1
2021: GBP0.7m reversal of impairment gains).
2 There was less than GBP0.1m of other comprehensive income
during this period and any other period, and hence no consolidated
statement of other comprehensive income is presented.
3 On 19 October 2020 Amigo announced that it had entered into an
Asset Voluntary Requirement with the Financial Conduct Authority
(FCA), meaning prior approval by the FCA is required to permit the
transfer of assets outside of the Group in certain circumstances,
including dividends to shareholders.
Condensed consolidated statement of financial position
as at 30 September 2021
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
------------------------------------------ ----- --------- --------- -------
Non-current assets
Customer loans and receivables 9 48.6 220.3 125.5
Property, plant and equipment 0.7 1.4 1.1
Right-of-use lease assets 0.9 1.1 1.0
50.2 222.8 127.6
------------------------------------------ ----- --------- --------- -------
Current assets
Customer loans and receivables 9 181.4 280.5 225.1
Other receivables 11 2.0 1.3 1.6
Current tax assets 0.6 26.7 -
Derivative asset - - 0.1
Cash and cash equivalents (restricted)(1) 2.0 9.5 6.3
Cash and cash equivalents 234.5 134.2 177.9
------------------------------------------ ----- --------- --------- -------
420.5 452.2 411.0
------------------------------------------ ----- --------- --------- -------
Total assets 470.7 675.0 538.6
------------------------------------------ ----- --------- --------- -------
Current liabilities
Trade and other payables 12 (10.6) (15.3) (15.9)
Borrowings 13 - - (64.4)
Lease liabilities (0.3) (0.3) (0.3)
Complaints provision 14 (344.3) (148.1) (344.6)
Restructuring provision 14 - - (1.0)
Current tax liabilities - - (0.8)
------------------------------------------ ----- --------- --------- -------
(355.2) (163.7) (427.0)
------------------------------------------ ----- --------- --------- -------
Non-current liabilities
Borrowings 13 (232.4) (399.7) (232.1)
Lease liabilities (0.7) (1.0) (0.9)
Complaints provision 14 - (11.0) -
------------------------------------------ ----- --------- --------- -------
(233.1) (411.7) (233.0)
------------------------------------------ ----- --------- --------- -------
Total liabilities (588.3) (575.4) (660.0)
------------------------------------------ ----- --------- --------- -------
Net (liabilities)/assets (117.6) 99.6 (121.4)
------------------------------------------ ----- --------- --------- -------
Equity
Share capital 15 1.2 1.2 1.2
Share premium 207.9 207.9 207.9
Merger reserve (295.2) (295.2) (295.2)
Retained earnings (31.5) 185.7 (35.3)
------------------------------------------ ----- --------- --------- -------
Shareholder equity (117.6) 99.6 (121.4)
------------------------------------------ ----- --------- --------- -------
The accompanying notes form part of these financial
statements.
(1) Cash and cash equivalents (restricted) materially relates to
restricted cash held for settlement of complaints, in HY21 and year
end restricted cash and cash equivalents materially related to cash
held in the AMGO Funding (No.1) Ltd bank account due to the
requirement under the waiver on the securitisation facility to use
collection from securitised assets to reduce the outstanding
facility balance.
The interim financial statements of Amigo Holdings PLC were
approved and authorised for issue by the Board and were signed on
its behalf by:
Michael Corcoran
Director
29 November 2021
Company no. 10024479
Condensed consolidated statement of changes in equity
for the 6 months to 30 September 2021
Share Share Merger Retained Total
capital premium reserve(1) earnings equity
GBPm GBPm GBPm GBPm GBPm
--------------------------- ------- ------- ---------- -------- -------
At 31 March 2020 1.2 207.9 (295.2) 253.5 167.4
Total comprehensive loss - - - (67.9) (67.9)
Share-based payments - - - 0.1 0.1
--------------------------- ------- ------- ---------- -------- -------
At 30 September 2020 1.2 207.9 (295.2) 185.7 99.6
Total comprehensive loss - - - (221.3) (221.3)
Share-based payments - - - 0.3 0.3
At 31 March 2021 1.2 207.9 (295.2) (35.3) (121.4)
Total comprehensive income - - - 3.3 3.3
Share-based payments - - - 0.5 0.5
--------------------------- ------- ------- ---------- -------- -------
At 30 September 2021 1.2 207.9 (295.2) (31.5) (117.6)
--------------------------- ------- ------- ---------- -------- -------
The accompanying notes form part of these financial
statements.
1 The merger reserve was created as a result of a Group
reorganisation in 2017 to create an appropriate holding company
structure. The restructure was within a wholly owned group,
constituting a common control transaction.
Condensed consolidated statement of cash flows
for the 6 months to 30 September 2021
6 months 6 months Year
to to to
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
GBPm GBPm GBPm
--------------------------------------------------------- --------- --------- --------
Profit/(loss) for the period 3.3 (67.9) (289.1)
Adjustments for:
Impairment expense 25.9 19.5 60.7
Complaints expense 5.3 93.7 318.8
Restructuring provision - - 1.0
Tax (credit)/charge (1.2) 5.3 5.5
Interest expense 9.8 15.6 27.5
Interest receivable (0.1) - (0.1)
Interest recognised on loan book (59.8) (98.6) (185.3)
Share-based payment 0.5 0.1 0.3
Depreciation of property, plant and equipment 0.2 0.5 1.1
--------------------------------------------------------- --------- --------- --------
Operating cash flows before movements in working capital (16.1) (31.8) (59.6)
--------------------------------------------------------- --------- --------- --------
(Increase)/decrease in receivables (0.2) 0.1 (0.9)
(Decrease)/increase in payables (6.0) 2.0 (0.3)
Complaints cash expense (4.8) (35.4) (64.6)
Tax refunds/(tax paid) - (3.7) 23.6
Interest paid (9.7) (12.0) (22.8)
Net cash (used in) operating activities before loans
issued and collections on loans (36.8) (80.8) (124.6)
--------------------------------------------------------- --------- --------- --------
Loans issued - (0.4) (0.4)
Collections 149.9 221.1 402.5
Other loan book movements (0.4) (1.4) (0.6)
Decrease in deferred brokers' costs 3.8 4.9 10.8
--------------------------------------------------------- --------- --------- --------
Net cash from operating activities 116.5 143.4 287.7
--------------------------------------------------------- --------- --------- --------
Investing activities
(Disposals)/purchases of property, plant and equipment 0.3 (0.3) (0.5)
--------------------------------------------------------- --------- --------- --------
Net cash from/(used in) investing activities 0.3 (0.3) (0.5)
--------------------------------------------------------- --------- --------- --------
Financing activities
Lease principal payments (0.1) (0.1) (0.2)
Cash held for repayment of borrowings - (9.5) -
Repayment of external funding (64.4) (63.6) (167.2)
--------------------------------------------------------- --------- --------- --------
Net cash (used in) financing activities (64.5) (73.2) (167.4)
--------------------------------------------------------- --------- --------- --------
Net increase in cash and cash equivalents 52.3 69.9 119.8
Effects of movement in foreign exchange - - 0.1
Cash and cash equivalents at beginning of period 184.2 64.3 64.3
--------------------------------------------------------- --------- --------- --------
Cash and cash equivalents at end of period 236.5(1) 134.2 184.2(1)
--------------------------------------------------------- --------- --------- --------
The accompanying notes form part of these financial
statements.
1 30 September 2021 and 31 March 2021 total cash is inclusive of
GBP2.0m and GBP6.3m restricted cash respectively.
Notes to the condensed consolidated financial statements
1. Accounting policies
1.1 Basis of preparation of financial statements
Amigo Holdings PLC is a public company limited by shares
(following IPO on 4 July 2018), listed on the London Stock
Exchange
(LSE: AMGO). The Company is incorporated and domiciled in
England and Wales and its registered office is Nova Building,
118-
128 Commercial Road, Bournemouth, United Kingdom BH2 5LT.
The principal activity of the Company is to act as a holding
company for the Amigo Loans Group of companies. The "principal"
activity of the Amigo Loans Group is to provide individuals with
guarantor loans from GBP2,000 to GBP10,000 over one to five
years.
These interim financial statements have been prepared fully in
accordance with IAS 34 Interim Financial Reporting in
conformity with the requirements of the Companies Act 2006. They
do not include all the information required for full annual
financial statements and should be read in conjunction with the
consolidated financial statements of Amigo Holdings PLC (the
'Group') as at and for the year ended 31 March 2021.
These consolidated Group financial statements have been prepared
on a going concern basis and approved by the Directors in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and these
Group and Company financial statements were also in accordance
with International Financial Reporting Standards as adopted
by the UK. There has been no departure from the required IFRS
standards.
The consolidated financial statements have been prepared under
the historical cost convention, except for financial
instruments
measured at amortised cost or fair value.
The presentational currency of the Group is GBP, the functional
currency of the Company is GBP and these financial statements
are presented in GBP. All values are stated in GBP million
(GBPm) except where otherwise stated.
The interim financial statements have been prepared applying the
accounting policies and presentation that were applied in the
preparation of the Company's published consolidated annual
report for the year ended 31 March 2021. Changes to significant
accounting policies are described in notes 1.2 and 2.
The consolidated financial statements of the Group as at and for
the year ended 31 March 2021 are available upon request from
the Company's registered office at Nova Building, 118-128
Commercial Road, Bournemouth, United Kingdom, BH2 5LT.
The comparative figures for the financial year ended 31 March
2021 are not the Group's statutory accounts for that financial
year, but are an extract from those statutory accounts for
interim reporting. Those accounts have been reported on by the
Company's auditor and delivered to the registrar of companies.
The report of the auditor:
i) drew attention to the material uncertainty related to going
concern referenced in the financial statements;
ii) drew attention to the provision for customer complaints,
estimated assuming that no Scheme is implemented, by
way of emphasis of matter without qualifying their report (see
notes 1 and 14); and
iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
These interim financial statements were approved by the Board of
Directors on 29 November 2021.
Going concern
In determining the appropriate basis of preparation for these
financial statements, the Board has assessed the Group and
Company's ability to continue as a going concern for a period of at
least twelve months from the date of approval of these financial
statements. The financial statements are prepared on a going
concern basis which the directors believe to be appropriate for the
reasons outlined below.
Following the ruling on 25 May 2021 in which the High Court did
not approve the proposed Scheme of Arrangement despite the positive
creditors vote, the Board continues to consider all options for the
Group. The Board believes that under all reasonably possible
scenarios, without an appropriate Scheme of Arrangement to deal
with the complaints liability, the expected volumes of complaints
from current and past customers would exhaust the Group's available
liquid resources; leaving the Group with insufficient liquid
resources to repay its non-current borrowings as they fall due in
January 2024.
Accounting standards require an entity to prepare financial
statements on a going concern basis unless the Board either intends
to liquidate the entity or to cease trading or has no realistic
alternative but to do so.
At the date of approval of these financial statements, the Board
continues to actively pursue options which represent realistic
alternatives to liquidation or the cessation of trade. These
options have been thoroughly considered and on 28 September 2021,
Amigo submitted a new Scheme proposal, along with its future
business plan, to the FCA and an independent customer committee
('ICC'). On 12 November 2021, Amigo submitted its final offer to
the ICC. The final offer incorporates two options which reflect the
feedback received from the ICC that their preference is for a
cash-based payment rather than one that comprises either a share in
future profits or a transfer of equity to creditors. The first
option, the 'New Business Scheme' is contingent on new lending
restarting and Amigo completing a successful equity raise. The
second is a managed wind down of the Amigo Loans Ltd business under
a Scheme framework, this scenario also includes new lending. It is
the Board's view that the 'New Business Scheme' will provide
redress creditors with more value and a more certain outcome. Both
options will be submitted to the Court for sanction at the same
time. If the judge does not sanction the 'New Business Scheme', the
judge will then be asked to sanction the wind down Scheme at the
same hearing. Furthermore, if the conditions precedent are not met
for the 'New Business Scheme', i.e. relending and an equity raise,
then the managed wind-down is the fallback solution. As such, a
rigorous assessment and modelling of financial projections have
been undertaken based on the range of possible scenarios;
-- a base scenario representing the 'New Business Scheme';
-- a severe but plausible downside scenario. Assumptions are
consistent with the base scenario but has liquidity stresses
applied to reflect principle risks;
-- a managed wind down of Amigo Loans Ltd within a Scheme
framework, whereby cash redress is made available to creditors from
the residual stressed collections of the existing loan book
following repayment of the senior secured notes; and
-- a non-Scheme scenario, in which neither the 'New Business
Scheme' or a managed wind-down is sanctioned by the High Court. As
noted above, in such a scenario, the Directors believe the expected
volumes of complaints from current and past customers would exhaust
the Group's available liquid resources; leaving the Group with
insufficient liquid resources to repay its non-current secured
borrowings as they fall due in January 2024.
Funding
The going concern assessment considers the Group's projected
liquidity position from existing committed financing facilities
throughout the forecast period. The Group is funded through
GBP234.1m of senior secured notes and held an unrestricted cash
balance of GBP234.5m as at 30 September 2021.
Base 'New Business Scheme' scenario
Following the High Court non-sanctioning of Amigo's original
proposed Scheme of Arrangement in May 2021, the Board continues to
pursue a new Scheme to address the complaints liability and to
address the concerns highlighted by the Judge at the original
sanction hearing. This included forming an Independent Customer
Committee to ensure the voice of the customer is heard and to
provide redress creditors with the opportunity to help shape a new
Scheme.
The 'New Business Scheme' projections are derived using the
Group's business planning tools with key judgements and assumptions
applied. These assumptions are listed below:
-- the 'New business Scheme' is approved by the High Court,
contingent on the resumption of new lending and Amigo completing a
successful equity raise. This would limit the cash redress
liability in respect of upheld customer complaints within a
Scheme
-- complaints volumes and uphold rates within a Scheme are
consistent with the assumptions that underpin the complaints
provision reported in the financial statements for half year
September 2021
-- write downs of customer balances in respect of upheld
customer complaints are also consistent with the redress
assumptions in the complaints provision, but adjusted to reflect
the passage of time
-- the FCA grants approval for the Group to recommence lending
and lending recommences within the period, albeit at significantly
reduced levels compared with pre-Covid-19 originations
-- credit losses, and therefore customer collections, remain in line with recent trends
This scenario indicates that the Group will have sufficient
funds to enable it to operate within its available facilities and
settle its liabilities as they fall due for at least the next
twelve months.
Severe but plausible downside 'New Business Scheme' scenario
The Directors have prepared a severe but plausible downside 'New
Business Scheme' scenario covering the same forecast period, being
at least the next twelve months from the date of approval of these
financial statements. This scenario is consistent with the base
scenario with the application of liquidity sensitives that consider
the potential impact of:
-- An increased uphold rate in respect of all claims within a
Scheme. Whilst this sensitivity does not increase the cash
liability which is assumed to be capped in the 'New Business
Scheme', the number of customers receiving balance write downs will
increase, thus impairing the recoverability of the loan book,
reducing future collections and stressing the Group's liquidity
position; and
-- increased credit losses as a result of any deterioration in
the macroeconomy due to Covid-19 and the inability of an increased
number of the Group's customers to continue to make payments.
This severe but plausible downside Scheme scenario indicates
that the Group's available liquidity headroom would reduce but it
would still have sufficient funds to enable it to operate within
its available facilities and settle its liabilities as they fall
due for at least the next twelve months.
Managed wind-down scenario
The directors have prepared a managed wind-down scenario
covering the same forecast period, being at least the next twelve
months from the date of approval of these financial statements,
which assumes the High Court doesn't sanction the 'New Business
Scheme' in the first instance but approves a managed wind down of
the Amigo Loans Ltd business under a Scheme framework. A Managed
wind-down under a Scheme framework would require a positive
creditor vote and High Court sanction, it is not contingent on an
equity raise or relending as the 'New Business Scheme' is.
Therefore, it remains the fallback solution if the conditions
precedent in the 'New Business Scheme' are not met. The key
assumptions modelled are explained below:
-- a 'Managed wind-down' is approved by the High Court, this is
within a Scheme framework. The cash redress liability in respect of
upheld customer complaints is deferred until the completion of
winding down Amigo Loans LTD. The quantum of redress for creditors
is therefore contingent on the collect-out of the book
-- complaints volumes and uphold rates within a Scheme are
consistent with the assumptions that underpin the complaints
provision reported in the financial statements for half year
September 2021
-- write downs of customer balances in respect of upheld
customer complaints are also consistent with the redress
assumptions in the complaints provision, but adjusted to reflect
the passage of time
-- although the managed wind-down is not contingent on lending
recommencing, the modelling does assume relending recommences in an
entity outside of Amigo Loans LTD, which would require FCA
approval, albeit at significantly reduced levels compared with
pre-Covid-19 originations
-- additional stress has been applied to the collections of the back-back
-- no equity raise or additional funding has been modelled
-- credit losses, and therefore customer collections, remain in line with recent trends
-- Any creditor dividends from the wind-down of Amigo Loans LTD
occur at the end of the collect out of back-book
This managed wind-down scenario indicates that the Group's
available liquidity headroom would reduce but it would still have
sufficient funds to enable it to operate within its available
facilities and settle its liabilities as they fall due for at least
the next twelve months, even if lending does not recommence in the
period.
No scheme scenario
The Board recognises that the proposed Schemes of Arrangement
such as those considered in the modelled scenarios require a second
positive creditor vote and High Court sanction. The 'New business
Scheme' is also contingent on approval of new lending and a
sufficient equity raise. All outcomes remain uncertain and outside
the direct control of the Group. In a scenario where this is not
achieved and cash redress to customers is not capped by the terms
of a Scheme the Board believes the expected volume of complaints
from current and past customers would exhaust the Group's available
liquid resources; leaving the Group with insufficient liquid
resources to repay its non-current borrowings as they fall due in
January 2024. This is reflected in the Group's Consolidated
Statement of Financial Position, which includes a complaints
provision based on the best estimate of the full settlement of all
current and future complaints. In such circumstances the Board
believes that there would be no realistic alternative other than to
enter a formal insolvency process.
FCA investigation
Additionally, in June 2020, the Financial Conduct Authority
(FCA) launched an investigation into the Group's creditworthiness
assessment process, and the governance and oversight of this
process. This investigation will cover the period from 1 November
2018 to date. Such investigations can take up to two years to
finalise, the current investigation is due to hit this milestone in
June 2022 and is still ongoing. The potential impact of the
investigation on the business is extremely difficult to predict and
quantify, and hence the potential adverse impact of the
investigation has been considered separately and not included in
the scenarios laid out above. There are several potential outcomes
which may result from the FCA investigation, including the
imposition of a significant fine and/or the requirement to perform
a mandatory back-book remediation exercise.
The Directors consider that should they be required to perform a
back-book remediation exercise it could reasonably be expected to
exhaust the Group's available liquid resources. Additionally, other
lesser but still significant adverse outcomes could significantly
reduce the Group's available liquidity headroom and thus the Group
would need to source additional financing to maintain adequate
liquidity and to continue to operate.
Conclusion
The Board continues to actively pursue options which represent
realistic alternatives to liquidation or the cessation of trade.
The Board believes that there is a reasonable basis to conclude
that the 'New Business Scheme' will be able to address concerns
raised by the High Court and the FCA. In each of the modelled
scenarios the financial projections indicate that the Group will
have sufficient funds to enable it to operate within its available
facilities and settle its liabilities as they fall due for at least
the next twelve months. Whilst the 'New Business Scheme' remains
the Board's preferred option, the fall back option of a Managed
Wind-down Scheme also presents a realistic alternative to
liquidation or cessation of trade for both the Bond Group and PLC
Group. Accordingly, the Directors believe that it remains
appropriate to prepare the financial statements on a going concern
basis.
The Board also recognises that at the date of approval of these
financial statements significant uncertainty remains over the
potential 'New Business Scheme' and the Managed Wind-Down Scheme,
both of which require a further positive creditor vote and High
Court sanction both of which are outside the control of the Group,
the 'New Business Scheme' is also contingent on approval of new
lending and a successful equity raise. These circumstances
represent a material uncertainty that may cast significant doubt on
the Group's ability to continue as a going concern and, therefore,
to continue realising its assets and discharging its liabilities in
the normal course of business. The financial statements do not
include any adjustments that would result from the basis of
preparation not being appropriate.
1.2 Amounts receivable from customers
i) Classification
IFRS 9 requires a classification and measurement approach for
financial assets which reflects how the assets are managed and
their cash flow characteristics. IFRS 9 includes three
classification categories for financial assets: measured at
amortised cost, fair value through other comprehensive income
(FVOCI) and fair value through profit and loss (FVTPL). Note, the
Group does not hold any financial assets that are equity
investments; hence the below considerations of classification and
measurement only apply to financial assets that are debt
instruments. A financial asset is measured at amortised cost if it
meets both of the following conditions (and is not designated as
FVTPL):
-- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest (SPPI) on the
principal amount outstanding.
Business model assessment
In the assessment of the objective of a business model, the
information considered includes:
-- the stated policies and objectives for the loan book and the
operation of those policies in practice, in particular whether
management's strategy focuses on earning contractual interest
revenue, maintaining a particular interest rate profile, matching
the duration of the financial assets to the duration of the
liabilities that are funding those assets or realising cash flows
through the sale of the assets;
-- how the performance of the loan book is evaluated and reported to the Group's management;
-- the risks that affect the performance of the business model
(and the financial assets held within that business model) and its
strategy for how those risks are managed;
-- how managers of the business are compensated (e.g. whether
compensation is based on the fair value of the assets managed or
the contractual cash flows collected); and
-- the frequency, volume and timing of debt sales in prior
periods, the reasons for such sales and the Group's expectations
about future sales activity. However, information about sales
activity is not considered in isolation, but as part of an overall
assessment of how the Group's stated objective for managing the
financial assets is achieved and how cash flows are realised.
The Group's business comprises primarily loans to customers that
are held for collecting contractual cash flows. Debt sales of
charged off assets are not indicative of the overall business model
of the Group. The business model's main objective is to hold assets
to collect contractual cash flows.
Assessment of whether contractual cash flows are solely payments
of principal and interest
For the purposes of this assessment, "principal" is defined as
the fair value of the financial asset on initial recognition.
"Interest" is defined as consideration for the time value of money
and for the credit risk associated with the principal amount
outstanding during a particular period of time, as well as profit
margin.
In assessing whether the contractual cash flows are solely
payments of principal and interest (SPPI), the Group considers the
contractual terms of the instrument.
This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of
contractual cash flows such that it would not meet this condition.
The Group has deemed that the contractual cash flows are SPPI and
hence, loans to customers are measured at amortised cost under IFRS
9.
ii) Impairment
IFRS 9 includes a forward-looking "expected credit loss" (ECL)
model in regards to impairment. IFRS 9 requires an impairment
provision to be recognised on origination of a financial asset.
Under IFRS 9, a provision is made against all stage 1 (defined
below) financial assets to reflect the expected credit losses from
default events within the next twelve months. The application of
lifetime expected credit losses to assets which have experienced a
significant increase in credit risk results in an uplift to the
impairment provision.
iii) Measurement of ECLs
Under IFRS 9 financial assets fall into one of three
categories:
Stage 1 - financial assets which have not experienced a
"significant" increase in credit risk since initial
recognition;
Stage 2 - financial assets that are considered to have
experienced a "significant" increase in credit risk since initial
recognition; and
Stage 3 - financial assets which are in default or otherwise
credit impaired.
Loss allowances for stage 1 financial assets are based on twelve
month ECLs; that is the portion of ECLs that result from default
events that are estimated within twelve months of the reporting
date and are recognised from the date of asset origination. Loss
allowances for stage 2 and 3 financial assets are based on lifetime
ECLs, which are the ECLs that result from all default events over
the expected life of a financial instrument.
In substance the borrower and the guarantor of each financial
asset have equivalent responsibilities. Hence for each loan there
are two obligors to which the entity has equal recourse. This dual
borrower nature of the product is a key consideration in
determining the staging and the recoverability of an asset.
The Group performs separate credit and affordability assessments
on both the borrower and guarantor. After having passed an initial
credit assessment, most borrowers and all guarantors are contacted
by phone and each is assessed for their creditworthiness and
ability to afford the loan. In addition, the guarantor's roles and
responsibilities are clearly explained and recorded. This is to
ensure that while the borrower is primarily responsible for making
the repayments, both the borrower and the guarantor are clear about
their obligations and are also capable of repaying the loan.
When a borrower misses a payment, both parties are kept informed
regarding the remediation of the arrears. If a missed payment is
not remediated within a certain timeframe, collection efforts are
switched to the guarantor and if arrears are cleared the loan is
considered performing.
The Covid-19 pandemic presents significant economic uncertainty.
The Group assessed that its key sensitivity was in relation to
expected credit losses on customer loans and receivables.
Given the significant uncertainty around the duration and
severity of the impact of the pandemic on the macroeconomy the
Group modelled a matrix of nine scenarios consisting of three
durations (three, six and twelve months) and three severities
(moderate, high and extremely high) has been modelled. Refer to
note 2.1.1 for further detail on the judgements and estimates used
in the measurement of ECLs and note 2.1.3 for detail on impact of
forward-looking information on the measurement of ECLs.
iv) Assessment of significant increase in credit risk (SICR)
In determining whether the credit risk (i.e. risk of default) of
a financial instrument has increased significantly since initial
recognition, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort, including both quantitative and qualitative information and
analysis.
The qualitative customer data used in this assessment is payment
status flags, which occur in specific circumstances such as a
short-term payment plans, breathing space or other indicators of a
change in a customer's circumstances. See note 2.1.2 for details of
how payment status flags are linked to staging, and judgements on
what signifies a significant increase in credit risk.
The Group has offered payment holidays to customers in response
to Covid-19. These measures were introduced on 31 March 2020, the
offering of these payment holidays concluded in March 2021. The
granting of a payment holiday, or the extension of a payment
holiday at the customer's request, does not automatically trigger a
significant increase in credit risk.
Customers granted payment holidays are assessed for other
indicators of SICR and are classified as stage 2 if other
indicators of a SICR are present. This is in line with guidance
issued by the International Accounting Standards Board (IASB) and
Prudential Regulation Authority (PRA) which noted that the
extension of government-endorsed payment holidays to all borrowers
in particular classes of financial instruments should not
automatically result in all those instruments being considered to
have suffered a significant increase in credit risk. At the time a
customer requests an extension to a payment holiday, the Group has
no additional information available than was present at the
original grant date for which to make an alternative assessment
over whether there has been a significant increase in credit risk;
extensions are granted on request. See note 2.1.2 for further
detail on SICR considerations for Covid-19 payment holidays and
note 2.4 for judgements and estimates applied by the Group on the
calculation of a modification loss resulting from the granting of
these payment holidays. As at 30 September 2021, the Group has been
able to analyse the initial data relating to customer behaviour and
payment patterns now these payment holidays have finished.
v) Derecognition
Historically, the Group offered, to certain borrowers, the
option to top up existing loans subject to internal eligibility
criteria and customer affordability. The Group pays out the
difference between the customer's remaining outstanding balance and
the new loan amount at the date of top-up. The Group considers a
top-up to be a derecognition event for the purposes of IFRS 9 on
the basis that a new contractual agreement is entered into by the
customer replacing the legacy agreement.
The borrower and guarantor are both fully underwritten at the
point of top-up and the borrower may use a different guarantor from
the original agreement when topping up.
vi) Modification
Aside from top-ups and Covid-19 payment holidays, no formal
modifications are offered to customers. In some instances,
forbearance measures are offered to customers. These are not
permanent measures; there are no changes to the customer's contract
and the measures do not meet derecognition or modification
requirements. See policy 1.11.1 in the Group's annual report and
accounts 2021 for more details on the Group's accounting policies
for modification of financial assets.
vii) Definition of default
The Group considers an account to be in default if it is more
than three contractual payments past due, i.e. greater than 61
days, which is a more prudent approach than the rebuttable
presumption in IFRS 9 of 90 days and has been adopted to align with
internal operational procedures. The Group reassesses the status of
loans at each month end on a collective basis. When the arrears
status of an asset improves so that it no longer meets the default
criteria for that portfolio, it is immediately cured and
transitions back from stage 3 within the Group's impairment
model.
viii) Forbearance
Where the borrower indicates to the Group that they are unable
to bring the account up to date, informal, temporary forbearance
measures may be offered. There are no changes to the customer's
contract at any stage. Therefore, with the exception of Covid-19
payment holidays, these changes are neither modification nor
derecognition events. Depending on the forbearance measure offered,
an operational flag will be added to the customer's account, which
may indicate significant increase in credit risk and trigger
movement of this balance from stage 1 to stage 2 in impairment
calculation. See note 2.1.2 for further details.
Throughout the Covid-19 pandemic, payment holidays have been
offered to all customers who indicated to the Group they were
experiencing potential payment difficulties and concluded March
2021. The granting of these payment holidays has been treated as
non-substantial modification events. See note 2.4.1 for more
details.
2. Critical accounting assumptions and key sources of estimation
uncertainty
Preparation of the financial statements requires management to
make significant judgements and estimates.
Judgements
The preparation of the condensed consolidated Group financial
statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the reported
amounts of assets and liabilities at the consolidated statement of
financial position date and the reported amounts of income and
expenses during the reporting period. The most significant uses of
judgements and estimates are explained in more detail in the
following sections:
-- IFRS 9 - measurement of ECLs:
-- Assessing whether the credit risk of an instrument has
increased significantly since initial recognition (note 2.1.2).
-- Definition of default is considered by the Group to be when
an account is three contractual payments past due (note
1.2.vii).
-- Multiple economic scenarios - the probability weighting of
nine scenarios to the ECL calculation (note 2.1.3).
-- IFRS 9 - modification of financial assets:
-- Assessment of Covid-19 payment holidays as a non-substantial modification (note 2.4.1).
-- Assessment of whether a modification loss is an indicator of
a significant increase in credit risk (note 2.4.2).
-- Complaints provisions:
-- Judgement is involved in determining whether a present
constructive obligation exists and in estimating the probability,
timing and amount of any outflows (note 2.3.2) .
-- Following the ruling on 24 May 2021 in which the High Court
did not approve the proposed Scheme of Arrangement despite the
overwhelmingly positive creditors' vote, the Board continues to
consider all options for the Group, including a potential
alternative Scheme of Arrangement. Significant judgement is applied
in determining if there is sufficient certainty over the potential
outcome of the Scheme to estimate the future complaints redress
liabilities on the basis of a successful Scheme outcome (note
2.3.1).
-- Going concern:
-- Judgement is applied in determining if there is a reasonable
expectation that the Group adopts the going concern basis in
preparing these financial statements (note 1.1).
-- IAS 1 requires the preparation of financial statements on a
going concern basis unless the Board either intends to liquidate
the entity or to cease trading or has no realistic alternative but
to do so. At the date of approval of these interim financial
statements, the Board continues to consider a number of options,
including a potential other Scheme of Arrangement, which represent
realistic alternatives to liquidation or the cessation of trade.
Hence, it has been deemed there is a reasonable expectation that
the Group is a going concern. However, due to significant
uncertainty around terms of a potential new Scheme and whether it
would be sanctioned by the High Court, there is a material
uncertainty that may cast significant doubt on the Group's ability
to continue as a going concern.
Estimates
Areas which include a degree of estimation uncertainty are:
-- IFRS 9 - measurement of ECLs:
-- Adopting a collective basis for measurement in calculation of
ECLs in IFRS 9 calculations (note 2.1.1).
-- Probability of default (PD), exposure at default (EAD) and
loss given default (LGD) (note 2.1.1).
-- Forward-looking information incorporated into the measurement of ECLs (note 2.1.3).
-- Incorporating a probability weighted estimate of external
macroeconomic factors into the measurement of ECLs (note
2.1.3).
-- IFRS 9 - modification of financial assets:
-- Estimating the change in net present value of the projected
future cashflows arising from Covid-19 payment holidays on a cohort
basis (note 2.4.2).
-- Estimating expected Covid-19 payment holiday duration (note 2.4.2).
-- Estimating the change in net present value of projected
future cash flows arising upon payment holiday extensions (note
2.4.2).
-- Complaints provisions:
-- Calculation of provisions involves management's best estimate
of expected future outflows, the calculation of which evaluates
current and historical data, and assumptions and expectations of
future outcomes (note 2.3.2).
-- Effective interest rate (note 2.2):
-- Calculation of the effective interest rate includes
estimation of the average behavioural life of the loans and the
profile of the loan payments over this period (note 2.2).
-- Carrying amount of current and deferred taxation assets and liabilities
-- The current uncertainty over the Group's future profitability
means that it is no longer considered probable that future taxable
profits will be available against which to recognise deferred tax
assets. No tax assets have been recognised in respect of losses in
the current period (note 7).
2.1 Credit impairment
2.1.1 Measurement of ECLs
The Group has adopted a collective basis of measurement for
calculating ECLs. The loan book is divided into portfolios of
assets with shared risk characteristics including whether the loan
is new business, repeat lending or part of a lending pilot as well
as considering if the customer is a homeowner or not. These
portfolios of assets are further divided by contractual term and
monthly origination vintages.
The allowance for ECLs is calculated using three components: a
probability of default (PD), a loss given default (LGD) and the
exposure at default (EAD). The ECL is calculated by multiplying the
PD (twelve month or lifetime depending on the staging of the loan),
LGD and EAD. The result of the ECL calculation is then discounted
to reflect the time value of money, the period discounted involves
an estimated time taken to default to the reporting date which
remains uncertain in nature.
The twelve month and lifetime PDs represent the probability of a
default occurring over the next twelve months or the lifetime of
the financial instruments, respectively, based on historical data
and assumptions and expectations of future economic conditions.
EAD represents the expected balance at default, considering the
repayment of principal and interest from the balance sheet date to
the default date. LGD is an estimate of the loss arising in the
case where a default occurs at a given time. It is based on the
difference between the contractual cash flows due and those that
the Group expects to receive.
The Group assesses the impact of forward-looking information on
its measurement of ECLs. The Group has analysed the effect of a
range of economic factors and identified the most significant
macroeconomic factor that is likely to impact credit losses as the
rate of unemployment.
Given the significant uncertainty around the duration and
severity of the Covid-19 pandemic on the macroeconomy a matrix of
nine scenarios consisting of three durations (three, six and twelve
months) and three severities (moderate, high and extremely high)
has been modelled and probability weighted to determine the ECL
provision (see note 2.1.3).
2.1.2 Assessment of significant increase in credit risk
(SICR)
To determine whether there has been a significant increase in
credit risk the following two step approach has been taken:
1) The primary indicator of whether a significant increase in
credit risk has occurred for an asset is determined by considering
the presence of certain payment status flags on a customer's
account. This is the Group's primary qualitative criteria
considered in the assessment of whether there has been a
significant increase in credit risk.
If a relevant operational flag is deemed a trigger indicating
the remaining lifetime probability of default has increased
significantly, the Group considers the credit risk of an asset to
have increased significantly since initial recognition. Examples of
this include operational flags for specific circumstances such as
short-term payment plans and breathing space granted to
customers.
2) As a backstop, the Group considers that a significant
increase in credit risk occurs no later than when an asset is two
contractual payments past due (equivalent to 30 days), in line with
the rebuttable presumption in IFRS 9 that credit risk has
significantly increased if contractual payments are more than 30
days past due. This is the primary quantitative information
considered by the Group in a significant increase in credit risk
assessments.
The Group reassesses the flag status of all loans at each month
end and remeasures the proportion of the book which has
demonstrated a significant increase in credit risk based on the
latest payment flag data. An account transitions from stage 2 to
stage 1 immediately when a payment flag is removed from the
account. Each quarter a flag governance meeting is held, to review
operational changes which may impact the use of operational flags
in the assessment of a significant increase in credit risk.
The Group has offered payment holidays to customers in response
to Covid-19; at the date a payment holiday is granted, the arrears
status of the loan is passed for the duration of the payment
holiday up to a maximum of six months. In normal circumstances, a
customer's request for a payment holiday (i.e. breathing space)
would trigger a SICR in line with the Group's payment status flag
approach to staging, however the granting of exceptional payment
holidays in response to Covid-19 does not automatically trigger a
significant increase in credit risk.
2.1.3 Forward-looking information
The Group assesses the impact of forward-looking information on
its measurement of ECLs. The Group has analysed the effect of a
range of economic factors and identified the most significant
macroeconomic factor that is likely to impact credit losses as the
rate of unemployment.
The Group has modelled a range of economic shock scenarios to
estimate the impact of a spike in unemployment as a result of the
Covid-19 pandemic. In doing so, consideration has also been given
to the potential impact of deep fiscal and monetary support
measures that have been implemented by the government to support
the economy during this time. Given the lack of reliable external
information the range of scenarios include a variety of both
severities and durations which are probability weighted. In
response to the significant uncertainty around the duration and
severity of the pandemic on the macroeconomy a matrix of nine
scenarios has been modelled. The probability weightings allocated
to the nine scenarios are included in the table below. These
scenarios are weighted according to management's judgement of each
scenario's likelihood.
The severity of the economic shock has been estimated with
reference to underlying expectations for customer payment behaviour
for accounts which are up to date or one contractual payment past
due. The moderate, high and extremely high severities represent
increases of 25%, 50% and 100% respectively, in the propensity for
these accounts to miss payments and fall into arrears for the full
duration of the economic shock.
Moderate (33%) High (33%) Extremely high (33%)
-------------------- -------------------------- ------------------------------ -----------------------
Three month Moderately severe impact High severity of an Extremely high severity
duration of an initial three initial three month of an initial three
month spike in the spike in the rate of month spike in the
rate of unemployment unemployment rate of unemployment
------------------ ---------------------------- ------------------------------ -----------------------
Six month duration Moderately severe impact High severity of the Extremely high severity
of the increase in increase in unemployment of the increase in
unemployment but with but with an extended unemployment but
an extended duration duration of six months with an extended
of six months duration of six months
------------------ ---------------------------- ------------------------------ -----------------------
Twelve month Moderately severe impact High severity of the Extremely high severity
duration of the increase in increase in unemployment of the increase in
unemployment and assuming and assuming that the unemployment and
that the deterioration deterioration in unemployment assuming that the
in unemployment continues continues to increase deterioration in
to increase for a full for a full year unemployment continues
year to increase for a
full year
------------------ ---------------------------- ------------------------------ -----------------------
The following table details the absolute impact on the current
ECL provision of GBP65.1m if each of the nine scenarios are given a
probability weighting of 100%.
Extremely
Moderate High high
--------------------- -------- -------- ---------
Three month duration -GBP7.9m -GBP5.9m -GBP3.7m
Six month duration -GBP5.7m -GBP1.7m +GBP3.1m
Twelve month duration -GBP1.3m +GBP6.7m +GBP16.4m
--------------------- -------- -------- ---------
The table above demonstrates that in the first scenario with a
moderate severity and an impact of an initial three month spike in
the unemployment rate, the ECL provision would decrease by GBP7.9m.
In the worst case scenario with the greatest severity assuming this
deterioration continues for a duration of twelve months the ECL
provision would increase by GBP16.4m. The scenarios above
demonstrate a range of ECL provisions from GBP57.2m to
GBP81.5m.
In the financial statements for the 6 months ended 30 September
2021 severity weightings used were 33% for moderate, high and
extremely high scenarios (H1 2021: 33%, 33% and 33%).
As with any economic forecasts, the projections and likelihoods
of occurrence are subject to a high degree of inherent uncertainty
and therefore the actual outcomes may be significantly different to
those projected.
2.2 Effective interest rates
Revenue comprises of interest income on amounts receivable from
customers. Loans are initially measured at fair value (which is
equal to cost at inception) plus directly attributable transaction
costs and are subsequently measured at amortised cost using the
effective interest rate method. Revenue is presented net of
amortised broker fees which are capitalised and recognised over the
expected behavioural life of the loan as part of the effective
interest rate method. The key judgement applied in the effective
interest rate calculation is the behavioural life of the loan.
The historical settlement profile of loans, which were initially
acquired through third-party brokers, is used to estimate the
average behavioural life of each monthly cohort of loans.
Settlements include early settlements and historically have also
included top-ups as they are considered derecognition events (see
note 1.2v). The average behavioural life is then used to estimate
the effective interest on broker originations and thus the
amortisation profile of the deferred costs.
Broker costs are predominantly calculated as a percentage of
amounts paid out and not as a fixed fee per loan. Therefore, in
determining the settlement profile of historical cohorts,
settlement rates are pay-out weighted to accurately match the value
of deferred costs with the settlement of loans.
2.3 Complaints provisions
2.3.1 Key judgements - Scheme of Arrangement
On 21 December 2020, the Group announced its intention to agree
a Scheme of Arrangement to address customer redress claims with the
aim that all customers are treated equitably. The vehicle ALL
Scheme Ltd ("SchemeCo") was incorporated on 6 January 2021 and is a
wholly owned subsidiary through which the Group intends to review
claims and, where appropriate, pay redress to customers that have
been affected as a result of historical issues in the UK business.
The Group's original proposal for a Scheme of Arrangement was not
sanctioned at the High Court hearing held on 19 May 2021, this
judgement was received on 24 May 2021, despite receiving support
from the majority of Scheme creditors who voted.
Subsequently the Board continues to consider all options
including the pursuit of an alternative Scheme of Arrangement to
the one which was not approved. It is the Board's view, in light of
the anticipated alternative - a possible insolvency - that subject
to further regulatory discussions, a successful alternative Scheme
is achievable. However, the Directors acknowledge that the ultimate
success of the Scheme is not wholly within their control not least
because at the reporting date the approval of an alternative Scheme
of Arrangement remains subject to reaching the key milestones of a
second successful creditor vote and a High Court sanction.
IAS 37 - Provisions, Contingent Liabilities and Contingent
Assets requires that the measurement of provisions is not adjusted
for future events, such as the approval of an alternative Scheme of
Arrangement, unless there is sufficient objective evidence that the
future event will occur. Each of the aforementioned factors are
ultimately outside of the Group's control and represent a
significant source of uncertainty with regard to the ultimate
success of an alternative Scheme. Hence, in line with IAS 37, it
has been determined that the complaints provision will be measured
by calculating a total redress liability assuming that there is no
scheme in place, as there is not sufficient objective evidence that
the future approval of an alternative Scheme of Arrangement will
occur.
2.3.2 Complaints provision - estimation uncertainty
Provisions included in the statement of financial position
refers to a provision recognised for customer complaints. The
provision represents an accounting estimate of the expected future
outflows arising from certain customer-initiated complaints, using
information available as at the date of signing these financial
statements and the assumption that there is no Court approved
Scheme of Arrangement (see note 14 for further detail).
Identifying whether a present obligation exists and estimating
the probability, timing, nature and quantum of the redress payments
that may arise from past events requires judgements to be made on
the specific facts and circumstances relating to the individual
complaints. Management evaluates on an ongoing basis whether
complaints provisions should be recognised, revising previous
judgements and estimates as appropriate; however, there is a wide
range of possible outcomes.
The key assumptions in these calculations which involve
significant, complex management judgement and estimation relate
primarily to the projected costs of potential future complaints,
where it is considered more likely than not that customer redress
will be appropriate. These key assumptions are:
-- Future estimated volumes - estimates of future volumes of complaints.
-- Uphold rate (%) - the expected average uphold rate applied to
future estimated volumes where it is considered more likely than
not that customer redress will be appropriate.
-- Average redress (GBP) - the estimated compensation, inclusive
of balance adjustments and cash payments, for future upheld
complaints included in the provision.
These assumptions remain subjective due to the uncertainty
associated with future complaint volumes and the magnitude of
redress which may be required. Complaint volumes may include
complaints under review by the Financial Ombudsman Service,
complaints received from claims management companies ("CMCs") or
complaints received directly from customers.
Following the announcement of the proposed Scheme of Arrangement
on 21 December 2020 these assumptions became more challenging to
estimate as customer and CMC behaviour was temporarily influenced
by the proposed Scheme of Arrangement.
Whilst the proposed Scheme was not sanctioned by the High Court
on 19 May 2021, the creditor meeting on 12 May 2021, in which the
Group received a total of 78,732 votes, provides some indication of
the potential future propensity for past and present customers to
raise a complaint. Whilst the vote provides a useful reference
point for the potential population of future claims, this estimate
remains highly uncertain. If an alternative Scheme is not
successfully approved, it is unclear to what extent future
complaint volumes would be impacted by increased customer awareness
generated by the engagement with customers as part of the creditor
vote process and increased publicity connected to the unsuccessful
outcome of the first proposed Scheme, as well as any additional
publicity relating to any potential future Scheme. Additionally,
throughout Amigo's progress towards a Scheme, substantial work has
gone into reviewing and enhancing our future claims handling
methodologies, aligning with the expectations of our regulator and
re-setting expectations of how claims will be assessed moving
forward regardless of whether a potential new Scheme is
successful.
As at 30 September 2020, the complaints provision was GBP159.1m;
the increase of 116.4% to GBP344.3m at 30 September 2021 is
primarily due to an increase in both the volume of estimated upheld
complaints provided for and the estimated uphold rate. Also
partially contributing to the increase is the rise in FOS invoice
costs from GBP650 to GBP750 each.
The following table details the effect on the complaints
provision considering incremental changes on key assumptions,
should current estimates prove too high or too low. Sensitivities
are modelled individually and not in combination.
Assumption Sensitivity
used applied Sensitivity
--------------------------------------- ---------- ----------- --------------
Future complaint volumes(1) 81,562 5% +57.9m -57.9m
Average uphold rate per customer(2) 65% 20 ppts +94.0m -94.0m
Average redress per valid complaint(3) GBP4,451 GBP1,000 +56.7m -56.7m
--------------------------------------- ---------- ----------- ------ ------
1. Future estimated volumes. Sensitivity analysis shows the
impact of a 5% change in the number of complaints estimated in the
provision.
2. Uphold rate. Sensitivity analysis shows the impact of a 20
percentage point change in the applied uphold rate on both the
current and forward-looking elements of the provision.
3. Average redress. Sensitivity analysis shows the impact of a
GBP1,000 change in average redress on the provision.
The table above shows the increase or decrease in total
provision charge resulting from reasonably possible changes in each
of
the key underlying assumptions. The Board considers that this
sensitivity analysis covers the full range of reasonably
possible
alternatives assumptions.
It is possible that the eventual outcome may differ materially
from the current estimate and could materially impact the
financial statements as a whole, given the Group's only activity
currently is guarantor-backed consumer credit. This is due to
the
risks and inherent uncertainties surrounding the assumptions
used in the provision calculation.
The complaints provision has been estimated assuming that there
is no Scheme in place, as there is not sufficient objective
evidence that the future approval of an alternative Scheme will
occur. However, a potential future Scheme remains a plausible
outcome. In this scenario, it is likely that the total redress
liability would be materially lower than the amount recognised
under
IAS 37 because cash redress would be capped at a level approved
by the Scheme creditors, which is expected to be substantially
lower than the total cash liability of GBP270.0m included in the
GBP344.3m provision. For example, the cash contribution proposed
under the terms of the original Scheme proposal, which was not
sanctioned by the High Court, was GBP15.0m. Amigo is still
considering all options, of which one option is a potential
alternative Scheme.
The Group has disclosed a contingent liability with respect to
the FCA investigation announced on 29 May 2020. The
investigation is with regards to the Group's creditworthiness
assessment process, the governance and oversight of this, and
compliance with regulatory requirements. The FCA investigation
is covering lending for the period from 1 November 2018 to
date. The Group was informed on 15 March 2021 that the FCA had
decided to extend the scope of its current investigation so
that it can investigate whether the Group appropriately handled
complaints after 20 May 2020 and whether the Group deployed
sufficient resource to address complaints in accordance with the
Voluntary Requirement (VReq) announced on 27 May 2020 and
the subsequent variation announced on 3 July 2020.
The FCA investigation will consider whether those complaints
have been handled appropriately and whether customers have
been treated fairly in accordance with Principle 6 of the FCA's
Principles for Business.
The Group will continue to co-operate fully with the FCA. There
is significant uncertainty around the impact of this investigation
on the business, the assumptions underlying the complaints
provision and any future regulatory intervention. See note 14 for
further details.
2.4 Modification of financial assets
2.4.1 Assessment of Covid-19 payment holidays as a
non-substantial modification
From 31 March 2020, Covid-19 relief measures were formally
introduced; on request, depending on a customer's individual
circumstances, initial payment holidays with durations of up to
three months were offered. At the end of the payment holiday the
customer's monthly instalments reverted to the contractual
instalment with the term of the loan effectively extended by the
duration of the payment holiday. Following the FCA's announcement
of the extension to customer payment holidays for personal loans
for up to six months, the Group's payment holiday policy was
revised. If a customer applied for a payment holiday extension, the
payment holiday automatically renewed on a monthly basis, up to a
maximum of six months.
The customer had the option to opt out and end the payment
holiday at any time. For the first three months of the payment
holiday no interest accruals were applied to customer balances;
from four to six months interest began to accrue again on the loan.
As a result of the Group's interest cap, the reintroduction of
interest accruals from months four to month six of a payment
holiday does not increase the total interest payable by the
customer over the life of the loan. Rolling monthly extensions were
predominantly granted from 1 July 2020 onwards. The final payment
holidays and extensions were granted in March 2021.
No capital or interest is forgiven as part of the payment
holiday despite no interest accruing during the first three months
of the payment holiday; the customer is still expected to repay the
loan in full.
The Group assessed Covid-19 payment holidays from both a
qualitative and quantitative perspective; the Group is not
originating new assets with substantially different terms and the
original asset's contractual cash flows are deferred, leading to
what is deemed a non-substantial estimated reduction in loan
carrying amounts.
Hence, the initial granting of a Covid-19 payment holidays was
accounted for as non-substantial modification of financial assets
under IFRS 9. When a customer was offered an extension to their
original payment holiday up to a total of six months in length,
this was considered a second non-substantial modification event.
Assets were not derecognised as the modifications were not
substantial; instead, modification losses were recognised in the
period to 31 March 2021. The impact of Covid-19 payment holiday
modifications is discussed in note 5.
2.4.2 Measurement of modification losses
The Group has estimated modification losses arising from
Covid-19 payment holidays on a cohort basis. Future contractual
cash flows are forecast collectively in cohorts based on the
remaining contractual term. The cash flow forecasts are then
further segmented by month of modification (being payment holiday
start date or date of extension) and payment holiday duration.
Following the introduction of automatic rolling extension of
payment holidays up to a maximum of six months, a key judgement is
the expected payment holiday duration. Customers on payment
holidays of one and two month initial durations could first extend
to a backstop of a three month payment holiday. Where the customer
applied for an extension to their original payment holiday beyond
the three month backstop, the payment holiday automatically
extended on a monthly basis up to a maximum of six months unless
the customer opted out.
Forecast cash flows are lagged by the relevant payment holiday
duration and discounted using the original effective interest rate
to calculate net present value of each cohort. The difference
between the net present value of the revised cash flows and the
carrying value of the assets is recognised in the consolidated
statement of comprehensive income as a modification loss.
Customers granted Covid-19 payment holidays were assessed for
other potential indicators of SICR. This assessment included a
historical review of the customer's payment performance and
behaviours. Following this review, those customers that were
granted a Covid-19 payment holiday and judged to have otherwise
experienced a SICR are transitioned to stage 2 within the Group's
impairment model (note 1.2.iii). Where the modification loss
related to customers that have been transitioned from stage 1 to
stage 2 as a result of this assessment, the modification loss has
been recognised as an impairment in the consolidated statement of
comprehensive income.
In the current period, there has been no modification loss
recognised in respect of Covid-19 payment holidays. In prior
periods if the customer was already in arrears, suggesting a
significant increase in credit risk event prior to them being
granted a payment holiday; a modification loss relating to these
customers has also been recognised in impairment. The remainder of
the modification loss has been recognised in revenue (see note 5
for further details).
3. Revenue and Segment reporting
Revenue consists of interest income and is derived primarily
from a single segment in the UK, but also from Irish entity
Amigo
Loans Ireland Limited. The Group has two operating segments
based on the geographical location of its operations, being the
UK
and Ireland. IFRS 8 requires segment reporting to be based on
the internal financial information reported to the chief
operating
decision maker. The Group's chief operating decision maker is
deemed to be the Group's Executive Committee (ExCo) whose
primary responsibility is to support the Chief Executive Officer
(CEO) in managing the Group's day-to-day operations and analyse
trading performance. The table below presents the Group's
performance on a segmental basis for the six months to 30 September
2021 in line with reporting to the chief operating decision
maker:
Period Period Period
to to to
30 Sep 30 Sep 30 Sep
21 21 21
GBPm GBPm GBPm
6 months to 30 September 2021 UK Ireland Total
--------------------------------------------------- ------- -------- -------
Revenue 55.9 0.6 56.5
Interest payable and funding facility fees (9.8) - (9.8)
Interest receivable 0.1 - 0.1
Impairment of amounts receivable from customers (26.1) 0.2 (25.9)
--------------------------------------------------- ------- -------- -------
Administrative and other operating expenses (13.2) (0.3) (13.5)
Provision expenses (5.3) - (5.3)
--------------------------------------------------- ------- -------- -------
Total operating expenses (18.5) (0.3) (18.8)
Profit before tax 1.6 0.5 2 .1
Tax credit on profit(1) 1.2 - 1.2
--------------------------------------------------- ------- -------- -------
Profit and total comprehensive income attributable
to equity shareholders of the Group 2.8 0.5 3.3
--------------------------------------------------- ------- -------- -------
30 Sep 30 Sep 30 Sep
21 21 21
GBPm GBPm GBPm
UK Ireland Total
-------------------------- ------ ------- ------
Gross loan book(2) 286.8 2.4 289.2
-------------------------- ------ ------- ------
Less impairment provision (64.6) (0.5) (65.1)
-------------------------- ------ ------- ------
Net loan book(3) 222.2 1.9 224.1
-------------------------- ------ ------- ------
1. The tax credit for the UK primarily relates to the release of
a historical tax provision no longer required.
2. Gross loan book represents total outstanding loans and excludes deferred broker costs.
3. Net loan book represents gross loan book less provision for impairment.
The carrying value of property, plant and equipment and
intangible assets included in the consolidated interim statement of
financial position materially all relates to the UK; hence the
split between UK and Ireland has not been presented. The results of
each segment have been prepared using accounting policies
consistent with those of the Group as a whole.
Period Period Period
to to to
30 Sep 30 Sep 30 Sep
20 20 20
GBPm GBPm GBPm
6 months to 30 September 2020 UK Ireland Total
------------------------------------------------------- ------- ------- -------
Revenue 91.0 1.3 92.3
------------------------------------------------------- ------- ------- -------
Interest payable and funding facility fees (15.6) - (15.6)
Impairment of amounts receivable from customers (19.2) (0.3) (19.5)
------------------------------------------------------- ------- ------- -------
Administrative and other operating expenses (21.9) (0.6) (22.5)
Complaints expense (93.7) - (93.7)
------------------------------------------------------- ------- ------- -------
Total operating expenses (115.6) (0.6) (116.2)
IPO, strategic review, formal sale process and related
financing costs (3.6) - (3.6)
------------------------------------------------------- ------- ------- -------
(Loss) before tax (63.0) 0.4 (62.6)
Tax charge on (loss) (5.2) (0.1) (5.3)
------------------------------------------------------- ------- ------- -------
(Loss) and total comprehensive income attributable
to equity shareholders of the Group (68.2) 0.3 (67.9)
------------------------------------------------------- ------- ------- -------
30 Sep 30 Sep 30 Sep
20 20 20
GBPm GBPm GBPm
UK Ireland Total
-------------------------- ------ ------- ------
Gross loan book(1) 558.3 5.6 563.9
-------------------------- ------ ------- ------
Less impairment provision (77.6) (1.1) (78.7)
-------------------------- ------ ------- ------
Net loan book (2) 480.7 4.5 485.2
-------------------------- ------ ------- ------
1 Gross loan book represents total outstanding loans and
excludes deferred broker costs.
2 Net loan book represents gross loan book less provision for
impairment.
4. Interest payable and funding facility fees
Period Period Year to
to to
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
GBPm GBPm GBPm
----------------------------------------------- --------- --------- -------
Senior secured notes interest payable 9.0 8.4 17.8
Funding facility fees 0.1 0.7 0.4
Securitisation interest payable 0.2 1.8 2.8
Complaints provision discount unwind (note 14) - 1.1 2.0
Other finance costs 0.5 3.6 4.5
----------------------------------------------- --------- --------- -------
9.8 15.6 27.5
----------------------------------------------- --------- --------- -------
No interest was capitalised by the Group during the period.
Funding facility fees include non-utilisation fees and amortisation
of initial costs of the Group's senior secured notes.
Non-utilisation fees of GBP0.3m relating to the securitisation
facility are included in other finance costs. In the prior year,
other finance costs also included written off fees totalling
GBP1.9m following cancellation of the Group's revolving credit
facility and substantial modification of the securitisation
facility.
5. Modification of financial assets
Covid-19 payment holidays and any subsequent extensions were
assessed as non-substantial financial asset modifications under
IFRS 9 (see note 2.4 for further details). The Group stopped
granting new payment holidays in March 2021; hence no additional
modification losses have been recognised in the period. All payment
holidays ended by 31 July 2021.
In the period, GBP3.7m of modification losses were released in
respect of loan agreements that settled or charged off in the six
months ended 30 September 2021. The carrying value of historical
modification losses at the period end was GBP9.4m.
Period Period Year to
to to
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
GBPm GBPm GBPm
--------------------------------------------- --------- --------- -------
Modification (loss) recognised in revenue - (24.9) (27.2)
Modification (loss) recognised in impairment - (7.1) (8.3)
--------------------------------------------- --------- --------- -------
Total modification (loss) - (32.0) (35.5)
--------------------------------------------- --------- --------- -------
6. Strategic review, formal sale process and related financing
costs
Strategic review, formal sale process and related financing
costs have been disclosed separately in the financial statements
because the Directors consider it necessary to do so to provide
further understanding of the financial performance of the Group.
There has been no strategic review, formal sale process and related
financing costs as at 30 September 2021, prior period costs are
material items of expense that have been shown separately due to
the significance of their nature and amount.
Period Period Year to
to to
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
Unaudited Unaudited Audited
----------------------------------------------- --------- --------- -------
Strategic review and formal sale process costs - 3.6 3.0
----------------------------------------------- --------- --------- -------
- 3.6 3.0
----------------------------------------------- --------- --------- -------
The costs above related to advisor and legal fees in respect of
the strategic review and formal sale process announced on 27
January 2020 and its termination was announced on 8 June 2020.
7. Taxation
The applicable corporation tax rate for the period to 30
September 2021 was 19.0% (H1 2021: 19.0%) and the effective tax
rate is 57.1% positive (H1 2021: negative 8.5%). This effective tax
rate is primarily due to the release of a historical tax provision
and the recognition of an imminent tax refund.
In the prior year, the Group's loss-making position and the
ongoing uncertainty over the Group's future profitability meant
that it was no longer considered probable that future taxable
profits would be available against which to recognise deferred tax
assets. Consequently, no tax assets were recognised in respect of
losses in prior year, which were driven primarily by the
recognition of a GBP344.6m complaints provision as at 31 March
2021. The uncertainty remains in the period to 30 September 2021 as
the Group continues to pursue a Scheme of Arrangement.
Whilst the six months ended 30 September 2021 were profitable,
no tax charge has been recognised on profits due to the uncertainty
around the profitability in the second half of the financial year,
whereby revenue will continue to decrease as the loan book declines
and the uncertainty surrounding the outcome of a Scheme of
Arrangement.
8. Profit/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the
profit/(loss) for the period attributable to equity shareholders by
the
weighted average number of ordinary shares outstanding during
the period.
Diluted earnings/(loss) per share calculates the effect on
profit/(loss) per share assuming conversion of all dilutive
potential
ordinary shares. Dilutive potential ordinary shares are
calculated as follows:
i) For share awards outstanding under performance-related share
incentive plans such as the Share Incentive Plan (SIP) and the Long
Term Incentive Plans (LTIPs), the number of dilutive potential
ordinary shares is calculated based on the number of shares which
would be issuable if the end of the reporting period is assumed to
be the end of each scheme's performance period. An assessment over
financial and non-financial performance targets as at the end of
the reporting period has therefore been performed to aid
calculation of the number of dilutive potential ordinary
shares.
ii) For share options outstanding under non-performance-related
schemes such as the two Save As You Earn schemes (SAYE), a
calculation is performed to determine the number of shares that
could have been acquired at fair value (determined as the average
annual market share price of the Company's shares) based on the
monetary value of the subscription rights attached to outstanding
share options. The number of shares calculated is compared with the
number of share options outstanding, with the difference being the
dilutive potential ordinary shares.
Potential ordinary shares are treated as dilutive when, and only
when, their conversion to ordinary shares would decrease earnings
per share or increase earnings/(loss) per share.
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
Pence Pence Pence
-------------------------------------------------------- --------- --------- -------
Basic earnings/ profit/(loss) per share 0.7 (14.3) (60.8)
Diluted earnings/ profit/(loss) per share 0.7 (14.2) (60.8)
Adjusted basic earnings/ profit/(loss) per share (basic
and diluted)2 0.4 (12.2) (58.9)
-------------------------------------------------------- --------- --------- -------
1. Adjusted basic (loss) per share and earnings for adjusted
basic (loss) per share are non-GAAP measures.
The Directors are of the opinion that the publication of the
adjusted profit/(loss) per share is useful as it gives a better
indication of ongoing business performance. Reconciliations of the
profit/loss used in the calculations are set out below.
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
GBPm GBPm GBPm
------------------------------------------------------------ --------- --------- -------
Profit/(loss) for basic EPS 3.3 (67.9) (289.1)
Strategic review, formal sale process and related financing
costs - 3.6 3.0
Write-off of revolving credit facility (RCF) fees - 0.7 0.7
Write-off of unamortised securitisation fees - 1.2 1.2
Tax provision release (0.8) (2.5) (2.5)
Tax refund due (0.5) - -
Tax asset write-off - 7.8 7.8
Less tax impact - (1.0) (0.9)
Profit/(loss) for adjusted basic EPS 1 2.0 (58.1) (279.8)
------------------------------------------------------------ --------- --------- -------
Basic weighted average number of shares (m) 475.3 475.3 475.3
------------------------------------------------------------ --------- --------- -------
Dilutive potential ordinary shares (m)(2) 1.1 2.6 0.5
------------------------------------------------------------ --------- --------- -------
Diluted weighted average number of shares (m) 476.4 477.9 475.8
------------------------------------------------------------ --------- --------- -------
1. Adjusted basic profit/(loss) per share and earnings for
adjusted basic profit/(loss) per share are non-GAAP measures.
2. Although the Group has issued further options under the
employee share schemes, upon assessment of the dilutive nature of
the options, some options are not considered dilutive as at 30
September 2021 as they would not meet the performance conditions.
Those dilutive shares included are in relation to the employee
October 2020 SAYE scheme.
9. Customer loans and receivables
The table shows the gross loan book and deferred broker costs by
stage, within the scope of the IFRS 9 ECL framework.
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
GBPm GBPm GBPm
--------------------------------------------- --------- --------- -------
Stage 1 209.0 451.3 311.5
Stage 2 45.6 91.8 61.4
Stage 3 34.6 20.8 50.0
--------------------------------------------- --------- --------- -------
Gross loan book 289.2 563.9 422.9
Deferred broker costs1 - stage 1 4.3 12.5 7.2
Deferred broker costs1 - stage 2 0.9 2.5 1.4
Deferred broker costs1 - stage 3 0.7 0.6 1.1
--------------------------------------------- --------- --------- -------
Loan book inclusive of deferred broker costs 295.1 579.5 432.6
Provision(2) (65.1) (78.7) (82.0)
--------------------------------------------- --------- --------- -------
Customer loans and receivables 230.0 500.8 350.6
--------------------------------------------- --------- --------- -------
1. Deferred broker costs are recognised within customer loans
and receivables and are amortised over the expected life of those
assets using the effective interest rate (EIR) method.
2. Included within the provision is a judgemental management
overlay of GBPnil for 30 September 2021, 30 September 2020 and
GBP6.0m for 31 March 2021.
As at 30 September 2021, GBP132.5m of loans to customers had
their beneficial interest assigned to the Group's special purpose
vehicle (SPV) entity, namely AMGO Funding (No. 1) Ltd, as
collateral for securitisation transactions (H1 2021: GBP255.7m).
See note 18 for further details of this structured entity.
Ageing of gross loan book (excluding deferred brokers' fees and
provision) by days overdue:
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
GBPm GBPm GBPm
---------------- --------- --------- -------
Current 210.5 454.0 315.5
1-30 days 32.6 78.3 41.4
31-60 days 11.5 10.8 16.0
>60 days 34.6 20.8 50.0
---------------- --------- --------- -------
Gross loan book 289.2 563.9 422.9
---------------- --------- --------- -------
The following table further explains changes in the net carrying
amount of loans receivable from customers to explain their
significance to the changes in the loss allowance for the same
portfolios.
Stage Stage Stage Total
1 2 3 GBPm
Period ended 30 September 2021 GBPm GBPm GBPm
-------------------------------------------------- ---------- ---------- ---------- ----------
Gross carrying amount as at 31 March 2021 311.5 61.4 50.0 422.9
Deferred brokers fees 7.2 1.4 1.1 9.7
-------------------------------------------------- ---------- ---------- ---------- ----------
Loan book inclusive of deferred broker costs 318.7 62.8 51.1 432.6
Changes in gross carrying amount attributable
to:
Transfer to stage 1 22.9 (22.3) (0.6) -
Transfer to stage 2 (47.9) 49.0 (1.1) -
Transfer to stage 3 (10.3) (19.2) 29.5 -
Passage of time(1) (45.6) (6.6) 0.5 (51.7)
Customer settlements (25.5) (5.0) (1.0) (31.5)
Loans charged off (2.3) (11.4) (41.2) (54.9)
Net movement in modification loss relating to
Covid-19 payment holidays 6.3 (0.3) (1.5) 4.5
Net movement in deferred broker fees (3.0) (0.5) (0.4) (3.9)
-------------------------------------------------- ---------- ---------- ---------- ----------
Loan book inclusive of deferred broker costs
as at 30 September 2021 213.3 46.5 35.3 295.1
-------------------------------------------------- ---------- ---------- ---------- ----------
Stage Stage Stage Total
1 2 3 GBPm
Period ended 30 September 2020 GBPm GBPm GBPm
--------------------------------------------------- ---------- ---------- ---------- ----------
Gross carrying amount as at 31 March 2020 601.1 106.8 42.0 749.9
Deferred brokers fees 16.5 2.9 1.1 20.5
--------------------------------------------------- ---------- ---------- ---------- ----------
Loan book inclusive of deferred broker costs 617.6 109.7 43.1 770.4
Changes in gross carrying amount attributable
to:
Transfer to stage 1 13.7 (13.4) (0.3) -
Transfer to stage 2 (26.8) 28.2 (1.4) -
Transfer to stage 3 (5.1) (8.4) 13.5 -
Passage of time(1) (57.9) (3.1) 0.1 (60.9)
Customer settlements (59.3) (7.3) (1.7) (68.3)
Loans charged off (2.4) (10.6) (31.0) (44.0)
Modification loss relating to Covid-19 payment
holidays (12.4) (0.4) (0.4) (13.2)
Net new receivables originated 0.4 - - 0.4
Net movement in deferred broker fees (4.0) (0.4) (0.5) (4.9)
--------------------------------------------------- ---------- ---------- ---------- ----------
Loan book inclusive of deferred broker costs
as at 30 September 2020 463.8 94.3 21.4 579.5
--------------------------------------------------- ---------- ---------- ---------- ----------
1 Passage of time relates to amortisation of loan balances over
the course of the financial year, due to cash payments partially
offset by interest accruals.
As shown in the table above, the loan book inclusive of deferred
broker cost decreased from GBP579.5m to GBP295.1m at 30 September
2021. This was primarily driven by the effect of passage of time
(loan balances amortising throughout the period), customer
settlements and minimal originations in the year.
The following tables explain the changes in the loan loss
provision between the beginning and the end of the period:
Stage Stage Stage Total
1 2 3 GBPm
Period ended 30 September 2021 GBPm GBPm GBPm
-------------------------------------------------- --------- --------- ---------- ----------
Loan loss provision as at 31 March 2021 21.0 14.1 46.9 82.0
-------------------------------------------------- --------- --------- ---------- ----------
Changes in loan loss provision attributable
to:
Transfer to stage 1 1.6 (1.9) (0.5) (0.8)
Transfer to stage 2 (3.3) 8.8 (0.9) 4.6
Transfer to stage 3 (0.7) (4.3) 24.6 19.6
Passage of time(1) (3.2) (0.7) 0.4 (3.5)
Customer settlements (1.7) (0.7) (0.9) (3.3)
Loans charged off (0.2) (4.7) (34.4) (39.3)
Net movement in modification loss relating to
Covid-19 payment holidays 0.8 - (0.2) 0.6
Remeasurement of ECLs 11.6 (0.2) (6.2) 5.2
-------------------------------------------------- --------- --------- ---------- ----------
Loan loss provision as at 30 September 2021 25.9 10.4 28.8 65.1
-------------------------------------------------- --------- --------- ---------- ----------
Stage Stage Stage Total
1 2 3 GBPm
Period ended 30 September 2020 GBPm GBPm GBPm
-------------------------------------------------- --------- --------- ---------- ----------
Loan loss provision as at 31 March 2020 55.1 20.1 31.6 106.8
-------------------------------------------------- --------- --------- ---------- ----------
Changes in loan loss provision attributable
to:
Transfer to stage 1 1.2 (1.9) (0.2) (0.9)
Transfer to stage 2 (2.4) 6.2 (1.1) 2.7
Transfer to stage 3 (0.4) (2.8) 10.1 6.9
Passage of time(1) (5.3) (0.4) 0.1 (5.6)
Customer settlements (5.5) (1.5) (1.3) (8.3)
Loans charged off (0.2) (4.2) (23.3) (27.7)
Management overlay (1.0) 2.5 6.7 8.2
Net movement in modification loss relating to
Covid-19 payment holidays (1.1) (0.2) (0.3) (1.6)
Remeasurement of ECLs (1.2) (1.0) 0.4 (1.8)
-------------------------------------------------- --------- --------- ---------- ----------
Loan loss provision as at 30 September 2020 39.2 16.8 22.7 78.7
-------------------------------------------------- --------- --------- ---------- ----------
1 Passage of time relates to amortisation of loan balances over
the course of the financial year, due to cash payments partially
offset by interest accruals.
As shown in the above tables, the allowance for ECL decreased
from GBP78.7m at 30 September 2020 to GBP65.1m at 30 September
2021. The overall provision has reduced in line with the
amortisation of the loan book in the absence of any meaningful
originations.
The following table splits the gross loan book by arrears
status, and then by stage respectively for the year ended 30
September 2021.
Stage Stage Stage 3 Total
1 2 GBPm GBPm
GBPm GBPm
----------- ----- ----- ------- -----
Up to date 193.8 16.7 - 210.5
1-30 days 15.2 17.4 - 32.6
31-60 days - 11.5 - 11.5
> 60 days - - 34.6 34.6
----------- ----- ----- ------- -----
209.0 45.6 34.6 289.2
----------- ----- ----- ------- -----
The following table splits the gross loan book by arrears
status, and then by stage respectively for the year ended 30
September 2020:
Stage Stage Stage 3 Total
1 2 GBPm GBPm
GBPm GBPm
----------- ----- ----- ------- -----
Up to date 411.7 42.3 - 454.0
1-30 days 39.4 38.9 - 78.3
31-60 days - 10.8 - 10.8
> 60 days - - 20.8 20.8
----------- ----- ----- ------- -----
451.1 92.0 20.8 563.9
----------- ----- ----- ------- -----
The following table further explains changes in the net carrying
amount of loans receivable from customers to explain their
significance to the changes in the loss allowance for the same
portfolios.
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
Customer loans and receivables GBPm GBPm GBPm
------------------------------- --------- --------- -------
Due within one year 177.4 270.9 218.9
Due in more than one year 46.7 214.3 122.0
------------------------------- --------- --------- -------
Net loan book 224.1 485.2 340.9
Deferred broker costs 1
Due within one year 4.0 9.6 6.2
Due in more than one year 1.9 6.0 3.5
------------------------------- --------- --------- -------
Customer loans and receivables 230.0 500.8 350.6
------------------------------- --------- --------- -------
1. Deferred broker costs are recognised within customer loans
and receivables and are amortised over the expected life of those
assets using the effective interest rate (EIR) method.
10. Financial instruments
The below tables show the carrying amounts and fair values of
financial assets and financial liabilities, including the levels in
the fair value hierarchy. The tables analyse financial instruments
into a fair value hierarchy based on the valuation technique used
to determine fair value:
a) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
b) Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices).
c) Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
30 Sept 21 30 Sep 20 31 Mar 21
----------------- ----------------- -----------------
Carrying Fair Carrying Fair Carrying Fair
Fair value amount value amount value amount value
hierarchy GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ----------- -------- ------- -------- ------- -------- -------
Financial assets not measured at
fair value(1)
Amounts receivable from Level
customers(2) 3 230.0 214.4 500.8 488.9 350.6 340.6
Level
Other receivables 3 2.1 2.1 1.3 1.3 1.6 1.6
Cash and cash equivalents Level
(restricted) 1 2.0 2.0 9.5 9.5 6.3 6.3
Level
Cash and cash equivalents 1 234.5 234.5 134.2 134.2 177.9 177.9
--------------------------- ----------- -------- ------- -------- ------- -------- -------
468.6 453.0 645.8 633.9 536.4 526.4
--------------------------------------- -------- ------- -------- ------- -------- -------
Financial assets measured
at fair value
Level
Derivative asset 2 - - - - 0.1 0.1
--------------------------- ----------- -------- ------- -------- ------- -------- -------
- - - - 0.1 0.1
Financial liabilities not
measured at fair value(1)
Level
Other liabilities 3 (10.6) (10.6) (15.3) (15.3) (15.9) (15.9)
Level
Senior secured notes(3) 1 (232.4) (224.3) (231.7) (165.6) (232.1) (187.6)
Level
Securitisation facility 2 - - (168.0) (180.9) (64.4) (64.5)
--------------------------- ----------- -------- ------- -------- ------- -------- -------
(243.0) (234.9) (415.0) (361.8) (312.4) (268.0)
--------------------------------------- -------- ------- -------- ------- -------- -------
1. The Group has disclosed the fair values of financial
instruments such as short-term trade receivables and payables at
their carrying value because it considers this a reasonable
approximation of fair value.
2. The unobservable inputs in the fair value calculation of
amounts receivable from customers are expected credit losses,
forecast cash flows and discount rates. As lifetime expected credit
losses are embedded in the calculation, this results in a fair
value lower than the carrying amount.
3. Senior secured notes are presented in the financial
statements net of unamortised fees. As at 30 September 2021, the
gross principal amount outstanding was GBP234.1m. The fair value
reflects the market price of the notes at the balance sheet
date.
Financial instruments not measured at fair value
The fair value of amounts receivable from customers has been
estimated using a net present value calculation using discount
rates derived from the blended effective interest rate of the
instruments. As these loans are not traded on an active market and
the fair value is therefore determined through future cash flows,
they are classed as Level 3 under IFRS 13 Fair Value Measurement.
The fair value of senior secured notes has been taken at the
Bloomberg Valuation Service (BVAL) market price.
All financial instruments are held at amortised cost, with the
exception of the derivative asset which is held at FVTPL.
The fair value of the securitisation facility is estimated using
a net present value calculation using discount rates derived from
contractual interest rates, with cash flows assuming no principal
repayments until maturity date.
The Group's activities expose it to a variety of financial
risks, which can be categorised as credit risk, liquidity risk,
interest rate risk, foreign exchange rate risk and market risk. The
objective of the Group's risk management framework is to identify
and assess the risks facing the Group and to minimise the potential
adverse effects of these risks on the Group's financial
performance. Financial risk management is overseen by the Group
Risk Committee.
30 Sep
30 Sep 21 20 31 Mar 21
Unaudited Unaudited Audited
GBPm GBPm GBPm
Maturity analysis of financial liabilities
Analysed as:
- due within one year
Other liabilities (10.6) (15.3) (15.9)
Securitisation facility - - (64.4)
- due in two to three years
Senior secured note liability (232.4) - (232.1)
Securitisation facility - (168.0) -
- due in three to four years
Senior secured note liability - (231.7) -
------------------------------------------- --------- --------- ---------
(243.0) (415.0) (312.4)
------------------------------------------- --------- --------- ---------
11. Other receivables
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
GBPm GBPm GBPm
------------------------------- --------- --------- -------
Current
Other receivables 0.7 0.1 0.5
Prepayments and accrued income 1.3 1.2 1.1
2.0 1.3 1.6
------------------------------- --------- --------- -------
12. Trade and other payables
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
GBPm GBPm GBPm
------------------------------------- --------- --------- -------
Current
Accrued senior secured note interest 3.7 3.7 3.7
Trade payables 0.2 0.7 0.5
Taxation and social security 0.7 0.7 0.8
Other creditors 0.8 0.9 1.8
Accruals and deferred income 5.2 9.3 9.1
------------------------------------- --------- --------- -------
10.6 15.3 15.9
------------------------------------- --------- --------- -------
13. Bank and other borrowings
30 Sep 30 Sep 31 Mar
21 20 21
Unaudited Unaudited Audited
GBPm GBPm GBPm
----------------------------------------- --------- --------- -------
Current and non-current liabilities
Amounts falling due in less than 2 years
Securitisation facility - - 64.4
Amounts falling due 2-3 years
Senior secured notes 232.4 - 232.1
Securitisation facility - 168.0 -
Amounts falling due 3-4 years
Senior secured notes - 231.7 -
----------------------------------------- --------- --------- -------
232.4 399.7 296.5
----------------------------------------- --------- --------- -------
The Group's facilities are:
-- Senior secured notes in the form of GBP232.4m high yield
bonds with a coupon rate of 7.625% which expire in January 2024 (H1
2021: GBP231.7m). The senior secured notes are presented in the
financial statements net of unamortised fees. As at 30 September
2021, the gross principal amount outstanding was GBP234.1m. On 20
January 2017, GBP275.0m of notes were issued at an interest rate of
7.625%. The high yield bond was tapped for GBP50.0m in May 2017 and
again for GBP75.0m in September 2017 at a premium of 3.8%.
GBP165.9m of notes have been repurchased in the open market in
prior financial years (2020: GBP85.9m; 2019: GBP80.0m).
-- The securitisation facility was in place during the period;
however, the securitisation facility has been fully repaid. Given
the current suspension of all new lending activity at Amigo, the
size of the securitisation facility was reduced from GBP250m to
GBP100m, effective 25 June 2021. On 25 June 2021, the Group
extended the securitisation facility's performance trigger waiver
period from 25 June 2021 to 24 September 2021. The 24 September
2021 extension of the facility's performance trigger waiver period
expired on 24 September 2021. In light of the Group's immediate
funding needs and current unrestricted cash balance, the Company
does not expect the need to operate the securitisation facility in
the near term. The Board intends to keep the securitisation
structure in place to provide the Company with more diversity for
future funding options. With effect from 24 September 2021, all
rights, obligations and liabilities of the Lead Arranger, Facility
Agent and Senior Noteholder, as defined in the securitisation
Facility Documents, were taken over and assumed by Amigo.
14. Provisions
Provisions are recognised for present obligations arising as the
consequence of past events where it is more likely than not
that
a transfer of economic benefit will be necessary to settle the
obligation, which can be reliably estimated.
30 Sep 21 30 Sep 20 31 Mar 2021
Complaints Restructuring Total Complaints Restructuring Total Complaints Restructuring Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---------- ------------- ----- ---------- ------------- ------ ---------- ------------- ------
Balance as at
31
March 2021/20 344.6 - 344.6 117.5 - 117.5 117.5 - 117.5
Provisions
made
during year 5.3 - 5.3 93.7 - 93.7 318.8 1.0 319.8
Discount
unwind
(note 4) - - - 1.1 - 1.1 2.0 - 2.0
Movement in
the
provision (5.6) - (5.6) (53.2) - (53.2) (93.7) - (93.7)
-------------- ---------- ------------- ----- ---------- ------------- ------ ---------- ------------- ------
Closing
provision 344.3 - 344.3 159.1 - 159.1 344.6 1.0 345.6
-------------- ---------- ------------- ----- ---------- ------------- ------ ---------- ------------- ------
Non-current - - - 11.0 - 11.0 - - -
Current 344.3 - 344.3 148.1 - 148.1 344.6 1.0 345.6
-------------- ---------- ------------- ----- ---------- ------------- ------ ---------- ------------- ------
344.3 - 344.3 159.1 - 159.1 344.6 1.0 345.6
-------------- ---------- ------------- ----- ---------- ------------- ------ ---------- ------------- ------
Customer complaints redress
As at 30 September 2021, the Group has recognised a complaints
provision totalling GBP344.3m in respect of customer complaints
redress and associated costs. Utilisation in the period totalled
GBP5.6m. Our lending practices have been subject to significant
shareholder, regulatory and customer attention, which, combined
with the pursuit of a Scheme, has resulted in an increase in the
number of complaints received.
The current provision reflects the estimate of the cost of
redress relating to customer-initiated complaints and complaints
raised
by CMCs for which it has been concluded that a present
constructive obligation exists, based on the latest information
available. The provision has two components, firstly a provision
for complaints received at the reporting date, and secondly a
provision for the projected costs of potential future complaints
where it is considered more likely than not that customer redress
will be appropriate. The engagement with customers and increased
publicity of complaints in connection with the proposed Scheme and
the accompanying creditor vote process, as well as ongoing
publicity relating to any potential future Scheme. Consequently, in
the current period, the complaints provision is classified as a
current liability.
There is significant uncertainty around the emergence period for
complaints, in particular the impact of customer
communications in connection with the unsuccessful Scheme of
Arrangement and any potential alternative Scheme of
Arrangement and the activities of claims management companies;
both of which could significantly affect complaint volumes,
uphold rates and redress costs. It is possible that the eventual
outcome may differ materially from current estimates which
could materially impact the financial statements, given the
Group's only activity is guarantor-backed consumer credit. See
note
2.3 for details of the key assumptions that involve significant
management judgement and estimation in the provision
calculation, and for sensitivity analysis.
The Group continues to monitor its policies and processes to
ensure that it responds appropriately to customer complaints.
The
Group will continue to assess both the underlying assumptions in
the calculation and the adequacy of this provision periodically
using actual experience and other relevant evidence to adjust
the provisions where appropriate.
Restructuring provision
As at 31 March 2021, the Group recognised a restructuring
provision totalling GBP1.0m in respect of the expected cost of
staff redundancies. This provision was fully utilised by 30 June
2021 and outstanding balance as at 30 September 2021 is GBPnil.
Contingent liability
FCA investigation
On 29 May 2020 the FCA commenced an investigation into whether
the Group's creditworthiness assessment process, and the
governance and oversight of this, was compliant with regulatory
requirements. The FCA investigation will cover lending for the
period from 1 November 2018 to date. There is significant
uncertainty around the impact of this on the business, the
assumptions underlying the complaints provision and any future
regulatory intervention.
The Group was informed on 15 March 2021 that the FCA has decided
to extend the scope of its current investigation so that it
can investigate whether the Group appropriately handled
complaints after 20 May 2020 and whether the Group deployed
sufficient resource to address complaints in accordance with the
Voluntary Requirement (VReq) announced on 27 May 2020 and
the subsequent variation announced on 3 July 2020. The FCA
investigation will consider whether those complaints have been
handled appropriately and whether customers have been treated
fairly in accordance with Principle 6 of the FCA's Principles
for
Business. The Group will continue to co-operate fully with the
FCA.
Such investigations take an average of two years to conclude
from the commencement date. There are a number of different
outcomes which may result from this FCA investigation, including
the imposition of a significant fine and/or the requirement to
perform a back-book remediation exercise in the absence of a
successful Scheme of Arrangement. Should the FCA mandate this
review it is possible that the cost of such an exercise will
exceed the Group's available resources. The potential impact of
the
investigation on the business is unpredictable and
unquantifiable.
15. Share capital
On 4 July 2018 the Company's shares were admitted to trading on
the London Stock Exchange. Immediately prior to admission the
shareholder loan notes were converted to equity, increasing the
share capital of the business to 475 million ordinary shares and
increasing net assets by GBP207.2m. No additional shares were
issued subsequent to conversion of the shareholder loan notes.
Ordinary Number Total Number
At 31 March 2021 475,333,760 475,333,760
--------------------- --------------- -------------------
At 30 September 2021 475,333,760 475,333,760
--------------------- --------------- -------------------
Ordinary shares
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at general meetings of the Company. Each ordinary share in
the capital of the Company ranks equally in all respects and no
shareholder holds shares carrying special rights relating to the
control of the Company. The nominal value of shares in issue is
shown in share capital, with any additional consideration for those
shares shown in share premium.
Deferred shares
At the time of the IPO and subdivision the 41,000 ordinary B
shares were split into 16,400,000 ordinary shares of 0.25p and
41,000 deferred shares of GBP0.24.
The deferred shares do not carry any rights to receive any
profits of the Company or any rights to vote at a general meeting.
Prior to the subdivision the ordinary B shares had 1.24 votes per
share; all other shares had one vote per share.
Dividends
Dividends are recognised through equity, on the earlier of their
approval by the Company's shareholders or their payment. Due to the
Asset Voluntary Requirement entered into with the FCA, prior
approval by the FCA will be required to pay dividends to
shareholders. The Board decided that it would not propose a final
dividend payment for the year to 31 March 2021 or an interim
dividend for the period to 30 September 2021. Total cost of
dividends paid in the period is GBPnil (2020: GBPnil).
16. Immediate and ultimate parent undertaking
The immediate and ultimate parent undertaking is Amigo Holdings
PLC, a company incorporated in England and Wales. The consolidated
financial statements of the Group as at and for the year ended 31
March 2021 are available upon request from the Company's registered
office at Nova Building, 118-128 Commercial Road, Bournemouth,
United Kingdom, BH2 5LT.
17. Share-based payments
The Group issues share options and awards to employees as part
of its employee remuneration packages. The Group operates three
types of equity settled share scheme: Long Term Incentive Plan
(LTIP), employee's savings-related share option schemes referred to
as Save As You Earn (SAYE) and the Share Incentive Plan (SIP).
During the period a secondary SAYE scheme was launched and
additional LTIP awards in the form of nil cost share options were
granted.
A summary of the new awards at the reporting date is set out
below:
Method of
Contractual life settlement Number of Vesting
Type of options Performance condition accounting instruments period
--------- ----------------- --------------------- ----------- ------------ -------
August 2021- July
2021 LTIP 2024 Y Equity 4,350,000 3 years
--------- ----------------- --------------------- ----------- ------------ -------
Granted LTIPs are subject to the following performance
conditions.
-- 40% of the LTIP Awards vest subject to an absolute total
shareholder return (ATSR) performance condition which will be
measured over a three year performance period commencing on 27
August 2021. Straight line vesting applies to share price growth
between GBP0.12 and GBP0.40;
-- 30% of the LTIP Awards are subject to the Group meeting an
earnings per share (EPS) performance condition which will be
measured over a three year performance period commencing 27 August
2021. Straight line vesting applies to EPS growth between GBP0.01
and GBP0.04; and
-- 30% of the LTIP Awards are subject to non-financial measures,
such as internal targets for corporate culture, conduct risk
matters, diversity and inclusiveness and other ESG measures.
Absolute TSR target Proportion of LTIP Awards subject
to Absolute TSR condition that vest
----------------------- ------------------------------------
Below GBP0.12 0%
GBP0.40 100%
----------------------- ------------------------------------
Proportion of LTIP Awards subject
EPS Target to EPS condition that vest
----------------------- ------------------------------------
Below GBP0.01 0%
GBP0.04 100%
----------------------- ------------------------------------
Non-financial measures 30%
----------------------- ------------------------------------
18. Investment in subsidiaries and structed entities
Amigo Loans Group Limited (ALGL) is a wholly owned subsidiary of
the Company and a reconciliation to its consolidated results is
included in the presentation pack on the Company's website as part
of ALGL's senior secured note reporting requirements.
The following are subsidiary undertakings of the Company at 30
September 2021 and includes undertakings registered or incorporated
up to the date of the Directors' Report as indicated. Unless
otherwise indicated all Group owned shares are ordinary. All
entities are subsidiaries on the basis of 100% ownership and
shareholding, aside from AMGO Funding (No. 1) Limited which is an
orphaned structured entity.
Class of
Country of Shares Ownership Ownership
Name incorporation held 2021 2020 Principal activity
------------------------------ ---------------- --------- --------- --------- ------------------
Direct holding
Amigo Loans Group Ltd1 United Kingdom Ordinary 100% 100% Holding company
Special purpose
ALL Scheme Ltd1* United Kingdom Ordinary 100% - vehicle
Indirect holdings
Amigo Loans Holdings Ltd1 United Kingdom Ordinary 100% 100% Holding company
Amigo Loans Ltd1 United Kingdom Ordinary 100% 100% Trading company
Amigo Management Services
Ltd1 United Kingdom Ordinary 100% 100% Trading company
Amigo Canteen Limited1** United Kingdom Ordinary 100% 100% In liquidation
Amigo Luxembourg S.A.2 Luxembourg Ordinary 100% 100% Financing company
Special purpose
AMGO Funding (No.1) Ltd4 United Kingdom n/a "SE" "SE" vehicle
Amigo Car Loans Limited1 United Kingdom Ordinary 100% 100% Dormant company
Amigo Motor Finance Limited1 United Kingdom Ordinary 100% 100% Dormant company
Amigo Car Finance Limited1 United Kingdom Ordinary 100% 100% Dormant company
Amigo Store Limited1 United Kingdom Ordinary 100% 100% Dormant company
Amigo Group Limited1 United Kingdom Ordinary 100% 100% Dormant company
Amigo Finance Limited1 United Kingdom Ordinary 100% 100% Dormant company
Amigo Loans International
Limited3 Ireland Ordinary 100% 100% Holding company
Amigo Loans Ireland
Limited3 Ireland Ordinary 100% 100% Trading company
----------------------------- ----------------- --------- --------- --------- ------------------
1 Registered at Nova Building, 118-128 Commercial Road, Bournemouth BH2 5LT, England.
2 Registered at 19, Rue de Bitbourg, L-1273 Luxembourg.
3 Registered at Suite 3, One Earlsfort Centre, Lower Hatch Street, Dublin 2.
4 Registered at Level 37, 25 Canada Square, London E14 5LQ.
* Incorporated on 6 January 2021.
** Previously RG Catering Services Limited.
19. Related party transactions
The Group had no related party transactions during the six month
period to 30 September 2021 that would materially affect the
performance of the Group. Details of the transactions for the year
ended 31 March 2021 can be found in note 24 of the Amigo Holdings
PLC financial statements.
Appendix: alternative performance measures (unaudited)
This financial report provides alternative performance measures
(APMs) which are not defined or specified under the requirements of
International Financial Reporting Standards. The Board believes
these APMs provide readers with important additional information on
the Group. To support this, details of the APMs used, how they are
calculated and why they are used are set out below.
Key performance indicators
Other financial data
6 months
6 months to to Year to
30 Sep 31 Mar
Figures in GBPm, unless otherwise stated 30 Sep 21 20 21
--------------------------------------------- ----------- -------- ---------
Average gross loan book 356.1 656.9 586.4
Gross loan book 289.2 563.9 422.9
Percentage of book <31 days past due 84.1% 94.4% 84.4%
Net loan book 224.1 485.2 340.9
Net borrowings 2.1 (265.5) (118.6)
Net borrowings/gross loan book (0.7)% 47.1% 28.0%
Net borrowings/equity 0.0X 2.7x (1.0)x
Revenue yield 31.7% 28.1% 29.1%
Risk adjusted revenue 30.6 72.8 110.1
Risk adjusted margin 17.2% 22.2% 18.8%
Net interest margin 16.6% 20.3% 20.3%
Adjusted net interest margin 26.3% 23.4% 24.5%
Cost of funds percentage 5.5% 4.7% 4.3%
Impairment:revenue ratio 45.8% 21.1% 35.5%
Impairment charge as a percentage of loan
book 17.9% 6.9% 14.4%
Cost:income ratio 33.3% 125.9% 212.7%
Operating cost:income ratio (ex. complaints) 23.9% 24.4% 26.1%
Adjusted profit/(loss) after tax 2.0 (58.1) (279.8)
Return on assets 1.3% (19.1)% (44.9)%
Adjusted return on average assets 0.8% (16.3)% (43.5)%
Return on equity (5.5)% (101.7)% (1257.0)%
Adjusted return on average equity (3.3)% (87.0)% (1216.5)%
--------------------------------------------- ----------- -------- ---------
1. Average gross loan book
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
--------------------------- ------ ------ ------
Opening gross loan book 422.9 749.9 749.9
Closing gross loan book 289.2 563.9 422.9
--------------------------- ------ ------ ------
Average gross loan book(1) 356.1 656.9 586.4
--------------------------- ------ ------ ------
1. Gross loan book represents total outstanding loans and excludes deferred broker costs.
2. The percentage of balances up to date or less than 31 days
overdue is presented as this is useful in reviewing the quality of
the loan book.
30 Sep 30 Sep 31 Mar
21 20 21
Ageing of gross loan book by days overdue: GBPm GBPm GBPm
------------------------------------------- ------ ------ ------
Current 210.5 454.0 315.5
1-30 days 32.6 78.3 41.4
31-60 days 11.5 10.8 16.0
>61 days 34.6 20.8 50.0
------------------------------------------- ------ ------ ------
Gross loan book 289.2 563.9 422.9
------------------------------------------- ------ ------ ------
Percentage of book <31 days past due 84.1% 94.4% 84.4%
------------------------------------------- ------ ------ ------
3. "Net loan book" is a subset of customer loans and receivables
and represents the interest yielding loan book when the IFRS 9
impairment provision is accounted for, comprised of:
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
------------------------------------ ------- ------ ------
Gross loan book1 (see APM number 2) 289.2 563.9 422.9
Provision2 (65.1) (78.7) (82.0)
------------------------------------ ------- ------ ------
Net loan book 3 224.1 485.2 340.9
------------------------------------ ------- ------ ------
(1) Gross loan book represents total outstanding loans and
excludes deferred broker costs.
(2) Provision for impairment represents the Group's estimate of
the portion of loan accounts that are not in arrears or are up to
five payments in arrears for which the Group will not ultimately be
able to collect payment. Provision for impairment excludes loans
that are six or more payments in arrears, which are charged off of
the statement of financial position and are therefore no longer
included in the loan book.
(3) Net loan book represents gross loan book less provision for
impairment.
4. "Net borrowings" is comprised of:
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
-------------------------- ------- ------- -------
Borrowings(1) (232.4) (399.7) (296.5)
Cash and cash equivalents 234.5 134.2 177.9
-------------------------- ------- ------- -------
Net borrowings 2.1 (265.5) (118.6)
-------------------------- ------- ------- -------
1. Total borrowings is net of unamortised fees.
This is deemed useful to show total borrowings if unrestricted
cash available at the period end was used to repay borrowings.
5. The Group defines loan to value (LTV) as net borrowings
divided by gross loan book. This measure shows if the borrowings'
year-on-year movement is in line with loan book growth.
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
----------------------------------- ------ ------- -------
Net borrowings (see APM number 4) 2.1 (265.5) (118.6)
Gross loan book (see APM number 2) 289.2 563.9 422.9
----------------------------------- ------ ------- -------
Net borrowings/gross loan book (0.7)% 47.1% 28.0%
----------------------------------- ------ ------- -------
6. Net borrowings/equity
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
---------------------------------- ------- ------- -------
Shareholder equity (117.6) 99.6 (121.4)
Net borrowings (see APM number 4) 2.1 (265.5) (118.6)
---------------------------------- ------- ------- -------
Net borrowings/equity 0.0x 2.7x (1.0)x
---------------------------------- ------- ------- -------
This is one of the Group's metrics to assess gearing.
7. The Group defines "revenue yield" as annualised revenue over
the average of the opening and closing gross loan book for the
period.
30 Sep 30 Sep 31 Mar
21 20 21
Revenue yield GBPm GBPm GBPm
------------------------------------- ------ ------ ------
Revenue 56.5 92.3 170.8
Opening loan book 422.9 749.9 749.9
Closing loan book 289.2 563.9 422.9
Average loan book (see APM number 1) 356.1 656.9 586.4
------------------------------------- ------ ------ ------
Revenue yield (annualised) 31.7% 28.1% 29.1%
------------------------------------- ------ ------ ------
This is deemed useful in assessing the gross return on the
Group's loan book.
8. The Group defines "risk adjusted revenue" as revenue less
impairment charge.
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
------------------------------------------------ ------ ------ ------
Revenue 56.5 92.3 170.8
Impairment of amounts receivable from customers (25.9) (19.5) (60.7)
------------------------------------------------ ------ ------ ------
Risk adjusted revenue 30.6 72.8 110.1
------------------------------------------------ ------ ------ ------
Risk adjusted revenue is not a measurement of performance under
IFRS and is not an alternative to profit/(loss) before tax as a
measure of the Group's operating performance, as a measure of the
Group's ability to meet its cash needs or as any other measure of
performance under IFRS.
9. The Group defines "risk adjusted margin" as risk adjusted
revenue divided by the average of gross loan book.
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
------------------------------------------- ------ ------ ------
Risk adjusted revenue (see APM number 8) 30.6 72.8 110.1
Average gross loan book (see APM number 1) 356.1 656.9 586.4
------------------------------------------- ------ ------ ------
Risk adjusted margin (annualised) 17.2% 22.2% 18.8%
------------------------------------------- ------ ------ ------
This measure is used internally to review an adjusted return on
the Group's loan book.
10. The Group defines "net interest margin" as annualised net
interest income divided by average interest-bearing assets (being
both gross loan book and cash) at the beginning of the period and
end of the period.
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
-------------------------------------------------- ------ ------ ------
Revenue 56.5 92.3 170.8
Interest payable, receivable and funding facility
fees (9.7) (15.6) (27.4)
-------------------------------------------------- ------ ------ ------
Net interest income 46.8 76.7 143.4
-------------------------------------------------- ------ ------ ------
Opening interest-bearing assets (gross loan book
plus unrestricted cash) 600.8 814.2 814.2
Closing interest-bearing assets (gross loan book
plus unrestricted cash) 523.7 698.1 600.8
Average interest-bearing assets (customer loans
and receivables plus unrestricted cash) 562.3 756.2 707.5
-------------------------------------------------- ------ ------ ------
Net interest margin (annualised) 16.6% 20.3% 20.3%
-------------------------------------------------- ------ ------ ------
Adjusted net interest margin, being net interest income divided
by average gross loan book, is also presented below:
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
------------------------------------------- ------ ------ ------
Net interest income 46.8 76.7 143.4
Average gross loan book (see APM number 1) 356.1 656.9 586.4
------------------------------------------- ------ ------ ------
Adjusted net interest margin (annualised) 26.3% 23.4% 24.5%
------------------------------------------- ------ ------ ------
11. The Group defines "cost of funds" as annualised interest
payable divided by the average of gross loan book at the beginning
and end of the period.
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
------------------------------------------------- ------ ------ ------
Cost of funds 9.8 15.6 27.5
Less complaints discount unwind expense (notes 4
and 14) - (1.1) (2.0)
------------------------------------------------- ------ ------ ------
Adjusted cost of funds 9.8 14.5 25.5
------------------------------------------------- ------ ------ ------
Average gross loan book (see APM number 1) 356.1 656.9 586.4
------------------------------------------------- ------ ------ ------
Cost of funds percentage (annualised) 5.5% 4.4% 4.3%
------------------------------------------------- ------ ------ ------
This measure is used by the Group to monitor the cost of funds
and impact of diversification of funding. The measure has been
amended to reflect on true interest expenses related to borrowings,
accounting related adjustments have been removed to provide a
better understanding for users.
12. Impairment charge as a percentage of revenue
"impairment:revenue ratio" represents the Group's impairment charge
for the period divided by revenue for the period.
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
------------------------------------------------ ------ ------ ------
Revenue 56.5 92.3 170.8
Impairment of amounts receivable from customers 25.9 19.5 60.7
------------------------------------------------ ------ ------ ------
Impairment charge as a percentage of revenue 45.8% 21.1% 35.5%
------------------------------------------------ ------ ------ ------
This is a key measure for the Group in monitoring risk within
the business.
13 . Impairment charge as a percentage of loan book represents
the Group's impairment charge for the period divided by closing
gross loan book.
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
------------------------------------------------------------ ------ ------ ------
Impairment of amounts receivable from customers 25.9 19.5 60.7
Closing gross loan book (see APM number 1) 289.2 563.9 422.9
------------------------------------------------------------ ------ ------ ------
Impairment charge as a percentage of loan book (annualised) 17.9% 6.9% 14.4%
------------------------------------------------------------ ------ ------ ------
This allows review of the impairment charge relative to the size
of the Group's gross loan book.
14. The Group defines "cost:income ratio" as operating expenses
excluding strategic review, formal sale process and related
financing costs divided by revenue.
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
------------------------- ------ ------ ------
Revenue 56.5 92.3 170.8
Total operating expenses 18.8 116.2 363.3
------------------------- ------ ------ ------
Cost:income ratio 33.3% 125.9% 212.7%
------------------------- ------ ------ ------
This measure allows review of cost management.
15. Operating cost:income ratio, defined as the cost:income
ratio excluding the complaints provision, is:
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
-------------------------------------------- ------ ------ ------
Revenue 56.5 92.3 170.8
Administrative and other operating expenses 13.5 22.5 44.5
-------------------------------------------- ------ ------ ------
Operating cost:income ratio 23.9% 24.4% 26.1%
-------------------------------------------- ------ ------ ------
16. The following table sets forth a reconciliation of
profit/(loss) after tax to "adjusted (loss)/profit after tax" for
the 6 months to 30 September 2021, 2020 and year to 31 March
2020.
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
----------------------------------------------- ------ ------ -------
Reported profit/(loss) after tax 3.3 (67.9) (289.1)
Revolving credit facility (RCF) fees - 0.7 0.7
Securitisation fees - 1.2 1.2
Strategic review and formal sale process costs - 3.6 3.0
Tax provision release (0.8) (2.5) (2.5)
Tax refund due (0.5) - -
Tax asset write-off - 7.8 7.8
Less tax impact - (1.0) (0.9)
----------------------------------------------- ------ ------ -------
Adjusted profit/(loss) after tax 2.0 (58.1) (279.8)
----------------------------------------------- ------ ------ -------
The above items were all excluded due to their exceptional
nature. The Directors believe that adjusting for these items is
useful in making year-on-year comparisons.
-- Senior secured note buybacks are not underlying business-as-usual transactions.
-- RCF fees relate to fees written-off following the
modification and extension of the revolving credit facility in
FY20, and in FY21 relates to fees written-off following
cancellation of the facility. Modification, extension and
cancellation of the facility were all deemed substantial
modifications of the financial instrument leading to the
derecognition of previously capitalised fees. The facility was
cancelled in May 2020 and hence these amounts have been
excluded.
-- Following the renegotiation of the securitisation facility on
14 August 2020 a substantial modification of the facility occurred;
as such all previous capitalised fees relating to the facility have
been written off. This has been adjusted for above as it was a
one-off event in the period.
-- Due to inherent uncertainty surrounding future profitability,
current and deferred tax assets were written off and charged to the
consolidated statement of comprehensive income in the year. The tax
provision release refers to the release of a tax provision no
longer required. These adjustments result in a tax charge for the
year despite the large loss making position as at 31 March 2021 and
hence have been adjusted for in the calculation.
-- Strategic review and formal sale process costs relate to the
strategic review and formal sale processes both announced in
January 2020. They are one off costs and hence have been
adjusted.
-- Tax provision release is a prior year adjustment due to the
release of the 2017 uncertain tax provision relating to the
potential thin capitalisation adjustment in Amigo Holdings.
None are business-as-usual transactions. Hence, removing these
items is deemed to give a view of underlying profit/(loss)
adjusting for non-business-as-usual items within the financial
year.
17. Return on assets (ROA) refers to annualised profit/(loss)
over tax as a percentage of average assets.
30 Sep 30 Sep 31 Mar
Return on assets 21 20 21
--------------------------------------------------- ------ ------- -------
Profit/(loss) after tax 3.3 (67.9) (289.1)
Customer loans and receivables at period and year
end 229.9 500.8 350.6
Other receivables and current assets at period and
year end 4.7 37.5 8.0
Cash and cash equivalents at period and year end 234.5 134.2 177.9
--------------------------------------------------- ------ ------- -------
Total 469.1 672.5 536.5
--------------------------------------------------- ------ ------- -------
Average assets 502.8 711.8 643.8
--------------------------------------------------- ------ ------- -------
Return on assets (annualised) 1.3% (19.1)% (44.9)%
--------------------------------------------------- ------ ------- -------
18. Adjusted return on assets refers to annualised adjusted
profit/(loss) over tax as a percentage of average assets
30 Sep 30 Sep 31 Mar
Adjusted return on assets 21 20 21
--------------------------------------------------- ------ ------- -------
Adjusted (loss)/profit after tax (see APM number
16) 2.0 (58.1) (279.8)
Customer loans and receivables at period and year
end 229.9 500.8 350.6
Other receivables and current assets at period and
year end 4.7 37.5 8.0
Cash and cash equivalents at period and year end 234.5 134.2 177.9
--------------------------------------------------- ------ ------- -------
Total 469.1 672.5 536.5
--------------------------------------------------- ------ ------- -------
Average assets 502.8 711.8 643.8
--------------------------------------------------- ------ ------- -------
Adjusted return on assets (annualised) 0.8% (16.3)% (43.5)%
--------------------------------------------------- ------ ------- -------
19. "Return on equity" (ROE) is calculated as annualised
profit/(loss) after tax divided by the average of equity at the
beginning of the period and the end of the period.
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
-------------------------------------- ------- -------- ---------
Profit/(loss) after tax 3.3 (67.9) (289.1)
Shareholder equity (117.6) 99.6 (121.4)
Average equity (119.5) 133.5 23.0
-------------------------------------- ------- -------- ---------
Return on average equity (annualised) (5.5)% (101.7)% (1257.0)%
-------------------------------------- ------- -------- ---------
20. "Adjusted return on equity" is calculated as annualised
adjusted profit/(loss) after tax divided by the average of equity
at the beginning of the period and the end of the period.
30 Sep 30 Sep 31 Mar
21 20 21
GBPm GBPm GBPm
------------------------------------------------- ------- ------- ---------
Adjusted profit/(loss) after tax (see APM number
16) 2.0 (58.1) (279.8)
Shareholder equity (117.6) 99.6 (121.4)
Average equity (119.5) 133.5 23.0
------------------------------------------------- ------- ------- ---------
Adjusted return on average equity (annualised) (3.3)% (87.0)% (1216.5)%
------------------------------------------------- ------- ------- ---------
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