TIDMAMGO
RNS Number : 3390H
Amigo Holdings PLC
27 July 2023
27 July 2023
Amigo Holdings PLC
Financial Results for the year ended 31 March 2023
Amigo Holdings PLC, ("Amigo" or the "Company"), a provider of
mid-cost credit in the UK that is currently progressing through an
orderly solvent wind down of its business, announces results for
the year ended 31 March 2023.
Danny Malone, Chief Executive Officer commented:
"These results come at a very sad time for Amigo. Despite the
hard work and dedication of all of Amigo's employees, economic and
market conditions made it impossible for the company to raise the
capital required to continue lending. Our priority now is to
progress the orderly wind down of the business, ensuring we are
able to maximise payments to redress creditors, whilst continuing
to provide the best level of service possible to our customers and
support for our staff. I am grateful to our employees who are
giving their all at a very difficult time.
"I regret that market conditions caused us to be unable to move
forward with the new Amigo business. As we announced in June, while
we have been engaging with potential providers of investment to
allow the business to restart, the Board of Amigo considers the
likelihood of success to be very low.
"I have been proud to both serve as Amigo's CEO and of the many
hurdles we overcame despite the final outcome. Whilst there is
still work ahead as we complete the wind down, I would like to take
this opportunity to thank all our people for their continuing
dedication and, as they prepare to leave the business in the months
ahead, wish them well for the future."
Operational Headlines
-- On 23 March 2023 Amigo's Scheme of Arrangement ("Scheme"),
sanctioned by the High Court in May 2022, switched to the Fallback
Solution, which is an orderly wind down of the Amigo Loans Ltd
business. All new lending ceased with immediate effect. As a
result, the Board has determined that the financial statements will
no longer be prepared on a going concern basis (see note 1 of the
financial statements).
-- This followed the Board concluding that it would not be able
to raise sufficient commitments for funds to meet both the Scheme
requirement of an additional GBP15m redress payment and to provide
working capital to enable the business to continue as a going
concern by 26 May 2023.
-- The existing loan books, including both the legacy loans and
new RewardRate loans, will continue to be collected or will be
sold. This is expected to be substantively completed by early
2024.
-- The FCA Enforcement action concluded on 14 February 2023 with
a fine of GBP72.9m reduced to nil by the FCA in order to not
threaten Amigo's ability to meet its commitments to redress
creditors identified under the Scheme.
-- The priorities now are to ensure the orderly wind down of the
business as outlined under the Fallback Solution, and the
realisation of assets to maximise returns for scheme creditors,
whilst looking after the wellbeing of our employees. A number of
roles will be required as we continue to service our existing
customers and manage the wind down. Consultation for the redundancy
of all roles is ongoing.
-- The wind down will leave no value for shareholders. While we
have continued to engage with potential providers of finance to
allow the business to restart, the Board considers the likelihood
of success to be low.
-- Post period end, in line with the wind down strategy, Chief
Executive ("CEO") Danny Malone resigned from his role as CEO and
Director, subject to a six-month notice period, ending 15 November
2023.
Financial headlines
Figures in GBPm, unless otherwise Year ended Year ended Change %
stated 31 March 2023 31 March 2022
Number of customers(1) '000 29.0 73.0 (60.3)
Net loan book(2) 45.4 138.0 (67.1)
Revenue 19.3 89.5 (78.4)
Impairment: revenue (17.6)% 41.3% NM
Complaints provision (balance
sheet) (195.9) (179.8) 8.9
Complaints charge (income statement) (19.1) 156.6 (112.2)
(Loss)/profit before tax (34.7) 167.9 (120.7)
(Loss)/profit after tax(3) (34.8) 169.6 (120.5)
Adjusted (loss)/profit after
tax(4) (9.3) 13.3 (169.6)
Basic EPS Pence (7.3) 35.7 (120.4)
EPS (Basic, adjusted)(5) Pence (2.0) 2.8 (171.4)
Net unrestricted cash(6) 62.4 83.9 (25.6)
*NM = not meaningful
-- Net loan book reduction of 67.1% to GBP45.4m (FY 2022:
GBP138.0m) and revenue reduction of 78.4% to GBP19.3m (FY 2022:
GBP89.5m), due to the ongoing run-off of the legacy loan book and
very limited new lending during the period. All new lending has now
stopped in line with the Fallback Solution requirements.
-- Complaints provision year-on-year increase of 8.9% to
GBP195.9m at 31 March 2023 (FY 2022: GBP179.8m). This reflects the
higher final number of claims received and higher expected uphold
rate which has been revised in line with observed third-party
decisioning. The increase in the provision substantially accounts
for the income statement charge of GBP19.1m.
-- Year-on-year costs increase of GBP11.6m owing primarily to
RewardRate development and restructuring costs.
-- The reduction in revenue as the book runs off, alongside the
increase in complaints provision, led to a reported loss before tax
of GBP34.7m, (FY 2022: profit of GBP167.9m). Loss after tax was
GBP34.8m (FY 2022: profit of GBP169.6m). The significant profit in
the prior year related to the release of a substantial proportion
of the complaints provision, following the sanctioning of the
Scheme.
-- Overall, collections have remained robust despite the
increased cost of living and the continued, but expected, rise in
delinquency as the book runs-off. This has been driven by continued
strong post-charge-off recoveries.
-- The remaining GBP50m of senior secured notes was repaid in full, at par, in March 2023.
-- Net unrestricted cash of GBP62.4m at 31 March 2023 (FY 2022:
net unrestricted cash of GBP83.9m) driven by the continued
collection of the back book and limited originations in the period.
The reduction from the prior year reflects the payment of the
GBP97m Scheme contribution, GBP51m of which has been repaid to
Amigo post year-end as part of the Fallback Solution. All net cash
is committed to the Scheme, other creditors and expenses, with no
residual value attributable to shareholders.
Notes to summary financial table:
(1) Number of customers represents the number of accounts with a
balance greater than zero, exclusive of charged off accounts.
(2) Net loan book represents total outstanding loans less
provision for impairment excluding deferred broker costs.
(3) (Loss)/profit after tax otherwise known as (loss)/profit and
total comprehensive (loss)/income to equity shareholders of the
Group as per the financial statements.
(4) Adjusted (loss)/profit after tax excludes items due to their
exceptional nature including: charge/write-back of complaints
provision, restructuring and onerous contract provision, senior
secured note buyback, securitisation facility fees write off, tax
provision release. 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 (loss)/earnings per share is a non-IFRS
measure and the calculation is shown in note 12 of the financial
statements. Adjustments to (loss)/profit are described in footnote
4 above.
(6) Net unrestricted cash is defined as unrestricted cash and
cash equivalents less borrowings and unamortised fees.
Detailed definitions and calculations of these alternative
performance measures (APMs) can be found in the APM section of
these condensed financial statements
Analyst, investor and bondholder conference call and webcast
Amigo will be hosting a live webcast for shareholders today at
1.00pm (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 4587 0498; Access code: 687268. A replay will be
available on Amigo's website after the event. The presentation pack
will be available at:
https://www.amigoplc.com/investors/results-centre .
Contacts:
Amigo
Kerry Penfold, Chief Financial Officer
Kate Patrick, Investor Relations Director investors@amigo.me
Lansons amigoloans@lansons.com
Tony Langham 07979 692287
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. On 23 March 2023
Amigo announced that it has ceased offering new loans, with
immediate effect, and would start the orderly solvent wind down of
the business. Amigo provided guarantor loans in the UK from 2005 to
2020 and unsecured loans under the RewardRate brand from October
2022 to March 2023, offering access to mid -- cost credit to those
who are unable to borrow from traditional lenders due to their
credit histories. Amigo's back book of loans is in the process of
being run off with all net proceeds due to creditors under a Court
approved Scheme of Arrangement. Amigo Loans Ltd and Amigo
Management Services Ltd are authorised and regulated in the UK by
the Financial Conduct Authority
Forward looking statements
This report contains certain forward-looking statements. These
include statements regarding Amigo Holdings PLC's intentions,
beliefs or current expectations and those of our officers,
Directors and employees concerning, amongst other things, our
financial condition, results of operations, liquidity, prospects,
growth, strategies, and the business we operate. These statements
and forecasts involve risk, uncertainty, and assumptions because
they relate to events and depend upon circumstances that will or
may occur in the future. There are a number of factors that could
cause actual results or developments to differ materially from
those expressed or implied by these forward-looking statements.
These forward-looking statements are made only as at the date of
this announcement. Nothing in this announcement should be construed
as a profit forecast. Except as required by law, Amigo Holdings PLC
has no obligation to update the forward-looking statements or to
correct any inaccuracies therein.
Chair Statement
It is with great sadness that I introduce this year's annual
financial results for the year ended 31 March 2023. The past twelve
months have been an extraordinarily challenging period. We made
significant progress during the first nine months, firstly
achieving sanction for our Scheme of Arrangement ("Scheme") and
then securing permission from our regulator, the Financial Conduct
Authority ("FCA"), to return to lending with the pilot launch of
our new RewardRate products. Unfortunately, with markets becoming
some of the most challenging they have been in years, and despite
securing offers for the required debt funding, we were unable to
raise sufficient interest to underwrite the required equity funding
to pay a further GBP15m contribution to Scheme creditors and
continue as a going concern. As a result, on 23 March 2023, the
Board announced that it had taken the difficult decision to switch
the Scheme from its Preferred Solution to the Fallback Solution,
which requires Amigo to wind down its Amigo Loans Ltd business. As
this is the only revenue-generating business within the Group, it
is envisaged that the whole Group will be liquidated. The Board is
deeply sorry for the impact this will have on Scheme creditors (who
will receive less compensation), our shareholders and
employees.
While an agreement has been signed with a shareholder who
approached management regarding seeking investment in the Company
or its subsidiaries, the Board considers that establishing a new
business and potentially creating value for shareholders in the
longer term has significant execution risks and would require
regulatory approval. We are pursuing all avenues in line with our
Directors' duties, under the Companies Act, to consider the
interests of all stakeholders, including creditors, shareholders
and employees. However, as a result of Amigo's Scheme of
Arrangement switch to the Fallback Solution (the orderly wind down
of the Amigo Loans Ltd business), the Board has determined that the
financial statements will no longer be prepared on a going concern
basis (note 1 of the financial statements). Under the Fallback
Solution, there is no expected residual value for shareholders. The
Board currently intends to ask shareholders to vote at the AGM in
September on proposals to delist the PLC shares unless discussions
with potential investors progress towards a successful
conclusion.
Culture and conduct
In February, the FCA Enforcement proceedings into the Group's
historic lending practices and complaints handling were concluded.
Although Amigo was not required to pay a financial penalty, were it
not for Amigo's financial position, we would have been subject to a
penalty of GBP72.9m. In reaching agreement on the level of the
final penalty, the FCA recognised that any penalty would cause
Amigo serious financial hardship and would threaten the Company's
ability to meet its commitments to its Scheme creditors.
We are cognisant of the time afforded to Amigo by the FCA
throughout the Scheme process and grateful for its recognition of
the significant programme of change Amigo has undertaken to deliver
improvements to the way in which our business operates, including
providing fair outcomes to customers. Amigo has made great strides
in setting a culture where the needs of our customers are
paramount, where we operate in an open and constructive manner, and
monitor and measure conduct and outcomes. As we move through the
wind down process, we remain committed to delivering the highest
standards of corporate oversight with diligence and integrity.
Our people
Our people are our greatest asset and the resilience and
adaptability they have shown has been remarkable. On behalf of the
Board, I would like to thank all our teams, both current and those
that have left the business already, for their unerring commitment
and energy over an immensely difficult period. A key priority for
us is the wellbeing of our teams. We are committed to looking after
those that remain with us as we progress through the wind down and
complete the Scheme, and to preparing our colleagues for their
onward journey as they leave the business.
Board
On 23 September 2022, Gary Jennison stepped down from his role
as Chief Executive Officer ("CEO") and as a Director of the Board.
In order to provide an appropriate transition, Gary remained
employed by Amigo until 31 December 2022. Gary was replaced as CEO
by Danny Malone, then Chief Financial Officer ("CFO"), who in turn
was replaced by Kerry Penfold as CFO. Kerry moved from the internal
position of Head of Finance and has previously held senior
positions at other financial institutions.
On 27 March 2023, Senior Independent Director, Maria
Darby-Walker and Non-Executive Director Jerry Loy, both resigned
from the Board with immediate effect, following the wind down
announcement. In line with the wind down strategy, on 15 May 2023
Danny Malone resigned from his role as CEO and Director, subject to
serving out his six-month notice period to support the orderly wind
down of the business.
I would like to thank each for their considerable contributions,
support, insight and counsel.
Looking ahead
The orderly wind down of the Amigo business is expected to be
substantively completed by the end of the coming financial year.
During the wind down process, we will remain guided by our values
with a strong focus on governance and oversight as we seek to
support all our stakeholders through the process. It is with deep
regret that there will be no residual value from the wind down for
our shareholders. We will seek to maximise returns for Scheme
creditors, support our customers for the remainder of their
relationship with us and safeguard the wellbeing of our
employees.
The economic environment and resultant tightening of credit
availability, coupled with the ongoing cost-of-living crisis, means
there is an increasing need for companies like Amigo to provide
mid-cost financial products to the financially underserved. With
more and more companies in the sector failing, action needs to be
taken to fill this gap and provide the opportunity of financial
mobility to all.
Jonathan Roe
Chair
27 July 2023
Chief Executive's Statement
Performance
Amigo's legacy book continued to unwind over the year, resulting
in a reduction in revenue and number of customers of 78.4% and
60.3% respectively, compared to the prior year. The net loan book,
at 31 March 2023, was GBP45.4m. Collections have remained
resilient, driven in part by recoveries achieved on charged off
accounts. Increases to the expected final number of claims and
uphold rate within the Scheme resulted in an increase in the
complaints provision. The associated uplift in complaints expense
in the income statement, coupled with the reduction in revenue, led
to a reported loss after tax for the period of GBP34.8m, (FY 2022:
profit of GBP169.6m). The significant profit in the prior year
reflected the release of a substantial proportion of the complaints
provision following the sanctioning of the Scheme in May 2022. As a
result of the wind down decision, the Board considers that Amigo is
no longer a going concern (note 1 of the financial statements).
However, we are effecting a solvent wind down of the Amigo business
and at 31 March 2023 the business had unrestricted cash of
GBP62.4m. Current unrestricted cash is over GBP121m. Substantially
all net assets are committed to the Scheme with, regrettably, no
value attributable to shareholders.
Scheme of Arrangement
Amigo's Scheme contained both a Preferred Solution and a
Fallback Solution. The Preferred Solution included an initial
payment of GBP97m to Scheme creditors and was conditional on Amigo
returning to lending by 26 February 2023 and the completion of a
minimum 19:1 capital raise by 26 May 2023, followed by the
contribution of a minimum GBP15m payment to the Scheme fund for
creditor redress. If these conditions were not met, or there was no
expectation that they could be met, the Fallback Solution would be
triggered. The Fallback Solution requires an orderly wind down of
the business. Both scenarios include a mechanism to return all
residual cash from the business to Scheme creditors.
On 13 October 2022, Amigo received permission from the FCA to
return to lending with its new RewardRate products under a pilot
test phase. This fulfilled the first Preferred Solution condition.
Once Amigo returned to lending, we were able to commence marketing
to fulfil the second Preferred Solution condition. The Board fought
hard to complete a successful capital raise with the strong belief
that doing so, and continuing with the Preferred Scheme, would be
in the best interests of not only its shareholders, but also Scheme
creditors, employees and wider stakeholders, including those in
society that do not have access to mainstream credit options. With
the help of our financial advisors, over 200 private and
institutional investors were approached to support a capital raise
of GBP45m, which comprised the Scheme contribution of GBP15m and
GBP30m of working capital, without which we would be unable to
continue as a going concern. This was undertaken against an
increasingly challenging economic backdrop in the UK which, in
turn, negatively impacted capital markets and the outlook for
consumer credit. Despite receiving indicative proposals sufficient
to finance our debt requirements, we were only able to secure
indications of interest for GBP11m in ordinary share capital and
GBP10m in exchangeable notes. On 10 March 2023, having lost the
last material potential investor from the process, the Board
announced that it believed it could not raise the total GBP45m
equity requirement by 26 May 2023. The main concerns investors
cited included: current affordability challenges for UK households,
particularly in our sector of the market; the history of regulatory
intervention in the non-standard credit market and the proposed
implementation of a consumer duty of care; the ability to write the
loan volumes in the business plan given the market backdrop; and
the impact of having to make a significant upfront payment to
Scheme creditors as part of the capital raise.
We have been asked many times why we did not seek investment
from our existing shareholder base. We looked into ways in which we
might be able to ascertain the amount our almost entirely retail
shareholder base would be able and willing to provide. The first
challenge was to identify the c.8,000 shareholders who hold their
share interests predominantly through third-party brokers. Even
with this information, we would have been unable to approach our
investors to solicit investment without producing a prospectus.
Without underwriters for the raise, we were unable to produce a
prospectus with an unqualified working capital statement. We
considered capturing indications of interest through a survey of
our retail investors but had no way to verify responses. A Board
decision to pursue the capital raise, with its associated high
costs, with no certainty of success and based on unverifiable
survey responses could have contravened the Directors' duties to
creditors. The indication that we were given by market experts was
that existing shareholders might contribute approximately GBP5m to
the raise. This was the best estimate that we could attain and was
not sufficient to continue the process. It excludes one shareholder
who had made a significant offer, already factored into the GBP11m
of indicated interest
To enable a continuation of the Preferred Solution, the Board
then explored the potential of pursuing a new scheme, to eliminate
the GBP15m Scheme commitment. A new scheme would be the only way
possible of making amendments to the existing Scheme. Cognisant of
our duties to shareholders and our wider stakeholders, including
Scheme creditors, the Board was resolute that we must explore all
options to find a go-forward solution that would retain some value
for shareholders and where Scheme creditors would benefit to a
greater degree than within the Fallback Solution.
In exploring the possibility of successfully completing a new
scheme, the Board took legal advice from several firms of
solicitors and King's Counsel in its consideration of a number of
factors including the ability to implement a new scheme which
secures creditor approval, is not objected to by the FCA and
receives High Court sanction, all within the required time. It also
considered the additional costs of implementing a new scheme and
the confidence that the capital, albeit a lower quantum, could
still be raised against the challenging ongoing market backdrop and
sentiment around the sector in which Amigo operates. As part of
that, it also took into account that the indications of interest
for GBP11m of equity and GBP10m of exchangeable notes received were
indications only and not firm commitments. In light of the advice
that it received, and the significant potential costs, the Board
reluctantly concluded that pursuing a new Scheme and subsequent
capital raise had such a low chance of success it could not be
considered to be in the best interests of Scheme creditors. We also
considered that while conversion rates under the RewardRate pilot
lending scheme had improved as we progressed through the pilot, the
business model was not yet proven and, although there was strong
potential demand, affordability challenges for UK households meant
most customer applications were rejected. As a result, on 23 March
2023, the Board announced that it had taken the very difficult
decision to switch the Scheme from the Preferred to the Fallback
Solution.
The Fallback Solution requires that the trading subsidiary,
Amigo Loans Ltd ("ALL") stopped lending with immediate effect and
was placed into an orderly wind down, with the Court order
requirement that all surplus assets after the wind down are
transferred to the Scheme creditors. In due course, ALL will be
liquidated. As ALL is the only revenue-generating business within
the Group, it is envisaged that the whole Group will be liquidated,
with significant inter-group debts due to ALL being unpaid. Amigo's
two authorised businesses, ALL and Amigo Management Services Ltd
("AMSL"), will ultimately require their authorised status to be
removed by the FCA. The authorised status must be retained for the
duration of any regulated activities including collections from the
existing loan book.
The wind down of the business, during which the existing loan
book will continue to be collected, will last for approximately
twelve months and, as such, will require a number of existing
roles. All employees were placed at risk of redundancy and
consultation began on 24 March 2023. This is a solvent wind down
and any services provided by our suppliers will be paid for in
accordance with contractual terms.
The Scheme claims process is unaffected. However, as noted
previously, there will be an impact to the total compensation
Scheme creditors will receive in terms of pence in the pound as
they will not receive a share of the minimum GBP15m Scheme
contribution that was to be raised from investors, and the turnover
provision from the new business scheme will be replaced by the
residual surplus under the Fallback Solution, which will result in
a smaller pool of distributable funds. Regrettably, there will be
no value attributable to the ordinary shares of the Company in the
Fallback Solution.
On 9 June 2023, we announced that the Company had been
approached by shareholder Michael Fleming seeking an exclusivity
agreement in relation to the business (the "Agreement") which Amigo
agreed to. This is to allow Mr Fleming to explore finding and
completing investment in the Company or its subsidiaries. The
period of exclusivity expires on 6 September 2023. The Agreement
will not stop the Company or its subsidiaries progressing with the
disposal of assets under its wind down plan or acting on any
transaction governed by the Takeover Code. Shareholders should note
that there remain significant impediments to any new capital being
made available to the business. In addition, establishing a new
business and potentially creating value for shareholders in the
longer term, has significant execution risks and will require
regulatory approval. The Board believes there to be a low
likelihood of a successful conclusion to any discussions arising
from this Agreement but is pursuing the Agreement in line with its
duties under the Companies Act to consider the interests of all
stakeholders, including creditors, shareholders and employees.
Wind down strategy
As Amigo is now progressing with the orderly wind down of the
business, our strategic objectives have changed. However, our
previously reported strategic pillars remain relevant within the
wind down strategy, as we seek to maximise returns to Scheme
creditors with a strong focus on costs, whilst maintaining good
governance and operating responsibly to meet our customers' needs
for the remainder of their relationship with us. The wellbeing of
our people will also remain a focus throughout the wind down, as we
retain key roles and provide support for our people throughout the
process.
As at the end of March 2023, we had c.29k legacy borrowers with
open loan positions, the average loan balance being c.GBP2.2k, and
c.500 RewardRate borrowers with an average loan balance of
c.GBP5.2k. By optimising collections activity and other value
realisation options, including the sale of all residual loans, we
will seek to maximise the amount payable to Scheme creditors.
Claims assessment, adjudication and the payment of redress is
unaffected by the wind down.
In order to maximise returns to Scheme creditors, specific cash
conservation measures have been, and will continue to be, taken.
Non-critical supplier contracts have been terminated and a head
office move to smaller premises was completed in May 2023. The
redemption in full of Amigo's senior secured notes in March 2023
was executed to save interest payments and the management buy-out
of Amigo's Irish business was completed in February 2023. While
proceeds of the buy-out were nominal (GBP1), Ireland was not
actively lending, and the sale resulted in an ultimate saving to
Amigo by eliminating premises and operational costs.
Effective governance and open dialogue with our Regulator will
be maintained throughout the wind down process as we focus on
delivering the best outcome possible for all our stakeholders.
Our people
Our people have always been what make Amigo special. Many of our
teams have been with us for a significant part of, if not all,
their careers. It is our priority to support our colleagues, both
while they remain with us and in their preparation and search for
their next role outside Amigo. I am incredibly proud of, and
grateful for, the resilience they have shown and their
determination to continue to perform at their best in support of
our customers and each other. On behalf of the Board, I should like
to thank all our people for their continued efforts.
Summary and outlook
The current Board came into Amigo because we believe
passionately that there is a need in the market for a regulated
mid-cost lender that meets the demand of financially excluded
people who deserve access to regulated credit. We have fought hard
to deliver the best outcome for creditors, colleagues and
shareholders and have left no stone unturned. I am deeply sorry
that we have been unable to successfully complete the capital raise
and continue as a going concern, and for the outcome for
shareholders who have supported us.
Our priority now is to complete an orderly wind down of both the
Amigo Loans Ltd business and the wider Group in which we maximise
returns for Scheme creditors and support our customers and our
people as we move through the process.
Danny Malone
Chief Executive Officer
27 July 2023
Financial Review
The decision to wind down the Amigo Loans Ltd business ("ALL"),
in line with the Court order associated with the Fallback Solution
of Amigo's Scheme of Arrangement, was announced on 23 March 2023.
As ALL is the only revenue-generating business within the Group, it
is envisaged that all businesses within the Group will be
liquidated. This process has begun and is likely to be
substantially completed by the first quarter of calendar year 2024,
following completion of the Scheme redress process. Over the course
of the wind down, we will continue to either collect out or dispose
of both the remaining legacy loan book and newer RewardRate loans.
The wind down is an orderly, solvent process and the business
remains in a positive net asset position. However, all net assets,
after the cost of collecting the loan book, are committed to Scheme
creditors.
Overall performance
In the year to 31 March 2023, the net loan book reduced by 67.1%
to GBP45.4m (FY 2022: GBP138.0). Revenue fell by 78.4% year-on-year
to GBP19.3m (FY 2022: GBP89.5m), reflecting the loan book reduction
with limited new lending over the period. Collections continue to
perform well, and ahead of expectations, despite the wind down
announcement and cost of living backdrop. The complaints provision
increased from the prior year, primarily due to the expected higher
uphold rate as claims are assessed. The associated increase in
complaints cost, alongside diminishing revenues and higher
operational costs, led to a reported loss before tax of GBP34.7m
(FY 2022: profit of GBP167.9m). The significant profit in the prior
year reflected the release of a substantial proportion of the
complaints provision following the sanctioning of the Scheme in May
2022.
Revenue
Revenue declined 78.4% to GBP19.3m over the 12-month period,
owing primarily to the pause in lending until October 2022 and
minimal lending thereafter. All lending was stopped on 23 March
2023, following the wind down announcement. The decline in revenue
is reflected in customer numbers which fell 60.3% to 29,000 (FY
2022: 73,000).
The pause in lending drove a 65.8% reduction in the gross loan
book year-on-year to GBP63.4m (FY 2022: GBP185.4m). The net loan
book reduced by 67.1% year-on-year to GBP45.4m (FY 2022:
GBP138.0m). This reduction is reflective of both the decline in the
gross loan book and impairment coverage which increased to 28.4%
(FY 2022: 25.6%) at the year end.
Revenue yield in the year decreased significantly from the prior
year to 15.5% (FY 2022: 29.4%), primarily due to the
non-recognition of estimated interest generated from prospective
upheld Scheme complaints. The Group defines revenue yield as
annualised revenue over the average of the opening and closing
gross loan book for the period.
Impairment
A credit in the period was recognised of GBP3.4m (Q3 FY 2022:
charge of GBP37.0m) primarily due to post-charge-off recoveries,
which have improved throughout the period, and continued robust
standard collections, alongside the gross loan book being
increasingly provided for under lifetime loss assumptions.
The impairment provision decreased to GBP18.0m (FY 2022:
GBP47.4m), representing 28.4% of the gross loan book (FY 2022:
25.6%). This reduction reflects the amortisation of the loan book
over the period,
Scheme provision
The Scheme provision has increased from the prior year to
GBP195.9m (FY 2022: GBP179.8), owing both to the now known final
number of claims received which was higher than originally
anticipated, and to the increase in the projected uphold rate to
just over 80%. Approximately 90% of the claims' population have now
been assessed by a third party and we therefore have greater
certainty in this figure. Following the passing of the Scheme
deadline to submit a claim, the final volume of claims is known to
be just under 210k. This includes some duplication where both
guarantor and borrower have claimed on the same loan agreement. The
provision includes both cash redress and balance adjustments.
Scheme creditors are expected to receive cash redress toward the
end of this calendar year which we estimate to be in the region of
17p to the pound. With claims still to be reviewed, this remains an
estimate and the final outcome is subject to change.
The increase in the provision has resulted in a corresponding
charge to the income statement of GBP19.1m (FY 2022: credit of
GBP156.6m). There remains a degree of uncertainty in the final
complaints outturn. Sensitivity analysis of the key assumptions is
set out in note 2.2 to these financial statements.
Cost management
Administrative and other operating costs of GBP36.2m increased
by GBP11.6m, (47.2%) year-on-year. The main categories of
expenditure included in administrative and other operating expenses
are employee costs of GBP17.3m (2022: GBP13.6m), legal,
professional and consultancy fees of GBP10.9m (2022: GBP5.1m) and
licence fees of GBP2.5m (2022: GBP1.9m). The substantial increase
year-on-year relates both to higher employee costs alongside
development requirements for the RewardRate platform. Employee
costs increased by GBP3.7m to GBP17.3m due to the provision of
GBP4.2m for estimated staff exit costs arising from the orderly
wind down, in which all employees will exit the business.
RewardRate development spend in the year was composed of both
incremental licence spend alongside internal staff and external
developer costs. The level of spend was required to facilitate an
accelerated lending platform with which to begin lending, as we did
in October 2022. A flexible and scalable IT platform was key to
demonstrating proof-of-concept for prospective investors in the
capital raise process. An onerous contract provision of GBP1.3m
(related expense of GBP1.8m), has been made in relation to the
RewardRate product, which has a number of associated supplier
contracts that either cannot be terminated or a termination fee has
been negotiated to end the contract early. As at 31 March 2023,
GBP0.5m had been paid and GBP1.3m remains payable.
Increased expenditure was partially offset by reductions in
variable costs, including communications, print, post and
stationery, and bank charges with declining volumes aligned to the
reducing customer base.
Tax
A tax charge for the year ended 31 March 2023 of GBP0.1m relates
to Amigo's Luxembourg entity.
Profit
Loss before tax was GBP34.7m for the year (FY 2022: profit of
GBP167.9m) with loss after tax of GBP34.8m (FY 2022: profit of
GBP169.6m) driven primarily by the increase in complaints provision
over the financial year. Excluding the complaints charge,
restructuring expense and onerous contract provision, adjusted loss
after tax was GBP9.3m (FY 2022: profit of GBP13.3m).
Our adjusted basic loss per share for the year was loss of 2.0p
(FY 2022: earnings of 2.8p), and basic loss per share for the year
was loss of 7.3p (FY 2022: earnings of 35.7p).
Funding and liquidity
The Group's remaining GBP50m of outstanding 7.625% senior
secured notes were redeemed, at par, in March 2023, ahead of
expiration in January 2024, resulting in a net interest saving.
Funding to the Group is now entirely in cash.
The proposed capital raise to fulfil the Scheme condition of a
further minimum GBP15m payment to Scheme creditors and to provide
working capital necessary for the continuation of the business was
unsuccessful. The Scheme was switched to the Fallback Solution as a
result.
Net unrestricted cash / (debt) 31 Mar 31 Mar
(GBPm) 23 22
=============================== ====== =======
Senior secured notes(1) - (49.7)
------ -------
Cash and cash equivalents
(unrestricted) 62.4 133.6
=============================== ====== =======
Net cash/(debt) 62.4 83.9
=============================== ====== =======
Cash and cash equivalents
(restricted) 107.2 7.6
=============================== ====== =======
(1) Figures presented above are net of unamortised fees.
With no remaining debt, net unrestricted cash was GBP62.4m at 31
March 2023 (FY 2022: GBP83.9m), comprising unrestricted cash and
cash equivalents, as the back book continued to be collected and
originations were limited. The year-on-year reduction of cash and
cash equivalents reflects the payment of the full GBP97m Scheme
contribution into a Scheme fund and the repayment of the senior
secured notes, offset by continued strong collections. Restricted
cash is GBP107.2m, which includes the GBP97m Scheme contribution
paid to the Scheme Fund as well as estimated set-off held in escrow
for customers with existing complaints who continued to make
payments up to the Scheme Effective Date. Since the year end, and
in accordance with the Fallback Solution conditions, Scheme Co has
returned funds to ALL to ensure it is well funded for an orderly
wind down of operations. Current unrestricted cash is over GBP121m
after repayment of the senior secured notes and withdrawal from
Scheme Co and current restricted cash is over GBP62m.
Summary
It is extremely disappointing to be executing the wind down of
the Amigo business. Despite this, collections are performing well
and the wind down strategy, whilst early in its execution, is on
track to deliver the expected contribution to Scheme creditors.
This is a testament to the dedication and hard work of all teams at
Amigo of which I am immensely proud.
Kerry Penfold
Chief Financial Officer
27 July 2023
Consolidated statement of comprehensive income
for the year ended 31 March 2023
Year
to Year to
31 Mar 31 Mar
23 22
Notes GBPm GBPm
------------------------------------------------------ ------ -------- ---------
Revenue 4 19.3 89.5
Interest payable and funding facility fees 5 (3.6) (16.7)
Interest receivable 1.5 0.1
Impairment of amounts receivable from customers 3.4 (37.0)
------------------------------------------------------ ------ -------- ---------
Administrative and other operating expenses 7 (36.2) (24.6)
Complaints provision (expense)/release 19 (19.1) 156.6
------------------------------------------------------ ------ -------- ---------
Total operating (expense)/income (55.3) 132.0
------------------------------------------------------ ------ -------- ---------
(Loss)/profit before tax (34.7) 167.9
Tax (charge)/credit on (loss)/profit 10 (0.1) 1.7
(Loss)/profit and total comprehensive (loss)/profit
attributable to equity shareholders of the Group(1) (34.8) 169.6
------------------------------------------------------ ------- -------- -------
The(loss)/profit is derived from continuing activities.
(Loss)/earnings per share
------------------------------------------ ----- ----
Basic (loss)/earnings per share (pence) 12 (7.3) 35.7
Diluted (loss)/earnings per share (pence) 12 (7.3) 35.7
------------------------------------------ ----- ----
The accompanying notes form part of these financial
statements.
1 There was less than GBP0.1m of other comprehensive income
during the relevant periods, and hence no consolidated statement of
other comprehensive income is presented.
Consolidated statement of financial position
as at 31 March 2023
31 Mar 31 Mar
23 22
Notes GBPm GBPm
------------------------------------------ ----- ------- -------
Non-current assets
Customer loans and receivables 13 - 25.4
Property, plant and equipment - 0.5
Right-of-use lease assets 20 - 0.8
- 26.7
------------------------------------------ ----- ------- -------
Current assets
Customer loans and receivables 13 45.7 114.8
Property, plant and equipment 0.3 -
Right-of-use lease assets 20 0.1 -
Other receivables 16 1.5 1.6
Current tax asset 0.8 0.7
Cash and cash equivalents (restricted)(1) 107.2 7.6
Cash and cash equivalents 62.4 133.6
------------------------------------------ ----- ------- -------
218.0 258.3
------------------------------------------ ----- ------- -------
Held for sale assets 14 1.1 -
Total assets 219.1 285.0
------------------------------------------ ----- ------- -------
Current liabilities
Trade and other payables 17 (6.0) (6.7)
Lease liabilities 20 (0.1) (0.3)
Complaints provision 19 (195.9) (82.8)
Restructuring provision 19 (4.5) -
(206.5) (89.8)
------------------------------------------ ----- ------- -------
Non-current liabilities
Borrowings 18 - (49.7)
Lease liabilities 20 - (0.6)
Complaints provision 19 - (97.0)
- (147.3)
------------------------------------------ ----- ------- -------
Total liabilities (206.5) (237.1)
------------------------------------------ ----- ------- -------
Net assets 12.6 47.9
------------------------------------------ ----- ------- -------
Equity
Share capital 21 1.2 1.2
Share premium 207.9 207.9
Translation reserve - 0.1
Merger reserve (295.2) (295.2)
Retained earnings 98.7 133.9
------------------------------------------ ----- ------- -------
Shareholder equity 12.6 47.9
------------------------------------------ ----- ------- -------
The accompanying notes form part of these financial
statements.
(1) Cash and cash equivalents (restricted) of GBP 107.2m (2022:
GBP7.6m) materially relates to cash held for the benefit of
customers in relation to payments arising out of the Scheme of
Arrangement.
The financial statements of Amigo Holdings PLC were approved and
authorised for issue by the Board and were signed on its behalf
by:
Kerry Penfold
Director
27 July 2023
Company no. 10024479
Consolidated statement of changes in equity
for the year ended 31 March 2023
Share Share Translation Merger Retained Total
capital premium reserve(1) reserve(2) earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ------- ------- ----------- ---------- -------- -------
At 1 April 2021 1.2 207.9 - (295.2) (35.3) (121.4)
Total comprehensive profit - - - - 169.6 169.6
Translation reserve - - 0.1 - - 0.1
Share-based payments - - - - (0.4) (0.4)
At 31 March 2022 1.2 207.9 0.1 (295.2) 133.9 47.9
Total comprehensive loss - - - - (34.8) (34.8)
Translation reserve - - (0.1) - - (0.1)
Share-based payments - - - - (0.4) (0.4)
--------------------------- ------- ------- ----------- ---------- -------- -------
At 31 March 2023 1.2 207.9 - (295.2) 98.7 12.6
--------------------------- ------- ------- ----------- ---------- -------- -------
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.
Consolidated statement of cash flows
for the year ended 31 March 2023
Year to Year to
31 Mar 31 Mar
23 22
GBPm GBPm
------------------------------------------------------------ ------- -------
(Loss)/profit for the period (34.8) 169.6
Adjustments for:
Impairment movement (3.4) 37.0
Complaints provision 28.8 (156.6)
Restructuring provision 4.5 -
Tax charge/(credit) 0.1 (1.7)
Interest expense 3.6 16.7
Interest receivable (1.5) (0.1)
Interest recognised on loan book (30.8) (97.0)
Share-based payment (0.4) (0.4)
Depreciation of property, plant and equipment 0.5 0.5
------------------------------------------------------------ ------- -------
Operating cash flows before movements in working capital (33.4) (32.0)
Decrease in receivables - 0.1
Increase/(decrease) in payables 0.6 (6.3)
Complaints cash expense (12.7) (8.1)
Tax (paid)/refunds (0.2) 0.2
Interest paid (3.4) (18.5)
Net cash (used in) operating activities before loans issued
and collections on loans (49.1) (64.6)
Loans issued (2.5) -
Collections 130.6 263.0
Other loan book movements (2.1) (0.4)
Decrease in deferred brokers' costs 1.9 7.5
------------------------------------------------------------ ------- -------
Net cash from operating activities 78.8 205.5
------------------------------------------------------------ ------- -------
Investing activities
Proceeds from sale of property, plant and equipment - 0.3
Net cash from investing activities - 0.3
------------------------------------------------------------ ------- -------
Financing activities
Lease principal payments (0.3) (0.3)
Repayment of external funding (50.0) (248.5)
------------------------------------------------------------ ------- -------
Net cash (used in) financing activities (50.3) (248.8)
------------------------------------------------------------ ------- -------
Net increase/(decrease) in cash and cash equivalents 28.5 (43.0)
Effects of movement in foreign exchange (0.1) -
Cash and cash equivalents at beginning of period 141.2 184.2
------------------------------------------------------------ ------- -------
Cash and cash equivalents at end of period(1) 169.6 141.2
------------------------------------------------------------ ------- -------
The accompanying notes form part of these financial
statements.
1 Total cash is inclusive of cash and cash equivalents
(restricted) of GBP107.2 m (2022: GBP7.6m). This restricted cash
materially relates to cash held for the benefit of customers in
relation to payments arising out of the Scheme of Arrangement.
Notes to the consolidated financial statements
for the year ended 31 March 2023
1. Accounting policies
1.1 Basis of preparation of financial statements
Amigo Holdings PLC is a public company limited by shares
(following IPO on 4 July 2018), listed on the London Stock Exchange
(LSE: AMGO). The Company is incorporated and domiciled in England
and Wales. With effect from 15 June 2023 the Company's registered
office is Unit 11a, The Avenue Centre, Bournemouth, Dorset, United
Kingdom BH2 5RP.
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 loans to
individuals. Previously, its principal activity was to provide
individuals with guarantor loans from GBP2,000 to GBP10,000 over
one to five years. No new advances on these products have been made
since November 2020. Following FCA approval to return to lending,
in October 2022, Amigo launched, on a pilot basis, a new guarantor
loan as well as an unsecured loan product which featured dynamic
pricing to reward on-time payment with lower rates and penalty-free
annual payment holidays. The new products were released under the
RewardRate brand. With the Fallback Solution being implemented,
leading to a cessation of trade and implementation of a wind down
plan, new lending has been stopped in the current year.
These consolidated Group and Company financial statements have
been prepared on a basis other than going concern and approved by
the Directors in conformity with the requirements of the Companies
Act 2006 and these Group and Company financial statements were also
in accordance with International Financial Reporting Standards
("IFRS") as adopted by the UK. There has been no departure from the
required IFRS standards.
The consolidated financial statements have been prepared under
the historical cost convention, except for financial instruments
measured at amortised cost or fair value.
The presentational currency of the Group is GBP, the functional
currency of the Company is GBP, and these financial statements are
presented in GBP. All values are stated in GBP million (GBPm)
except where otherwise stated.
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.
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 the
financial statements.
The Directors believe there is no general dispensation from the
measurement, recognition and disclosure requirements of IFRS
despite the Group not continuing as a Going Concern. Therefore,
IFRS is applied accordingly throughout the financial statements.
The relevant accounting standards for each part of the Financial
Statements have been applied on the conditions that existed and
decisions that had been taken by the Board as at or prior to 31
March 2023.
In undertaking a Going Concern review, the Directors considered
the Group's decision to switch the Scheme from the Preferred to the
Fallback Solution, announced on 23 March 2023.
The switch to the Fallback Solution required that the trading
subsidiary, Amigo Loans Ltd ("ALL"), stopped lending with immediate
effect and be placed into an orderly wind down, with the result
that all surplus assets after the wind down will be transferred to
the Scheme creditors. A further requirement of the Fallback
Solution is that ALL be placed into liquidation within two months
of payment of the final Scheme dividend. No value will be
attributed to the ordinary shares of the Company in this
scenario.
Given the cessation of trading on 23 March 2023, alongside no
apparent realistic strategic capital raise or viable alternative
solutions, and the requirement dictated by the Scheme to ultimately
liquidate Amigo Loans Ltd (the Group's sole cash-generating unit),
the Board have determined that the Annual Report and Financial
Statements for FY23 will be prepared on a basis other than Going
Concern.
The Board has prepared a set of financial projections for the
solvent wind down following the cessation of new lending in March.
Alongside a base scenario which indicates ample liquidity available
through the course of wind down, a downside scenario has been
collated that stresses the primary cash flow risks to the Group
that are considered severe but plausible. Stresses have been
applied to:
-- The collect out of the legacy Amigo loan book
-- Removal of any prospective debt sales
-- Increased Scheme liabilities
-- Increased overhead spend
Despite the stresses applied, the Group maintains sufficient
liquidity in the period. It is therefore considered only a marginal
risk that the Group is unable to remain solvent during the orderly
wind down. The key risks that would prevent this from being
achieved can be considered the risks applied in the downside
scenario alongside potential regulatory action or intervention.
Basis of consolidation
The consolidated statement of comprehensive income, consolidated
statement of financial position, consolidated statement of changes
in shareholders' equity, consolidated statement of cash flows and
notes to the financial statements include the financial statements
of the Company and all of its subsidiary undertakings inclusive of
structured entities ("SEs"); see note 28 for a full list of
subsidiaries and SEs. Subsidiaries are entities controlled by the
Group. The Group controls an entity when it is exposed to, or has
rights to, variable returns through its involvement with the entity
and has the ability to affect those returns through its power over
the entity. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control
commences until the date that control ceases.
The vehicle ALL Scheme Ltd was incorporated on 6 January 2021
and is a wholly owned and controlled subsidiary of the Group
included in the consolidated financial statements for the years
ended 31 March 2023 and 31 March 2022. The Group reviews complaint
claims through this vehicle and, where appropriate, will pay cash
redress to customers that have been affected by historical issues
in the UK business. There was no activity through this vehicle in
the prior financial year.
The Group's securitisation facility was established in November
2018. The Company fully repaid the facility in September 2021, and
the securitisation structure was subsequently closed in November
2022 (see note 18 for further details). The structured entity AMGO
Funding (No. 1) Ltd was set up in this process. The Group had both
power and control over that structured entity, as well as exposure
to variable returns from the special purpose vehicle ("SPV)";
hence, this is included in the consolidated financial statements.
SEs are fully consolidated based on the power of the Group to
direct relevant activities, and its exposure to the variable
returns of the SE. In assessing whether the Group controls an SE,
judgement is exercised to determine the following: whether the
activities of the SE are being conducted on behalf of the Group to
obtain benefits from the SE's operation; whether the Group has the
decision-making powers to control or to obtain control of the SE or
its assets; whether the Group is exposed to the variable returns
from the SE's activities; and whether the Group is able to use its
power to affect the amount of returns. The Group's involvement with
SEs is detailed in note 25.
All intercompany balances and transactions are eliminated fully
on consolidation. The financial statements of the Group's
subsidiaries (including SEs that the Group consolidates) are
prepared for the same reporting period as the Group and Company,
using consistent accounting policies.
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 model historically comprised primarily of
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.
In light of the decision to enter into the Fallback Solution and
the trigger for an orderly wind down of the business the Board
re-evaluated this business model assessment, noting also that any
reclassification of financial assets identified as requiring
reclassification is the first day of the next accounting period.
The assessment was no longer considered appropriate for the
RewardRate portfolio for which a decision has been made to sell as
a result of the wind down strategy and has been classified as Held
for Sale as at 31 March 2023 (see note 14). The RewardRate
portfolio has been reclassified under fair value through other
comprehensive income with effect from 1 April 2023.
Assessment of whether contractual cash flows are solely payments
of principal and interest
For the purposes of this assessment, "principal" is defined as
the fair value of the financial asset on initial recognition.
"Interest" is defined as consideration for the time value of money
and for the credit risk associated with the principal amount
outstanding during a particular period of time, as well as profit
margin.
In assessing whether the contractual cash flows are SPPI, the
Group considers the contractual terms of the instrument. This
includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of
contractual cash flows such that it would not meet this condition.
The Group has deemed that the contractual cash flows are SPPI and
hence, loans to customers are measured at amortised cost under IFRS
9.
ii) Impairment
IFRS 9 includes a forward-looking expected credit loss ("ECL")
model with regards to impairment. IFRS 9 requires an impairment
provision to be recognised on origination of a financial asset.
Under IFRS 9, a provision is made against all stage 1 (defined
below) financial assets to reflect the expected credit losses from
default events within the next twelve months. The application of
lifetime expected credit losses to assets which have experienced a
significant increase in credit risk results in an uplift to the
impairment provision.
iii) Measurement of ECLs
Under IFRS 9 financial assets fall into one of three
categories:
stage 1 - financial assets which have not experienced a
"significant" increase in credit risk since initial
recognition;
stage 2 - financial assets that are considered to have
experienced a "significant" increase in credit risk since initial
recognition; and
stage 3 - financial assets which are in default or otherwise
credit impaired.
Loss allowances for stage 1 financial assets are based on
twelve-month ECLs; that is the portion of ECLs that result from
default events that are estimated within twelve months of the
reporting date and are recognised from the date of asset
origination. Loss allowances for stage 2 and 3 financial assets are
based on lifetime ECLs, which are the ECLs that result from all
default events over the expected life of a financial
instrument.
At the reporting date, the Group held both guarantor and
personal loans on balance sheet. In relation to the guarantor
loans, 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 new
guarantor and unsecured loan products under the RewardRate brand
have been disclosed as held for sale assets at 31 March 2023 and
therefore does not attract ECL impairments.
The Group has assessed that ECLs on customer loans and
receivables is a key sensitivity, 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
Receivable from customers are derecognised when the entity's
contractual rights to the financial asset's cash flows have
expired.
vi) Definition of default
The Group considers an account to be in default if it is more
than three contractual payments past due, i.e. greater than 61
days, which is a more prudent approach than the rebuttable
presumption in IFRS 9 of 90 days and has been adopted to align with
internal operational procedures. The Group reassesses the status of
loans at each month end on a collective basis. When the arrears
status of an asset improves so that it no longer meets the default
criteria for that portfolio, it is immediately cured and
transitions back from stage 3 within the Group's impairment
model.
vii) Forbearance
Where the borrower indicates to the Group that they are unable
to bring the account up to date, informal, temporary forbearance
measures may be offered. There are no changes to the customer's
contract at any stage. Depending on the forbearance measure
offered, an operational flag will be added to the customer's
account, which may indicate significant increase in credit risk and
trigger movement of this balance from stage 1 to stage 2 in
impairment calculation. See note 2.1.2 for further details.
1.3 Revenue
Revenue comprises interest income on amounts receivable from
customers. Loans are initially measured at fair value (which is
equal to cost at inception) plus directly attributable transaction
costs and are subsequently measured at amortised cost using the
effective interest rate method. Revenue is presented net of
amortised broker fees which are spread over the expected
behavioural lifetime of the loan as part of the effective interest
rate method. Revenue is also presented net of modification
adjustments recognised in the period, where no historical event
suggesting a significant increase in credit risk has occurred on
that asset (see notes 1.12.1.d for further details).
The effective interest rate ("EIR") is the rate that discounts
estimated future cash payments or receipts through the expected
life of the financial instrument (or a shorter period where
appropriate) to the net carrying value of the financial asset or
financial liability. The calculation takes into account all
contractual terms of the financial instrument and includes any
incremental costs that are directly attributable to the instrument,
but not future credit losses.
1.4 Operating expenses
Operating expenses include all direct and indirect costs. Where
loan origination and acquisition costs can be referenced directly
back to individual transactions (e.g. broker costs), they are
included in the effective interest rate in revenue and amortised
over the behavioural life of the loan rather than recognised in
full at the time of acquisition.
1.5 Interest payable and funding facilities
Interest expense and income, excluding bond premium, is
recognised as it accrues in the consolidated statement of
comprehensive income using the EIR method so that the amount
charged is at a constant rate on the carrying amount. Issue costs
are initially recognised as a reduction in the proceeds of the
associated capital instruments and recognised over the behavioural
life of the liability. The bond premium is amortised over the life
of the bond. Amortised facility fees are charged to the
consolidated statement of comprehensive income over the term of the
facility using the effective interest rate method. Non-utilisation
fees are charged to the consolidated statement of comprehensive
income as incurred.
Where an existing debt instrument is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as a derecognition of the original
liability and the recognition of a new liability. All capitalised
fees relating to the prior debt instrument are written off to the
consolidated statement of comprehensive income at the date of
derecognition.
Senior secured note premiums and discounts are part of the
instrument's carrying amount and therefore are amortised over the
expected life of the notes. Where senior secured notes are
repurchased in the open market resulting in debt extinguishment,
the difference between the carrying amount of the liability
extinguished or transferred to another party and the consideration
paid, including any non-cash assets transferred or liabilities
assumed, is recognised in the consolidated statement of
comprehensive income.
1.6 Dividends
Equity dividends payable are recognised when they become legally
payable. Interim equity dividends are recognised when paid. Final
equity dividends are recognised on the earlier of their approval or
payment date.
1.7 Taxation
Tax on the profit or loss for the year comprises current and
deferred tax. Tax is recognised in the consolidated statement of
comprehensive income except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in
equity.
1.7.1 Current tax
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the consolidated statement of financial
position date, and any adjustment to tax payable in respect of
previous years. Taxable profit/loss differs from profit/loss before
taxation as reported in the income statement because it excludes
items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or
deductible.
1.7.2 Deferred tax
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax
assets are recognised to the extent that it is probable that future
taxable profits will be available against which the temporary
differences can be utilised. Should circumstances arise where the
Group concludes it is no longer considered probable that future
taxable profits will be available against which temporary
differences can be utilised, deferred tax assets will be written
off and charged to the consolidated statement of comprehensive
income.
The following temporary differences are not provided for: the
initial recognition of goodwill; the initial recognition of assets
or liabilities that affect neither accounting nor taxable profit
other than in a business combination; and differences relating to
investments in subsidiaries to the extent that they are unlikely to
reverse in the foreseeable future. The amount of deferred tax
provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the consolidated
statement of financial position date.
1.8 Property, plant and equipment ("PPE")
PPE is stated at cost less accumulated depreciation and
accumulated impairment losses. Cost includes expenditure that is
directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner
intended by management. Where parts of an item of PPE have
different useful lives, they are accounted for as separate items of
property, plant and equipment. Repairs and maintenance are charged
to the consolidated statement of comprehensive income during the
period in which they are incurred.
Depreciation is charged to the consolidated statement of
comprehensive income on a straight-line basis over the estimated
useful lives of each part of an item of property, plant and
equipment. The estimated useful lives are as follows:
-- Leasehold improvements 10% straight line
-- Fixtures and fittings 25% straight line
-- Computer equipment 50% straight line
-- Office equipment 50% straight line
-- Motor vehicles 25% straight line
Depreciation methods, useful lives and residual values are
reviewed, and adjusted if appropriate, at each consolidated
statement of financial position date.
1.9 Intangible assets
Intangible assets are recognised at historical cost less
accumulated amortisation and accumulated impairment losses.
Intangible assets are amortised from the date they are available
for use. Amortisation is charged to the consolidated statement of
comprehensive income.
Acquired software costs incurred are capitalised and amortised
on a straight-line basis over the anticipated useful life, which is
normally four years.
Amortisation methods, useful lives and residual values are
reviewed at each consolidated statement of financial position
date.
1.10 Held for sale assets
A non-current asset or disposal group is classified as
held-for-sale when its carrying amount will be recovered
principally through a sale transaction. This is the case when the
asset is available for immediate sale in its present condition
subject only to terms that are usual and customary for sales of
such asset and its sale is highly probable. On initial
classification as held-for-sale non-current assets are measured at
the lower of their carrying amount and the fair value less costs to
sell.
1.11 Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best
estimate of the consideration required to settle the present
obligation at the consolidated statement of financial position
date, taking into account the risks and uncertainties surrounding
the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is
the present value of those cash flows. For more details see note
2.2 and note 19.
Contingent liabilities are possible obligations arising from
past events, whose existence will be confirmed only by uncertain
future events, or present obligations arising from past events that
are not recognised because either an outflow of economic benefits
is not probable, or the amount of the obligation cannot be reliably
measured. Contingent liabilities are not recognised in the
consolidated statement of financial position but information about
them is disclosed unless the possibility of any economic outflow in
relation to settlement is remote. See note 19 for further
details.
1.12 Financial instruments
The Group primarily enters into basic financial instruments
transactions that result in the recognition of financial assets and
liabilities, the most significant being amounts receivable from
customers and senior secured notes in the form of high yield bonds.
During the year the Group utilised a securitisation facility which
has been fully repaid at the balance sheet date.
1.12.1 Financial assets
a) Other receivables
Other receivables relating to loans and amounts owed by parent
and subsidiary undertakings are measured at transaction price, less
any impairment. Loans and amounts owed by parent and subsidiary
undertakings are unsecured, have no fixed repayment date, and are
repayable on demand and interest on such balances is accrued on an
arm's length basis. The impact of ECLs on other receivables has
been evaluated and it is immaterial.
b) Cash and cash equivalents
Cash is represented by cash in hand and deposits with financial
institutions repayable without penalty on notice of not more than
24 hours. Cash equivalents are highly liquid investments that
mature in no more than three months from the date of acquisition
and that are readily convertible to known amounts of cash with
insignificant risk of change in value. The impact of ECLs on cash
has been evaluated and it is immaterial.
c) Cash and cash equivalents (restricted).
Cash and cash equivalents (restricted) materially relate to cash
held for the benefit of customers in relation to payments arising
out of the Scheme of Arrangement.
d) Modification of financial assets
Where modifications to financial asset terms occur, for example,
modified payment terms following granting of a Covid-19 payment
holiday to customers, the Group evaluates from both quantitative
and qualitative perspectives whether the modifications are deemed
substantial. If the cash flows are deemed substantially different,
then the contractual rights to cash flows from the original asset
are deemed to have expired and the asset is derecognised (see
1.12.1.e) and a new asset is recognised at fair value plus eligible
transaction costs.
For non-substantial modifications the Group recalculates the
gross carrying amount of a financial asset based on the revised
cash flows and recognises a modification loss in the consolidated
statement of comprehensive income. The modified gross carrying
amount is calculated by discounting the modified cash flows at the
original effective interest rate. For customer loans and
receivables, where the modification event is deemed to be a trigger
for a significant increase in credit risk or occurs on an asset
where there were already indicators of significant increase in
credit risk, the modification loss is presented together with
impairment losses. In other cases, it is presented within
revenue.
e) Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
derecognised when:
-- the rights to receive cash flows from the asset have expired; or
-- the Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
"pass-through" arrangement and either:
-- the Group has transferred substantially all the risks and rewards of the asset; or
-- the Group has neither transferred nor retained substantially
all the risks and rewards of the asset but has transferred control
of the asset.
f) Write-off
Customer loans and receivables are written off the consolidated
statement of financial position when an account is six contractual
payments past due, as at this point it is deemed that there is no
reasonable expectation of recovery. When there is recovery on
written-off debts or when cash is received from the third-party
purchaser on the legal purchase date of the assets, recoveries are
recognised in the consolidated statement of comprehensive income
within the impairment charge.
1.12.2 Financial liabilities
Debt instruments (other than those wholly repayable or
receivable within one year), i.e. borrowings, are initially
measured at fair value less transaction costs and subsequently at
amortised cost using the effective interest method.
Debt instruments that are payable within one year, typically
trade payables, are measured, initially and subsequently, at the
undiscounted amount of the cash or other consideration expected to
be paid or received. These include liabilities recognised for the
expected cost of repurchasing customer loans and receivables
previously sold to third parties, where a lending decision
complaint has since been upheld in the customer's favour. However,
if the arrangements of a short-term instrument constitute a
financing transaction, like the payment of a trade debt deferred
beyond normal business terms or financed at a rate of interest that
is not a market rate or in case of an outright short-term loan not
at market rate, the financial liability is measured, initially, at
the present value of the future cash flow discounted at a market
rate of interest for a similar debt instrument and subsequently at
amortised cost.
Interest-bearing borrowings are recognised initially at fair
value less attributable transaction costs. See note 1.5 for details
of treatment of premiums/discounts on borrowings.
Short-term payables are measured at the transaction price. Other
financial liabilities, including bank loans, are measured initially
at fair value, net of transaction costs, and are measured
subsequently at amortised cost using the effective interest
method.
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or has expired. Where an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original
liability and the recognition of a new liability. The difference
between the carrying value of the original financial liability and
the consideration paid is recognised in the consolidated statement
of comprehensive income.
1.13 Securitisation
The Group securitised certain financial assets via the sale of
these assets to a special purpose entity, which in turn issued
securities to investors. All financial assets continue to be held
on the Group's consolidated statement of financial position,
together with debt securities in issue recognised for the funding.
Securitised loans are not derecognised for the purposes of IFRS 9
on the basis that the Group retains substantially all the risks and
rewards of ownership. The securitisation structure was closed in
November 2022. See note 25 for further details.
1.14 Merger reserve
The merger reserve was created as a result of a Group
reorganisation in 2017 to create an appropriate holding company
structure. With the merger accounting method, the carrying values
of the assets and liabilities of the parties to the combination are
not required to be adjusted to fair value, although appropriate
adjustments shall be made through equity to achieve uniformity of
accounting policies in the combining entities. The restructure was
within a wholly owned group, constituting a common control
transaction.
1.15 Leases
IFRS 16 distinguishes between leases and service contracts on
the basis of whether the use of an identified asset is controlled
by the Group. Control is considered to exist if the Group has:
-- the right to obtain substantially all of the economic
benefits from the use of an identified asset; and
-- the right to direct the use of that asset.
Where control, and therefore a lease, exists, a right-of-use
asset and a corresponding liability are recognised for all leases
where the Group is the lessee, except for short-term assets and
leases of low-value assets. Short-term assets and leases of
low-value assets are expensed to the consolidated statement of
comprehensive income as incurred.
i) Lease liability
All leases for which the Group is a lessee, other than those
that are less than twelve months in duration or are low value which
the Group has elected to treat as exempt, require a lease liability
to be recognised on the consolidated statement of financial
position on origination of the lease. For these leases, the lease
payment is recognised within administrative and operating expenses
on a straight-line basis over the lease term. The lease liability
is initially measured at the present value of the lease payments at
the commencement date, discounted using the incremental borrowing
rate, as there is no rate implicit in the lease. This is defined as
the rate of interest that the lessee would have to pay to borrow,
over a similar term and with similar security, the funds necessary
to obtain an asset of a similar value to the right-of-use asset in
a similar economic environment. The interest expense on the lease
liability is to be presented as a finance cost.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease, using the
effective interest rate method, and reducing the carrying amount to
reflect the lease payments made. The lease liability is remeasured
whenever:
-- the lease term has changed, in which case the lease liability
is remeasured by discounting the revised lease payments using a
revised discount rate;
-- the lease payments change due to changes in an index or rate,
in which case the lease liability is remeasured by discounting the
revised lease payments using the initial discount rate; and
-- the lease contract is modified and the modification is not
accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease payments
using a revised discount rate.
ii) Right-of-use asset
For each lease liability a corresponding right-of-use asset is
recorded in the consolidated statement of financial position.
The right-of-use asset is initially measured at cost and
subsequently measured at cost less accumulated depreciation and
impairment losses, adjusted for any remeasurement of the lease
liability. Right-of-use assets are depreciated over the shorter
period of lease term and useful life of the underlying asset, with
the depreciation charge presented under administrative and
operating expenses. The Group's right-of-use assets relate to two
property leases for offices in Bournemouth.
1.16 Foreign currency translation
Items included in the financial statements of each of the
Group's subsidiaries are measured using the currency of the primary
economic environment in which the subsidiary operates (the
functional currency). The Group's subsidiaries primarily operate in
the UK and Republic of Ireland. The Irish subsidiaries were
disposed of in February 2023. The consolidated and the Company
financial statements are presented in Sterling, which is the Group
and Company's presentational currency.
Transactions that are not denominated in the Group's
presentational currency are recorded at an average exchange rate
for the month. Monetary assets and liabilities denominated in
foreign currencies are translated into the relevant presentational
currency at the exchange rates prevailing at the consolidated
statement of financial position date. Non-monetary items carried at
historical cost are translated using the exchange rate at the date
of the transaction. Differences arising on translation are charged
or credited to the consolidated statement of comprehensive
income.
1.17 Defined contribution pension scheme
The Group operates a defined contribution pension scheme.
Contributions payable to the Group's pension scheme are charged to
the consolidated statement of comprehensive income on an accruals
basis.
1.18 Share-based payments
The Company grants options under employee savings-related share
option schemes (typically referred to as Save As You Earn schemes
("SAYE")) and makes awards under the Share Incentive Plans ("SIP")
and the Long Term Incentive Plans ("LTIP"). All of these plans are
equity settled.
The fair value of the share plans is recognised as an expense
over the expected vesting period with a corresponding entry to
retained earnings, net of deferred tax. The fair value of the share
plans is determined at the date of grant. The fair value of the
awards granted is measured based on Company-specific observable
market data, taking into account the terms and conditions upon
which the awards were granted.
Non-market-based vesting conditions (i.e. earnings per share and
absolute total shareholder return targets) are taken into account
in estimating the number of awards likely to vest, which is
reviewed at each accounting date up to the vesting date, at which
point the estimate is adjusted to reflect the actual awards
issued.
The grant by the Company of options and awards over its equity
instruments to the employees of subsidiary undertakings is treated
as an investment in the Company's financial statements.
1.19 Items presented separately within the consolidated
statement of comprehensive income
Complaints expense is presented separately on the face of the
consolidated statement of comprehensive income. This item is deemed
exceptional because of its size, nature or incidence and which the
Directors consider should be disclosed separately to enable a full
understanding of the Group's results.
1.20 Share capital
Financial instruments issued by the Group are classified as
equity only to the extent that they do not meet the definition of a
financial liability or financial asset. The Group's ordinary shares
are classified as equity instruments.
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:
-- Assessing whether the credit risk of an instrument has
increased significantly since initial recognition (note 2.1.2).
-- Definition of default is considered by the Group to be when
an account is three contractual payments past due (note
1.2.vi).
-- Multiple economic scenarios - the probability weighting of
base, downside and severe downside scenarios to the ECL calculation
(note 2.1.3).
-- Complaints provision:
-- Estimating the probability, timing and amount of any outflows (note 2.2.1).
-- Restructuring provision:
-- Required resource plan and subsequent timing of staff exits
-- Assessing supplier requirements and recognition of onerous contracts
-- Accounts receivable from customers:
-- Judgement is applied in assessing whether the contractual
cash flows are "SPPI", the Group considers the contractual terms of
the instrument. This includes assessing whether the financial asset
contains a contractual term that could change the timing or amount
of contractual cash flows such that it would not meet this
condition
-- Held for sale assets:
-- Assessing probability and timing of an asset's prospective sale (note 14)
Estimates
Areas which include a degree of estimation uncertainty are:
-- IFRS 9: measurement of ECLs:
-- Adopting a collective basis for measurement in calculation of
ECLs in IFRS 9 calculations (note 2.1.1).
-- Probability of default ("PD"), exposure at default ("EAD")
and loss given default ("LGD") (note 2.1.1).
-- Forward-looking information incorporated into the measurement of ECLs (note 2.1.3).
-- Incorporating a probability weighted estimate of external
macroeconomic factors into the measurement of ECLs (note
2.1.3).
-- Complaints provisions:
-- Calculation of the uphold rate for customers on the gross
loan book and/or customers that have made payments post the Scheme
Effective Date. These calculations evaluate current and historical
data, and assumptions and expectations of future outcomes (note
2.2.1).
-- Estimation of the cash liability is based on assumptions
around net future collections which uses assumptions around credit
losses, valuation of impaired debt and operating expenses.
-- Valuation of the investment in subsidiaries held by parent
company Amigo Holdings PLC (note 2a of Company financial
statements).
-- Restructuring provision:
-- Severance costs of staff exits which are contingent on the
timing of exit and therefore contingent on future resource
required.
-- Held for sale asset:
-- Estimate of expected fair value less costs to sell, valued via a market approach (note 14).
2.1 Credit impairment
2.1.1 Measurement of ECLs
The Group has adopted a collective basis of measurement for
calculating ECLs. The loan book is bifurcated into those customers
who have had a Covid-19 forbearance plan and those who have not.
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.
2.1.2 Assessment of significant increase in credit risk
("SICR")
To determine whether there has been a SICR the following
two-step approach has been taken:
1) The primary indicator of whether a significant increase in
credit risk has occurred for an asset is determined by considering
the presence of certain payment status flags on a customer's
account. This is the Group's primary qualitative criteria
considered in the assessment of whether there has been a
significant increase in credit risk. If a relevant operational flag
is deemed a trigger indicating the remaining lifetime probability
of default has increased significantly, the Group considers the
credit risk of an asset to have increased significantly since
initial recognition. Examples of this include operational flags for
specific circumstances such as short-term payment plans and
breathing spaces 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 (one payment past due is equivalent
to 30 days past due), which is aligned to the IFRS 9 rebuttable
presumption of more than 30 days past due. This is the primary
quantitative information considered by the Group in significant
increase in credit risk assessments.
The Group reassesses the flag status of all loans at each month
end and remeasures the proportion of the book which has
demonstrated a significant increase in credit risk based on the
latest payment flag data. An account transitions from stage 2 to
stage 1 immediately when a payment flag is removed from the
account.
2.1.3 Forward-looking information
The Group assesses the impact of forward-looking information on
its measurement of ECLs. While the Group has historically analysed
effects of a range of macro-economic variables it believes the most
significant factors likely to impact future credit losses will be
unemployment and inflation. These factors are considered on a
qualitative basis in estimating PDs and weighting scenarios and
ultimately reflect The Group's expectations of future credit
losses.
The Group has modelled and weighted three different ECL
scenarios - a base, a downside and a severe downside scenario;
-- The base scenario broadly represents probability of defaults
whereby historic performance is extrapolated with an expectation
for future deterioration applied on a judgemental qualitative basis
relating to expectations on the aforementioned macroeconomic
factors. A weighting of 25% has been applied to reflect the Group's
assumption that whilst the current macroeconomic environment has
the potential to improve based on recent Office for Budgetary
Reporting ("OBR") forecasts, the rate of inflation is likely to
remain high throughout the remaining life of the loan book and
therefore likely to impact customers in an adverse manner. Further
consideration has been given to the rise in interest rates, which
are expected to remain materially above recent prior year
averages.
-- The downside scenario uplifts the base scenario probability
of default by an average of 17%. Incremental to the base scenario
assumptions, further consideration has been given to the
uncertainty surrounding macroeconomic forecasts and the potential
for a range of outcomes. In the downside scenario, the uplift to
PDs is modelled based on a further potential deterioration in the
economy and the macroeconomic factors that may impact the Group's
customer base, for example inflation and unemployment spike, which
would result in an income shock and rise in defaults. A weighting
of 50% has been applied to this scenario to reflect a prudent
judgement on future credit losses given the high level of
uncertainty in economic forecasts.
-- The severe downside applies a further uplift of 25% to the
downside scenario, weighted at 25%. This scenario captures the
income shock outlined in the downside scenario along with
incremental credit losses the Group may reasonably expect to
experience in the managed wind down of the business.
The following table details the absolute impact on the current
ECL provision of GBP18.0m if each of the three scenarios are given
a probability weighting of 100%.
Impact
---------------- ------
Base -0.9m
Downside +0.2m
Severe downside +0.5m
---------------- ------
The scenarios above demonstrate a range of ECL provisions from
GBP17.1m to GBP18.5m.
As with any economic forecasts, the projections and likelihoods
of occurrence are subject to a high degree of inherent uncertainty
and therefore the actual outcomes may be significantly different to
those projected.
2.2 Complaints provisions
2.2.1 Complaints provision - estimation uncertainty
Provisions included in the statement of financial position
refers to a provision recognised for customer complaints. The
provision represents an accounting estimate of the expected future
outflows arising from certain customer-initiated complaints, using
information available as at the date of signing these financial
statements.
Identifying whether a present obligation exists and estimating
the probability, timing, nature and quantum of the redress payments
that may arise from past events require judgements to be made on
the specific facts and circumstances relating to the individual
complaints. Management evaluates on an ongoing basis whether
complaints provisions should be recognised, revising previous
judgements and estimates as appropriate; however, there is a wide
range of possible outcomes.
These calculations involve significant, complex management
judgement and estimation. The key assumption with the most
potential for variability is the uphold rate (%) - the expected
average uphold rate applied to future undecisioned Scheme
claims.
The calculation of the complaints provision as at 31 March 2023
is based on Amigo's best estimate of the future obligation. The
Scheme cash redress provision is GBP97.1m, which is estimated based
on future financial projections of the orderly wind down of the
Group, which therefore inherently carries a degree of uncertainty.
This estimate assumes, as per the Scheme, that all assets of the
business are committed to Scheme claimants.
As at 31 March 2023, the Group has recognised a complaints
provision totalling GBP195.9m in respect of customer complaints
redress and associated costs. Utilisation in the period totalled
GBP3.0m, primarily relating to the cost incurred in processing
decisioning on Scheme claims. The liability has increased by
GBP16.1m compared to prior year. The closing provision is comprised
of balance adjustments which have decreased with the passage of
time, due to the collection of customer balances, and an estimate
of refunds to upheld Scheme claimants for collections made since
Scheme effective date, which will be redressed in full and attract
compensatory interest.
On an underlying basis the liability for customer redress has
increased approximately GBP27m, which is reflective of both
increased volume of claims, now known, and the estimated rate of
the claims that are upheld. The uphold rate in prior year was
estimated at 65% based primarily on empirical evidence from
comparable schemes, this has been revised to 81% as at 31 March
2023 based on actual decisioning data from a material portion of
the claimant population.
The following table details the effect on the complaints
provision considering incremental changes on the key assumption,
should current estimates prove too high or too low.
Assumption Sensitivity
used applied Sensitivity (GBPm)
------------------------------------ ---------- ----------- --------------------
Average uphold rate per customer(1) 81% +/- 5 ppts +5.0 -5.0
Cash redress provision(2) GBP97.1m +/- 5 ppts +4.9 -4.9
1. Uphold rate. Sensitivity analysis shows the impact of a 5
percentage point change in the applied uphold rate on both the
current and forward-looking elements of the provision.
2. Cash redress. Sensitivity analysis shows the impact of a 5
percentage point change in the amount of the cash redress
provision.
The table above shows the increase or decrease in total
provision charge resulting from reasonably possible changes in the
key uphold rate assumption. The Board considers that this
sensitivity analysis covers the full range of likely outcomes based
on the fact that a significant portion of claims has been
decisioned already.
It is possible that the eventual outcome may differ materially
from the current estimate and could materially impact the financial
statements as a whole. This is due to the risks and inherent
uncertainties surrounding the assumptions used in the provision
calculation.
3. Segment reporting
The Group has one operating segment based on the geographical
location of its operations, being the UK. IFRS 8 requires segment
reporting to be based on the internal financial information
reported to the chief operating decision maker. The Group's chief
operating decision maker is deemed to be the Group's Executive
Committee ("ExCo") whose primary responsibility is to support the
Chief Executive Officer ("CEO") in managing the Group's day-to-day
operations and analyse trading performance.
Amigo Loans Ireland Limited, registered in Ireland, is not a
reportable operating segment, as it is not separately included in
the reports provided to the strategic steering committee. The
results of these operations are included in the "other segments"
column. Amigo Loans Ireland Limited was, in prior years, reported
as a separate segment but it no longer meets the criteria for
separate segment reporting. Amigo Loans Ireland Limited was sold by
the Group to the CEO of the business in a management buy-out on 28
February 2023.
The table below presents the Group's performance on a segmental
basis for the year to 31 March 2023 in line with reporting to the
chief operating decision maker:
Year to Year to Year to
31 Mar 31 Mar 31 Mar
23 23 23
GBPm GBPm GBPm
Year ended 31 March 2023 UK Other Total
---------------------------------------------------------- ------- ------- -------
Revenue 19.2 0.1 19.3
Interest payable and funding facility fees (3.6) - (3.6)
Interest receivable 1.5 - 1.5
Impairment of amounts receivable from customers 3.4 - 3.4
---------------------------------------------------------- ------- ------- -------
Administrative and other operating expenses (37.5) 1.3 (36.2)
Complaints provision expense (19.1) - (19.1)
---------------------------------------------------------- ------- ------- -------
Total operating (expense)/income (56.6) 1.3 (55.3)
(Loss)/profit before tax (36.1) 1.4 (34.7)
Tax charge on profit (0.1) - (0.1)
---------------------------------------------------------- ------- ------- -------
(Loss)/profit and total comprehensive income attributable
to equity shareholders of the Group (36.2) 1.4 (34.8)
---------------------------------------------------------- ------- ------- -------
31 Mar 31 Mar 31 Mar
23 23 23
GBPm GBPm GBPm
UK Other Total
-------------------------- ------ ------ ------
Gross loan book(1) 63.4 - 63.4
-------------------------- ------ ------ ------
Less impairment provision (18.0) - (18.0)
-------------------------- ------ ------ ------
Net loan book(2) 45.4 - 45.4
-------------------------- ------ ------ ------
(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. The results of
each segment have been prepared using accounting policies
consistent with those of the Group as a whole.
Year to Year to Year to
31 Mar 31 Mar 31 Mar
22 22 22
GBPm GBPm GBPm
Year ended 31 March 2022 UK Other Total
--------------------------------------------------- ------- ------- -------
Revenue 88.6 0.9 89.5
--------------------------------------------------- ------- ------- -------
Interest payable and funding facility fees (16.6) (0.1) (16.7)
Interest receivable 0.1 - 0.1
Impairment of amounts receivable from customers (37.4) 0.4 (37.0)
--------------------------------------------------- ------- ------- -------
Administrative and other operating expenses (23.9) (0.7) (24.6)
Complaints provision release 156.6 - 156.6
--------------------------------------------------- ------- ------- -------
Total operating income/(expense) 132.7 (0.7) 132.0
Profit before tax 167.4 0.5 167.9
Tax credit on profit(1) 1.7 - 1.7
--------------------------------------------------- ------- ------- -------
Profit and total comprehensive income attributable
to equity shareholders of the Group 169.1 0.5 169.6
--------------------------------------------------- ------- ------- -------
31 Mar 31 Mar 31 Mar
22 22 22
GBPm GBPm GBPm
UK Other Total
-------------------------- ------ ------ ------
Gross loan book(2) 184.2 1.2 185.4
-------------------------- ------ ------ ------
Less impairment provision (47.1) (0.3) (47.4)
-------------------------- ------ ------ ------
Net loan book (3) 137.1 0.9 138.0
-------------------------- ------ ------ ------
(1) The tax credit for the UK reflects an adjustment for prior
years and a tax refund received during the year.
(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. Revenue
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 (see note 3 for further details).
Year to Year to
31 Mar
23 31 Mar 22
GBPm GBPm
------------------------------------------ ------- ---------
Interest under amortised cost method 19.0 88.2
Modification of financial assets (note 6) 0.3 1.2
Other income - 0.1
------------------------------------------ ------- ---------
19.3 89.5
------------------------------------------ ------- ---------
5. Interest payable and funding facility fees
Year to Year to
31 Mar 31 Mar
23 22
GBPm GBPm
-------------------------------------- ------- -------
Senior secured notes interest payable 3.7 14.9
Funding facility fees (0.1) 1.0
Securitisation interest payable - 0.2
Other finance costs - 0.6
3.6 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.
Other finance costs in the prior year largely represent
non-utilisation fees of GBP0.5m relating to the securitisation
facility.
6. Modification of financial assets
Covid-19 payment holidays and any subsequent extensions were
assessed as non-substantial financial asset modifications under
IFRS 9. The carrying value of historical modification losses at the
year end was GBP0.6m (2022: GBP5.9m).
Year to Year to
31 Mar 23 31 Mar 22
GBPm GBPm
Modification release recognised in revenue - 1.2
Modification release recognised in impairment 0 .1 4.1
----------------------------------------------- --------- ---------
Total modification release 0 .1 5.3
----------------------------------------------- --------- ---------
7. Operating expenses
The main categories of expenditure included in administrative
and other operating expenses are employee costs GBP17.3m
(2022: GBP13.6m), legal, professional and consultancy fees
GBP10.9m (2022: GBP5.1m) and licence fees GBP2.5m (2022: Year
GBP1.9m). Year to to
31 Mar 31 Mar
23 22
Other operating expenses include: GBPm GBPm
---------------------------------------------------------------- ------- ------
Fees payable to the Company's auditor and its associates
for:
- audit of these financial statements 0.2 0.3
- audit of financial statements of subsidiaries 0.4 0.9
- audit-related assurance services1 0.1 0.4
Depreciation of property, plant and equipment 0.5 0.5
Depreciation and interest expense on leased assets 0.3 0.3
Defined contribution pension cost 0.4 0.4
---------------------------------------------------------------- ------- ------
1 Other assurance services includes reviews of interim financial
statements and other assurance services. In 2023, audit fees were
paid to MHA, and in 2022 they were paid to KPMG.
8. Employees
Year to Year to
31 Mar 31 Mar
23 22
GBPm GBPm
------------------------------------------------------ ------- -------
Employee costs
Wages and salaries 10.9 11.1
Social security costs 1.4 1.4
Cost of defined contribution pension scheme (note 23) 0.4 0.4
Share-based payments (note 22) (0.2) (0.4)
Restructuring provision(1) (note 19) 4.2 -
-Other (termination payments) 0.6 1.1
------------------------------------------------------ ------- -------
17.3 13.6
------------------------------------------------------ ------- -------
1 Restructuring provision relates to the cost of redundancies
(see note 19 for further details)
The average monthly number of employees employed by the Group
(including the Directors) during the year, analysed by category,
was as follows:
Year to Year to Year to Year to Year to Year to
31 Mar 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar
23 23 23 22 22 22
UK Other Total UK Other Total
----------------- ------- ------- ------- ------- ------- -------
Employee numbers
Operations 101 7 108 151 7 158
Support 101 3 104 97 5 102
----------------- ------- ------- ------- ------- ------- -------
202 10 212 248 12 260
----------------- ------- ------- ------- ------- ------- -------
Operations roles are customer supporting roles such as
collections and complaints handling teams. Support teams include
but are not limited to: IT, HR, finance and legal.
Average headcount decreased by 48 in the current year as
compared to prior year, reflecting the reduction in size of book
over the year.
9. Key management remuneration
The remuneration of the Executive and Non-Executive Directors,
who are the key management personnel of the Group, is set out below
in aggregate for each of the categories specified in IAS 24 Related
Party Disclosures.
Year to Year to
31 Mar 31 Mar
23 22
GBPm GBPm
-------------------------------------------------------- ------- -------
Key management emoluments including employers' National
Insurance costs 1.8 1.6
Termination payments 0.6 -
2.4 1.6
-------------------------------------------------------- ------- -------
During the year retirement benefits were accruing for one
Director (2022: one) in respect of defined contribution pension
schemes. There are no other benefits relating to key management
personnel except for those disclosed above.
The highest paid Director in the current year received
remuneration of GBP1,417,007 inclusive of employers' National
Insurance payments, of which GBP630,000 related to loss of office
payments (2022: GBP745,005 inclusive of employers' National
Insurance payments).
The value of the Group's contributions paid to a defined
contribution pension scheme in respect of the highest-paid Director
amounted to GBPnil due to an election being made for payment in
lieu of pension (2022: GBPnil).
10. Taxation
The applicable corporation tax rate for the period to 31 March
2023 was 19.0% (2022: 19.0%) and the effective tax rate is negative
0.3% (2022: negative 1.0%).
Year to Year to
31 Mar 31 Mar
23 22
GBPm GBPm
------------------------------------------- ------- -------
Corporation tax
Current tax on (loss)/profit for the year 0.1 (0.3)
Adjustments in respect of previous periods - (1.4)
------------------------------------------- ------- -------
Total current tax charge/(credit) 0.1 (1.7)
Taxation charge/(credit) on (loss)/profit 0.1 (1.7)
------------------------------------------- ------- -------
A reconciliation of the actual tax charge/(credit), shown above,
and the (loss)/profit before tax multiplied by the standard rate of
tax, is as follows:
Year to Year to
31 Mar 31 Mar
23 22
GBPm GBPm
--------------------------------------------------------- ------- -------
(Loss)/profit before tax (34.7) 167.9
--------------------------------------------------------- ------- -------
(Loss)/profit before tax multiplied by the standard rate
of corporation tax in the UK of 19% (2022: 19%) (6.6) 31.9
Effects of:
Expenses not deductible for tax purposes 0.8 0.7
Non-taxable income - (0.6)
Adjustments to tax charge in respect of prior periods - (1.4)
Other (0.1) -
Current-year (losses)/profits for which no deferred tax
asset is recognised 6.0 (32.3)
--------------------------------------------------------- ------- -------
Total tax charge/(credit) for the year 0.1 (1.7)
--------------------------------------------------------- ------- -------
Effective tax rate (0.3)% (1.0)%
--------------------------------------------------------- ------- -------
The Finance Act 2021 increased the UK corporation tax rate from
19% to 25% with effect from 1 April 2023. While this change does
not affect the current tax position for the year, it will affect
future periods.
11. Deferred tax
A deferred tax asset is recognised to the extent that it is
expected that it will be recovered in the form of economic benefits
that will flow to the Group in future periods. In recognising the
asset, management judgement on the future profitability and any
uncertainties surrounding the profitability is required to
determine that future economic benefits will flow to the Group in
which to recover the deferred tax asset that has been recognised.
Further details of the assessment performed by management and the
key factors included in this assessment can be found under the
going concern considerations in note 1.1.
A deferred tax asset of GBP41.8m at the substantively enacted
rate of 25% (FY22: GBP35.3m at 25%) has not been recognised given
that the Group is now being wound down, and there is no expectation
of suitable future taxable profits. This is comprised of GBP36.3m
(FY22: GBP28.5m) in relation to GBP145m (FY22: GBP114m) of
unutilised tax losses and GBP5.6m (FY22: GBP6.8m) in relation to
other timing differences of GBP22.3m (FY22: GBP27m).
The UK statutory rate for FY23 is 19% (FY22: 19%). Finance Act
2021 increased the UK corporation tax rate from 19% to 25% with
effect from 1 April 2023, which impacts the deferred tax position
in the current period.
12. (Loss)/earnings per share
Basic (loss)/earnings per share is calculated by dividing the
(loss)/profit for the period attributable to equity shareholders by
the weighted average number of ordinary shares outstanding during
the period.
Diluted (loss)/earnings per share calculates the effect on
(loss)/earnings per share assuming conversion of all dilutive
potential ordinary shares. In the current year, following the
closure of the performance-related share incentive plans and
non-performance-related schemes, there are no dilutive potential
ordinary shares. Dilutive potential ordinary shares in the prior
year were calculated as follows:
i) For share awards outstanding under performance-related share
incentive plans, such as the Share Incentive Plan ("SIP)" and the
Long Term Incentive Plans ("LTIPs"), the number of dilutive
potential ordinary shares is calculated based on the number of
shares which would be issuable if the end of the reporting period
is assumed to be the end of each 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 loss per share.
31 Mar 31 Mar
23 22
Pence Pence
-------------------------------------------------------- ------ ------
Basic (loss)/earnings per share (7.3) 35.7
Diluted (loss)/earnings per share1 (7.3) 35.7
Adjusted (loss)/earnings per share (basic and diluted)2 (2.0) 2.8
-------------------------------------------------------- ------ ------
1 The effects of anti-dilutive potential ordinary shares are
ignored in calculating diluted loss per share.
2 Adjusted basic (loss)/earnings per share and earnings for
adjusted basic earnings(loss) per share are non-GAAP measures.
The Directors are of the opinion that the publication of the
adjusted (loss)/earnings per share is useful as it gives a better
indication of ongoing business performance. Reconciliations of the
loss used in the calculations are set out below.
31 Mar 31 Mar
23 22
GBPm GBPm
---------------------------------------------- ------ -------
(Loss)/profit for basic EPS (34.8) 169.6
Complaints provision expense/(release) 19.1 (156.6)
Restructuring expense 4.5 -
Onerous contract expense 1.9 -
Senior secured notes redemption - 0.7
Write-off of unamortised securitisation fees - 0.5
Tax provision release - (0.8)
Less tax impact - (0.1)
(Loss)/profit for adjusted basic EPS 1 (9.3) 13.3
---------------------------------------------- ------ -------
Basic weighted average number of shares (m) 475.3 475.3
---------------------------------------------- ------ -------
Dilutive potential ordinary shares (m)(2) - -
---------------------------------------------- ------ -------
Diluted weighted average number of shares (m) 475.3 475.3
---------------------------------------------- ------ -------
1. Adjusted basic (loss)/profit per share and earnings for
adjusted basic (loss) per share are non-GAAP measures.
2. Although the Group issued further options' under the employee
share schemes in the prior year, upon assessment of the dilutive
nature of the options, some options are not considered dilutive as
they would not meet the performance conditions. Those dilutive
shares included are in relation to the employee October 2020 SAYE
scheme and time apportioned for the year. Please see note 22 for
further details.
13. 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.
31 Mar 31 Mar
23 22
GBPm GBPm
--------------------------------------------- ------ ------
Stage 1 42.2 128.8
Stage 2 11.0 32.4
Stage 3 10.2 24.2
--------------------------------------------- ------ ------
Gross loan book 63.4 185.4
Deferred broker costs1 - stage 1 0.2 1.5
Deferred broker costs1 - stage 2 0.1 0.4
Deferred broker costs1 - stage 3 - 0.3
--------------------------------------------- ------ ------
Loan book inclusive of deferred broker costs 63.7 187.6
Provision (18.0) (47.4)
--------------------------------------------- ------ ------
Customer loans and receivables 45.7 140.2
--------------------------------------------- ------ ------
(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.
Ageing of gross loan book (excluding deferred brokers' fees and
provision) by days overdue:
31 Mar 31 Mar
23 22
GBPm GBPm
---------------- ------ ------
Current 43.7 132.1
1-30 days 6.7 21.1
31-60 days 2.7 8.0
>60 days 10.3 24.2
---------------- ------ ------
Gross loan book 63.4 185.4
---------------- ------ ------
The following table further explains changes in the gross
carrying amount of loans receivable from customers to explain their
significance to the changes in the loss allowance for the same
portfolios.
Stage Stage Stage
1 2 3 Total
-----------------------------------------------
Year ended 31 March 2023 GBPm GBPm GBPm GBPm
----------------------------------------------- ------ ------ ------ ------
Gross carrying amount at 1 April 2022 128.8 32.4 24.2 185.4
----------------------------------------------- ------ ------ ------ ------
Deferred broker fees 1.5 0.4 0.3 2.2
----------------------------------------------- ------ ------ ------ ------
Loan book inclusive of deferred broker costs
at 1 April 2022 130.3 32.8 24.5 187.6
----------------------------------------------- ------ ------ ------ ------
Changes in gross carrying amount attributable
to:
Transfer of loans receivable to stage 1 3.1 (3.0) (0.1) -
Transfer of loans receivable to stage 2 (9.5) 10.1 (0.6) -
Transfer of loans receivable to stage 3 (6.9) (3.2) 10.1 -
Passage of time1 (28.4) (7.8) (3.0) (39.2)
Customer settlements (37.6) (5.9) (1.3) (44.8)
Loans charged off (11.4) (11.9) (20.0) (43.3)
Modification loss relating to Covid-19 payment
holidays (note 6) 4.1 0.3 0.9 5.3
Net movement in deferred broker fees (1.3) (0.3) (0.3) (1.9)
----------------------------------------------- ------ ------ ------ ------
Loan book inclusive of deferred broker costs
as at 31 March 2023 42.4 11.1 10.2 63.7
----------------------------------------------- ------ ------ ------ ------
Stage Stage Stage
1 2 3 Total
-----------------------------------------------
Year ended 31 March 2022 GBPm GBPm GBPm GBPm
----------------------------------------------- ------ ------ ------ ------
Gross carrying amount at 1 April 2021 311.5 61.4 50.0 422.9
----------------------------------------------- ------ ------ ------ ------
Deferred broker fees 7.2 1.4 1.1 9.7
----------------------------------------------- ------ ------ ------ ------
Loan book inclusive of deferred broker costs
at 1 April 2021 318.7 62.8 51.1 432.6
----------------------------------------------- ------ ------ ------ ------
Changes in gross carrying amount attributable
to:
Transfer of loans receivable to stage 1 16.3 (15.8) (0.5) -
Transfer of loans receivable to stage 2 (50.4) 51.4 (1.0) -
Transfer of loans receivable to stage 3 (15.6) (9.6) 25.2 -
Passage of time1 (63.4) (13.1) (3.2) (79.7)
Customer settlements (60.3) (10.4) (1.9) (72.6)
Loans charged off (18.3) (31.4) (43.8) (93.5)
Modification loss relating to Covid-19 payment
holidays (note 6) 9.0 (0.1) (0.6) 8.3
Net movement in deferred broker fees (5.7) (1.0) (0.8) (7.5)
----------------------------------------------- ------ ------ ------ ------
Loan book inclusive of deferred broker costs
as at 31 March 2022 130.3 32.8 24.5 187.6
----------------------------------------------- ------ ------ ------ ------
1 Passage of time relates to amortisation of loan balances over
the course of the financial year, due to cash payments partially
offset by interest accruals.
As shown in the table above, the loan book inclusive of deferred
broker cost decreased from GBP1 87.6 m to GBP63.7m at 31 March
2023. This was primarily driven by the effect of passage of time
(loan balances amortising throughout the period), customer
settlements and no originations on these loans in the year. The
originations in the year related to the RewardRate brand. These are
shown as held for sale assets (note 14).
The following tables explain the changes in the loan loss
provision between the beginning and the end of the period:
Stage Stage Stage
1 2 3 Total
-----------------------------------------------
Year ended 31 March 2023 GBPm GBPm GBPm GBPm
----------------------------------------------- ----- ----- ------ ------
Loan loss provision as at 1 April 2022 18.1 8.9 20.4 47.4
Changes in loan loss provision attributable
to:
Transfer of loans receivable to stage 1 0.5 (0.5) (0.1) (0.1)
Transfer of loans receivable to stage 2 (1.3) 2.9 (0.5) 1.1
Transfer of loans receivable to stage 3 (1.0) (0.9) 8.2 6.3
Passage of time1 (4.0) (2.0) (2.4) (8.4)
Customer settlements (5.2) (1.4) (1.0) (7.6)
Loans charged off (1.6) (3.9) (16.6) (22.1)
Management overlay 0.1 0.1 0.6 0.8
Modification loss relating to Covid-19 payment
holidays (note 6) 0.5 0.1 - 0.6
Loan loss provision as at 31 March 2023 6.1 3.3 8.6 18.0
----------------------------------------------- ----- ----- ------ ------
Stage Stage Stage
1 2 3 Total
-----------------------------------------------
Year ended 31 March 2022 GBPm GBPm GBPm GBPm
----------------------------------------------- ----- ----- ------ ------
Loan loss provision as at 1 April 2021 21.0 14.1 46.9 82.0
Changes in loan loss provision attributable
to:
Transfer of loans receivable to stage 1 1.2 (1.4) (0.4) (0.6)
Transfer of loans receivable to stage 2 (3.5) 8.4 (0.8) 4.1
Transfer of loans receivable to stage 3 (1.1) (1.5) 20.9 18.3
Passage of time1 (4.4) (2.1) (2.6) (9.1)
Customer settlements (4.2) (1.2) (1.6) (7.0)
Loans charged off (1.2) (8.5) (36.3) (46.0)
Management overlay 0.1 0.1 0.5 0.7
Modification loss relating to Covid-19 payment
holidays (note 6) 0.6 - (0.1) 0.5
Remeasurement of ECLs 9.6 1.0 (6.1) 4.5
----------------------------------------------- ----- ----- ------ ------
Loan loss provision as at 31 March 2022 18.1 8.9 20.4 47.4
----------------------------------------------- ----- ----- ------ ------
1 Passage of time relates to amortisation of loan balances over
the course of the financial year, due to cash payments partially
offset by interest accruals.
As shown in the above tables, the allowance for ECL decreased
from GBP4 7.4 m at 31 March 2022 to GBP18.0m at 31 March 2023. The
overall provision has reduced as the book amortises and ages in the
absence of new originations on these loans.
The following table splits the gross loan book by arrears
status, and then by stage respectively for the year ended 31 March
2023.
Stage Stage Stage
1 2 3 Total
GBPm GBPm GBPm GBPm
----------- ----- ----- ----- -----
Up to date 39.7 4.0 - 43.7
1-30 days 2.5 4.2 - 6.7
31-60 days - 2.8 - 2.8
>60 days - - 10.2 10.2
----------- ----- ----- ----- -----
42.2 11.0 10.2 63.4
----------- ----- ----- ----- -----
The following table splits the gross loan book by arrears
status, and then by stage respectively for the year ended 31 March
2022.
Stage Stage Stage
1 2 3 Total
GBPm GBPm GBPm GBPm
----------- ----- ----- ----- -----
Up to date 120.5 11.6 - 132.1
1-30 days 8.3 12.8 - 21.1
31-60 days - 8.0 - 8.0
>60 days - - 24.2 24.2
----------- ----- ----- ----- -----
128.8 32.4 24.2 185.4
----------- ----- ----- ----- -----
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.
31 Mar 31 Mar
23 22
Customer loans and receivables GBPm GBPm
------------------------------- ------ ------
Due within one year 45.4 113.0
Due in more than one year - 25.0
------------------------------- ------ ------
Net loan book 45.4 138.0
Deferred broker costs 1
Due within one year 0.3 1.8
Due in more than one year - 0.4
------------------------------- ------ ------
Customer loans and receivables 45.7 140.2
------------------------------- ------ ------
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.
14. Held for sale assets
Following FCA approval to return to lending, in October 2022,
Amigo launched, on a pilot basis, a new guarantor loan as well as
an unsecured loan product which feature dynamic pricing to reward
on-time payment with lower rates and penalty-free annual payment
holidays. The new products were released under the RewardRate
brand. Following the implementation of the wind down plan on 23
March 2023, new lending immediately ceased. It is considered that,
under IFRS 5, the RewardRate loan book meets the criteria as a held
for sale asset. This conclusion has been reached in the assessment
of the following criteria outlined in IFRS 5:
-- Carrying amount to be recovered principally through the sale
- given the loan book will run for approximately five years based
on loan term, this far exceeds the current wind down plan timeline
and any period that would be economical to collect. The only
reasonable solution to maximise creditor returns is to sell the
RewardRate loan book rather than collect it to term.
-- Asset is available for immediate sale - The loan book is
considered to be available for sale reasonably imminently.
-- Sale is highly probable It is considered given the nascency
of the book and the robustness of creditworthiness, alongside
initial indications of interest, a sale is more likely than
not.
Given the Group expects to sell the loan book at a discount
(i.e. below carrying value) it will be measured at the fair value
less costs to sell.
It is not expected to incur costs to sell the asset and
therefore can recognise the asset at fair value - i.e. the price it
expects to receive from a third party purchasing the asset.
15. Financial instruments
The below tables show the carrying amounts and fair values of
financial assets and financial liabilities, including the levels in
the fair value hierarchy. The tables analyse financial instruments
into a fair value hierarchy based on the valuation technique used
to determine fair value:
a) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
b) Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices).
c) Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
31 Mar 23 31 Mar 22
--------------- ----------------
Carrying Fair Carrying Fair
Fair value amount value amount Value
hierarchy GBPm GBPm GBPm GBPm
--------------------------------------- ----------- -------- ----- -------- ------
Financial assets not measured at fair
value 1
Level
Amounts receivable from customers2 3 45.7 -17.2 140.2 125.0
Level
Held for sale assets 3 1.1 1.1 - -
Level
Other receivables 3 1.5 1.5 1.6 1.6
Level
Cash and cash equivalents (restricted) 1 107.2 107.2 7.6 7.6
Level
Cash and cash equivalents 1 62.4 62.4 133.6 133.6
--------------------------------------- ----------- -------- ----- -------- ------
217.9 189.4 283.0 267.8
--------------------------------------------------- -------- ----- -------- ------
Financial liabilities not measured
at fair value 1
Level
Other liabilities 3 (6.0) (6.0) (6.7) (6.7)
Level
Senior secured notes(3) 1 - - (49.7) (48.7)
(6.0) (6.0) (56.4) (55.4)
--------------------------------------------------- -------- ----- -------- ------
1 The Group has disclosed the fair values of financial
instruments such as short-term trade receivables and payables at
their carrying value because it considers this is a reasonable
approximation of fair value.
2 The unobservable inputs in the fair value calculation of
amounts receivable from customers are balance adjustments arising
from upheld Scheme claims, expected credit losses, forecast cash
flows and discount rate. As both balance adjustments and lifetime
expected credit losses are embedded in the calculation, this
results in a fair value lower than the carrying amount.
3 Senior secured notes are presented in the financial statements
net of unamortised fees. As at 31 March 2023, the gross principal
amount outstanding was GBP0m (2022: GBP50.0m). The fair value
reflects the market price of the notes at the financial year
end.
Financial instruments not measured at fair value
The fair value of amounts receivable from customers has been
estimated using a net present value calculation using discount
rates derived from the blended effective interest rate of the
instruments. As these loans are not traded on an active market and
the fair value is therefore determined through future cash flows,
they are classed as Level 3 under IFRS 13: Fair Value
Measurement.
The fair value of senior secured notes has been taken at the
Bloomberg Valuation Service ("BVAL") market price.
All financial instruments are held at amortised cost. There are
no derivative assets in the current or prior period.
The Group's activities expose it to a variety of financial
risks, which are categorised under credit risk and treasury risk.
The objective of the Group's risk management framework is to
identify and assess the risks facing the Group and to minimise the
potential adverse effects of these risks on the Group's
performance. Financial risk management is overseen by the Group
Risk Committee alongside other principal risks: operational,
regulatory, strategic and conduct risks.
Credit risk
Credit risk is the risk that the Group will suffer loss in the
event of a default by a customer or a bank counterparty. A default
occurs when the customer or bank fails to honour repayments as they
fall due. Amigo defines both borrowers and, where applicable,
guarantors as customers.
a) Amounts receivable from customers
Whilst Amigo currently has only a single product in a single
market for the legacy lending, and two products for the pilot
lending (solo and guarantor), there is a limited concentration of
risk to individual customers with an average customer balance
outstanding on the legacy lending of GBP2,181 (2022: GBP2,540), and
for the pilot lending GBP5,238 (2022: GBPnil). The carrying amount
of the loans represents the Group's maximum exposure to credit
risk.
The Group carried out an affordability assessment on the
customer before a loan could be paid out. As a separate exercise,
each potential loan undergoes a creditworthiness assessment based
on the customer's credit history.
The Group managed credit risk at origination by actively
managing the blend of risk in its portfolio to achieve the desired
impairment rates in the long term. This objective was achieved by
managing application scorecards and the maximum exposure to
individual customers depending on their circumstance and credit
history. Credit risk exposure at origination has been minimal in
the year due to the low value of lending during the pilot period
for the new RewardRate product.
Credit risk continues to be managed post-origination via ongoing
monitoring and collection activities. When payments are missed,
regular communication with customers commences. We will contact the
borrower and, where applicable, the guarantor from day one to
advise them of the missed payment and seek to agree a resolution
with the borrower. For loans supported by a guarantor, if we are
unable to resolve with the borrower, then we will turn to the
guarantor for payment after fourteen days. Throughout this whole
process, operational flags will be added to the account to allow
monitoring of the status of the account. Operational flags are used
within the Group's impairment model in the assessment of whether
there has been a significant increase in credit risk on an account
(see note 2.1.2 for further details).
Risk segmentation - Previously the IFRS 9 provision was
segmented into Amigo's risk segments. It is apparent that due to
the impact of Covid-19 these segments no longer have discernible
credit risk profiles. Instead, and with a view for simplicity, the
book is bifurcated into customers who have had a Covid-19
forbearance plan and those that have not, along with the lending
pilot.
b) Bank counterparties
This credit risk is managed by the Group's key management
personnel. This risk is deemed to be low; derivative financial
instruments held are immaterial to the Group, and cash deposits are
only placed with high quality counterparties such as tier 1 bank
institutions.
Treasury risk
Interest rate risk
Interest rate risk is the risk of a change in external interest
rates which leads to an increase in the Group's cost of borrowing.
The Group seeks to limit the net exposure to changes in interest
rates. Interest rate risk has diminished in the period as debt with
a variable interest rate has been paid off.
Foreign exchange risk
Foreign exchange rate risk is the risk of a change in foreign
currency exchange rates leading to a reduction in profits or
equity. There is no significant foreign exchange risk to the Group.
The Group does incur some operating costs in US Dollar and Euro,
which it does not hedge as there would be minimal impact on
reported profits and equity. Amigo Luxembourg S.A. is a GBP
functional currency entity and gives no foreign exchange exposure
upon consolidation. During the year the Group was exposed to
foreign exchange risk through its Amigo Ireland operation, but this
was considered immaterial; as at 31 March 2022 the Irish net loan
book represented 0.7% of the Group's consolidated net loan book.
During the year the Group disposed of its Irish operation. Hence,
foreign exchange risk is deemed immaterial.
Liquidity risk
Liquidity risk is the risk that the Group will have insufficient
liquid resources to fulfil its operational plans and/or meet its
financial obligations as they fall due. Liquidity risk is managed
by the Group's central finance department through daily monitoring
of expected cash flows and ensuring sufficient funds are available
to meet obligations as they fall due. The unrestricted cash and
cash equivalents balance at 31 March 2023 was GBP 62.4m
Since entering the Fallback solution the management of cash
balances has changed substantially in line with obligations under
the Court approved Scheme of Arrangement. The Scheme was designed
to ensure the Group could carry out an orderly wind down, which
includes having access to sufficient liquidity from previously
restricted balances. This sufficiently mitigates the risk that
would otherwise arise due to the Group having no immediately
accessible debt facilities.
Capital management
Since entering the Fallback Solution the Board is no longer
actively seeking new capital to sustain the business.
31 Mar 31 Mar
23 22
GBPm GBPm
------------------------------------------- --------------------- --------
Maturity analysis of financial liabilities
Analysed as:
Due within one year
Other liabilities (6.0) (6.7)
Due in one to two years
Senior secured notes - (49.7)
(6.0) (56.4)
------------------------------------------- --------------------- --------
Maturity analysis of contractual cash flows of financial
liabilities
Carrying
0-1 year 1-2 years Total amount
As at 31 March 2023 GBPm GBPm GBPm GBPm
-------------------- -------- --------- ----- --------
Other liabilities 6.0 - 6.0 6.0
-------------------- -------- --------- ----- --------
Carrying
0-1 year 2-5 years Total Amount
As at 31 March 2022 GBPm GBPm GBPm GBPm
--------------------- -------- --------- ----- --------
Other liabilities 6.7 - 6.7 6.7
Senior secured notes 3.8 53.8 57.6 49.7
10.5 53.8 64.3 56.4
--------------------- -------- --------- ----- --------
16. Other receivables
31 Mar 31 Mar
23 22
GBPm GBPm
------------------------------- ------ ------
Current
Other receivables 0.2 0.6
Prepayments and accrued income 1.3 1.0
1.5 1.6
------------------------------- ------ ------
17. Trade and other payables
31 Mar 31 Mar
23 22
GBPm GBPm
------------------------------------- ------ ------
Current
Accrued senior secured note interest - 0.8
Trade payables 0.9 0.4
Taxation and social security 0.3 0.4
Other creditors(1) 1.9 1.1
Accruals 2.9 4.0
6.0 6.7
------------------------------------- ------ ------
(1) Other creditors include an onerous contract provision of
GBP1.3m in relation to the Reward Rate (RR) product. The product
has a number of associated supplier contracts that cannot either be
terminated, or a termination fee has been negotiated to end the
contract early. These unavoidable costs are expected to be GBP1.8m
which is greater than the economic benefits (actual achieved and
forecast) of the potential RR loan book sale (expected to be
GBP1.5m). At 31 March 2023 GBP0.5m has already been paid and
GBP1.3m remains payable. Revenue generated from RR is separately
distinguishable. Contracts associated with the pay-out process for
the RR product are considered as onerous from March 2023 following
the announcement that the business would stop new lending.
Contracts associated with the independent RR loan book platform are
considered onerous from the expected date of the debt sale.
18. Bank and other borrowings
31 Mar 31 Mar
23 22
GBPm GBPm
---------------------------------------- ------ ------
Current and non-current liabilities
Amounts falling due in one to two years
Senior secured notes - 49.7
- 49.7
---------------------------------------- ------ ------
Below is a reconciliation of the Group's borrowing
liabilities:
31 Mar 31 Mar
23 22
GBPm GBPm
---------------------------------------------- ------ -------
Opening Group borrowings 49.7 2 96.5
---------------------------------------------- ------ -------
(2 48.5
Repayment of external funding (50.0) )
Interest expense relating to Group borrowings 4.8 1 9.6
(17 .9
Interest paid relating to Group borrowings (4.5) )
Closing Group borrowings - 4 9.7
---------------------------------------------- ------ -------
The Group's Senior secured notes in the form of GBP49.7m high
yield bonds with a coupon rate of 7.625% which were due to expire
in January 2024, were redeemed early in March 2023.
19. 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.
2023 2022
Complaints Restructuring Total Complaints Restructuring Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ---------- ------------- ------ ---------- ------------- -------
Opening provision 179.8 - 179.8 344.6 1.0 345.6
Provisions made/(released)
during year 19.1 4.5 23 .6 (156.6) - (156.6)
Net utilisation of the
provision (3.0) - (3.0) (8.2) (1.0) (9.2)
--------------------------- ---------- ------------- ------ ---------- ------------- -------
Closing provision 195.9 4.5 2 00.4 179.8 - 179.8
--------------------------- ---------- ------------- ------ ---------- ------------- -------
Non-current - - - 9 7.0 - 97.0
Current 195.9 4.5 200.4 82.8 - 82.8
--------------------------- ---------- ------------- ------ ---------- ------------- -------
200
195.9 4.5 .4 179.8 - 179.8
--------------------------- ---------- ------------- ------ ---------- ------------- -------
Customer complaints redress
As at 31 March 2023, the Group has recognised a complaints
provision totalling GBP195.9m in respect of customer complaints
redress and associated costs. Utilisation in the period totalled
GBP3.0m. The liability has increased by GBP16.1m compared to prior
year. The closing provision is comprised of an estimate of cash
liability, balance adjustments which have decreased with the
passage of time, due to the collection of customer balances, and an
estimate of refunds to upheld Scheme claimants for collections made
since Scheme effective date, which will be redressed in full and
attract compensatory interest.
On an underlying basis the liability for customer redress has
increased approximately GBP27m, which is reflective of both
increased volume of claims, now known, and the estimated rate of
the claims that are upheld. The uphold rate in prior year was
estimated at 65% based primarily on empirical evidence from
comparable schemes, this has been revised to 81% as at 31 March
2023 based on actual decisioning data from material portion of the
claimant population.
The Group continues to monitor its policies and processes to
ensure that it responds appropriately to customer complaints.
The Group will continue to assess both the underlying
assumptions in the calculation and the adequacy of this provision
periodically using actual experience and other relevant evidence to
adjust the provisions where appropriate.
The Group anticipates the redress programme will be complete, or
substantially complete, within twelve months of the year end.
Uncertainties exist around the timing of completion of the redress
programme due to operational complexity and the potential for
customer appeals.
Restructuring provision
As at 31 March 2023, the Group recognised a restructuring
provision totalling GBP4.5m in respect of the expected cost of
staff redundancies and liquidator costs due to wind down of the
business.
20. Leases
All right-of-use assets relate to property leases. For
short-term and low-value leases, lease payments are recognised in
the consolidated statement of comprehensive income on a
straight-line basis over the lease term. Short-term and low-value
leases are immaterial to the Group.
2023 2022
Right-of-use assets GBPm GBPm
--------------------------------------------------------- ----- -----
Cost
At 1 April 2022/1 April 2021 1.4 1.4
Restatement of lease term (0.5) -
--------------------------------------------------------- ----- -----
At 31 March 2023/31 March 2022 0.9 1.4
--------------------------------------------------------- ----- -----
Accumulated depreciation and impairment
As at 1 April 2022/1 April 2021 (0.6) (0.4)
Charged to consolidated statement of other comprehensive
income (0.2) (0.2)
--------------------------------------------------------- ----- -----
At 31 March 2023/31 March 2022 (0.8) (0.6)
--------------------------------------------------------- ----- -----
Net book value at 31 March 2023/31 March 2022 0.1 0.8
--------------------------------------------------------- ----- -----
Lease liabilities
2023 2022
GBPm GBPm
------------ ---- ----
Current 0.1 0.3
Non-current - 0.6
------------ ---- ----
Total 0.1 0.9
------------ ---- ----
A maturity analysis of the lease liabilities is shown below:
2023 2022
GBPm GBPm
------------------------------- ---- -----
Due within one year 0.1 0.3
Due between one and five years - 0.5
Due in more than five years - 0.2
------------------------------- ---- -----
Total 0.1 1.0
------------------------------- ---- -----
Unearned finance cost - (0.1)
------------------------------- ---- -----
Total lease liabilities 0.1 0.9
------------------------------- ---- -----
In the year GBP0.3m (GBP0.2m in relation to depreciation and
impairment and GBP0.1m in relation to interest expense) was charged
to the consolidated statement of comprehensive income in relation
to leases (2022: GBP0.3m). Lease liabilities relate to Amigo's
offices in Bournemouth.
Following the decision to revert to the Fallback Scheme on 23
March 2023, the right of use assets and lease liabilities have been
remeasured to reflect a reduction in useful life in accordance with
IFRS 16.
21. Share capital
On 4 July 2018 the Company's shares were admitted to trading on
the London Stock Exchange. Immediately prior to admission the
shareholder loan notes were converted to equity, increasing the
share capital of the business to 475m ordinary shares and
increasing net assets by GBP207.2m. No additional shares were
issued subsequent to conversion of the shareholder loan notes.
Allotted and called up shares at par value
31 Mar
23
GBP'000
Total
------------------------------------------------ -------
41,000 deferred ordinary shares of GBP0.24 each 10
475,333,760 ordinary shares of 0.25p each 1,188
-------------------------------------------------- -------
1,198
------------------------------------------------ -------
31 Mar
22
GBP'000
Total
------------------------------------------------ -------
41,000 deferred ordinary shares of GBP0.24 each 10
475,333,760 ordinary shares of 0.25p each 1,188
-------------------------------------------------- -------
1,198
------------------------------------------------ -------
Ordinary Ordinary Ordinary Ordinary
A B C D Ordinary Total
Number Number Number Number Number Number
---------------------- --------- -------- -------- -------- ----------- -----------
At 31 March 2018 803,574 41,000 97,500 57,926 - 1,000,000
Subdivision (803,574) (41,000) (97,500) (57,926) 400,000,000 399,000,000
Shareholder loan note
conversion - - - - 75,333,760 75,333,760
---------------------- --------- -------- -------- -------- ----------- -----------
At 31 March 2019 - - - - 475,333,760 475,333,760
---------------------- --------- -------- -------- -------- ----------- -----------
At 31 March 2020 - - - - 475,333,760 475,333,760
---------------------- --------- -------- -------- -------- ----------- -----------
At 31 March 2021 - - - - 475,333,760 475,333,760
---------------------- --------- -------- -------- -------- ----------- -----------
At 31 March 2022 - - - - 475,333,760 475,333,760
---------------------- --------- -------- -------- -------- ----------- -----------
At 31 March 2023 - - - - 475,333,760 475,333,760
---------------------- --------- -------- -------- -------- ----------- -----------
Ordinary shares
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at general meetings of the Company. Each ordinary share in
the capital of the Company ranks equally in all respects and no
shareholder holds shares carrying special rights relating to the
control of the Company. The nominal value of shares in issue is
shown in share capital, with any additional consideration for those
shares shown in share premium.
Deferred shares
At the time of the IPO and subdivision the 41,000 ordinary B
shares were split into 16,400,000 ordinary shares of 0.25p and
41,000 deferred shares of GBP0.24. The deferred shares do not carry
any rights to receive any profits of the Company or any rights to
vote at a general meeting. Prior to the subdivision the ordinary B
shares had 1.24 votes per share; all other shares had one vote per
share. The Group plans to cancel these deferred shares in due
course.
Dividends
Dividends are recognised through equity, on the earlier of their
approval by the Company's shareholders or their payment.
The Board has decided that it will not propose a final dividend
payment for the year ended 31 March 2023 (2022: GBPnil).
22. Share-based payment
The Group issues share options and awards to employees as part
of its employee remuneration packages. The Group operated three
types of equity settled share scheme: Long Term Incentive Plan
("LTIP"), employee savings-related share option schemes referred to
as Save As You Earn ("SAYE") and the Share Incentive Plan
("SIP").
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 increase 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, taking into account the terms and conditions upon
which the awards were granted.
When an equity settled share option or award is granted, a fair
value is calculated based on: the share price at grant date, the
probability of the option/award vesting, the Group's recent share
price volatility, and the risk associated with the option/award. A
fair value is calculated based on the value of awards granted and
adjusted at each balance sheet date for the probability of vesting
against performance conditions. The fair value of all
options/awards is charged to the consolidated statement of
comprehensive income on a straight-line basis over the vesting
period of the underlying option/award.
The credit to the consolidated statement of comprehensive income
for the year to 31 March 2023 was GBP0.4m (2022: credit of GBP0.4m)
for the Group and Company.
A summary of the awards issued under each scheme is set out
below:
31 Mar 31 Mar
2023 2022
Aug Feb/Mar Dec Sep Aug 2021 Feb/Mar 2021 Dec 2020 Sep 2019
2021 2021 LTIPs 2020 2019 LTIPs LTIPs LTIP LTIP
LTIPs LTIP LTIP
---------------- -------- ------------- -------- -------- ---------- ---------------- ---------- ---------
Performance Yes Yes Yes Yes Yes Yes Yes Yes
condition
Method of Equity Equity Equity Equity Equity Equity Equity Equity
settlement
accounting
Number of
instruments - - - - 3,700,000 2,500,000 4,750,000 688,347
Vesting period N/A N/A N/A N/A 3 years 3 years 3 years 3 years
Exercise price - - - - - - - -
31 Marr 2023 31 Mar 2022
Oct 2020 Sep 2019 Oct 2020 Sep 2019
SAYE SAYE SAYE SAYE
---------------------- ---------------------------------- -------------- ---------- ------------
Performance condition No No No No
Method of settlement Equity Equity Equity Equity
accounting
Number of instruments - - 2,747,494 37,781
Vesting period N/A N/A 3.3 years 3.3 years
Exercise price - - 0.097 0.6368
---------------------------- ---------------------------- -------------- ---------- ------------
31 Mar 2023 31 Mar 2022
2019 SIP 2019 SIP
-------------------------------- ------------ -----------
Performance condition No No
Method of settlement accounting Equity Equity
2,552,822
Number of instruments - (1)
3 years
Vesting period N/A rolling
Exercise price - -
--------------------------------- -------------- -----------
1 This figure includes both matching and partnership shares.
Long Term Incentive Plans ("LTIPs")
With effect from 31 March 2023, all outstanding awards in favour
of Directors, Persons Discharging Management Responsibilities
'PDMR' and employees made under the Amigo Holdings PLC Long Term
Incentive Plan were cancelled for nil consideration.
At the time of the cancellation, there were outstanding LTIP
awards over 8,047,349 ordinary shares of 0.25 pence each in the
Company ("Ordinary Shares"). Over the course of the period since
the introduction of the LTIP, no LTIP awards over Ordinary Shares
have vested.
Details of the cancelled LTIP held by PDMR, totalling awards
over 3,500,000 Ordinary Shares are set out in the table below.
PDMR shares cancelled:
Name Position No. of ord. shares
Nicholas Beal Chief Restructuring Officer 1,000,000
Paul Dyer Chief Operating Officer 1,500,000
Jacob Ranson Chief Customer Officer 1,000,000
Share Incentive Plan ("SIP")
The Company gives participating employees one matching share for
each partnership share acquired on behalf of the employee using
deductions from participating employees' gross salaries. The shares
vest at the end of three years on a rolling basis as they are
purchased, with employees required to stay in employment for the
vesting period to receive the matching shares. Following the move
into wind down all remaining matching shares held in the SIP were
released from the vesting period requirement.
Save As You Earn option plan ("SAYE")
Options under the 2020 scheme were granted on 9 October 2020
(2019 scheme: 23 September 2019).
The Company offers a savings contract that gives participating
employees an opportunity to save a set amount using the
participating employees' net salaries. The shares vest at the end
of three years where the employee has the opportunity to purchase
the shares at the fixed option price, take the funds saved or buy a
portion of shares and take the remaining funds, with the employees
required to stay in employment for the vesting period to receive
the shares; however, the funds can be withdrawn at any point.
The SAYE awards are treated as vesting after three and a quarter
years; the participants will have a window of six months in which
to exercise their options. Due to the short nature of the exercise
window it is reasonable to assume the participants will exercise,
on average, at the mid-point of the exercise window. The SAYE
awards are not subject to the achievement of any performance
conditions.
Following the announcement on 23 March 2023 that the Fallback
Solution under the Scheme of Arrangement was being implemented and
the business was entering an orderly wind down all SAYE plans have
been cancelled, no SAYE options were ever exercised.
23. Pension commitments
The Group operates defined contribution pension schemes for the
benefit of its employees. The assets of the schemes are
administered by trustees in funds independent from those of the
Group.
The total contributions charged during the year amounted to
GBP0.4m (2022: GBP0.4m).
24. Related party transactions
The Group had no related party transactions during the
twelve-month period to 31 March 2023 that would materially affect
the performance of the Group.
Intra-group transactions between the Company and the fully
consolidated subsidiaries or between fully consolidated
subsidiaries are eliminated on consolidation.
Key management of the Group, being the Executive and
Non-Executive Directors of the Board, and the Executive Committee
controlled 0.30% of the voting shares of the Company as at 31 March
2023 (2022: 0.58%). The remuneration of key management is disclosed
in note 9.
25. Structured entities
AMGO Funding (No. 1) Ltd is a special purpose vehicle ("SPV")
formed as part of a securitisation facility to fund the Group. The
consolidated subsidiary and structured entities table in note 28
has further details of the structured entities consolidated into
the Group's financial statements for the year ended 31 March 2023.
This is determined on the basis that the Group has the power to
direct relevant activities, is exposed to variable returns of the
entities and is able to use its power to affect those returns. The
results of the securitisation vehicle are consolidated by the Group
at year end per the Group accounting policy (see note 1.1). The
securitisation structure was closed in November 2022.
26. New standards and interpretations
The following standards, amendments to standards and
interpretations are newly effective in the year in addition to the
ones covered in note 1.1. There has been no significant impact to
the Group as a result of their issue.
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
-- Annual Improvements to IFRS Standards 2018-2020
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)
-- Reference to the Conceptual Framework (Amendments to IFRS 3)
Other standards
The IASB has also issued the following standards, amendments to
standards and interpretations that will be effective from 1 January
2023, however these have not been early adopted by the Group. The
Group does not expect any significant impact on its consolidated
financial statements from these amendments.
-- IFRS 17: Insurance Contracts amendments
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
-- Definition of Accounting Estimate (Amendments to IAS 8)
-- Deferred Tax Related to Assets and Liabilities Arising from a
Single Transaction - Amendments to IAS 12 Income Taxes
-- Initial Application of IFRS 17 and IFRS 9 - Comparative Information (Amendments to IFRS 17)
27. Immediate and ultimate parent undertaking
The immediate and ultimate parent undertaking as at 31 March
2023 is Amigo Holdings PLC, a company incorporated in England and
Wales.
28. Investment in subsidiaries and structured entities
Amigo Loans Group Ltd ("ALGL") is a wholly owned subsidiary of
the Company and a reconciliation to its consolidated results were
included in the presentation pack on the Company's website as part
of ALGL's senior secured note reporting requirements. Following
repayment of the senior secured notes in March 2023 this is no
longer necessary.
The following are subsidiary undertakings of the Company at 31
March 2023 and include undertakings registered or incorporated up
to the date of the Directors' Report as indicated. Unless otherwise
indicated all Group owned shares are ordinary. All entities are
subsidiaries on the basis of 100% ownership and shareholding.
The Irish entity, Amigo Loans International Limited, together
with its subsidiary, Amigo Loans Ireland Limited, was sold by the
Group to the CEO of the business in a management buy-out on 28
February 2023. Following write off of the intercompany balances
there were net liabilities in the Irish entities of less than
GBP0.1m. Consideration for the disposal was GBP1. Prior to
disposal, Amigo Loans Ireland Limited contributed revenue of
GBP0.1m and a loss of GBP0.6m to the Group's results in the year
ending 31 March 2023.
Class of
Country of shares
Name incorporation held Ownership2023 Ownership2022 Principal activity
---------------------------- --------------- --------- ------------- ------------- ------------------
Direct holding
Amigo Loans Group Ltd1 United Kingdom Ordinary 100% 100% Holding company
Special purpose
ALL Scheme Ltd1 United Kingdom Ordinary 100% 100% vehicle
Indirect holdings
Amigo Loans Holdings Ltd1 United Kingdom Ordinary 100% 100% Holding company
Amigo Loans Ltd1 United Kingdom Ordinary 100% 100% Trading company
Amigo Management Services
Ltd1 United Kingdom Ordinary 100% 100% Trading company
Amigo Luxembourg S.A.2 Luxembourg Ordinary 100% 100% Financing company
AMGO Funding (No.1) Ltd Special purpose
3* United Kingdom n/a - SE vehicle
Amigo Car Loans Limited1* United Kingdom Ordinary 100% 100% Dormant company
Vanir Financial Limited1* United Kingdom Ordinary 100% 100% Dormant company
Vanir Business Financial
Limited1* United Kingdom Ordinary 100% 100% Dormant company
Amigo Store Limited1* United Kingdom Ordinary 100% 100% Dormant company
Amigo Group Limited1* United Kingdom Ordinary 100% 100% Dormant company
Amigo Finance Limited1* United Kingdom Ordinary 100% 100% Dormant company
Amigo Loans International
Limited Ireland Ordinary - 100% Holding company
Amigo Loans Ireland Limited Ireland Ordinary - 100% Trading company
---------------------------- --------------- --------- ------------- ------------- ------------------
1 Registered at Unit 11a, The Avenue Centre, Bournemouth, Dorset, BH2 5RP, England.
2 Registered at 9, Rue de Bitbourg, L-1273 Luxembourg.
3 Registered at Level 37, 25 Canada Square, London E14 5LQ.
* Currently under liquidation
29. Post balance sheet events
In April 2023 GBP50.7m of Scheme restricted cash was transferred
to unrestricted cash as permitted under the Fallback Solution to
support the orderly wind down of the business.
On 15 May 2023 Danny Malone resigned from his role as CEO and
Director, subject to serving out his six-month notice period to
ensure the continuation of the solvent and orderly wind down of the
business.
On 9 June 2023 the Board announced that the Company had been
approached by Michael Fleming, a financier and shareholder, to
request an exclusivity arrangement in relation to the business,
which Amigo agreed to. This is to allow Mr Fleming to explore
finding and completing an investment in the Company or its
subsidiaries. The period of exclusivity expires on 6 September
2023. The Agreement will not stop the Company or its subsidiaries
progressing with the disposal of assets under its wind down plan or
acting on any transaction governed by the Takeover Code. There
remain significant impediments to any new capital being made
available to the business. In addition, establishing a new business
and potentially creating value for shareholders in the longer term,
has significant execution risks and will require regulatory
approval.
Company statement of financial position
as at 31 March 2023
31 Mar 31 Mar
23 22
Notes GBPm GBPm
------------------------------------------ ----- --------- ---------
Non-current assets
Investments 2a - 26.1
------------------------------------------ ----- --------- ---------
Current assets
------------------------------------------ ----- --------- ---------
Investments 2a 0.9 -
------------------------------------------ ----- --------- ---------
Total assets 0.9 26.1
------------------------------------------ ----- --------- ---------
Current liabilities
Other payables 3a (70.6) (69.8)
------------------------------------------ ----- --------- ---------
Total liabilities (70.6) (69.8)
------------------------------------------ ----- --------- ---------
Net assets/(liabilities) (69.7) (43.7)
------------------------------------------ ----- --------- ---------
Equity
Share capital 4a 1.2 1.2
Share premium 207.9 207.9
Merger reserve 4.7 4.7
Retained earnings (including loss for the
year of GBP25.6m (2022:loss of GBP47.4m) (283.5) (257.5)
------------------------------------------ ----- --------- ---------
Shareholder equity (69.7) (43.7)
------------------------------------------ ----- --------- ---------
The parent company financial statements were approved and
authorised for issue by the Board and were signed on its behalf
by:
Kerry Penfold
Director
27 July 2023
Company no. 10024479
The accompanying notes form part of these financial
statements.
Company statement of changes in equity
for the year ended 31 March 2023
Share Share Merger Retained Total
reserve
capital premium 1 earnings equity
GBPm GBPm GBPm GBPm GBPm
--------------------------- ------- ------- ------- -------- ------
At 1 April 2021 1.2 207.9 4.7 (209.7) 4.1
Total comprehensive (loss) - - - (47.4) (47.4)
Share-based payments - - - (0.4) (0.4)
--------------------------- ------- ------- ------- -------- ------
At 1 April 2022 1.2 207.9 4.7 (257.5) (43.7)
Total comprehensive income - - - (25.6) (25.6)
Share-based payments - - - (0.4) (0.4)
--------------------------- ------- ------- ------- -------- ------
At 31 March 2023 1.2 207.9 4.7 (283.5) (69.7)
--------------------------- ------- ------- ------- -------- ------
1The merger reserve was created as a result of a Group
reorganisation to create an appropriate holding company structure.
The restructure was within a wholly owned group and so merger
accounting applied under Group reconstruction relief.
The accompanying notes form part of these financial
statements.
Company statement of cash flows
for the year ended 31 March 2023
Year to Year to
31 Mar 31 Mar
23 22
GBPm GBPm
------------------------------------------------- ------- -------
Loss for the period (25.6) (47.4)
Adjustments for:
Impairment of investment in subsidiaries 25.2 48.0
Income tax credit (0.2) (1.1)
Share-based payment (0.4) (0.4)
------------------------------------------------- ------- -------
Operating cash flows before movements in working
capital (1.0) (0.9)
(Decrease)/increase in payables (0.1) 0.2
------------------------------------------------- ------- -------
Net cash (used in) operating activities (1.1) (0.7)
------------------------------------------------- ------- -------
Financing activities
Proceeds from intercompany funding 1.1 0.7
Net cash from financing activities 1.1 0.7
------------------------------------------------- ------- -------
Net movement in cash and cash equivalents - -
Cash and cash equivalents at beginning of period - -
------------------------------------------------- ------- -------
Cash and cash equivalents at end of period - -
------------------------------------------------- ------- -------
The accompanying notes form part of these financial
statements.
Notes to the financial statements - Company
for the year ended 31 March 2023
1a. Accounting policies
i) Basis of preparation of financial statements
Amigo Holdings PLC (the "Company") is a company limited by
shares and incorporated and domiciled in England and Wales.
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
loans to individuals. Previously, its principal activity was to
provide individuals with guarantor loans from GBP2,000 to GBP10,000
over one to five years. No new advances on this lending have been
made since November 2020. Following FCA approval to return to
lending, in October 2022,
Amigo launched, on a pilot basis, a new guarantor loan as well
as an unsecured loan product which featured dynamic pricing to
reward on-time payment with lower rates and penalty-free annual
payment holidays. The new products were released under the
RewardRate brand. With the Fallback Solution being implemented,
leading to a cessation of trade and implementation of a wind down
plan, new lending has been stopped in the current year.
The financial statements have been prepared under the historical
cost convention, in accordance with International Financial
Reporting Standards as adopted by the UK, and in conformity with
the requirements of the Companies Act 2006.
In accordance with the exemption allowed by section 408 of the
Companies Act 2006, the Company has not presented its own income
statement or statement of other comprehensive income.
The functional currency of the Company is GBP. These financial
statements are presented in GBP.
The following principal accounting policies have been
applied:
ii) 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 the
financial statements.
The Directors believe there is no general dispensation from the
measurement, recognition and disclosure requirements of IFRS
despite the Group not continuing as a Going Concern. Therefore,
IFRS is applied accordingly throughout the financial statements.
The relevant accounting standards for each part of the Financial
Statements have been applied on the conditions that existed and
decisions that had been taken by the Board as at or prior to 31
March 2023.
In undertaking a Going Concern review, the Directors considered
the Group's decision to switch the Scheme from the Preferred to the
Fallback Solution, announced on 23 March 2023.
The switch to the Fallback Solution required that the trading
subsidiary, Amigo Loans Ltd ("ALL"), stopped lending with immediate
effect and be placed into an orderly wind down, with the result
that all surplus assets after the wind down will be transferred to
the Scheme creditors. A further requirement of the Fallback
Solution is that ALL be placed into liquidation within two months
of payment of the final Scheme dividend. No value will be
attributed to the ordinary shares of the Company in this
scenario.
Given the cessation of trading on 23 March 2023, alongside no
apparent realistic strategic capital raise or viable alternative
solutions, and the requirement dictated by the Scheme to ultimately
liquidate Amigo Loans Ltd (the Group's sole cash-generating unit),
the Board have determined that the Annual Report and Financial
Statements for FY23 will be prepared on a basis other than Going
Concern.
The Board has prepared a set of financial projections for the
solvent wind down following the cessation of new lending in March.
Alongside a base scenario which indicates ample liquidity available
through the course of wind down, a downside scenario has been
collated that stresses the primary cash flow risks to the Group
that are considered severe but plausible. Stresses have been
applied to:
-- The collect out of the legacy Amigo loan book
-- Removal of any prospective debt sales
-- Increased Scheme liabilities
-- Increased overhead spend
Despite the stresses applied, the Group maintains sufficient
liquidity in the period. It is therefore considered only a marginal
risk that the Group is unable to remain solvent during the orderly
wind down. The key risks that would prevent this from being
achieved can be considered the risks applied in the downside
scenario alongside potential regulatory action or intervention.
iii) Investments
Investments in subsidiaries are stated at cost less, where
appropriate, provisions for impairment. Impairment is calculated by
comparing the carrying value of the investment with the higher of
an asset's cash-generating units fair value less costs of disposal
and its value in use.
iv) Financial instruments
See the Group accounting policy in note 1.12.
2a. Investments
31 Mar 31 Mar
23 22
GBPm GBPm
-------------------------------- ------ ------
At 1 April 2022/1 April 2021 26.1 74.1
Impairment of investment (24.8) (47.6)
Movement in share-based payment (0.4) (0.4)
-------------------------------- ------ ------
At 31 March 2023/31 March 2022 0.9 26.1
-------------------------------- ------ ------
Non-current - 26.1
Current 0.9 -
------------ --- ----
0.9 26.1
------------ --- ----
At 31 March 2023 the share price of Amigo Holdings PLC implied a
fair value lower than the carrying value of net assets on the Group
balance sheet. This was considered an indicator of impairment and
hence an impairment review to calculate the recoverable amount of
the investment in subsidiaries held by the Company was
performed.
The share price at the measurement date 31 March 2023 is a
readily available indication of the price for an orderly
transaction between market participants. In the current year the
share price has fallen from 5.4p to 0.2p. This resulted in the
investment being impaired to a recoverable amount of GBP0.9m (2022:
GBP26.1m).
The table below demonstrates the sensitivity of the valuation of
the investment in subsidiary to a change in the share price at 31
March 2023.
Sensitivity
Assumption GBPm
---------- -----------
+20%(1) +0.2m
-20%(2) -0.2m
---------- -----------
1. Sensitivity analysis shows the impact of a 20% increase in Amigo Holdings PLC share price.
2. Sensitivity analysis shows the impact of a 20% decrease in Amigo Holdings PLC share price.
For details of investments in Group companies, refer to the list
of subsidiary companies within note 28 to the consolidated
financial statements. The share-based payment investment relates to
share schemes introduced in the year, investing in our employees
and thus increasing the value of investment in subsidiaries. For
more details of schemes introduced, see note 22.
3a. Other payables
31 Mar 31 Mar
23 22
GBPm GBPm
----------------------------------- ------ ------
Amounts owed to Group undertakings 70.4 69.5
Accruals and deferred income 0.2 0.3
----------------------------------- ------ ------
70.6 69.8
----------------------------------- ------ ------
4a. Share capital
For details of share capital, see note 21 to the consolidated
financial statements. GBPnil dividends were paid in the year (2022:
GBPnil).
5a. Share-based payment
For details of share-based payments in the year, see note 21 to
the consolidated financial statements.
6a. Capital commitments
The Company had no capital commitments as at 31 March 2023
(2022: GBPnil).
7a. Related party transactions
The Company had no transactions with or amounts due to or from
subsidiary undertakings that are not 100% owned either by the
Company or by its subsidiaries. For details of transactions the
Group's subsidiaries, see note 24 to the consolidated financial
statements. There were no related party transactions in the
year.
For details of key management compensation, see note 9 to the
consolidated financial statements.
8a. Post balance sheet events
See note 29 to the Group financial statements for further
details.
Appendix: alternative performance measures
Given the implementation of the Fallback Scheme and the winding
down of the Group's business, the Board believes that disclosure of
alternative performance measures ("APMs") are no longer relevant,
and therefore they are no longer disclosed.
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END
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