TIDMAMGO
RNS Number : 1493X
Amigo Holdings PLC
25 August 2022
25 August 2022
Amigo Holdings PLC
First Quarter Financial Results for the three-month period ended
30 June 2022
Amigo Holdings PLC, ("Amigo" or the "Company"), provider of
mid-cost credit in the UK, announces results for the three-month
period ended 30 June 2022.
Gary Jennison, Chief Executive Officer commented:
"We continue to engage positively with the FCA around our return
to lending. This is the next step in our recovery, ahead of a
proposed capital raise and would enable a new start for the
business having taken on board the learnings from the past.
"Our new lending proposition, under the RewardRate brand, aims
to offer a more affordable, responsible and flexible option to
underserved customers who currently have very few choices. By
allowing customers who make their loan payments on time to reduce
their APR by up to 15 percentage points, we aim to help customers
achieve a better credit rating and move towards cheaper credit. We
believe fair and responsible non-standard lending choices are vital
to creating greater financial inclusion and mobility."
Headlines
-- On 26 May 2022, the Board's preferred proposed Scheme of
Arrangement ("Scheme"), was sanctioned by the High Court. The
Scheme seeks to deliver the best possible outcome to Scheme
creditors to address Amigo's historical lending complaints
liability.
-- The "preferred" solution under the Scheme is contingent on
lending restarting by 26 February 2023 and Amigo completing a
capital raise by 26 May 2023. If either of the conditions is not
met, the Scheme will revert to the "fallback" solution and the
business will be wound down.
-- Engagement with the Financial Conduct Authority ("FCA")
continues to be positive with Amigo's new platform, processes and
procedures being assessed to satisfy the FCA that all conditions
are being met to enable a return to lending.
-- Volumes of complaints received to date in the Scheme process
are within expectations. A report from Scheme supervisors, PWC,
will be published in early September 2022.
-- Subject to FCA consent, Amigo will return to lending with a
revised guarantor loan as well as an unsecured non-guarantor loan
product which will both feature dynamic pricing to encourage and
reward on-time payment with lower rates and penalty-free annual
payment holidays. The new products will be released under the
RewardRate brand, representing a new start for the business.
-- The Board expects that the proposed capital raise will
require shareholder approval and that the proceeds will be used
both to fund the minimum GBP15m Scheme contribution and to support
future lending. While the quantum is yet to be determined, the
Board is currently working with advisers to determine the overall
structure of the capital raise in a way that seeks to facilitate
existing shareholders' participation whilst balancing this with the
need to ensure the success of the capital raise for the purposes
of, and in the timeframe required under, the Scheme. Further
details are expected to be announced in due course.
-- The FCA investigations, initiated in 2020 and 2021, into
Amigo's creditworthiness assessment and complaints handling
respectively, are ongoing. The Board recognises the importance of a
resolution to the investigations in the context of the capital
raise and is working towards obtaining this as soon as
possible.
-- On 6 June 2022, Danny Malone was appointed Chief Financial
Officer, having performed the role on an interim basis since
February 2022.
-- Post period end, the Board appointed Peel Hunt LLP as
financial adviser and sole corporate broker and Ashcombe Advisers
LLP as financial adviser. Both will be instrumental in assisting
with the required fund raising in the coming months.
Financial headlines
Figures in GBPm, unless otherwise First Quarter First Quarter Change %
stated to to
30 June 2022 30 June 2021
Number of customers(1) '000 61.0 118.0 (48.3)
Net loan book(2) 105.9 288.7 (63.3)
Revenue 10.4 32.5 (68.0)
Impairment: revenue 2.9% 23.4% (87.6)
Complaints provision (balance
sheet) (176.9) (338.0) (47.7)
Complaints credit (income statement) - 1.7 (100.0)
Profit before tax 2.2 15.0 (85.3)
Profit after tax(3) 2.2 16.0 (86.3)
Adjusted profit after tax(4) 2.2 15.2 (85.5)
Basic EPS Pence 0.5 3.4 (85.3)
EPS (Basic, adjusted)(5) Pence 0.5 3.2 (84.4)
Net unrestricted cash/(debt)(6) 52.6 (56.2) 193.6
Net unrestricted cash/(debt) to gross
loan book(7) 36.7% (16.0)% 329.4
--------------------------------------------- ------------- ------------- --------
-- Net loan book reduction of 63.3% to GBP105.9m (Q1 FY2022:
GBP288.7m, FY2022: GBP138.0m) due to the run-off of the legacy loan
book and the continued pause in lending.
-- Revenue reduction of 68.0% to GBP10.4m (Q1 FY2022: GBP32.5m)
due to the reduction in the loan book and ongoing pause in lending
throughout the period.
-- Complaints provision down 47.7% to GBP176.9m (Q1 FY2022:
GBP338.0m, FY2022: GBP179.8m). The complaints provision has been
replaced with a reduced provision for Scheme redress. The
significant release in complaints provision occurred at year end
and therefore had no impact on the income statement in this
quarter.
-- With no additional Scheme provision recognised in the
quarter, and a decline due to the reduction in the size of the loan
book, reported statutory profit before tax for the period was
GBP2.2m (Q1 FY2022: GBP15.0m). No tax impact or profit adjustments
made in the period.
-- Overall collections, including early repayments and
recoveries from written-off accounts, have remained robust despite
the continued rise in delinquency expected from a book in
run-off.
-- Ongoing focus on controlling costs.
-- GBP102.4m of unrestricted cash and cash equivalents as at 30
June 2022 (Q1 FY2022: GBP201.2m, FY2022: GBP133.6m), following the
payment of the GBP60m initial Scheme contribution, reflects
continued strong cash generation. Current unrestricted cash balance
of over GBP115m, following payment of the bi-annual senior secured
note coupon payment in July 2022.
-- Net assets of GBP50.2m at 30 June 2022 (Q1 FY2022: net
liabilities of GBP105.2m, FY2022: GBP47.9m). Substantially all the
Group's net assets, excluding c.GBP8m of working capital, are
committed within the Scheme.
-- Net unrestricted cash of GBP52.6m at 30 June 2022 (Q1 FY2022:
net debt of GBP56.2m, FY2022: GBP83.9m) driven by the continued
collection of the back book while originations remained
suspended.
Notes to summary financial table:
(1) Number of customers represents the number of accounts with a
balance greater than zero, exclusive of charged off accounts.
(2) Net loan book represents total outstanding loans less
provision for impairment excluding deferred broker costs.
(3) Profit after tax otherwise known as profit/(loss) and total
comprehensive income/(loss) to equity shareholders of the Group as
per the financial statements.
(4) Adjusted profit after tax excludes items due to their
exceptional nature including: senior secured note, RCF fees,
securitisation facility fees write off, tax provision release, tax
asset write off and strategic review and write-back of complaints
provision. 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
profit/earnings are described in footnote 4 above.
(6) Net unrestricted cash/(debt) is defined as borrowings less
unamortised fees and unrestricted cash and cash equivalents.
(7) Net unrestricted cash(debt)/gross loan book : this measure
shows whether the cash and borrowings' year-on-year movement is in
line with changes in the loan book.
*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 10:30am (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: 159756). 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
Danny Malone, Chief Financial Officer
Kate Patrick, Head of Investor Relations investors@amigo.me
Lansons amigoloans@lansons.com
Tom Baldock 07860 101715
Ed Hooper
07783 387713
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. Whilst not
currently lending, Amigo has provided guarantor loans in the UK
since 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 was founded in 2005 and grew to become
the UK's largest provider of guarantor loans. In the process,
Amigo's guarantor loan product has allowed borrowers to rebuild
their credit scores and improve their ability to access credit from
mainstream financial service providers in the future. Amigo 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
Performance
The three months ended 30 June 2022 have seen considerable
progress in addressing Amigo's historical complaints liability and
in re-establishing Amigo as a provider of responsible finance to
meet the needs of a growing underserved population. The sanctioning
of Amigo's Scheme of Arrangement by the High Court on 26 May 2022
represents a turning point for the business. The approval of the
Scheme will deliver the best possible outcome for creditors and
enable Amigo to continue to play an important role in the mid-cost
credit sector, at a time when the UK is facing an unprecedented
rise in the cost of living and a further tightening of credit
availability.
Amigo's pause in lending continued throughout the reporting
period to 30 June 2022 and resulted in a 48.3% decline in customer
numbers to 61,000 and a 63.3% reduction in the net loan book to
GBP105.9m. Revenue fell 68.0% to GBP10.4m, compared to the prior
year period, primarily driven by the reduction in the loan book.
Overall collections, which have included early repayments and
recoveries from written-off accounts, have remained robust despite
the anticipated increase in delinquency associated with a loan book
in run-off.
The provision for complaints on the balance sheet at 30 June
2022 is broadly in line with the full year and reduced
significantly, down 47.7%, on the prior year. This follows the
sanctioning of the Scheme and the introduction of a reduced Scheme
provision. The significant release in complaints provision occurred
at year end and therefore had no impact on the income statement in
this quarter. With no additional complaints provision recognised in
the quarter, reported statutory profit before tax for the period
was GBP2.2m (Q1 FY2022: GBP15.0m). No tax impact or profit
adjustments were made in the period.
The reduced provision on the balance sheet has resulted in a net
asset position of GBP50.2m. However, as we noted at year end,
although we have returned to balance sheet solvency, substantially
all the Shareholders' Equity in the business, excluding a small
working capital amount of c.GBP8m, is committed to Scheme creditors
under the Scheme.
Our cash position remains strong with unrestricted cash at 30
June 2022 of GBP102.4m after payment of the initial GBP60m Scheme
contribution and current cash of over GBP115m, after payment of the
bi-annual coupon on our senior secured notes.
Scheme of Arrangement Update
The Scheme was sanctioned by the High Court on 26 May 2022.
Under the "preferred" solution of the Scheme, 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 2022. 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. In order
to secure the best possible result for Scheme creditors in the
circumstances, the Scheme includes a mechanism for additional
monies to be paid to Scheme creditors in the event that the
existing loan book generates a better return than anticipated. The
judgment, passed down to Amigo on 30 May 2022, is available on
www.amigoscheme.co.uk .
The "preferred" solution under the Scheme is contingent on Amigo
returning to lending, with FCA consent, by 26 February 2023. It is
also contingent on Amigo completing a capital raise by 26 May 2023.
If Amigo fails to meet these conditions, the Scheme will revert to
the "fallback" solution which is an orderly wind-down of the Amigo
Loans Ltd business.
Return to lending
We have made significant progress in preparing to return to
lend. While the Scheme condition is that we return to lending by 26
February 2023, we aim to do so far sooner. Engagement with the FCA
has continued to be positive and we remain grateful for the
considerable amount of time that the teams at the FCA have afforded
us as we test our new platform, processes and procedures to satisfy
them that threshold conditions are met and we are ready to return
to lending. We will initiate lending with a limited pilot, building
to a maximum of GBP35m net originations until the capital raise has
been completed. The initial GBP35m of planned new lending will be
funded by existing resources.
We will not return to lending with our Amigo brand. Our revised
guarantor loan product and new non-guarantor unsecured loan will be
released under our new brand, RewardRate. This represents a new
start for our business. We have designed our RewardRate products to
meet the needs of a large underserved market, offering affordable,
responsible, and flexible finance to an eligible segment of the
estimated 12 million adults in the UK who currently have few
options to borrow. Our products aim to help customers achieve a
better credit rating and move towards cheaper credit by enabling
those that make their loan payments on time to reduce the effective
APR by up to 15 percentage points. The personal loan will start at
49.9% APR while the guarantor product will begin at 39.9% APR, with
both products offering the borrower the opportunity to reduce the
interest rate to equivalent 34.9% APR and take an interest free
payment holiday once a year, with no penalties.
This new proposition has been shaped through learnings from
Amigo's past and all new lending is designed to meet the FCA's
proposed new Consumer Duty outcomes. There will be an improved
underwriting process with enhanced affordability checks for
customers. We have invested in soft search application capability
enabling targeted and accurate quotes to be presented to customers
who match our target customer profile without impacting their
credit file. When we return to lending, open banking, or an
equivalent, will be used in all affordability assessments. To
support our new products, we will be deploying a new technology
environment. The new technologies are cloud-based and built around
market-leading solutions tailored to our products and customer
needs. Working with best-in-class third parties, such as Mambu,
Mulesoft and Salesforce, the platform provides quality system
solutions that are scalable and easily configured to suit our and
our customers' needs, now and as they change. Third-party
supporting services are being integrated using open application
programming interfaces ("API") technologies which both speed up and
simplify the build. We continue to build and own several key
services such as our underwriting decision engines and our
websites. These will be fully integrated into the overall
architecture alongside our third-party partners. Alongside this,
our new data environment is being purpose-built to give us more
flexibility and scalability for both data storage and
reporting.
Capital Raise
Amigo expects to propose a capital raise to fund both the
minimum GBP15m additional Scheme contribution required under the
"preferred" solution of the Scheme and to support future lending.
The Scheme requires Amigo to issue at least 19 new shares for every
existing share in issue. Whilst the final amount of the capital
raise is yet to be determined and will be subject to market
conditions at the time, the Board is currently working with
advisers to determine the overall structure of the capital raise in
a way that seeks to facilitate existing shareholders' participation
whilst balancing this with the need to ensure the success of the
capital raise for the purposes of, and in the timeframe required
under, the Scheme. In addition, Amigo plans to raise additional
debt to fulfil total funding requirements. No final decision has
been made on quantum or structure. The Board has appointed Peel
Hunt LLP as financial adviser and sole corporate broker and
Ashcombe Advisers LLP as financial adviser. Both will be
instrumental in assisting with the required fund raising in the
coming months. Amigo expects to publish further details on the
capital raise in due course.
The Board recognises the importance of a resolution to the
ongoing FCA investigations into complaints handling and
affordability processes in the context of the capital raise and is
working towards obtaining this as soon as possible. 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
proposed capital raise not to proceed, the Scheme will revert to
the "fallback" solution and the business will be wound down.
ESG
The proper and effective governance of Amigo is fundamentally
important. During the period, Amigo's Responsible Business Council,
was established. The Council meets monthly and reports quarterly to
the Board, advising on key ESG matters. It acts as a sounding
board, challenger, innovator and adviser to the Board and business
leaders responsible for defining, planning and executing Amigo's
ESG strategy. Priority areas include setting Amigo's ESG vision,
goals and targets, driving diversity, equity and inclusion,
climate- change related matters and our strategy for charity and
community engagement. It has undertaken a culture review in
partnership with the risk function to identify how Amigo performs
across six key categories - leadership, competency, governance,
decisions, relationships, and ethics. This will help drive the
values, behaviours, and attitudes the Council wants to embed in the
business, which will support the business' future growth as well as
its impact on customers, employees, and the wider community. The
Responsible Business Council is working on defining the core
metrics it wants to influence and have an impact on over the next
year. This will guide the solutions it champions and proposes to
the wider business.
Amigo has also recently selected four priority UN Sustainable
Development Goals which align to our strategic pillars, our values
and our purpose, following a materiality assessment and review by
the Responsible Business Council. Over the coming year, we will be
setting targets and metrics against each goal and will report on
these in future annual reports.
Board
Danny Malone, who joined Amigo in February as Interim CFO, was
appointed to the Board and as CFO on 6 June 2022, subject to
approval under the FCA's Senior Managers and Certification Regime.
Danny is a Chartered Accountant and has extensive business and
regulatory experience gained from working predominantly in the
specialist consumer finance sector and having co-founded Everyday
Loans in 2006.
Maria Darby-Walker, who joined the Board in October 2020, was
appointed Senior Independent Director, subject to approval under
the FCA's Senior Managers and Certification Regime on 6 June
2022.
Summary and Outlook
In summary, the sanctioning of the Scheme represents a turning
point for Amigo. We have made significant progress as we work with
the FCA to bring our new RewardRate products to market. We have
appointed advisers who will support us as we seek to raise capital
to fund both the minimum Scheme contribution and to support future
lending and we are working with them to determine the overall
structure of the capital raise. This is critical for the future
survival of the business.
The current cash position remains strong at over GBP115m after
payment of the initial GBP60m Scheme contribution and the bi-annual
coupon on our senior secured notes.
Amigo is a very different business to the business of the past.
We have a refreshed culture, focused on delivering positive
outcomes for all stakeholders, as we pursue our purpose of
providing those with few options to borrow the opportunity to
achieve financial mobility. The Board is confident that its future
lending proposition meets a strong demand in the market for a
competitively priced, mid-cost, specialist credit product and that
Amigo can be a responsible and valuable contributor to the sector.
Amigo is preparing and looking forward to returning to lending as
soon as possible and fulfilling its obligations under the
Scheme.
Financial Review
In the three months to 30 June 2022, the net loan book reduced
by 63.3% to GBP105.9m (Q1 FY2022: GBP288.7m, FY2022: GBP138.0m).
Revenue fell by 68.0% year on year to GBP10.4m (Q1 FY2022:
GBP32.5m), reflecting the pause in lending and loan book reduction.
Customer numbers reduced by 48.3% compared to the prior year to
61,000 (Q1 FY2022: 118,000). With no additional complaints
provision recognised in the quarter, reported statutory profit
before tax for the period was GBP2.2m (Q1 FY2022: GBP15.0m). There
was no tax impact in the quarter or profit adjustments made in the
period.
Net assets at 30 June 2022 were GBP50.2m (Q1 FY2022: net
liabilities of GBP105.2m, FY 2022: GBP47.9m). Although the results
show a strong shareholder equity position, substantially all the
existing net assets of the business will be delivered to the Scheme
creditors by way of the Scheme. 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 will be funded, in part, by way of a capital
raise to be completed by 26 May 2023.
Impairment
The impairment charge for the period was GBP0.3m (Q1 FY2022:
GBP7.6m), with the impairment:revenue ratio decreasing
significantly to 2.9%. The ongoing pause in originations and
consequent reduction in the size of the loan book drove the lower
impairment charge, 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. There
were also no key judgements revisions in the period.
The impairment provision decreased to GBP37.6m (Q1 FY2022:
GBP62.2m), primarily due to the decline of the loan book,
representing 26.2% of the gross loan book (Q1 FY2022: 23.4%, FY
2022: 25.6%). The increase in coverage is due to the expected
increase in delinquency, within modelled levels, as the book runs
off.
Scheme provision
At year end, the Board believed there to be sufficient certainty
to account for claims redress on a Scheme basis. This was confirmed
following the High Court decision to sanction the Scheme in May
2022. The provision on the balance sheet at 30 June 2022 is broadly
in line with the year-end provision, at GBP176.9m (FY 2022:
GBP179.8m; Q1 FY2022 GBP338.0), with all material judgements and
assumptions remaining unchanged. The reduction from year end is
primarily due to the payment of Scheme administration costs over
the period. There was no impact on the income statement in the
quarter.
A key consideration will be uptake and volumes of complaints in
the Scheme. Volumes of complaints received to date are within
Scheme provision assumptions. Under the terms of the Scheme,
customers have until 26 November 2022 to submit a claim.
Sensitivity analysis of the key assumptions, including the
volume of claims, is set out in note 2.2 to these financial
statements.
Tax
Whilst the three months ended 30 June 2022 were profitable, no
tax charge has been recognised on profits as the Group has
sufficient losses brought forward.
Funding and liquidity
Net cash was GBP52.6m at 30 June 2022 (Q1 FY2022: net debt of
GBP56.2m) as the back book continued to be collected while
originations remained suspended. Unrestricted cash and cash
equivalents at 30 June 2022 was GBP102.4m (Q1 FY2022: GBP201.2m, FY
2022: GBP133.6m) following the payment of the GBP60m initial Scheme
contribution in June 2022. Restricted cash is GBP70.2m which
includes the GBP60m Scheme contribution as well as estimated
set-off held in escrow for customers with existing complaints who
continue to make payments. Current unrestricted cash, after payment
of the interest due on the senior secured notes, is over
GBP115m.
The group has GBP50.0m outstanding 7.625% senior secured notes
due in January 2024.
Going concern
Despite the sanctioning of the Scheme, the Board has concluded
that a material uncertainty over going concern remains (see note 1
to the financial statements for further information). However, the
Board considers that it is appropriate to prepare these financial
statements on a going concern basis, as the sanctioning of the
Scheme and the potential to successfully meet the conditions of the
"preferred solution" under the Scheme provide a realistic
alternative to a managed wind-down or insolvency.
Condensed consolidated statement of comprehensive income
for the 3 months ended 30 June 2022
3 months 3 months Year to
ended ended
30 Jun 30 Jun 31-Mar-22
22 21
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
--------------------------------------------------- ----- --------- --------- ---------
Revenue 3 10.4 32.5 89.5
Interest payable and funding facility fees 4 (0.9) (5.1) (16.7)
Interest receivable 0.1 - 0.1
Impairment of amounts receivable from customers (0.3) (7.6) (37.0)
--------------------------------------------------- ----- --------- --------- ---------
Administrative and other operating expenses (7.1) (6.5) (24.6)
Complaints credit 12 - 1.7 156.6
--------------------------------------------------- ----- --------- --------- ---------
Total operating (expense)/income (7.1) (4.8) 132.0
--------------------------------------------------- ----- --------- --------- ---------
Profit before tax 2.2 15.0 167.9
Tax credit on profit 6 - 1.0 1.7
--------------------------------------------------- ----- --------- --------- ---------
Profit and total comprehensive Income attributable
to equity shareholders of the Group 1 2.2 16.0 169.6
--------------------------------------------------- ----- --------- --------- ---------
The profit is derived from continuing activities.
Earnings per share
---------------------------------------------- ------ ------ ------ ------
Basic earnings per share (pence) 7 0.5 3.4 35.7
Diluted earnings per share (pence) 7 0.5 3.4 35.7
---------------------------------------------- ------ ----- ------- ------
The accompanying notes form part of these financial
statements.
1 There was less than GBP0.1m of other comprehensive income
during any other period, and hence no consolidated statement of
other comprehensive income is presented.
Condensed consolidated statement of financial position
as at 30 June 2022
30 Jun 30 Jun 31 Mar
22 21 22
Unaudited Unaudited Audited
Notes GBPm GBPm GBPm
------------------------------------------ ----- ---------- ------------------ -------
Non-current assets
Customer loans and receivables 8 19.5 97.7 25.4
Property, plant and equipment 0.4 0.9 0.5
Right-of-use lease assets 0.7 0.9 0.8
------------------------------------------ ----- ---------- ------------------ -------
20.6 99.5 26.7
------------------------------------------ ----- ---------- ------------------ -------
Current assets
Customer loans and receivables 8 87.9 198.9 114.8
Other receivables 9 2.2 3.2 1.6
Current tax assets 6 0.8 0.4 0.7
Derivative asset - 0.1 -
Cash and cash equivalents (restricted)(1) 70.2 6.8 7.6
Cash and cash equivalents 102.4 201.2 133.6
------------------------------------------ ----- ---------- ------------------ -------
263.5 410.6 258.3
------------------------------------------ ----- ---------- ------------------ -------
Total assets 284.1 510.1 285.0
------------------------------------------ ----- ---------- ------------------ -------
Current liabilities
Trade and other payables 10 (6.4) (18.8) (6.7)
Borrowings 11 - (25.1) -
Lease liabilities (0.3) (0.3) (0.3)
Complaints provision 12 (79.9) (338.0) (82.8)
------------------------------------------ ----- ---------- ------------------ -------
(86.6) (382.2) (89.8)
------------------------------------------ ----- ---------- ------------------ -------
Non-current liabilities
Borrowings 11 (49.8) (232.3) (49.7)
Lease liabilities (0.5) (0.8) (0.6)
Complaints provision 12 (97.0) - (97.0)
------------------------------------------ ----- ---------- ------------------ -------
(147.3) (233.1) (147.3)
------------------------------------------ ----- ---------- ------------------ -------
Total liabilities (233.9) (615.3) (237.1)
------------------------------------------ ----- ---------- ------------------ -------
Net assets/(liabilities) 50.2 (105.2) 47.9
------------------------------------------ ----- ---------- ------------------ -------
Equity
Share capital 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 136.3 (19.1) 133.9
------------------------------------------ ----- ---------- ------------------ -------
Shareholder equity 50.2 (105.2) 47.9
------------------------------------------ ----- ---------- ------------------ -------
The accompanying notes form part of these financial
statements.
(1) Cash and cash equivalents (restricted) of GBP70.2m (Q1 2021:
GBP6.8m) includes (at 30 June 2022) the GBP60m initial payment to
the Scheme Fund. This amount will be returned to the Group if the
Scheme Fallback solution 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 financial statements of Amigo Holdings PLC were approved and
authorised for issue by the Board and were signed on its behalf
by:
Danny Malone
Director
25 August 2022
Company no. 10024479
Condensed consolidated statement of changes in equity
for the 3 months to 30 June 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 - - - - 16.0 16.0
Share-based payments - - - - 0.2 0.2
--------------------------- ------- ------- ----------- ---------- -------- -------
At 30 June 2021 1.2 207.9 - (295.2) (19.1) (105.2)
Total comprehensive income - - - - 153.6 153.6
Translation reserve - - 0.1 - - 0.1
Share-based payments - - - - (0.6) (0.6)
At 31 March 2022 1.2 207.9 0.1 (295.2) 133.9 47.9
Total comprehensive income - - - - 2.2 2.2
Translation reserve - - (0.1) - - (0.1)
Share-based payments - - - - 0.2 0.2
--------------------------- ------- ------- ----------- ---------- -------- -------
At 30 June 2022 1.2 207.9 - (295.2) 136.3 50.2
--------------------------- ------- ------- ----------- ---------- -------- -------
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 3 months to 30 June 2022
3 months 3 months Year
ended ended to
30 Jun 30 Jun 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
--------------------------------------------------------- --------- --------- -------
Profit for the period 2.2 16.0 169.6
Adjustments for:
Impairment expense 0.3 7.6 37.0
Complaints (credit) - (1.7) (156.6)
Tax (credit) - (1.0) (1.7)
Interest expense 0.9 5.1 16.7
Interest receivable (0.1) - (0.1)
Interest recognised on loan book (12.7) (35.0) (97.0)
Share-based payment 0.2 0.2 (0.4)
Depreciation of property, plant and equipment 0.1 0.2 0.5
--------------------------------------------------------- --------- --------- -------
Operating cash flows before movements in working capital (9.1) (8.6) (32.0)
(Increase)/decrease in receivables (0.6) (1.5) 0.1
(Decrease) in payables (1.3) (2.5) (6.3)
Complaints cash expense (3.7) (4.0) (8.1)
(Tax paid)/tax refund (0.1) - 0.2
Interest received/(paid) 0.2 (0.5) (18.5)
Net cash (used in) operating activities before loans
issued and collections on loans (14.6) (17.1) (64.6)
Collections 43.5 79.0 263.0
Other loan book movements 2.0 (0.4) (0.4)
Decrease in deferred brokers' costs 0.6 1.7 7.5
--------------------------------------------------------- --------- --------- -------
Net cash from operating activities 31.5 63.2 205.5
--------------------------------------------------------- --------- --------- -------
Investing activities
Proceeds from sale of property, plant and equipment - - 0.3
--------------------------------------------------------- --------- --------- -------
Net cash from investing activities - - 0.3
--------------------------------------------------------- --------- --------- -------
Financing activities
Lease principal payments (0.1) (0.1) (0.3)
Repayment of external funding - (39.3) (248.5)
--------------------------------------------------------- --------- --------- -------
Net cash (used in) financing activities (0.1) (39.4) (248.8)
--------------------------------------------------------- --------- --------- -------
Net increase/(decrease) in cash and cash equivalents 31.4 23.8 (43.0)
Cash and cash equivalents at beginning of period 141.2 184.2 184.2
--------------------------------------------------------- --------- --------- -------
Cash and cash equivalents at end of period (1) 172.6 208.0 141.2
--------------------------------------------------------- --------- --------- -------
The accompanying notes form part of these financial
statements.
1 Total cash is inclusive of cash and cash equivalents
(restricted) of GBP70.2m (Q1 2021: GBP6.8m). Cash and cash
equivalents (restricted) includes (at 30 June 2022) the GBP60m
initial payment to the Scheme Fund. This amount will be returned to
the Group if the Scheme Fallback solution 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.
1. Accounting policies
1.1 General information and basis of preparation of financial
statements
Amigo Holdings PLC is a public company limited by shares
(following IPO on 4 July 2018), listed on the London Stock Exchange
(LSE: AMGO). The Company is incorporated and domiciled in England
and Wales and its registered office is Nova Building, 118-128
Commercial Road, Bournemouth, United Kingdom BH2 5LT.
The principal activity of the Company is to act as a holding
company for the Amigo Loans Group of companies. The principal
activity of the Amigo Loans Group is to provide individuals with
guarantor loans from GBP2,000 to GBP10,000 over one to five
years.
These unaudited condensed consolidated Group financial
statements for the three months ended 30 June 2022 have been
prepared on a going concern basis and approved by the Directors in
accordance with UK-adopted International Financial Reporting
Standards ("IFRS"). There has been no departure from the required
IFRS standards. The unaudited 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 consolidated financial statements have been prepared under
the historical cost convention, except for financial instruments
measured at amortised cost or fair value.
The presentational currency of the Group is GBP, the functional
currency of the Company is GBP and these unaudited condensed
financial statements are presented in GBP. All values are stated in
GBP million (GBPm) except where otherwise stated.
These interim financial statements have not been prepared fully
in accordance with IAS 34 Interim Financial Reporting. They do not
include all the information required for full annual financial
statements and should be read in conjunction with the consolidated
financial statements of Amigo Holdings PLC (the 'Group') as at and
for the year ended 31 March 2022.
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. Changes to significant accounting
policies are described in notes 1.2 and 2.
The consolidated financial statements of the Group as at and for
the year ended 31 March 2022 are available upon request from the
Company's registered office at Nova Building, 118-128 Commercial
Road, Bournemouth, United Kingdom, BH2 5LT.
In preparing the financial statements, the Directors are
required to use certain critical accounting estimates and are
required to exercise judgement in the application of the Group and
Company's accounting policies. See note 2 for further details.
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. Those accounts have been reported on by the Company's
auditor and delivered to the registrar of companies. The report of
the auditor was not qualified and:
i) drew attention to the material uncertainty related to going
concern referenced in the financial statements; and
ii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
These condensed interim financial statements for the three
months ended 30 June 2022 were approved by the board of directors
on 25 August 2022.
Going concern
In determining the appropriate basis of preparation for these
financial statements, the Board has undertaken an assessment 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 ("the
Scheme"). The financial statements have been prepared on a going
concern basis which the Directors believe to be appropriate for the
following reasons.
Following the sanctioning by the High Court on 26 May of the
Scheme of Arrangement ("the Scheme") the Group now has a clear path
to returning to lending over the next twelve months. Failure to
meet the conditions of the Scheme however remains a key risk faced
by the Group. The relevant conditions are:
-- approval before 26 February 2023 by the Financial Conduct
Authority for Amigo to resume lending; and
-- issuance and sale of at least 19 shares for every 1 share in
issue before 26 May 2023
Should either of these conditions remain unsatisfied within the
required timeframes, under the terms of the Scheme the business
will revert to a managed wind-down and neither the Group nor
Company will be a going concern. 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 being
received
-- balance adjustments resulting from complaints in the Scheme
are consistent with the assumptions that underpin the complaints
provision reported as at 31 March 2022 (see note 2.2.1)
-- at least the minimum committed amount of GBP112m is paid out
as cash redress in the Scheme, being GBP97m from existing resources
and future collections plus an additional GBP15m following the
capital raise
-- new lending originations commence as soon as possible
-- collections on the existing loan book continue in line with recent experience
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 and
also that the Group is able to successfully obtain new debt
financing to enable it to repay its non-current borrowings as they
fall due in January 2024, 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 adversely
impacting the Group's liquidity position.
-- 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.
-- halving of new capital raised (whilst still meeting the dilution conditions of the Scheme)
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.
FCA investigation
The Group is currently under investigation by the FCA in
relation to historical lending and complaints management processes.
If the enforcement process is not completed by then and this
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.
Conclusion
Approval by the High Court of the Scheme provides the Group with
a clear path to return to lending under a business plan which has
been the subject of extensive external scrutiny as a result of the
Court process. Based on the severe but plausible scenario the
Directors have a reasonable expectation that the Group and Company
have adequate resources to continue in operation for at least the
next twelve months. Accounting standards require an entity to
prepare financial statements on a going concern basis unless the
Board either intends to liquidate the entity or to cease trading or
has no realistic alternative but to do so. Accordingly, 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 conditions, being approval for a
return to lending before 26 February 2023 and issuance and sale of
at least 19 shares for every 1 share in issue before 26 May 2023.
Additionally, the successful delivery of the Group's business plan
depends on raising sufficient equity and/or debt funding and the
final outcome of the FCA investigations remains highly uncertain.
These conditions are outside of the control of the Group. 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. The financial statements do not include any
adjustments that would result from the basis of preparation being
inappropriate.
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 at
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.
In substance the borrower and the guarantor of each financial
asset have equivalent responsibilities. Hence, for each loan there
are two obligors to which the entity has equal recourse. This dual
borrower nature of the product is a key consideration in
determining the staging and the recoverability of an asset.
The Group performs separate credit and affordability assessments
on both the borrower and guarantor. After having passed an initial
credit assessment, most borrowers and all guarantors are contacted
by phone and each is assessed for their creditworthiness and
ability to afford the loan. In addition, the guarantor's roles and
responsibilities are clearly explained and recorded. This is to
ensure that while the borrower is primarily responsible for making
the repayments, both the borrower and the guarantor are clear about
their obligations and are also capable of repaying the loan.
When a borrower misses a payment, both parties are kept informed
regarding the remediation of the arrears. If a missed payment is
not remediated within a certain timeframe, collection efforts are
switched to the guarantor and if arrears are cleared the loan is
considered performing.
The 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 the prior year 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. 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 (see note 2.1.3).
Previously the IFRS 9 provision was segmented into the Group's
seven legacy risk segments. Due to the impact of Covid-19 these
segments no longer have discernible credit risk profiles. Instead,
and in line with information used by management in internal
decision making and review, the book is bifurcated into customers
who have had a Covid-19 forbearance plan and those who have not.
Refer to note 2.1.1 for further detail of the judgements and
estimates used in the measurement of ECLs and note 2.1.3 for detail
on impact of forward-looking information on the measurement of
ECLs.
iv) Assessment of significant increase in credit risk (SICR)
In determining whether the credit risk (i.e. risk of default) of
a financial instrument has increased significantly since initial
recognition, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort, including both quantitative and qualitative information and
analysis. The qualitative customer data used in this assessment is
payment status flags, which occur in specific circumstances such as
a short-term payment plans, breathing space or other indicators of
a change in a customer's circumstances. See note 2.1.2 for details
of how payment status flags are linked to staging, and judgements
on what signifies a significant increase in credit risk.
v) Derecognition
Historically, the Group offered, to certain borrowers, the
option to top up existing loans subject to internal eligibility
criteria and customer affordability. The Group pays out the
difference between the customer's remaining outstanding balance and
the new loan amount at the date of top up. The Group considers a
top up to be a derecognition event for the purposes of IFRS 9 on
the basis that a new contractual agreement is entered into by the
customer replacing the legacy agreement. The borrower and guarantor
are both fully underwritten at the point of top up and the borrower
may use a different guarantor from the original agreement when
topping up.
vi) Modification
Aside from top ups and Covid-19 payment holidays, no formal
modifications are offered to customers. In some instances,
forbearance measures are offered to customers. These are not
permanent measures; there are no changes to the customer's contract
and the measures do not meet derecognition or modification
requirements.
vii) Definition of default
The Group considers an account to be in default if it is more
than three contractual payments past due, i.e. greater than 61
days, which is a more prudent approach than the rebuttable
presumption in IFRS 9 of 90 days and has been adopted to align with
internal operational procedures. The Group reassesses the status of
loans at each month end on a collective basis. When the arrears
status of an asset improves so that it no longer meets the default
criteria for that portfolio, it is immediately cured and
transitions back from stage 3 within the Group's impairment
model.
viii) Forbearance
Where the borrower indicates to the Group that they are unable
to bring the account up to date, informal, temporary forbearance
measures may be offered. There are no changes to the customer's
contract at any stage. 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 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:
o Assessing whether the credit risk of an instrument has
increased significantly since initial recognition (note 2.1.2).
o Definition of default is considered by the Group to be when an
account is three contractual payments past due (note 1.2.vii).
o 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.
o Application of a management overlay - A judgemental overlay
has been applied to the impairment provision to approximate the
potential short-term impact on the ageing of the loan book (note
2.1.4).
-- Complaints provisions:
o Judgement is involved in determining whether a present
constructive obligation exists and in estimating the probability,
timing and amount of any outflows (note 2.2.1).
-- Going concern:
o 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).
Estimates
Areas which include a degree of estimation uncertainty are:
-- IFRS 9 - measurement of ECLs:
o Adopting a collective basis for measurement in calculation of
ECLs in IFRS 9 calculations (note 2.1.1).
o Probability of default ("PD"), exposure at default ("EAD") and
loss given default ("LGD") (note 2.1.1).
o Forward-looking information incorporated into the measurement
of ECLs (note 2.1.3).
o Incorporating a probability weighted estimate of external
macroeconomic factors into the measurement of ECLs (note
2.1.3).
o Calculation of the management overlay which has been applied
to the impairment provision (note 2.1.4).
-- Complaints provisions:
o Calculation of balance adjustments involve management's best
estimate of Scheme uptake, uphold rate and average redress. The
calculation of these evaluates current and historical data, and
assumptions and expectations of future outcomes (note 2.2.1).
-- Valuation of the investment in subsidiaries held by parent company Amigo Holdings PLC.
-- Carrying amount of current and deferred taxation assets and liabilities
o 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 was 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 factor that is likely to impact credit losses as the
rate of unemployment and the rate of inflation.
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 (see note 2.1.3).
2.1.2 Assessment of significant increase in credit risk
(SICR)
To determine whether there has been a significant increase in
credit risk the following two step approach has been taken:
1) The primary indicator of whether a significant increase in
credit risk has occurred for an asset is determined by considering
the presence of certain payment status flags on a customers'
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 a significant increase in credit risk assessments.
The Group reassesses the flag status of all loans at each month
end and remeasures the proportion of the book which has
demonstrated a significant increase in credit risk based on the
latest payment flag data. An account transitions from stage 2 to
stage 1 immediately when a payment flag is removed from the
account. Each quarter a flag governance meeting is held, to review
operational changes which may impact the use of operational flags
in the assessment of a significant increase in credit risk.
2.1.3 Forward-looking information
The Group assesses the impact of forward-looking information on
its measurement of ECLs. The Group has analysed the effect of a
range of economic factors and identified the most significant
macroeconomic factor that is likely to impact credit losses as the
rate of unemployment.
The Group has modelled 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 rise further 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 a prudent approach and 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 GBP37.6m if each of the three scenarios are given
a probability weighting of 100%.
Impact
---------------- ------
Base -2.1m
Downside +0.5m
Severe downside +1.1m
---------------- ------
The scenarios above demonstrate a range of ECL provisions from
GBP35.5m to GBP38.7m.
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.
The key assumptions in these calculations which involve
significant, complex management judgement and estimation relate
primarily to the projected costs of potential future complaints,
where it is considered more likely than not that customer redress
will be appropriate. These key assumptions are:
-- future estimated volumes - estimates of future volumes of complaints;
-- uphold rate (%) - the expected average uphold rate applied to
future estimated volumes where it is considered more likely than
not that customer redress will be appropriate;
-- average balance adjustments (GBP) - the estimated balance
adjustments for future upheld complaints included in the provision;
and
-- portion of complaints on gross loan book (%) - whether these
are customers on the existing loan book remediated via balance
adjustment or whether redress is achieved via the Scheme cash
pot.
The calculation of the complaints provision as at 30 June 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 GBP97m post-Scheme. A further contribution of
GBP15m 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 June 2022, the Group has recognised a complaints
provision totalling GBP176.9m in respect of customer complaints
redress and associated costs. Utilisation in the period totalled
GBP2.9m. The liability has decreased by GBP161.1m compared to Q1 in
the prior year. GBP128.8m 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 GBP36.7m. 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
--------------------------------- ------------------- ----------- -------------
Future complaint volumes 1 115,321 +/- 5% +6.6 -6.6
Average uphold rate per customer
2 65% +/- 20 ppts +15.6 -15.6
Average balance adjustment
per valid complaint 3 GBP2,600 +/- GBP500 +8.8 -8.8
Portion of complaints on gross
loan book 4 21% +/- 10 ppts +21.3 -21.3
--------------------------------- ------------------- ----------- ------ -----
1. Future estimated volumes. Sensitivity analysis shows the
impact of a 5% change in the number of complaints estimated in the
provision.
2. Uphold rate. Sensitivity analysis shows the impact of a 20
percentage point change in the applied uphold rate on both the
current and forward-looking elements of the provision.
3. Average balance adjustment. Sensitivity analysis shows the
impact of a GBP500 change in average balance adjustment on the
provision. In prior years, average redress was used as a key
assumption, but average balance adjustment is now considered more
appropriate with the provision being calculated on a Scheme
basis.
4. Portion of complaints on gross loan book. Sensitivity
analysis shows the impact of a 10 percentage point change in the
portion of total current and future upheld complaints on the Gross
Loan Book.
The table above shows the increase or decrease in total
provision charge resulting from reasonably possible changes in each
of the key underlying assumptions. The Board considers that this
sensitivity analysis covers the full range of reasonably possible
alternatives assumptions.
It is possible that the eventual outcome may differ materially
from the current estimate and could materially impact the financial
statements as a whole, given the Group's only activity 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 consists of interest income and is derived primarily
from a single segment in the UK, but also from Irish entity Amigo
Loans Ireland Limited. The Group has two operating segments based
on the geographical location of its operations, being the UK and
Ireland. IFRS 8 requires segment reporting to be based on the
internal financial information reported to the chief operating
decision maker. The Group's chief operating decision maker is
deemed to be the Group's Executive Committee ("ExCo") whose primary
responsibility is to support the Chief Executive Officer ("CEO") in
managing the Group's day-to-day operations and analyse trading
performance. The table below presents the Group's performance on a
segmental basis for the 3 months to 30 June 2022 in line with
reporting to the chief operating decision maker:
3 months
3 months 3 months ended
ended ended 30 Jun
30 Jun 22 30 Jun 22 22
GBPm GBPm GBPm
3 months ended 30 June 2022 UK Ireland Total
------------------------------------------------------ ------------- ---------- --------
Revenue 10.4 - 10.4
Interest payable and funding facility fees (0.9) - (0.9)
Interest receivable 0.1 - 0.1
Impairment of amounts receivable from customers (0.3) - (0.3)
Administrative and other operating expenses (6.9) (0.2) (7.1)
Profit/(loss) and total comprehensive income/(expense)
attributable to equity shareholders of the Group 2.4 (0.2) 2.2
----------------------------------------------------------- -------- ---------- --------
30 Jun
22 30 Jun 22 30 Jun 22
GBPm GBPm GBPm
UK Ireland Total
-------------------------- ------ --------- ---------
Gross loan book(1) 142.8 0.7 143.5
-------------------------- ------ --------- ---------
Less impairment provision (37.4) (0.2) (37.6)
-------------------------- ------ --------- ---------
Net loan book 105.4 0.5 105.9
-------------------------- ------ --------- ---------
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 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.
3 months 3 months 3 months
ended ended ended
30 Jun 30 Jun 30 Jun
21 21 21
GBPm GBPm GBPm
3 months ended 30 June 2021 UK Ireland Total
--------------------------------------------------- -------- -------- --------
Revenue 32.2 0.3 32.5
Interest payable and funding facility fees (5.1) - (5.1)
Impairment of amounts receivable from customers (7.7) 0.1 (7.6)
--------------------------------------------------- -------- -------- --------
Administrative and other operating expenses (6.4) (0.1) (6.5)
Complaints credit 1.7 - 1.7
--------------------------------------------------- -------- -------- --------
Total operating expenses (4.7) (0.1) (4.8)
--------------------------------------------------- -------- -------- --------
Profit before tax 14.7 0.3 15.0
Tax credit on profit(1) 1.0 - 1.0
--------------------------------------------------- -------- -------- --------
Profit and total comprehensive income attributable
to equity shareholders of the Group 15.7 0.3 16.0
--------------------------------------------------- -------- -------- --------
30 Jun 30 Jun 30 Jun
21 21 21
GBPm GBPm GBPm
UK Ireland Total
-------------------------- ------ ------- ------
Gross loan book(2) 347.8 3.1 350.9
-------------------------- ------ ------- ------
Less impairment provision (61.4) (0.8) (62.2)
-------------------------- ------ ------- ------
Net loan book (3) 286.4 2.3 288.7
-------------------------- ------ ------- ------
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
3 months Year to
3 months ended ended
31 Mar
30 Jun 22 30 Jun 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
-------------------------------------- -------------- --------- -------
Senior secured notes interest payable 0.9 4.5 14.9
Funding facility fees - 0.1 1.0
Securitisation interest payable - 0.2 0.2
Other finance costs - 0.3 0.6
0.9 5.1 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 Group stopped granting new payment holidays in March 2021;
hence no additional modification losses have been recognised in the
period. All payment holidays ended by 31 July 2021.
The carrying value of historical modification losses at the
period end was GBP4.3m (Q1 2021: GBP11.1m).
3 months 3 months Year to
ended ended
31 Mar
30 Jun 22 30 Jun 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
---------------------------------------------- --------- --------- -------
Modification release recognised in revenue 0.1 - 1.2
Modification release recognised in impairment 0.2 - 4.1
---------------------------------------------- --------- --------- -------
Total modification release 0.3 - 5.3
---------------------------------------------- --------- --------- -------
6. Taxation
The applicable corporation tax rate for the period to 30 June
2022 was 19.0% (Q1 2021: 19.0%) and the effective tax rate is 0.0%
(Q1 2021: negative 6.7%).
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 schemes' 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 Jun 30 Jun 31 Mar
22 21 22
Unaudited Unaudited Audited
Pence Pence Pence
------------------------------------------------------- --------- --------- -------
Basic earnings per share 0.5 3.4 35.7
Diluted earnings) per share 0.5 3.4 35.7
Basic adjusted earnings per share (basic and diluted)1 0.5 3.2 2.8
------------------------------------------------------- --------- --------- -------
1. Basic adjusted earnings per share and earnings for basic
adjusted profit/(loss) 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 Jun 30 Jun 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
---------------------------------------------- --------- --------- -------
Profit for basic EPS 2.2 16.0 169.6
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)
Less tax impact - - (0.1)
Profit for basic adjusted EPS 1 2.2 15.2 13.3
---------------------------------------------- --------- --------- -------
Basic weighted average number of shares (m) 475.3 475.3 475.3
---------------------------------------------- --------- --------- -------
Dilutive potential ordinary shares (m) - 2.0(2) -
---------------------------------------------- --------- --------- -------
Diluted weighted average number of shares (m) 475.3 477.3 475.3
---------------------------------------------- --------- --------- -------
1. Basic adjusted earnings per share and earnings for basic
adjusted 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 June
2021 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 Jun 30 Jun 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
--------------------------------------------- --------- --------- -------
Stage 1 98.0 258.6 128.8
Stage 2 25.6 54.7 32.4
Stage 3 19.9 37.6 24.2
--------------------------------------------- --------- --------- -------
Gross loan book 143.5 350.9 185.4
Deferred broker costs1 - stage 1 1.0 5.9 1.5
Deferred broker costs1 - stage 2 0.3 1.2 0.4
Deferred broker costs1 - stage 3 0.2 0.8 0.3
--------------------------------------------- --------- --------- -------
Loan book inclusive of deferred broker costs 145.0 358.8 187.6
Provision (37.6) (62.2) (47.4)
--------------------------------------------- --------- --------- -------
Customer loans and receivables 107.4 296.6 140.2
--------------------------------------------- --------- --------- -------
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 June 2022, GBP66.2m 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 (Q1 2021: GBP153.3m).
Ageing of gross loan book (excluding deferred brokers' fees and
provision) by days overdue:
30 Jun 30 Jun 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
---------------- --------- --------- -------
Current 99.2 261.5 132.1
1-30 days 18.1 40.2 21.1
31-60 days 6.4 13.3 8.0
>60 days 19.8 35.9 24.2
---------------- --------- --------- -------
Gross loan book 143.5 350.9 185.4
---------------- --------- --------- -------
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 Jun 30 Jun 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
------------------------------- --------- --------- -------
Due within one year 86.7 193.9 113.0
Due in more than one year 19.2 94.8 25.0
------------------------------- --------- --------- -------
Net loan book 105.9 288.7 138.0
Deferred broker costs 1
Due within one year 1.2 5.0 1.8
Due in more than one year 0.3 2.9 0.4
------------------------------- --------- --------- -------
Customer loans and receivables 107.4 296.6 140.2
------------------------------- --------- --------- -------
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. Other receivables
30 Jun 30 Jun 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
------------------------------- --------- --------- -------
Current
Other receivables 0.6 2.0 0.6
Prepayments and accrued income 1.6 1.2 1.0
2.2 3.2 1.6
------------------------------- --------- --------- -------
10. Trade and other payables
30 Jun 30 Jun 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
------------------------------------- --------- --------- -------
Current
Accrued senior secured note interest 1.7 8.2 0.8
Trade payables 0.3 0.4 0.4
Taxation and social security - 0.6 0.4
Other creditors 1.0 1.2 1.1
Accruals and deferred income 3.4 8.4 4.0
6.4 18.8 6.7
------------------------------------- --------- --------- -------
11. Bank and other borrowings
30 Jun 30 Jun 31 Mar
22 21 22
Unaudited Unaudited Audited
GBPm GBPm GBPm
----------------------------------------- --------- --------- -------
Current and non-current liabilities
Amounts falling due in less than 1 year
Securitisation facility - 25.1 -
Amounts falling due in less than 2 years
Senior secured notes 49.8 - 49.7
Amounts falling due 2-3 years
Senior secured notes - 232.3 -
49.8 257.4 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 expires in January 2024 (Q1
2021: GBP232.3m). The senior secured notes are presented in the
financial statements net of unamortised fees. As at 30 June 2022,
the gross principal amount outstanding was GBP50m. On 20 January
2017, GBP275m of notes were issued at an interest rate of 7.625%.
The high yield bond was tapped for GBP50m in May 2017 and again for
GBP75m in September 2017 at a premium of 3.8%. GBP350.0m of notes
have been repurchased in the open market 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.
-- During the year ended 31 March 2022 the Group fully repaid
the securitisation facility, although at the period end the
structure remained in place. With effect from 24 September 2021,
all rights, obligations and securitisation liabilities of the Lead
Arranger, Facility Agent and Senior Noteholder, as defined in the
securitisation facility documents, were taken over and assumed by
Amigo.
12. 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 Jun 22 30 Jun 21 31 Mar 2022
Unaudited Unaudited Audited
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 1.0 345.6 344.6 1.0 345.6
Provisions
(released)
during the
period - - - (1.7) - (1.7) (156.6) - (156.6)
Utilised
during
the period (2.9) - (2.9) (4.9) (1.0) (5.9) (8.2) (1.0) (9.2)
-------------- ---------- ------------- ----- ---------- ------------- ----- ---------- ------------- -------
Closing
provision 176.9 - 176.9 338.0 - 338.0 179.8 - 179.8
-------------- ---------- ------------- ----- ---------- ------------- ----- ---------- ------------- -------
Non-current 97.0 - 97.0 - - - 97.0 - 97.0
Current 79.9 - 79.9 338.0 - 338.0 82.8 - 82.8
-------------- ---------- ------------- ----- ---------- ------------- ----- ---------- ------------- -------
176.9 - 176.9 338.0 - 338.0 179.8 - 179.8
-------------- ---------- ------------- ----- ---------- ------------- ----- ---------- ------------- -------
Customer complaints redress
As at 30 June 2022, the Group recognised a complaints provision
totalling GBP176.9m (Q1 2021:GBP338.0m) in respect of customer
complaints redress and associated costs. Utilisation in the period
totalled GBP2.9m. The liability has decreased by GBP161.1m compared
to prior year. GBP128.8m 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 GBP36.7m. 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.
Restructuring provision
As at 31 March 2021, the Group recognised a restructuring
provision totalling GBP1.0m in respect of the expected cost of
staff redundancies. This provision was fully utilised by 30 June
2021 and the outstanding balance at 30 June 2022 is GBPnil.
Contingent liability
FCA investigation
On 29 May 2020 the FCA commenced an investigation into whether
the Group's creditworthiness assessment process, and the governance
and oversight of this, was compliant with regulatory requirements.
The FCA investigation will cover lending for the period from 1
November 2018 to date. There is significant uncertainty around the
impact of this on the business, the assumptions underlying the
complaints provision and any future regulatory intervention.
The Group was informed on 15 March 2021 that the FCA has decided
to extend the scope of its current investigation so that it can
investigate whether the Group appropriately handled complaints
after 20 May 2020 and whether the Group deployed sufficient
resource to address complaints in accordance with the Voluntary
Requirement ("VReq") announced on 27 May 2020 and the subsequent
variation announced on 3 July 2020.
The FCA investigation will consider whether those complaints
have been handled appropriately and whether customers have been
treated fairly in accordance with Principle 6 of the FCA's
Principles for Business. The Group will continue to co-operate
fully with the FCA.
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 in the next twelve months to enter into a capital raise for
the purposes of recapitalising the business for future lending. 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.
13. 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.
14. Share-based payments
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 Group recognised an expense of GBP0.2m in the three
months to 30 June 2022 (Q1 2021: GBP0.2m).
15. Related party transactions
The Group had no related party transactions during the three
month period to 30 June 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.
16. Post balance sheet events
Post period end, the Board appointed Peel Hunt LLP as financial
adviser and sole corporate broker and Ashcombe Advisers LLP as
financial adviser. Both will be instrumental in assisting with the
required fund raising in the coming months.
This financial report provides alternative performance measures
(APMs) which are not defined or specified under the requirements of
International Financial Reporting Standards. The Board believes
these APMs provide readers with important additional information on
the Group. To support this, details of the APMs used, how they are
calculated and why they are used are set out below.
Key performance indicators
Other financial data
3 months 3 months
ended ended Year to
31 Mar
Figures in GBPm, unless otherwise stated 30 Jun 22 30 Jun 21 22
----------------------------------------------- --------- --------- --------
Average gross loan book 164.5 386.9 304.2
Gross loan book 143.5 350.9 185.4
Percentage of book <31 days past due 81.7% 86.0% 82.6%
Net loan book 105.9 288.7 138.0
Net unrestricted cash/(debt)(1) 52.6 (56.2) 83.9
Net (unrestricted cash)/debt over gross loan
book(1) (36.7)% 16.0% (45.3)%
Net (unrestricted cash)/debt over equity(1) (1.0)x (0.5)x (1.8)x
Revenue yield 25.3% 33.6% 29.4%
Risk adjusted revenue 10.1 24.9 52.5
Risk adjusted margin 24.6% 25.7% 17.3%
Net interest margin 13.6% 19.0% 15.9%
Adjusted net interest margin 23.3% 28.3% 24.0%
Cost of funds percentage 2.2% 5.3% 5.5%
Impairment:revenue ratio 2.9% 23.4% 41.3%
Impairment charge as a percentage of loan book 0.8% 8.7% 20.0%
Cost:income ratio 68.3% 14.8% (147.5)%
Operating cost:income ratio (ex. complaints) 68.3% 20.0% 27.5%
Adjusted profit after tax 2.2 15.2 13.3
Return on assets 3.1% 12.3% 41.4%
Adjusted return on average assets 3.1% 11.6% 3.2%
Return on equity 17.9% (56.5)% 460.9%
Adjusted return on average equity 17.9% (53.7)% 36.1%
----------------------------------------------- --------- --------- --------
Amendments to alterative performance measures
(1) Net unrestricted cash/(debt), net (unrestricted cash)/debt
over gross loan book and net (unrestricted cash)/debt over equity -
the definitions of these alternative performance measures (APMs)
have been amended from net cash/(debt), net (cash)/debt over gross
loan book and net (cash)/debt over equity to highlight that
restricted cash is excluded from these definitions.
1. Average gross loan book
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
--------------------------- ------ ------ ------
Opening gross loan book 185.4 422.9 422.9
Closing gross loan book 143.5 350.9 185.4
--------------------------- ------ ------ ------
Average gross loan book(1) 164.5 386.9 304.2
--------------------------- ------ ------ ------
(1) Gross loan book represents total outstanding loans and
excludes deferred broker costs.
2. The percentage of balances up to date or less than 31 days
overdue is presented as this is useful in reviewing the quality of
the loan book.
30 Jun 30 Jun 31 Mar
22 21 22
Ageing of gross loan book by days overdue: GBPm GBPm GBPm
------------------------------------------- ------ ------ ------
Current 99.2 261.5 132.1
1-30 days 18.1 40.2 21.1
31-60 days 6.4 13.3 8.0
>61 days 19.8 35.9 24.2
------------------------------------------- ------ ------ ------
Gross loan book 143.5 350.9 185.4
------------------------------------------- ------ ------ ------
Percentage of book <31 days past due 81.7% 86.0% 82.6%
------------------------------------------- ------ ------ ------
3. "Net loan book" is a subset of customer loans and receivables
and represents the interest yielding loan book when the IFRS 9
impairment provision is accounted for, comprised of:
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------------------ ------- ------- ------
Gross loan book1 (see APM number 2) 143.5 350.9 185.4
Provision2 (37.6) (62.2) (47.4)
------------------------------------ ------- ------- ------
Net loan book 3 105.9 288.7 138.0
------------------------------------ ------- ------- ------
(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.
4. "Net unrestricted cash/(debt)" is comprised of:
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
----------------------------- ------ ------- ------
Borrowings (49.8) (257.4) (49.7)
Cash and cash equivalents 102.4 201.2 133.6
----------------------------- ------ ------- ------
Net unrestricted cash/(debt) 52.6 (56.2) 83.9
----------------------------- ------ ------- ------
This is deemed useful to show total cash/(debt) if unrestricted
cash available at the period end was used to repay borrowings.
5. The Group defines "loan to value" ("LTV") as net
(unrestricted cash)/debt divided by gross loan book. This measure
shows if the borrowings' year-on-year movement is in line with loan
book growth.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
-------------------------------------------------- ------- ------ -------
Net unrestricted cash/(debt) (see APM number 4) 52.6 (56.2) 83.9
Gross loan book (see APM number 2) 143.5 350.9 185.4
-------------------------------------------------- ------- ------ -------
Net (unrestricted cash)/debt over gross loan book (36.7)% 16.0% (45.3)%
-------------------------------------------------- ------- ------ -------
6. Net (unrestricted cash)/debt over equity
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------------------------------ ------ ------- ------
Shareholder equity 50.2 (105.2) 47.9
Net unrestricted cash/(debt) (see APM number 4) 52.6 (56.2) 83.9
------------------------------------------------ ------ ------- ------
Net (unrestricted cash)/debt over equity (1.0)x (0.5)x (1.8)x
------------------------------------------------ ------ ------- ------
This is one of the Group's metrics to assess gearing.
7. The Group defines "revenue yield" as annualised revenue over
the average of the opening and closing gross loan book for the
period.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------------------- ------ ------ ------
Revenue 10.4 32.5 89.5
Opening loan book 185.4 422.9 422.9
Closing loan book 143.5 350.9 185.4
Average loan book (see APM number 1) 164.5 386.9 304.2
------------------------------------- ------ ------ ------
Revenue yield 25.3% 33.6% 29.4%
------------------------------------- ------ ------ ------
This is deemed useful in assessing the gross return on the
Group's loan book.
8. The Group defines "risk adjusted revenue" as revenue less
impairment charge.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------------------------------ ------ ------ ------
Revenue 10.4 32.5 89.5
Impairment of amounts receivable from customers (0.3) (7.6) (37.0)
------------------------------------------------ ------ ------ ------
Risk adjusted revenue 10.1 24.9 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.
9. The Group defines "risk adjusted margin" as risk adjusted
revenue divided by the average of gross loan book.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------------------------- ------ ------ ------
Risk adjusted revenue (see APM number 8) 10.1 24.9 52.5
Average gross loan book (see APM number 1) 164.5 386.9 304.2
------------------------------------------- ------ ------ ------
Risk adjusted margin 24.6% 25.7% 17.3%
------------------------------------------- ------ ------ ------
This measure is used internally to review an adjusted return on
the Group's loan book.
10. The Group defines "net interest margin" as annualised net
interest income divided by average interest-bearing assets (being
both gross loan book and cash) at the beginning of the period and
end of the period.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
-------------------------------------------------- ------ ------ ------
Revenue 10.4 32.5 89.5
Interest payable, receivable and funding facility
fees (0.8) (5.1) (16.6)
-------------------------------------------------- ------ ------ ------
Net interest income 9.6 27.4 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) 245.9 552.1 319.0
Average interest-bearing assets (customer loans
and receivables plus unrestricted cash) 282.5 576.5 459.9
-------------------------------------------------- ------ ------ ------
Net interest margin 13.6% 19.0% 15.9%
-------------------------------------------------- ------ ------ ------
Adjusted net interest margin, being net interest income divided
by average gross loan book, is also presented below:
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------------------------- ------ ------ ------
Net interest income 9.6 27.4 72.9
Average gross loan book (see APM number 1) 164.5 386.9 304.2
------------------------------------------- ------ ------ ------
Adjusted net interest margin 23.3% 28.3% 24.0%
------------------------------------------- ------ ------ ------
11. The Group defines "cost of funds" as annualised interest
payable divided by the average of gross loan book at the beginning
and end of the period.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------------------------- ------ ------ ------
Cost of funds 0.9 5.1 16.7
Average gross loan book (see APM number 1) 164.5 386.9 304.2
------------------------------------------- ------ ------ ------
Cost of funds percentage 2.2% 5.3% 5.5%
------------------------------------------- ------ ------ ------
This measure is used by the Group to monitor the cost of funds
and impact of diversification of funding.
12. Impairment charge as a percentage of revenue
"impairment:revenue ratio" represents the Group's impairment charge
for the period divided by revenue for the period.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------------------------------ ------ ------ ------
Revenue 10.4 32.5 89.5
Impairment of amounts receivable from customers 0.3 7.6 37.0
------------------------------------------------ ------ ------ ------
Impairment charge as a percentage of revenue 2.9% 23.4% 41.3%
------------------------------------------------ ------ ------ ------
This is a key measure for the Group in monitoring risk within
the business.
13 . "Impairment charge as a percentage of loan book" represents
the Group's impairment charge for the period divided by closing
gross loan book.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------------------------------ ------ ------ ------
Impairment of amounts receivable from customers 0.3 7.6 37.0
Closing gross loan book (see APM number 1) 143.5 350.9 185.4
------------------------------------------------ ------ ------ ------
Impairment charge as a percentage of loan book 0.8% 8.7% 20.0%
------------------------------------------------ ------ ------ ------
This allows review of the impairment charge relative to the size
of the Group's gross loan book.
14. The Group defines "cost:income ratio" as operating expenses
excluding strategic review, formal sale process and related
financing costs divided by revenue.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------- ------ ------ --------
Revenue 10.4 32.5 89.5
Total operating expenses 7.1 4.8 (132.0)
------------------------- ------ ------ --------
Cost:income ratio 68.3% 14.8% (147.5)%
------------------------- ------ ------ --------
This measure allows review of cost management.
15. Operating cost:income ratio , defined as the cost:income
ratio excluding the complaints provision, is:
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
-------------------------------------------- ------ ------ ------
Revenue 10.4 32.5 89.5
Administrative and other operating expenses 7.1 6.5 24.6
-------------------------------------------- ------ ------ ------
Operating cost:income ratio 68.3% 20.0% 27.5%
-------------------------------------------- ------ ------ ------
16. The following table sets forth a reconciliation of profit
after tax to "adjusted profit after tax" for the 3 months to 30
June 2022, 2021 and year to 31 March 2022.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
----------------------------------- ------ ------ -------
Reported profit after tax 2.2 16.0 169.6
Write back of complaints provision - - (156.6)
Senior secured note buyback - - 0.7
Securitisation fees - - 0.5
Tax provision release - (0.8) (0.8)
Less tax impact - - (0.1)
----------------------------------- ------ ------ -------
Adjusted profit after tax 2.2 15.2 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 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.
17. "Return on assets" ("ROA") refers to annualised profit after
tax as a percentage of average assets.
30 Jun 30 Jun 31 Mar
22 21 22
-------------------------------------------------- ------ ------ ------
Return on assets GBPm GBPm GBPm
-------------------------------------------------- ------ ------ ------
Profit after tax 2.2 16.0 169.6
Customer loans and receivables at period and year
end 107.4 296.6 140.2
Other receivables and current assets at period
and year end 73.2 10.5 9.9
Cash and cash equivalents at period and year end 102.4 201.2 133.6
-------------------------------------------------- ------ ------ ------
Total 283.0 508.3 283.7
-------------------------------------------------- ------ ------ ------
Average assets 283.3 522.4 410.1
-------------------------------------------------- ------ ------ ------
Return on assets 3.1% 12.3% 41.4%
-------------------------------------------------- ------ ------ ------
18. "Adjusted return on assets" refers to annualised adjusted
profit after tax as a percentage of average assets
30 Jun 30 Jun 31 Mar
22 21 22
--------------------------------------------------- ------ ------ ------
Adjusted return on assets GBPm GBPm GBPm
--------------------------------------------------- ------ ------ ------
Adjusted profit after tax (see APM number 16) 2.2 15.2 13.3
Customer loans and receivables at period and year
end 107.4 296.6 140.2
Other receivables and current assets at period and
year end 73.2 10.5 9.9
Cash and cash equivalents at period and year end 102.4 201.2 133.6
--------------------------------------------------- ------ ------ ------
Total 283.0 508.3 283.7
--------------------------------------------------- ------ ------ ------
Average assets 283.3 522.4 410.1
--------------------------------------------------- ------ ------ ------
Adjusted return on assets 3.1% 11.6% 3.2%
--------------------------------------------------- ------ ------ ------
19. "Return on equity" ("ROE") is calculated as annualised
profit after tax divided by the average of equity at the beginning
of the period and the end of the period.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
------------------------- ------ ------- ------
Profit after tax 2.2 16.0 169.6
Shareholder equity 50.2 (105.2) 47.9
Average equity 49.1 (113.3) (36.8)
------------------------- ------ ------- ------
Return on average equity 17.9% (56.5)% 460.9%
------------------------- ------ ------- ------
20. "Adjusted return on equity" is calculated as annualised
adjusted profit after tax divided by the average of equity at the
beginning of the period and the end of the period.
30 Jun 30 Jun 31 Mar
22 21 22
GBPm GBPm GBPm
---------------------------------------------- ------ ------- ------
Adjusted profit after tax (see APM number 16) 2.2 15.2 13.3
Shareholder equity 50.2 (105.2) 47.9
Average equity 49.1 (113.3) (36.8)
---------------------------------------------- ------ ------- ------
Adjusted return on average equity 17.9% (53.7)% 36.1%
---------------------------------------------- ------ ------- ------
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