TIDMAMGO
RNS Number : 8503H
Amigo Holdings PLC
29 November 2022
29 November 2022
Amigo Holdings PLC
Interim Financial Results for the six months ended 30 September
2022
Amigo Holdings PLC, ("Amigo" or the "Company"), provider of
mid-cost credit in the UK, announces results for the six-month
period ended 30 September 2022.
Danny Malone, Chief Executive Officer commented:
"Amigo's recovery continues to make good progress. We recently
started a pilot of our new RewardRate product and meetings with
potential investors in relation to a capital raise are now also
underway. The last date for making claims under the Scheme was 26
November 2022. The indication is that the volume of claims is c.25%
ahead of previous expectations. Under the terms of our Scheme of
Arrangement, compensation pay-outs will begin next year to
customers who are owed redress. It has been a long process of
renewal but I'm proud of the journey we have been on. We've built a
better company with the right culture and strong underwriting
standards. We're now well positioned to support people through this
cost-of-living crisis with responsible lending."
Headlines
-- Amigo continues to make progress following the sanctioning by
the High Court of its Scheme of Arrangement ("the Scheme") in May
2022.
-- The Scheme allows for Amigo to pay compensation to customers
with a valid claim for redress for loans which were mis-sold prior
to the Company suspending all lending in November 2020.
-- Under the Scheme, all claims were submitted by 26 November
2022. The final number of claimants is being verified. However, the
indication is that the volumes of claims are c.25% ahead of
previous expectations.
-- Amigo returned to lending in October 2022, post period end,
following approval from the Financial Conduct Authority ("FCA") for
a pilot phase to proceed, thereby meeting one of two Scheme
conditions set by the Court.
-- The second condition is the completion of a successful
capital raise including issuing 19 ordinary shares for every one
ordinary share in issue at that time. Work on this is underway and
the process must complete by 26 May 2023.
-- On 23 September 2022, Chief Financial Officer ("CFO") Danny
Malone succeeded Gary Jennison as Chief Executive Officer ("CEO")
and Kerry Penfold joined the Board as CFO; these management changes
reflect the transition from turnaround to rebuild and future
growth.
Financial headlines
Figures in GBPm, unless otherwise Six months to Six months to Change %
stated 30 September 30 September
2022 2021
Number of customers(1) '000 49.0 102.0 (52.0)
Net loan book(2) 80.6 224.1 (64.0)
Revenue 15.8 56.5 (72.0)
Impairment: revenue (1.3)% 45.8% NM*
Complaints provision (balance
sheet) (191.4) (344.3) (44.4)
Complaints charge (income statement) (11.3) (5.3) 113.2
(Loss)/profit before tax (12.7) 2.1 NM*
(Loss)/profit after tax(3) (12.7) 3.3 NM*
Adjusted (loss)/profit after
tax(4) (12.7) 2.0 NM*
Basic EPS Pence (2.7) 0.7 NM*
EPS (Basic, adjusted)(5) Pence (2.7) 0.4 NM*
Net unrestricted cash(6) 78.6 2.1 NM*
*NM = not meaningful
Financial headlines (cont.)
-- Net loan book reduction of 64.0% to GBP80.6m (H1 FY2022:
GBP224.1m) and revenue reduction of 72.0% to GBP15.8m (H1 FY2022:
GBP56.5m), due to the ongoing run-off of the legacy loan book and
no new lending during the period.
-- Complaints provision down 44.4% to GBP191.4m (H1 FY2022:
GBP344.3m). This provision has increased from the full year number
of GBP179.8m as assumptions for both the volume of claims under the
Scheme and the estimated uphold rate, have been revised higher in
line with observed claims. The increase in the provision
substantially accounts for the income statement charge of
GBP11.3m.
-- The reduction in revenue as the book runs off, alongside the
increase in provision, led to a reported loss before tax of
GBP12.7m, (H1 FY2022: profit of GBP2.1m). No tax impact or profit
adjustments were made in the period.
-- Overall collections, including early repayments and
recoveries from written-off accounts, have remained robust despite
the increased cost of living and notwithstanding the continued, but
expected, rise in delinquency as the book runs-off.
-- GBP128.4m of unrestricted cash and cash equivalents as at 30
September 2022 (H1 FY2022: GBP234.5m), following the payment of the
GBP60m initial Scheme contribution and bi-annual senior secured
note coupon payment in July 2022, reflects continued strong cash
generation. Current unrestricted cash balance of over
GBP130.0m.
-- Net unrestricted cash of GBP78.6m at 30 September 2022 (H1
FY2022: net cash of GBP2.1m) driven by the continued collection of
the back book while originations remained suspended. Substantially
all of the Group's net cash, excluding c.GBP8m of working capital,
is committed within the Scheme.
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( Loss)/profit after tax otherwise known as (loss)/profit and
total comprehensive (loss)/income to equity shareholders of the
Group as per the financial statements.
(4) Adjusted (loss)/profit after tax excludes items due to their
exceptional nature including: write-back of complaints provision,
senior secured note buyback, securitisation facility fees write
off, tax provision release and tax refund due. None are
business-as-usual transactions. Hence, removing these items is
deemed to give a view of underlying profit adjusting for
non-business-as-usual items within the financial year.
(5) Basic adjusted profit/earnings per share is a non-IFRS
measure and the calculation is shown in note 7. Adjustments to
(loss)/profit are described in footnote 4 above.
(6) Net unrestricted cash is defined as unrestricted cash and
cash equivalents less borrowings and unamortised fees.
*Detailed definitions and calculations of these alternative
performance measures (APMs) can be found in the APM section of
these condensed financial statements
Analyst, investor and bondholder conference call and webcast
Amigo will be hosting a live webcast for investors and
bondholders today at 10.00am (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: + 020 3936 2999; Access code: 597054). 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').
Contacts:
Amigo
Kerry Penfold, Chief Financial Officer
Kate Patrick, Head of Investor Relations investors@amigo.me
Lansons
amigoloans@lansons.com
Tony Langham
07979 692287
Tom Baldock
07860 101715
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. Since October
2022, Amigo has offered guarantor loans and non-guarantor personal
loans under its RewardRate brand. Both products reward customers
for on-time payments with an annual, interest-free, payment holiday
and the opportunity to reduce the effective APR, encouraging better
financial management and facilitating a long-term improvement of
customers' credit scores and financial mobility. Amigo has provided
guarantor loans in the UK from 2005, offering 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's back book
of loans issued pre-November 2020 is in the process of being run
off with all net proceeds due to creditors under a Court approved
Scheme of Arrangement. 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.
Chief Executive's Statement
Amigo has made good progress over the financial year to date.
Following the sanctioning of our Scheme of Arrangement ("Scheme")
in May 2022, we fulfilled the first of two Scheme conditions in
October 2022 by returning to lending with FCA approval. A pilot is
now underway and our new products, processes and systems are being
further tested. After such a long period without new lending, I
would like to thank all our employees for their ongoing
commitment.
Performance
During the six-month period to 30 September 2022, as expected,
Amigo's legacy book has continued to unwind, resulting in a
reduction in revenue of 72.0% compared to the prior year period and
in customer numbers, which were down 52.0%. The net loan book, at
30 September 2022, was GBP80.6m. Despite the challenging
macroeconomic backdrop and the increased cost of living being felt
across society, collections, which have included early repayments
and recoveries from written-off accounts, have remained robust.
Following the sanctioning of the Scheme, the complaints
liability has halved and the provision reduced accordingly from the
prior year (reflecting the terms of the Scheme which cap the
redress amount). However, in the most recent quarter, we have
revised the provision upwards in line with the observed volume of
claims in the Scheme and the projected uphold rate. This increase
in the provision equates to an income statement charge of GBP11.3m.
This, alongside the reduction in revenue as the book runs-off, has
resulted in a reported loss before tax for the period of GBP12.7m,
(H1 FY2022: profit of GBP2.1m). No tax impact or profit adjustments
were made in the period.
Our cash position remains strong with unrestricted cash at 30
September 2022 of GBP128.4m after payment of the initial GBP60m
Scheme contribution in June 2022 and the bi-annual senior secured
note coupon payment in July 2022. Current unrestricted cash is over
GBP130.0m.
FCA Approval to lend
On 13 October 2022, post period-end, Financial Conduct Authority
("FCA") approval was received for Amigo to return to lending under
certain agreed conditions. The full letter outlining these
conditions can be found on the FCA website here . The FCA confirmed
that it is satisfied Amigo has met the threshold conditions
required for the Company to return to lending, initially through
the operation of a pilot lending scheme which will limit the level
of new loans issued for at least two months. During the initial
pilot phase plus a required period for assessment, Amigo will
undertake further outcomes testing, led by a third party, to
demonstrate that the new systems and controls meet regulatory
expectations and that it can continue to meet threshold conditions
when lending volumes are increased. If the FCA is satisfied with
the outcome of this pilot phase, Amigo's increase in volumes will
then be limited, as agreed within the Scheme, to a maximum of
GBP35m cumulative net originations until a minimum GBP15m from the
proposed capital raise is paid into the Scheme fund. Under the
terms of the Scheme, this must be completed by 26 May 2023.
Amigo has returned to lending under the new RewardRate brand and
product set, which offers a combination of unsecured and guarantor
loan products to a large and clearly defined addressable market of
around 12m adults. Designed in conjunction with an anti-poverty
charity, these products give people who are underserved by
mainstream credit providers the opportunity to achieve financial
mobility. Stronger underwriting standards have underpinned the
development of these products during a period in which borrowers'
affordability is being impacted by the increasing cost of living.
RewardRate's products are specifically aligned to the FCA's
upcoming Consumer Duty regulations, meaning we are now
well-positioned for the future regulatory environment.
As well as designing the new product set, we have invested in
new technology and undergone a cultural reset. As noted in the FCA
letter, dated 13 October 2022, the FCA recognises the significant
programme of change Amigo has undertaken and that it continues to
progress to deliver improvements to the way in which its business
operates including providing fair outcomes to consumers. I am
confident that Amigo now has the right culture, discipline and
operational processes in place as we rebuild our business and
position it for future growth.
Scheme of Arrangement
Amigo's Scheme of Arrangement was sanctioned by the High Court
in May 2022 and it closed to new claims on 26 November 2022. Under
the "preferred" Scheme solution, Amigo will make an initial cash
contribution of GBP97m to the Scheme fund, of which GBP60m was paid
in June 2022. GBP37m is due to be paid to the Scheme fund by 26
February 2023. Amigo, based on current projections, expects to meet
the initial Scheme contribution. In the event that total net
recoveries from the back book, excluding the liquidity buffer of
GBP8.4m, result in an amount greater than the GBP97m initial Scheme
contribution, the excess will be paid to the Scheme fund. A further
contribution of at least GBP15m is expected to be made from the
proceeds of the proposed capital raise, in accordance with the
terms of the Scheme.
The FCA's decision to approve a return to lending is an
important milestone for creditors owed redress by Amigo, as it
meets one of two Scheme conditions which must be fulfilled to meet
the "preferred" solution. The second condition is the completion of
a capital raise by 26 May 2023. If Amigo fails to meet this final
condition, the Scheme will revert to the "fallback" solution which
is an orderly wind-down of the Amigo Loans Ltd business.
Capital Raise
Contact with potential investors began in October 2022,
following receipt of FCA approval to return to lending. Amigo
represents a rare opportunity to invest in an established
specialist lending platform with limited legacy risk which operates
in market segments with increasing demand. As set out in Amigo's
AGM statement on 28 September 2022, the Board expects to propose a
capital raise of approximately GBP40m, which will include the 19:1
ordinary share issue mandated by the Scheme. In addition, Amigo
will raise debt to support future growth. As noted in Amigo's AGM
statement, the Board will seek to facilitate meaningful
participation by its existing shareholders on a pre-emptive basis,
underwritten by one or more institutional investors whom it expects
to account for the majority of the capital raise.
This is a complex transaction, not least because of the May
deadline for satisfaction of the Scheme conditions, and that the
anticipated significant institutional investor underwriting may
require FCA consent for a change of control. The structure remains
under consideration and, due to its complexity and the
uncertainties of the market, Amigo reserves the right to make
appropriate amendments to the size and terms of the Capital
Raise.
Amigo continues to provide information to the FCA with regard to
its enforcement investigation into affordability of loans and
complaints handling and expects the investigation to be concluded
prior to the capital raise.
Corporate Governance
The proper and effective governance of Amigo is fundamental to
our future success, and I'm pleased with the FCA's recognition of
the significant change and progress we have made to deliver
improvements to the way in which our business operates.
Central to this is our enhanced governance and cultural
framework and our focus on customer outcomes and Environmental,
Social and Governance ("ESG") responsibilities.
Amigo's Responsible Business Council ("RBC"), established in the
period, has been working with representatives across the business
to support and drive Amigo's ESG commitments. For example, by
partnering with Amigo's internal charity and employee-event focused
committee to support the local community through volunteer events
and food bank drives. It has also collaborated with the HR function
to deliver financial support to Amigo's employees to help combat
the cost-of-living crisis and together they will be undertaking a
full diversity, equity and inclusion review. The RBC is committed
to identifying longer-term goals to benefit our customers,
employees and wider community and to implementing specific metrics
and targets to record progress against the recently adopted
priority UN Sustainable Development Goals.
One of these goals is climate action. In line with the roadmap
set out in our Annual Report 2022, we are taking steps towards
integrating climate impact into our business planning. The first of
these is a scenario analysis to identify material climate-related
risks and opportunities under different climate pathways and to
quantify the potential business impacts. In the new year, we will
be working to assess a science-based, credible net-zero target. In
summary, we are on track to deliver on this year's disclosure
requirements, as per our defined roadmap, and more importantly, to
incorporating climate impact into our business planning.
Board
On 23 September 2022, I took on the role of CEO. Following the
successful sanctioning of the Scheme and as the business began a
transition from turnaround to rebuild and future growth, Gary
Jennison retired from his role as CEO and as a Director of the
Board. At the same time, Kerry Penfold became CFO, moving from the
role of Head of Finance at Amigo. Kerry has 20 years' experience in
financial services, and I am delighted that she agreed to become
CFO. Both appointments are subject to FCA approval under the Senior
Managers Regime.
On 3 October, Jerry Loy joined the Board as a Non-Executive
Director and Chair of the Audit Committee, subject to FCA approval
under the Senior Managers Regime. With over 30 years' experience
working in financial services and with extensive audit and
regulatory experience, Jerry is a valuable addition to the
Board.
On behalf of the Board, I would like to thank Gary for his
considerable contribution and welcome both Kerry and Jerry who join
at an important turning point for the business.
Summary and Outlook
In summary, Amigo continues to make significant progress. With
the sanction of the Scheme and its recent closure to new Scheme
claims, redress customers are a step closer to receiving
compensation and Amigo is near to having clarity on its long-term
future. Our legacy risk is now minimal, and we have designed new
products during an economic crisis that will stand us in good stead
for the future. Returning to lending for the first time since 2020
has been a great achievement which has taken considerable effort
from our teams, of whom I am immensely proud. The capital raise
process has begun and we look forward to updating shareholders on
progress in due course.
The next six months are critical for Amigo's ongoing survival.
If we are successful in raising capital, we move forward with a
very different business to that of the past and with a business
model that is well positioned for the future regulatory environment
and for growth as a responsible and valuable contributor to the
mid-cost specialist credit market.
Financial Review
In the six months to 30 September 2022, the net loan book
reduced by 64.0% to GBP80.6m (H1 FY2022: GBP224.1m). Revenue fell
by 72.0% year on year to GBP15.8m (H1 FY2022: GBP56.5m), reflecting
the loan book reduction with no new lending over the period.
Customer numbers reduced by 52.0% compared to the prior year to
49,000 (H1 FY2022: 102,000). The reduction in revenue, alongside an
increase in the provision following upward revised volume and
uphold assumptions led to a reported statutory loss before tax for
the period of GBP12.7m (H1 FY2022: profit of GBP2.1m). There was no
tax impact for the half year or profit adjustments made in the
period.
Net assets at 30 September 2022 were GBP35.2m (H1 FY2022: net
liabilities of GBP117.6m). Although the results show a positive
shareholder equity position, substantially all the existing net
assets of the business will be delivered to the Scheme creditors.
After the costs of administering the Scheme and collecting out the
remaining portfolio are paid, only a small working capital amount
of c.GBP8m will remain. This will not be sufficient to support
future lending beyond the initial period; future lending is
expected to be funded, in part, by way of the capital raise to be
completed by 26 May 2023.
Impairment
The ongoing pause in originations and consequent reduction in
the size of the loan book drove a lower impairment charge,
resulting in a credit for the period of GBP0.2m (H1 FY2022: charge
of GBP25.9m). This was also partly owing to the upfront expected
credit loss methodology of IFRS 9. As the book runs off, the gross
loan book is increasingly provided for under lifetime loss
assumptions.
The impairment provision decreased to GBP30.1m (H1 FY2022:
GBP65.1m), primarily due to the decline of the loan book,
representing 27.2% of the gross loan book (H1 FY2022: 22.5%). The
increase in coverage is due to the expected increase in
delinquency, within modelled levels, as the book runs off.
Scheme provision
All components of the provision have been considered with more
information available as the Scheme process has progressed. The
deadline for customers to submit a claim within the Scheme passed
on 26 November 2022. While final numbers are being verified, we now
have greater visibility and have revised our volume assumptions
higher accordingly. An extension of this, is that the fixed pot
available to creditors within the Scheme is likely to be spread
amongst a higher number of claimants. The estimated uphold rate
within the provision has also been revised from 65% to 70%
following initial work performed by a third party. While the sample
analysed is small, a prudent uplift has been applied.
The revision of assumptions has resulted in an increase to the
provision from the full year to GBP191.4m (H1 FY2022: GBP344.3m,
FY2022: GBP179.8m), and a corresponding charge to the income
statement of GBP11.3m. There remains a significant degree of
uncertainty in the final complaints outturn. Sensitivity analysis
of the key assumptions is set out in note 2.2 to these financial
statements.
Tax
No tax charge has been recognised in the period.
Funding and liquidity
Net unrestricted cash was GBP78.6m at 30 September 2022 (H1
FY2022: GBP2.1m) as the back book continued to be collected while
originations remained suspended. Unrestricted cash and cash
equivalents at 30 September 2022 was GBP128.4m (H1 FY2022:
GBP234.5m) following the payment of the GBP60m initial Scheme
contribution in June 2022 and the bi-annual senior secured note
coupon in July 2022. Restricted cash is GBP70.3m, which includes
the GBP60m Scheme contribution as well as estimated set-off held in
escrow for customers with existing complaints who continued to make
payments up to the Scheme Effective Date. Current unrestricted cash
is over GBP130.0m.
The group has GBP50.0m of outstanding 7.625% senior secured
notes due in January 2024. The securitisation structure for the
facility paid down in September 2021 was closed post period end. As
disclosed with the full year results in July 2022, the Board did
not consider the structure to be appropriate for the future needs
of the business.
A capital raise process is underway, with equity of c.GBP40m
sought to provide a minimum GBP15m to the Scheme and growth
capital. The Board will also look to raise additional debt to
support future growth.
Going concern
The Board believes that it remains appropriate to prepare the
financial statements on a going concern basis. However, the Board
also recognises that at the date of approval of these financial
statements significant uncertainty remains. The Scheme requires the
meeting of capital raise conditions, and the business will require
a full return to lending, which are at least in part outside of the
control of the Group. Additionally, the final outcome of the FCA
enforcement investigation remains highly uncertain. These matters
indicate the existence of a material uncertainty related to events
or conditions that may cast significant doubt over the Group and
Company's ability to continue as a going concern and, therefore,
that the Group and Company may be unable to realise their assets
and discharge their liabilities in the normal course of
business.
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.
Our 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.
Amigo is a mid-cost lender, and we take a degree of credit risk
that is consistent with our pricing. Our lending is to customer
segments we understand well. We may engage on a controlled basis in
pilot lending, testing new segments that we think are appropriate
for our product.
The organisation is subject to risks arising from changes in the
cost of living which may impact the recovery rates of existing
loans and the affordability of loans to new borrowers. Increases in
the cost of living will detrimentally impact both outcomes. Credit
risk is managed carefully by applying a strict set of
creditworthiness and affordability rules.
Conduct risk
Conduct risks arise from inappropriate actions taken by
individuals or the Company that could lead to customer detriment.
They can arise at each stage of the customer journey, from product
design through to sales and post-sales servicing, for example:
-- Inadequate planning and design may lead to products and
servicing that don't meet the needs of customers or represent fair
value.
-- Not providing adequate information and customer support could
lead to customers not having a clear understanding of the product
or being unable to make informed decisions.
-- Inappropriate lending practices and decisions may result in
unaffordable debt for customers and poor conduct post-sale. It
could also lead to vulnerable customers and/or those experiencing
financial difficulty not being identified and treated fairly.
Amigo recognises that the vulnerability of its target market
poses higher than average conduct risks and is mindful of the
impact of increasing inflation and the cost of living on borrowers
which will put additional strain on customer finances and
affordability.
The FCA's Consumer Duty will underpin our customer outcomes. Our
new products are focused on delivering positive customer outcomes -
if it's good for our customer, it's good for us. Integral to our
new lending proposition are enhanced borrower and guarantor credit
and affordability assessments in both current forbearance and our
future lending approach.
Regulatory and political risk
The risk that the regulatory environment will change in a way
that has adverse consequences to our business (explicit changes in
regulation or legislation or changes in interpretation), or where
Amigo introduces new products or approaches and does not fully
comply with existing regulatory requirements. At a minimum, the
impact would be the operational burden of adapting to changing
regulation. However, where we fail (or have failed) to adapt to
changes, the impact can extend to regulatory action, including
investigation, fines, or 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.
Amigo aims to identify specific harms that we seek to avoid or
consider how they fit in the achievement of objectives.
We are committed to a high level of compliance with relevant
legislation, regulation as well as internal policies and governance
requirements. Identified breaches will be remedied as soon as
possible. Amigo has no appetite for deliberate or purposeful
violations of legislative or regulatory requirements.
Amigo maintains a constructive and open relationship with the
Financial Conduct Authority and other regulators and agencies.
While permission has been received to pursue pilot lending, the
FCA's enforcement investigations remain open. Amigo still operates
under a VREQ and remains on the FCA's watchlist.
Operational risk
This relates to the possibility of business operations failing
due to inefficiencies or breakdown in internal processes, systems,
people 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 key
supplier failure, fraud, the risk of Amigo's product being used for
money laundering, or the risk of an error in the business's
decisioning models.
Amigo's operational risk includes the risk that it does not have
human capacity or system capacity 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.
Amigo aims to have the quantity and quality of people necessary
to meet its objectives at all times and to maintain its performance
in case of unexpected loss of key personnel. Our operational
resilience approach has been designed to ensure highly available
services, infrastructure and lending processes. Over the last
twelve months, operational resilience has been stable with no
significant disruptions to operations. While approval of the Scheme
has increased the certainty of Amigo's future, people risk and
potential for attrition will remain until successful completion of
the lending pilot. Third-party risk has increased given the
reliance on new key suppliers associated with the new lending
platform and this has been recognised through the introduction of
risk-based supplier selection and management practices. The risk of
cyber attacks continues to be a threat across all industries.
Strategic and competitive risk
Strategic risk refers to emerging internal and external events
that can disrupt or prevent the organisation from achieving its
objectives and strategic goals. These risks are present within
launching new products and services, or the failure to meet the
expectations of customers should they shift.
There is a risk that Amigo fails to achieve its objectives,
either due to poor decision making or failure to adapt to changes
in the competitive environment, leading to reduced revenue,
increased expenses, or lost opportunities. This could include the
risk of new competitors, market or industry changes, entering a new
geography or the effectiveness of changing or introducing a new
product.
Building on our previously established leading position, with
tighter eligibility criteria and robust affordability and credit
checks, we will prioritise long-term growth and controlled
scalability over short-term results as we meet this increasing
demand. The Company needs to maintain the ability to evolve, adapt,
and be responsive to changes in the internal and external operating
environment.
Business transformation is focused on delivering a new lending
proposition to market and deploying iterated improvements based on
user data and customer behaviour and feedback.
Treasury risk
The risk arising from the core actions of the Treasury function.
A failure to properly manage liquidity could lead to the
organisation requiring more expensive funding, reducing
profitability, failure to manage assets/liabilities or to obtain
value for money from the resources deployed.
The decision to stop lending has left the business cash
generative, but this is significantly offset 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.
The fundamental purpose of our treasury activity is to support
business growth, rather than generate proprietary profit.
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.
Kerry Penfold
Director
29 November 2022
Independent review report to the members of Amigo Holdings
PLC
Conclusion
We have been engaged by Amigo Holdings PLC (the "Company") to
review the condensed set of financial statements in the half-yearly
financial report for the six-month period ended 30 September 2022,
which comprises the condensed consolidated statement of
comprehensive income, the condensed consolidated statement of
financial position, the condensed consolidated statement of changes
in equity, the condensed consolidated statement of cash flows, and
the related Notes 1 to 19.
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 2022 is not prepared, in all material respects, in
accordance with International Accounting Standard ('IAS') 34
"Interim Financial Reporting", as adopted for use in the United
Kingdom and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority ("FCA").
Basis of Conclusion
We conducted our review in accordance with International
Standard on Review Engagements ('ISRE') (UK) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued for use in the United Kingdom. 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. 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.
As disclosed in Note 1.1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards adopted for use in the United Kingdom ("UK
adopted IFRS"). The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard
('IAS') 34 "Interim Financial Reporting".
Material Uncertainty Relating to Going Concern
We draw your attention to Note 1.1 Basis of preparation on pages
17 to 19, which indicates that management have assessed the ability
of the Group to continue as a going concern is significantly
impacted by:
-- the conditions attached to the Scheme of Arrangement (the
"Scheme") which include the requirement to return to full lending
by 26 February 2023 and meeting the conditions of raising capital
by 26 May 2023.
-- the ongoing FCA investigation in relation to historical
lending and complaints management processes of the Group.
The outcome of these matters is, in part, outside the control of
the Group. This indicates that a material uncertainty exists that
may cast significant doubt upon the Group's and Company's ability
to continue as a going concern.
Our conclusion is not modified in respect of these matters.
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that the Directors have inappropriately adopted the going
concern basis of accounting.
Independent review report to the members of Amigo Holdings
PLC
Responsibilities of Directors
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the Directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis of Conclusion paragraph of
this report.
This report is made solely to the Company in accordance with
guidance contained in ISRE (UK) 2410 "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity"
issued by the Financial Reporting Council. Our review work has been
undertaken so that we might state to the Company those matters we
are required to state to them in a review report and for no other
purposes. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company, for our
work, for this report, or for the conclusions we have formed.
MHA MacIntyre Hudson
Statutory Auditor
London
29 November 2022
Condensed consolidated statement of comprehensive income
for the 6 months to 30 September 2022
6 months 6 months Year to
ended ended
30 Sep 30 Sep 31-Mar-22
22 21
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
----------------------------------------------------- ----- --------- --------- ---------
Revenue 3 15.8 56.5 89.5
Interest payable and funding facility fees 4 (1.8) (9.8) (16.7)
Interest receivable 0.3 0.1 0.1
Impairment of amounts receivable from customers 0.2 (25.9) (37.0)
----------------------------------------------------- ----- --------- --------- ---------
Administrative and other operating expenses (15.9) (13.5) (24.6)
Complaints expense 13 (11.3) (5.3) 156.6
----------------------------------------------------- ----- --------- --------- ---------
Total operating expenses (27.2) (18.8) 132.0
----------------------------------------------------- ----- --------- --------- ---------
(Loss)/ profit before tax (12.7) 2.1 167.9
Tax credit on (loss)/profit 6 - 1.2 1.7
----------------------------------------------------- ----- --------- --------- ---------
(Loss)/ profit and total comprehensive (loss)/income
attributable to equity shareholders of the Group
1 (12.7) 3.3 169.6
----------------------------------------------------- ----- --------- --------- ---------
The (loss)/profit is derived from continuing activities.
(Loss)/earnings per share
------------------------------------------ ----- --- ----
Basic (loss)/earnings per share (pence) 7(2.7) 0.7 35.7
Diluted (loss)/earnings per share (pence) 7(2.7) 0.7 35.7
------------------------------------------ ----- --- ----
The accompanying notes form part of these financial
statements.
1 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.
Condensed consolidated statement of financial position
as at 30 September 2022
30 Sep 30 Sep 31 Mar
22 21 22
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
------------------------------------------ ----- --------- --------- -------
Non-current assets
Customer loans and receivables 8 15.3 48.6 25.4
Property, plant and equipment 0.4 0.7 0.5
Right-of-use lease assets 0.7 0.9 0.8
16.4 50.2 26.7
------------------------------------------ ----- --------- --------- -------
Current assets
Customer loans and receivables 8 66.2 181.4 114.8
Other receivables 10 2.0 2.0 1.6
Current tax assets 0.8 0.6 0.7
Cash and cash equivalents (restricted)(1) 70.3 2.0 7.6
Cash and cash equivalents 128.4 234.5 133.6
------------------------------------------ ----- --------- --------- -------
267.7 420.5 258.3
------------------------------------------ ----- --------- --------- -------
Total assets 284.1 470.7 285.0
------------------------------------------ ----- --------- --------- -------
Current liabilities
Trade and other payables 11 (6.9) (10.6) (6.7)
Lease liabilities (0.3) (0.3) (0.3)
Complaints provision 13 (191.4) (344.3) (82.8)
(198.6) (355.2) (89.8)
------------------------------------------ ----- --------- --------- -------
Non-current liabilities
Borrowings 12 (49.8) (232.4) (49.7)
Lease liabilities (0.5) (0.7) (0.6)
Complaints provision 13 - - (97.0)
------------------------------------------ ----- --------- --------- -------
(50.3) (233.1) (147.3)
------------------------------------------ ----- --------- --------- -------
Total liabilities (248.9) (588.3) (237.1)
------------------------------------------ ----- --------- --------- -------
Net assets/(liabilities) 35.2 (117.6) 47.9
------------------------------------------ ----- --------- --------- -------
Equity
Share capital 14 1.2 1.2 1.2
Share premium 207.9 207.9 207.9
Translation reserve - - 0.1
Merger reserve (295.2) (295.2) (295.2)
Retained earnings 121.3 (31.5) 133.9
------------------------------------------ ----- --------- --------- -------
Shareholder equity 35.2 (117.6) 47.9
------------------------------------------ ----- --------- --------- -------
The accompanying notes form part of these financial
statements.
(1) Cash and cash equivalents (restricted) of GBP70.3m (H1 2022:
GBP2.0m) includes (at 30 September 2022) the GBP60m initial payment
to the Scheme Fund. This amount will be returned to the Group if
the Scheme Fallback situation is activated and the Group goes into
runoff. The remainder materially relates to restricted cash held in
a Trust Account for the benefit of those customers with an open
complaint, who may later have their complaints upheld in the
Scheme, who continued to make payments on their loan from 1
December 2021 to the Scheme effective date.
The condensed consolidated financial statements of Amigo
Holdings PLC were approved and authorised for issue by the Board
and were signed on its behalf by:
Kerry Penfold
Director
29 November 2022
Company no. 10024479
Condensed consolidated statement of changes in equity
for the 6 months to 30 September 2022
Share Share Translation Merger Retained Total
capital premium Reserve(1) Reserve(2) earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ------- ------- ----------- ---------- -------- -------
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)
Total comprehensive income - - - - 166.3 166.3
Translation reserve - - 0.1 - - 0.1
Share-based payments - - - (0.9) (0.9)
At 31 March 2022 1.2 207.9 0.1 (295.2) 133.9 47.9
Total comprehensive loss - - - - (12.7) (12.7)
Translation reserve - - (0.1) - - (0.1)
Share-based payments - - - - 0.1 0.1
--------------------------- ------- ------- ----------- ---------- -------- -------
At 30 September 2022 1.2 207.9 - (295.2) 121.3 35.2
--------------------------- ------- ------- ----------- ---------- -------- -------
The accompanying notes form part of these financial
statements.
1 The translation reserve is due to the effect of foreign
exchange rate changes on translation of financial statements of the
Irish entities.
2 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 2022
6 months 6 months Year
to to to
30 Sep 30 Sep 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
--------------------------------------------------------- --------- --------- -------
(Loss)/profit for the period (12.7) 3.3 169.6
Adjustments for:
Impairment expense (0.2) 25.9 37.0
Complaints provision 16.3 5.3 (156.6)
Tax (credit)/charge - (1.2) (1.7)
Interest expense 1.8 9.8 16.7
Interest receivable (0.3) (0.1) (0.1)
Interest recognised on loan book (25.1) (59.8) (97.0)
Share-based payment 0.1 0.5 (0.4)
Depreciation of property, plant and equipment 0.3 0.2 0.5
--------------------------------------------------------- --------- --------- -------
Operating cash flows before movements in working capital (19.8) (16.1) (32.0)
--------------------------------------------------------- --------- --------- -------
(Increase)/decrease in receivables (0.3) (0.2) 0.1
Increase/(decrease) in payables 0.3 (6.0) (6.3)
Complaints cash expense (4.7) (4.8) (8.1)
(Tax paid)/tax refunds (0.2) - 0.2
Interest paid (1.6) (9.7) (18.5)
Net cash (used in) operating activities before loans
issued and collections on loans (26.3) (36.8) (64.6)
--------------------------------------------------------- --------- --------- -------
Collections 79.7 149.9 263.0
Other loan book movements 2.9 (0.4) (0.4)
Decrease in deferred brokers' costs 1.4 3.8 7.5
--------------------------------------------------------- --------- --------- -------
Net cash from operating activities 57.7 116.5 205.5
--------------------------------------------------------- --------- --------- -------
Investing activities
Proceeds from sale of property, plant and equipment - 0.3 0.3
--------------------------------------------------------- --------- --------- -------
Net cash from investing activities - 0.3 0.3
--------------------------------------------------------- --------- --------- -------
Financing activities
Lease principal payments (0.1) (0.1) (0.3)
Repayment of external funding - (64.4) (248.5)
--------------------------------------------------------- --------- --------- -------
Net cash (used in) financing activities (0.1) (64.5) (248.8)
--------------------------------------------------------- --------- --------- -------
Net increase in cash and cash equivalents 57.6 52.3 (43.0)
Effects of movement in foreign exchange (0.1) - -
Cash and cash equivalents at beginning of period 141.2 184.2 184.2
--------------------------------------------------------- --------- --------- -------
Cash and cash equivalents at end of period(1) 198.7 236.5 141.2
--------------------------------------------------------- --------- --------- -------
The accompanying notes form part of these financial
statements.
1 Total cash is inclusive of cash and cash equivalents
(restricted) of GBP70.3m (H1 2022: GBP2.0m). Cash and cash
equivalents (restricted) includes (at 30 September 2022) the GBP60m
initial payment to the Scheme Fund. This amount will be returned to
the Group if the Scheme Fallback situation is activated and the
Group goes into runoff. The remainder materially relates to
restricted cash held in a Trust Account for the benefit of those
customers with an open complaint, who may later have their
complaints upheld in the Scheme, who continued to make payments on
their loan from 1 December 2021 to the Scheme effective date.
Notes to the condensed consolidated financial statements
1. Accounting policies
1.1 Basis of preparation of financial statements
General information
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 (the "Group") of companies. The principal
activity of the Amigo Loans Group is to provide loans to
individuals. Previously, its principal activity was to provide
individuals with guarantor loans from GBP2,000 to GBP10,000 over
one to five years. No new advances on this lending have been made
since November 2020. Following FCA approval to return to lending,
in October 2022, Amigo has launched, initially on a two-month pilot
basis, a new guarantor loan as well as an unsecured loan product
which feature dynamic pricing to reward on-time payment with lower
rates and penalty-free annual payment holidays. The new products
have been released under the RewardRate brand.
The condensed interim financial statements do not constitute the
statutory financial statements of the Group within the meaning of
section 434 of the Companies Act 2006. The statutory financial
statements for the year ended 31 March 2022 were approved by the
board of directors on 8 July 2022 and have been delivered to the
Registrar of Companies. The consolidated financial statements of
the Group as at and for the year ended 31 March 2022 are available
upon request from the Company's registered office at Nova Building,
118-128 Commercial Road, Bournemouth, United Kingdom, BH2 5LT.
Those accounts have been reported on by the Company's previous
auditor, KPMG. The report of the auditor:
i) drew attention to the material uncertainty related to going
concern referenced in the consolidated financial statements of the
Group; and
ii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The condensed interim financial statements for the six months
ended 30 September 2022 have been reviewed, not audited, by the
incumbent auditor, MHA Macintyre Hudson, and were approved by the
board of directors on 29 November 2022.
Accounting policies
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 2022.
Basis of preparation
The condensed interim financial statements for the six months
ended 30 September 2022 have been prepared in accordance with IAS
34 'Interim Financial Reporting' as adopted for use in the United
Kingdom (UK). The condensed interim financial statements should be
read in conjunction with the statutory financial statements for the
year ended 31 March 2022. The comparative figures for the financial
year ended 31 March 2022 are not the Group's statutory accounts for
that financial year, but are an extract from those statutory
accounts for interim reporting.
These interim financial statements have been prepared on a going
concern basis 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.
Going concern
In determining the appropriate basis of preparation for these
financial statements, the Board has undertaken an appropriate
review of 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. This has taken into account
the Group's business plan and the principal risks and uncertainties
facing the Group, including the success of the Scheme of
Arrangement (Scheme). The interim financial statements have been
prepared on a going concern basis which the Directors believe to be
appropriate for the following reasons.
On 26 May the High Court sanctioned Amigo's Scheme of
Arrangement ("the Scheme") which allowed the Company to return to
solvency. The Preferred Solution of the Scheme allows Amigo to
resume lending, subject to making agreed payments into a Scheme
fund and meeting two New Business Conditions. Failure to meet these
requirements would place Amigo into a managed wind-down. The New
Business Conditions are: FCA approval to return to lending to be
received by 26 February 2023 and issue of 19 new shares in Holdings
Plc for every one ordinary share in issue, to be achieved by 26 May
2023.
On 13 October 2022, FCA approval for a return to lending was
received. Amigo commenced lending on a pilot basis in October 2022.
Following the end of the pilot lending phase, the FCA will consider
the impact on consumers of Amigo returning to lending on a wider
scale, and whether the results of the outcomes testing demonstrate
that Amigo is able to continue to meet FCA expectations. Amigo is
limited to a maximum of GBP35.0m cumulative net originations until
successful completion of the required dilutory share issue and
payment of a further GBP15.0m into the Scheme. Failure to meet the
Scheme conditions represent a material uncertainty that may cast
significant doubt on the Company'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.
Should these conditions remain unsatisfied within the required
timeframes, under the terms of the Scheme the business will revert
to a managed wind-down. Projections show the business has
sufficient resources for a solvent wind-down in this context.
However, the Directors have a reasonable expectation that these
conditions can be met and, therefore, have modelled a 'Base
scenario' and 'Severe but plausible downside Scheme scenario' which
the Directors believe are realistic alternatives to the managed
wind-down scenario.
Base scenario - business plan assumptions
The Base scenario assumes that:
-- the conditions of the Scheme (explained above) are met in the
required timescales, with FCA approval to commence re-lending
having been received, and new lending originations commencing, in
October 2022
-- balance adjustments and refunds resulting from complaints in
the Scheme are consistent with the assumptions that underpin the
complaints provision reported as at 30 September 2022 (see note
2.2.2)
-- at least the minimum committed amount of GBP112.0m is paid
out as cash redress in the Scheme, being GBP97.0m from existing
resources and future collections plus an additional GBP15.0m
following the equity raise
-- additional new funding is received beyond the equity raise to
facilitate future growth of the business
-- collections on the existing loan book continue in line with expectation
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 Scheme scenario
The Directors have prepared a severe but plausible downside
scenario. This assumes the conditions of the Scheme are met but
considers the potential impact of:
-- an increased number of upheld complaints. Whilst this
sensitivity does not increase the cash liability, which is capped
under the Scheme, the number of customers receiving balance write
downs will increase, thus reducing future collections and stressing
the Group's liquidity position alongside increasing cash refunds
given to customers that are upheld in the Scheme for payments
collected over the Scheme period
-- increased credit losses as a result of the cost of living
crisis and the inability of an increased number of the Group's
customers to continue to make payments.
-- Halving of forecast origination volumes, whether arising due
to delays in new product launch or market conditions.
This severe but plausible downside Scheme scenario indicates
that the Group's available liquidity headroom would reduce but
would be sufficient to enable the Group to continue to settle its
liabilities as they fall due for at least the next twelve
months.
Status of Scheme Conditions
Payment of GBP60m Complete
into Scheme Fund by
Payment of GBP37m The Group currently has, and
into Scheme Fund by is forecast to continue to have,
26th February 2023 sufficient cash to meet this
requirement
-------------------------------------
FCA permission to Complete. The Company continues
return to lending to work with the FCA toward
by 26th February 2023 a full return to lending
-------------------------------------
Issue and sell at The Company announced, on 28
least 19 ordinary September 2022, its intention
shares in Holdings to raise new capital in combination
Plc for every 1 share of debt and equity with includes
in issue by 26th May this requirement and is actively
2023 marketing to potential investors
-------------------------------------
Payment of GBP15m Contingent on completion of
into Scheme Fund within share issue above
10 business days of
completion of the
share issue
-------------------------------------
Payment of any further Contingent on performance of
net proceeds from the Legacy book over the period
collection of the
legacy Amigo loan
book ("The Turnover
Amount") to the Scheme
Fund
-------------------------------------
FCA investigation
The Group is currently under investigation by the FCA in
relation to historical lending and complaints management processes.
We are hopeful that the outcome of these investigations will be
known shortly. If the enforcement process is not completed before
the proposed capital raise, then Amigo could fail to comply with
one of the Scheme conditions and is likely to revert to the
fallback solution or some form of insolvency.
There are a number of avenues of sanction open to the FCA should
they deem it appropriate and so the potential impact of the
investigation on the business is extremely difficult to predict and
quantify and is not modelled in the business plan or stress
scenario. In mitigation, the FCA has stated that the levying of any
fine would be considered in the context of the Scheme and its
impact on creditors.
Conclusion
Accounting standards require an entity to prepare financial
statements on a going concern basis unless the Directors either
intend to liquidate the entity or to cease trading or has no
realistic alternative but to do so. Accordingly, the Directors
believes that it remains appropriate to prepare the financial
statements on a going concern basis.
However, the Directors also recognise that, at the date of
approval of these financial statements, significant uncertainty
remains. The Scheme requires the meeting of capital raise
conditions, and the business will require a full return to lending,
which are at least in part outside of the control of the Group.
Additionally, the final outcome of the FCA investigation remains
highly uncertain. These matters indicate the existence of a
material uncertainty related to events or conditions that may cast
significant doubt over the Group and Company's ability to continue
as a going concern and, therefore, that the Group and Company may
be unable to realise their assets and discharge their liabilities
in the normal course of business.
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 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 with 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.
At the reporting date, the Group only held guarantor loans on
balance sheet. 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 assessed that its key sensitivity was in relation to
expected credit losses on customer loans and receivables. The
matrix of nine scenarios used in September 2021 for calculating the
ECL provision has been simplified into base, downside and severe
downside scenarios. In prior years nine macroeconomic scenarios
were applied and weighted (see note 2.1.3).
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.
v) Derecognition
Receivable from customers are derecognised when the entity's
contractual rights to the financial asset's cash flows have
expired.
vi) 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.
vii) 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. 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.
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.vi).
-- Multiple economic scenarios - the probability weighting of
base, downside and severe downside scenarios to the ECL calculation
(note 2.1.3). These scenarios replaced the nine different economic
scenarios used in the prior year.
-- Complaints provisions:
-- Judgement is involved in estimating the probability, timing
and amount of any outflows (note 2.2.1) .
-- 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).
-- Accounts receivable from customers:
-- Judgement is applied in assessing whether the contractual
cash flows are 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.
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).
-- Complaints provisions:
-- Calculation of uphold rate. This calculation evaluates
current and historical data, and assumptions and expectations of
future outcomes (note 2.2.1).
-- 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.
2 .1 Credit impairment
2.1.1 Measurement of ECLs
The Group has adopted a collective basis of measurement for
calculating ECLs. In the current year the loan book is bifurcated
into those customers who have had a Covid-19 forbearance plan and
those who have not. In the prior year, the loan book was 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 was a
homeowner or not. These portfolios of assets were further divided
by contractual term and monthly origination vintages. These
portfolios are no longer considered to have discernible credit risk
profiles due to the impact of Covid-19.
The allowance for ECLs is calculated using three components: PD,
LGD and EAD. The ECL is calculated by multiplying the PD (twelve
month or lifetime depending on the staging of the loan), LGD and
EAD and the result is discounted to the reporting date at the
original EIR.
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 factors that are likely to impact credit losses as
the rate of unemployment and the rate of inflation.
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), which is
aligned to the rebuttable presumption of more than 30 days past
due. This is the primary quantitative information considered by the
Group in 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.
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 factors that are likely to impact credit losses as
the rate of unemployment and the rate of inflation.
The Group has modelled and weighted three different
macroeconomic scenarios - a base, a downside and a severe downside
scenario.
-- The base scenario broadly represents probability of defaults
whereby there is no significant deviation of delinquency beyond the
current run-rate. The base scenario captures an element of stress
to reflect current inflationary pressures. A weighting of 25% has
been applied to reflect the Group's assumption that the current
macroeconomic environment is more likely than not due to worsen,
given the inflationary pressures facing the Group's customer base.
Historical trends of prior inflationary increases showed no
statistical relationship to the Group's customers propensity to
make payments, so the base scenario appears reasonable.
-- The downside scenario uplifts the base scenario probability
of default by approximately 50%. Based on recent Office for
Budgetary Reporting (OBR) forecasts, inflation rates, which are
already at 40-year highs, are expected to remain high in the
short-term. Although there are no historical indications of a
statistical relationship between inflationary rises and customers'
propensity to make payments, a weighting of 50% has been applied to
reflect the expectation that customers will be, in some form,
adversely impacted.
-- The severe downside applies a further uplift of 25% to the
probability of default in the downside scenario, reflecting a
significant impact from macroeconomic factors. Whilst the economic
outlook is not set to return to more normal levels in the near
term, the Group's loan book does not have significant time left to
run off. Judgement has been made to weight this scenario at 25%.
Given the lack of statistical relationship and level of uncertainty
around the impact on customers' payment behaviour, the Group
believes this weighting is fair and reasonable, but will evolve
over time as the cost of living crisis plays out.
The following table details the absolute impact on the current
ECL provision of GBP30.1m if each of the three scenarios are given
a probability weighting of 100%.
Impact
---------------- ------
Base -1.7m
Downside +0.4m
Severe downside +1.0m
---------------- ------
The scenarios above demonstrate a range of ECL provisions from
GBP28.4m to GBP31.1m.
In prior years nine macroeconomic scenarios were applied and
weighted. However, given the impact of the Covid-19 pandemic is
better known and already to an extent has been realised, this
methodology was reviewed and simplified down to three scenarios - a
base, downside and severe downside scenario, to determine the ECL
provision.
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.
2.1.4 Application of a management overlay to the impairment
provision calculation
In the prior year management overlay was used to enhance the
modelled outcome to take account of increasing credit risk
indicators that were potentially masked by payment holidays granted
due to Covid-19. This is no longer relevant as all impacted
accounts have reverted to a tailored collections approach captured
by status flag.
As noted in 2.1.3, the Board notes that forward looking
information carries a degree of uncertainty, particularly in
relation to the impact of the forecast cost of living crisis.
However, in the view of the Board, the use of a sufficiently severe
downside scenario in the modelled approach negates the requirement
for further management overlay in the impairment estimation.
2.2 Complaints provisions
2.2.1 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.
Identifying whether a present obligation exists and estimating
the probability, timing, nature and quantum of the redress payments
that may arise from past events require 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.
These calculations involve significant, complex management
judgement and estimation. As the Scheme closing date draws near,
however, the key assumption with the most potential for variability
is the 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.
The calculation of the complaints provision as at 30 September
2022 is based on Amigo's best estimate of the future obligation at
the Scheme effective date. The revised complaints cash redress
provision will be GBP97.0m post-Scheme. A further contribution of
GBP15.0m is expected to be made from the proceeds of the proposed
capital raise, plus a top-up if net collections exceed those
forecast in the Scheme scenarios.
The capital raise is a critical component of the preferred
solution under the Scheme succeeding, and while the provision is
being accounted for on the basis that the Scheme is successful, it
is currently determined that the capital raise contribution
component cannot be accrued as it cannot be justified as more
likely than not to occur at today's date.
As at 30 September 2022, the Group has recognised a complaints
provision totalling GBP191.4m in respect of customer complaints
redress and associated costs. Utilisation in the period totalled
GBP4.7m. The liability has decreased by GBP152.9m compared to 30
September 2021. GBP141.1m of the decrease is due to the cash
redress liability being reduced to the GBP97.0m contribution as per
the Scheme. The other main component of the reduction is a decrease
in the balance adjustments on the loan book of GBP25.7m. The level
of balance adjustments has declined due to customers paying down
their loan and customers charging off the loan book. This has been
partly offset by an increase in the assumed volume of customers
coming forward in the Scheme.
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.
Sensitivity
Assumption used applied Sensitivity (GBPm)
--------------------------------- --------------- ----------- --------------------
Average uphold rate per customer
(1) 70% +/- 20 ppts +18.9m -18.9m
1. 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.
The table above shows the increase or decrease in total
provision charge resulting from reasonably possible changes in the
key uphold rate assumption. The Board considers that this
sensitivity analysis covers the full range of reasonably possible
alternative 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 is
guarantor-backed consumer credit. This is due to the risks and
inherent uncertainties surrounding the assumptions used in the
provision calculation.
3. Revenue and segment reporting
Revenue comprises 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 spread over the expected
behavioural lifetime of the loan as part of the effective interest
rate method.
The effective interest rate ("EIR") is the rate that discounts
estimated future cash payments or receipts through the expected
life of the financial instrument (or a shorter period where
appropriate) to the net carrying value of the financial asset or
financial liability. The calculation takes into account all
contractual terms of the financial instrument and includes any
incremental costs that are directly attributable to the instrument,
but not future credit losses.
Revenue is derived primarily from a single segment. The Group
has one operating segment based on the geographical location of its
operations, being the UK. 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.
Amigo Loans Ireland Limited, registered in Ireland, is not a
reportable operating segment, as they are not separately included
in the reports provided to the strategic steering committee. The
results of these operations are included in the 'other segments'
column. Amigo Loans Ireland Limited, was, in prior years, reported
as a separate segment but it no longer meets the criteria for
separate segment reporting.
The table below presents the Group's performance on a segmental
basis for the six months to 30 September 2022 in line with
reporting to the chief operating decision maker:
Period Period Period
to to to
30 Sep 30 Sep 30 Sep
22 22 22
GBPm GBPm GBPm
6 months to 30 September 2022 UK Other segments Total
------------------------------------------------ ------- --------------- -------
Revenue 15.7 0.1 15.8
Interest payable and funding facility fees (1.8) - (1.8)
Interest receivable 0.3 - 0.3
Impairment of amounts receivable from customers 0.1 0.1 0.2
------------------------------------------------ ------- --------------- -------
Administrative and other operating expenses (15.6) (0.3) (15.9)
Provision expenses (11.3) - (11.3)
------------------------------------------------ ------- --------------- -------
Total operating expenses (26.9) (0.3) (27.2)
Loss before tax (12.6) (0.1) (12.7)
Tax credit on loss - - -
------------------------------------------------ ------- --------------- -------
Loss and total comprehensive loss attributable
to equity shareholders of the Group (12.6) (0.1) (12.7)
------------------------------------------------ ------- --------------- -------
30 Sep 30 Sep 30 Sep
22 22 22
GBPm GBPm GBPm
Other
UK segments Total
-------------------------- ------- --------- -------
Gross loan book(1) 110.3 0.4 110.7
-------------------------- ------- --------- -------
Less impairment provision (30.0) (0.1) (30.1)
-------------------------- ------- --------- -------
Net loan book(2) 80.3 0.3 80.6
-------------------------- ------- --------- -------
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.
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
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
recognition of a GBP0.4m tax asset and the impact of the release of
a 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.
4. Interest payable and funding facility fees
Period Period Year to
to to
30 Sep 30 Sep 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
-------------------------------------- --------- --------- -------
Senior secured notes interest payable 1.9 9.0 14.9
Funding facility fees (0.1) 0.1 1.0
Securitisation interest payable - 0.2 0.2
Other finance costs - 0.5 0.6
-------------------------------------- --------- --------- -------
1.8 9.8 16.7
-------------------------------------- --------- --------- -------
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.
5. Modification of financial assets
Covid-19 payment holidays and any subsequent extensions were
assessed as non-substantial financial asset modifications under
IFRS 9.
The carrying value of historical modification losses at the
period end was GBP1.7m (H1 2022: GBP9.4m).
Period Period Year to
to to
30 Sep 30 Sep 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
---------------------------------------------- --------- --------- -------
Modification release recognised in revenue 0.2 - 1.2
Modification release recognised in impairment 0.3 - 4.1
---------------------------------------------- --------- --------- -------
Total modification release 0.5 - 5.3
---------------------------------------------- --------- --------- -------
6. Taxation
The applicable corporation tax rate for the period to 30
September 2022 was 19.0% (H1 2022: 19.0%) and the effective tax
rate is 0.0% (H1 2022: 57.1% positive).
The Finance Act 2021 increased the UK corporation tax rate from
19% to 25% with effect from 1 April 2023. While this change does
not affect the current tax position for the year, it will affect
future periods.
The Group's loss-making position and the ongoing uncertainty
over the Group's future profitability meant that it is 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 the year, which
are driven primarily by the recognition of complaints provision as
at 30 September 2022.
7. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the period attributable to equity shareholders by the
weighted average number of ordinary shares outstanding during
the period.
Diluted earnings per share calculates the effect on profit 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 the 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 per share.
30 Sep 30 Sep 31 Mar
22 21 22
Unaudited Unaudited Audited
Pence Pence Pence
---------------------------------------------------- --------- --------- -------
Basic (loss)/earnings per share (2.7) 0.7 35.7
Diluted (loss)/earnings per share (2.7) 0.7 35.7
Basic adjusted (loss)/earnings per share (basic and
diluted) 1 (2.7) 0.4 2.8
---------------------------------------------------- --------- --------- -------
1. Adjusted basic (loss)/earnings per share and earnings for
adjusted basic (loss)/earnings per share are non-GAAP measures.
The Directors are of the opinion that the publication of the
adjusted earnings per share is useful as it gives a better
indication of ongoing business performance. Reconciliations of the
earnings used in the calculations are set out below.
30 Sep 30 Sep 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
---------------------------------------------- --------- --------- -------
(Loss)/profit for basic EPS (12.7) 3.3 169.6
Release of complaints provision - - (156.6)
Senior secured notes redemption - - 0.7
Write-off of unamortised securitisation fees - - 0.5
Tax provision release - (0.8) (0.8)
Tax refund due - (0.5) -
Less tax impact - - (0.1)
(Loss)/profit for basic adjusted EPS 1 (12.7) 2.0 13.3
---------------------------------------------- --------- --------- -------
Basic weighted average number of shares (m) 475.3 475.3 475.3
---------------------------------------------- --------- --------- -------
Dilutive potential ordinary shares (m)(2) - 1.1 -
---------------------------------------------- --------- --------- -------
Diluted weighted average number of shares (m) 475.3 476.4 475.3
---------------------------------------------- --------- --------- -------
1. Adjusted basic (loss)/earnings per share and earnings for
adjusted basic (loss)/earnings 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 2022 as they would not meet the performance conditions.
Those dilutive shares included are in relation to the employee
October 2020 SAYE scheme.
8. 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
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
--------------------------------------------- --------- --------- -------
Stage 1 74.8 209.0 128.8
Stage 2 20.0 45.6 32.4
Stage 3 15.9 34.6 24.2
--------------------------------------------- --------- --------- -------
Gross loan book 110.7 289.2 185.4
Deferred broker costs1 - stage 1 0.6 4.3 1.5
Deferred broker costs1 - stage 2 0.2 0.9 0.4
Deferred broker costs1 - stage 3 0.1 0.7 0.3
--------------------------------------------- --------- --------- -------
Loan book inclusive of deferred broker costs 111.6 295.1 187.6
Provision (30.1) (65.1) (47.4)
--------------------------------------------- --------- --------- -------
Customer loans and receivables 81.5 230.0 140.2
--------------------------------------------- --------- --------- -------
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.
As at 30 September 2022, GBP50.5m 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 2022: GBP132.5m).
See note 17 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
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
---------------- --------- --------- -------
Current 76.8 210.5 132.1
1-30 days 12.9 32.6 21.1
31-60 days 5.1 11.5 8.0
>60 days 15.9 34.6 24.2
---------------- --------- --------- -------
Gross loan book 110.7 289.2 185.4
---------------- --------- --------- -------
The following table further explains changes in the gross
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 2022 GBPm GBPm GBPm
-------------------------------------------------- ---------- --------- ---------- ----------
Gross carrying amount as at 31 March 2022 128.8 32.4 24.2 185.4
Deferred brokers fees 1.5 0.4 0.3 2.2
-------------------------------------------------- ---------- --------- ---------- ----------
Loan book inclusive of deferred broker costs 130.3 32.8 24.5 187.6
Changes in gross carrying amount attributable
to:
Transfer to stage 1 4.4 (4.3) (0.1) -
Transfer to stage 2 (11.6) 12.3 (0.7) -
Transfer to stage 3 (6.6) (5.8) 12.4 -
Passage of time(1) (26.3) (6.2) (1.4) (33.9)
Customer settlements (14.9) (2.4) (0.6) (17.9)
Loans charged off (2.0) (6.2) (18.8) (27.0)
Net movement in modification loss relating to
Covid-19 payment holidays 3.0 0.2 0.9 4.1
Net movement in deferred broker fees (0.9) (0.2) (0.2) (1.3)
-------------------------------------------------- ---------- --------- ---------- ----------
Loan book inclusive of deferred broker costs
as at 30 September 2022 75.4 20.2 16.0 111.6
-------------------------------------------------- ---------- --------- ---------- ----------
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
-------------------------------------------------- ------------ ----------- ----------- ------------
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 GBP295.1m to GBP111.6m at 30 September
2022. This was primarily driven by the effect of passage of time
(loan balances amortising throughout the period), customer
settlements and no 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 2022 GBPm GBPm GBPm
-------------------------------------------------- --------- --------- ---------- ----------
Loan loss provision as at 31 March 2022 18.1 8.9 20.4 47.4
-------------------------------------------------- --------- --------- ---------- ----------
Changes in loan loss provision attributable
to:
Transfer to stage 1 0.6 (0.9) (0.1) (0.4)
Transfer to stage 2 (1.6) 3.7 (0.6) 1.5
Transfer to stage 3 (0.9) (1.7) 10.2 7.6
Passage of time(1) (3.7) (1.5) (1.1) (6.3)
Customer settlements (2.0) (0.6) (0.5) (3.1)
Loans charged off (0.3) (2.5) (15.4) (18.2)
Management overlay 0.1 0.1 0.5 0.7
Net movement in modification loss relating to
Covid-19 payment holidays 0.4 - 0.1 0.5
Remeasurement of ECLs 0.8 (0.5) 0.1 0.4
-------------------------------------------------- --------- --------- ---------- ----------
Loan loss provision as at 30 September 2022 11.5 5.0 13.6 30.1
-------------------------------------------------- --------- --------- ---------- ----------
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
-------------------------------------------------- ----------- ----------- ----------- -----------
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 GBP65.1m at 30 September 2021 to GBP30.1m at 30 September
2022. The overall provision has reduced in line with the
amortisation of the loan book in the absence of any
originations.
The following table splits the gross loan book by arrears
status, and then by stage respectively for the year ended 30
September 2022.
Stage Stage Stage 3 Total
1 2 GBPm GBPm
GBPm GBPm
----------- -------- -------- -------- ---------
Up to date 69.6 7.2 - 76.8
1-30 days 5.2 7.7 - 12.9
31-60 days - 5.1 - 5.1
> 60 days - - 15.9 15.9
----------- -------- -------- -------- ---------
74.8 20.0 15.9 110.7
----------- -------- -------- -------- ---------
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 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
22 21 22
Unaudited Unaudited Audited
Customer loans and receivables GBPm GBPm GBPm
------------------------------- --------- --------- -------
Due within one year 65.5 177.4 113.0
Due in more than one year 15.1 46.7 25.0
------------------------------- --------- --------- -------
Net loan book 80.6 224.1 138.0
Deferred broker costs 1
Due within one year 0.7 4.0 1.8
Due in more than one year 0.2 1.9 0.4
------------------------------- --------- --------- -------
Customer loans and receivables 81.5 230.0 140.2
------------------------------- --------- --------- -------
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.
9. 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 22 30 Sep 21 31 Mar 22
------------------ -------------------- ------------------
Fair Carrying Fair Carrying Fair Carrying 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 81.5 75.1 230.0 214.4 140.2 125.0
Level
Other receivables 3 2.0 2.0 2.1 2.1 1.6 1.6
Cash and cash equivalents Level
(restricted) 1 70.3 70.3 2.0 2.0 7.6 7.6
Level
Cash and cash equivalents 1 128.4 128.4 234.5 234.5 133.6 133.6
--------------------------- ----------- -------- -------- --------- --------- -------- --------
282.2 275.8 468.6 453.0 283.0 267.8
--------------------------------------- -------- -------- --------- --------- -------- --------
Financial liabilities not
measured at fair value(1)
Level
Other liabilities 3 (6.9) (6.9) (10.6) (10.6) (6.7) (6.7)
Level
Senior secured notes(3) 1 (49.8) (47.3) (232.4) (224.3) (49.7) (48.7)
(56.7) (54.2) (243.0) (234.9) (56.4) (55.4)
--------------------------------------- -------- -------- --------- --------- -------- --------
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 2022, the
gross principal amount outstanding was GBP50.0m (H1 2021:
GBP234.1m). The fair value reflects the market price of the notes
at the financial year end.
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. There are
no derivative assets in the current or prior period.
The Group's activities expose it to a variety of financial
risks, which can be categorised under credit risk and treasury
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
performance. Financial risk management is overseen by the Group
Risk Committee alongside other principal risks: operational,
regulatory, strategic and conduct risks.
30 Sep
30 Sep 22 21 31 Mar 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
Maturity analysis of financial liabilities
Analysed as:
- due within one year
Other liabilities (6.9) (10.6) (6.7)
- due in one to two years
Senior secured note liability (49.8) - -
- due in two to three years
Senior secured note liability - (232.4) (49.7)
(56.7) (243.0) (56.4)
------------------------------------------- --------------- --------- ---------
10. Other receivables
30 Sep 30 Sep 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
------------------------------- --------- --------- -------
Current
Other receivables 0.6 0.7 0.6
Prepayments and accrued income 1.4 1.3 1.0
2.0 2.0 1.6
------------------------------- --------- --------- -------
11. Trade and other payables
30 Sep 30 Sep 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
------------------------------------- --------- --------- -------
Current
Accrued senior secured note interest 0.8 3.7 0.8
Trade payables 0.4 0.2 0.4
Taxation and social security 0.4 0.7 0.4
Other creditors 0.9 0.8 1.1
Accruals and deferred income 4.4 5.2 4.0
------------------------------------- --------- --------- -------
6.9 10.6 6.7
------------------------------------- --------- --------- -------
12. Bank and other borrowings
30 Sep 30 Sep 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
------------------------------------ --------- --------- -------
Current and non-current liabilities
Amounts falling due in 1-2 years
Senior secured notes 49.8 - 49.7
Amounts falling due 2-3 years
Senior secured notes - 232.4 -
49.8 232.4 49.7
------------------------------------ --------- --------- -------
The Group's facilities are:
-- Senior secured notes in the form of GBP49.8m high yield bonds
with a coupon rate of 7.625% which expire in January 2024 (H1 2022:
GBP232.4m). The senior secured notes are presented in the financial
statements net of unamortised fees. As at 30 September 2022, the
gross principal amount outstanding was GBP50.0m. 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%. GBP350.0m of
notes have been repurchased in the open market/redeemed in prior
financial years (2022: GBP184.1m; 2020: GBP85.9m; 2019: GBP80.0m).
The remaining GBP50.0m gross principal amount outstanding is due in
January 2024.
13. 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 22 30 Sep 21 31 Mar 2022
Complaints Restructuring Total Complaints Restructuring Total Complaints Restructuring Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ---------- ------------- ----- ---------- ------------- ----- ---------- ------------- -------
Opening
provision 179.8 - 179.8 344.6 - 344.6 344.6 1.0 345.6
Provisions
made
during period 16.3 - 16.3 5.3 - 5.3 (156.6) - (156.6)
Net
utilisation
of the
provision (4.7) - (4.7) (5.6) - (5.6) (8.2) (1.0) (9.2)
-------------- ---------- ------------- ----- ---------- ------------- ----- ---------- ------------- -------
Closing
provision 191.4 - 191.4 344.3 - 344.3 179.8 - 179.8
-------------- ---------- ------------- ----- ---------- ------------- ----- ---------- ------------- -------
Non-current - - - - - - 97.0 - 97.0
Current 191.4 - 191.4 344.3 - 344.3 82.8 - 82.8
-------------- ---------- ------------- ----- ---------- ------------- ----- ---------- ------------- -------
191.4 - 191.4 344.3 - 344.3 179.8 - 179.8
-------------- ---------- ------------- ----- ---------- ------------- ----- ---------- ------------- -------
Customer complaints redress
As at 30 September 2022, the Group has recognised a complaints
provision totalling GBP191.4m in respect of customer complaints
redress and associated costs. Utilisation in the period totalled
GBP4.7m. The liability has decreased by GBP152.9m compared to 30
September 2021. GBP141.1m of the decrease is due to the cash
redress liability being reduced to the GBP97.0m contribution as per
the Scheme. The other main component of the reduction is a decrease
in the balance adjustments on the loan book of GBP25.7m. The level
of balance adjustments has declined due to customers paying down
their loan and customers charging off the loan book. This has been
partly offset by an increase in the assumed volume of customers
coming forward in the Scheme
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.
If the enforcement process is not completed and prevents the
capital raise from being successful, then Amigo could fail to
comply with one of the Scheme conditions and is likely to revert to
the "fallback" solution or some form of insolvency. There are a
number of avenues of sanction open to the FCA should it deem it
appropriate and so the potential impact of the investigation on the
business is extremely difficult to predict and quantify, so has not
been provided for in the financial statements and is not modelled
in the business plan or stress scenario. In mitigation, the FCA has
stated that the levying of any fine would be considered in the
context of the Scheme and its impact on creditors. In the event
that the investigations have not concluded or that they have
concluded with an adverse outcome, either of which causes the
capital raise not to proceed, the Scheme will revert to the
"fallback" solution and the business will be wound down.
Following the Court sanction of the Scheme the Company is
obliged to enter into a capital raise for the purposes of
recapitalising the business for future lending by 26 May 2023. If
this capital raise is successful a further GBP15.0m cash
contribution must be made to the Scheme. The successful raising of
sufficient capital relies on a number of uncertain events, not
least market appetite which may be influenced by a number of
external factors beyond the Company's control.
14. 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 2022 475,333,760 475,333,760
--------------------- --------------- -------------------
At 30 September 2022 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. The Group plans to
cancel these deferred shares in due course.
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 2022 or an interim
dividend for the period to 30 September 2022. Total cost of
dividends paid in the period is GBPnil (2021: GBPnil).
15. 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 2022 are available upon request from the Company's registered
office at Nova Building, 118-128 Commercial Road, Bournemouth,
United Kingdom, BH2 5LT.
16. 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").
The number of LTIP instruments has been reduced since the prior
year, with the tranche of LTIP's that matured in September 2022
having lapsed.
Share-based payment transactions in which the Group receives
goods or services as consideration for its own equity instruments
are accounted for as equity settled share-based payments. At the
grant date, the fair value of the share-based payment is recognised
by the Group as an expense, with a corresponding entry in equity,
over the period in which the employee becomes unconditionally
entitled to the awards. The fair value of the awards granted is
measured based on Company specific observable market data,
considering the terms and conditions upon which the awards were
granted. The charge to the consolidated statement of comprehensive
income was GBP0.1m in the six months to 30 September 2022 (H1 2022:
charge of GBP0.5m).
17. Investment in subsidiaries and structured 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 2022 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 2022 2021 Principal activity
---------------------------- ------------------- --------- --------- --------- ------------------
Direct holding
Amigo Loans Group Ltd1 United Kingdom Ordinary 100% 100% Holding company
Special purpose
ALL Scheme Ltd1 United Kingdom Ordinary 100% 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 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
Vanir Financial Limited1 United Kingdom Ordinary 100% 100% Dormant company
Vanir Business Financial
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.
18. Related party transactions
The Group had no related party transactions during the six-month
period to 30 September 2022 that would materially affect the
performance of the Group. Details of the transactions for the year
ended 31 March 2022 can be found in note 24 of the Amigo Holdings
PLC financial statements.
19. Post Balance Sheet events
FCA approval for pilot lending - In a letter to the Company from
the FCA, dated 13 October 2022, the FCA has confirmed that it is
satisfied that Amigo has met the threshold conditions required for
Amigo to return to lending, initially through the operation of a
pilot lending scheme, which would limit the level of new loans
issued for at least two months. Under the terms of the FCA's
notice, Amigo will undertake further customer outcomes' testing,
led by a third party, during the initial two-month pilot lending
phase and a required period for assessment. If the FCA is satisfied
with the outcome of this pilot phase, Amigo will still be limited
to a maximum of GBP35.0m cumulative net originations until a
further minimum GBP15.0m Scheme contribution from the proposed
capital raise is paid into the Scheme fund, by no later than 26 May
2023.
Under its new RewardRate brand, Amigo will offer a revised
guarantor loan product and a non-guarantor unsecured loan, both of
which have been specifically designed for its target market.
Securitisation structure - The securitisation structure for the
facility paid down in September 2021 was closed in November
2022.
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. Management uses
these financial measures, along with the most directly comparable
GAAP financial measures, in evaluating the operating performance
and value creation. Non-GAAP financial measures should not be
considered in isolation from, or as a substitute for, financial
information presented in compliance with GAAP. Wherever appropriate
and practical, we provide reconciliations to relevant GAAP
measures.
To ensure these APMs remain relevant to the Group and its
current circumstances, the Board has taken the decision to reduce
the number of APMs presented in these financial statements.
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 22 21 22
--------------------------------------------- ----------- -------- --------
Net loan book 80.6 224.1 138.0
Net unrestricted cash/(debt)(1) 78.6 2.1 83.9
Revenue yield 21.3% 31.7% 29.4%
Risk adjusted revenue 16.0 30.6 52.5
Net interest margin 10.2% 16.6% 15.9%
Impairment:revenue ratio (1.3)% 45.8% 41.3%
Impairment coverage as a percentage of loan
book(2) 27.2% 22.5% 25.6%
Cost:income ratio 172.2% 33.3% (147.5)%
Operating cost:income ratio (ex. complaints) 100.6% 23.9% 27.5%
Adjusted (loss)/ profit after tax (12.7) 2.0 13.3
Return on assets (9.0)% 1.3% 41.4%
Amendments to alterative performance measures
(1) Net unrestricted cash/(debt) - the definition of this
alternative performance measure (APM) has been amended from net
cash/(debt), to highlight that restricted cash is excluded from
these definitions.
(2) Impairment coverage as a percentage of loan book - the
definition of this alternative performance measure (APM) has been
amended from impairment charge as a percentage of loan book, as
this was considered a more relevant measure.
1. "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
22 21 22
GBPm GBPm GBPm
----------------- ------- ------- -------
Gross loan book1 110.7 289.2 185.4
Provision2 (30.1) (65.1) (47.4)
----------------- ------- ------- -------
Net loan book 3 80.6 224.1 138.0
----------------- ------- ------- -------
(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.
2. "Net unrestricted cash/(debt)" is comprised of:
30 Sep 30 Sep 31 Mar
22 21 22
GBPm GBPm GBPm
----------------------------- ------ ------- ------
Borrowings (49.8) (232.4) (49.7)
Cash and cash equivalents 128.4 234.5 133.6
----------------------------- ------ ------- ------
Net unrestricted cash/(debt) 78.6 2.1 83.9
----------------------------- ------ ------- ------
This is deemed useful to show total cash/(debt) if unrestricted
cash available at the period end was used to repay borrowings.
3. 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
22 21 22
Revenue yield GBPm GBPm GBPm
--------------------------- ------ ------ ------
Revenue 15.8 56.5 89.5
Opening loan book 185.4 422.9 422.9
Closing loan book 110.7 289.2 185.4
Average loan book 148.1 356.1 304.2
--------------------------- ------ ------ ------
Revenue yield (annualised) 21.3% 31.7% 29.4%
--------------------------- ------ ------ ------
This is deemed useful in assessing the gross return on the
Group's loan book.
4. The Group defines "risk adjusted revenue" as revenue less
impairment charge. " Risk adjusted revenue " is a useful indicator
of profitability.
30 Sep 30 Sep 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------------------------------ ------ ------ ------
Revenue 15.8 56.5 89.5
Impairment of amounts receivable from customers 0.2 (25.9) (37.0)
------------------------------------------------ ------ ------ ------
Risk adjusted revenue 16.0 30.6 52.5
------------------------------------------------ ------ ------ ------
Risk adjusted revenue is not a measurement of performance under
IFRS and is not an alternative to profit before tax as a measure of
the Group's operating performance, Group's ability to meet its cash
needs or as any other measure of performance under IFRS.
5. 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.
Net interest margin is a measure of profitability. It refers to
the difference between interest received and interest paid.
Interest rates in the economy can significantly affect the
financial net interest margin. A positive net interest margin
suggests that an entity operates profitably.
30 Sep 30 Sep 31 Mar
22 21 22
GBPm GBPm GBPm
-------------------------------------------------- ------ ------ ------
Revenue 15.8 56.5 89.5
Interest payable, receivable and funding facility
fees (1.5) (9.7) (16.6)
-------------------------------------------------- ------ ------ ------
Net interest income 14.3 46.8 72.9
-------------------------------------------------- ------ ------ ------
Opening interest-bearing assets (gross loan book
plus unrestricted cash) 319.0 600.8 600.8
Closing interest-bearing assets (gross loan book
plus unrestricted cash) 239.1 523.7 319.0
Average interest-bearing assets (customer loans
and receivables plus unrestricted cash) 279.1 562.3 459.9
-------------------------------------------------- ------ ------ ------
Net interest margin (annualised) 10.2% 16.6% 15.9%
-------------------------------------------------- ------ ------ ------
6. 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
22 21 22
GBPm GBPm GBPm
------------------------------------------------ ------ ------ ------
Revenue 15.8 56.5 89.5
Impairment of amounts receivable from customers (0.2) 25.9 37.0
------------------------------------------------ ------ ------ ------
Impairment charge as a percentage of revenue (1.3)% 45.8% 41.3%
------------------------------------------------ ------ ------ ------
This is a key measure for the Group in monitoring risk within
the business.
7 . "Impairment coverage as a percentage of loan book"
represents the Group's impairment coverage divided by closing gross
loan book.
30 Sep 30 Sep 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------------------------------- ------ ------ ------
Provision for impairment 30.1 65.1 47.4
Closing gross loan book 110.7 289.2 185.4
------------------------------------------------- ------ ------ ------
Impairment coverage as a percentage of loan book 27.2% 22.5% 25.6%
------------------------------------------------- ------ ------ ------
This allows review of the impairment coverage relative to the
size of the Group's gross loan book.
8. The Group defines "cost:income ratio" as operating expenses
costs divided by revenue.
30 Sep 30 Sep 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------- ------ ------ --------
Revenue 15.8 56.5 89.5
Total operating expenses 27.2 18.8 (132.0)
------------------------- ------ ------ --------
Cost:income ratio 172.2% 33.3% (147.5)%
------------------------- ------ ------ --------
This measure allows review of cost management.
9. "Operating cost:income ratio" , defined as the cost:income
ratio excluding the complaints provision, is:
30 Sep 30 Sep 31 Mar
22 21 22
GBPm GBPm GBPm
-------------------------------------------- ------ ------ ------
Revenue 15.8 56.5 89.5
Administrative and other operating expenses 15.9 13.5 24.6
-------------------------------------------- ------ ------ ------
Operating cost:income ratio 100.6% 23.9% 27.5%
-------------------------------------------- ------ ------ ------
10 . The following table sets forth a reconciliation of profit
after tax to "adjusted profit after tax" for the 6 months to 30
September 2022, 2021 and year to 31 March 2022. Underlying
operating profit mean operating profit before the impact of
non-underlying items within operating profit.
The reconciliation of operating profit to underlying operating
profit is as follows:
30 Sep 30 Sep 31 Mar
22 21 22
GBPm GBPm GBPm
----------------------------------- ------ ------ -------
Reported (loss)/profit after tax (12.7) 3.3 169.6
Write back of complaints provision - - (156.6)
Senior secured note buyback - - 0.7
Securitisation fees - - 0.5
Tax provision release - (0.8) (0.8)
Tax refund due - (0.5) -
Less tax impact - - (0.1)
----------------------------------- ------ ------ -------
Adjusted (loss)/profit after tax (12.7) 2.0 13.3
----------------------------------- ------ ------ -------
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.
-- Write back of the complaints provision is due to cash redress
liability being reduced to the GBP97.0m contribution as per the
Scheme.
-- Senior secured note redemption adjustments relate to the
accelerated bond cost and premium write off triggered by the early
bond redemption in January 2022. Senior secured note buybacks are
not underlying business-as-usual transactions.
-- 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.
-- 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.
None of the above are business-as-usual transactions. Hence,
removing these items is deemed to give a view of underlying profit
adjusting for non-business-as-usual items within the financial
year. In the six months ended 30 Sep 2022, there are no adjustments
to the profit after tax figure as no one off transaction existed,
hence reported PAT is the same as Adjusted PAT.
11." Return on assets" ("ROA") refers to annualised profit after
tax as a percentage of average assets. Return on assets (ROA)
measures how efficiently the Company is earning profit from their
economic resources or assets on their balance sheet.
30 Sep 30 Sep 31 Mar
Return on assets 22 21 22
--------------------------------------------------- ------ ------ ------
GBPm GBPm GBPm
--------------------------------------------------- ------ ------ ------
(Loss)/profit after tax (12.7) 3.3 169.6
Customer loans and receivables at period and year
end 81.5 229.9 140.2
Other receivables and current assets at period and
year end 73.1 4.7 9.9
Cash and cash equivalents at period and year end 128.4 234.5 133.6
--------------------------------------------------- ------ ------ ------
Total 283.0 469.1 283.7
--------------------------------------------------- ------ ------ ------
Average assets 283.3 502.8 410.1
--------------------------------------------------- ------ ------ ------
Return on assets (annualised) (9.0)% 1.3% 41.4%
--------------------------------------------------- ------ ------ ------
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