REG - Amigo Holdings PLC - Financial Results for the year ended 31 March 2023
27/07/2023 07:15
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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 £15m 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 £72.9m 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 £m, unless otherwise stated Year ended Year ended Change %
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 £45.4m (FY 2022: £138.0m)
and revenue reduction of 78.4% to £19.3m (FY 2022: £89.5m), 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 £195.9m at
31 March 2023 (FY 2022: £179.8m). 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 £19.1m.
· Year-on-year costs increase of £11.6m 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
£34.7m, (FY 2022: profit of £167.9m). Loss after tax was £34.8m (FY 2022:
profit of £169.6m). 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 £50m of senior secured notes was repaid in full,
at par, in March 2023.
· Net unrestricted cash of £62.4m at 31 March 2023 (FY 2022: net
unrestricted cash of £83.9m) 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 £97m Scheme contribution, £51m 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
(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 £15m 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 £72.9m. 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 £45.4m.
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 £34.8m, (FY 2022: profit of £169.6m). 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 £62.4m. Current unrestricted cash is over
£121m. 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 £97m 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 £15m 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 £45m, which comprised the Scheme
contribution of £15m and £30m 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 £11m in
ordinary share capital and £10m 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 £45m 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 £5m 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 £11m 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 £15m 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 £11m of equity and £10m 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 £15m 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.£2.2k, and c.500 RewardRate
borrowers with an average loan balance of c.£5.2k. 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 (£1), 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 £45.4m
(FY 2022: £138.0). Revenue fell by 78.4% year-on-year to £19.3m (FY 2022:
£89.5m), 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 £34.7m (FY 2022: profit of £167.9m). 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 £19.3m 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 £63.4m (FY 2022: £185.4m). The net loan book reduced by
67.1% year-on-year to £45.4m (FY 2022: £138.0m). 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 £3.4m (Q3 FY 2022: charge of
£37.0m) 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 £18.0m (FY 2022: £47.4m), 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 £195.9m (FY 2022:
£179.8), 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 £19.1m (FY 2022: credit of £156.6m). 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 £36.2m increased by £11.6m,
(47.2%) year-on-year. The main categories of expenditure included in
administrative and other operating expenses are employee costs of £17.3m
(2022: £13.6m), legal, professional and consultancy fees of £10.9m (2022:
£5.1m) and licence fees of £2.5m (2022: £1.9m). The substantial increase
year-on-year relates both to higher employee costs alongside development
requirements for the RewardRate platform. Employee costs increased by £3.7m
to £17.3m due to the provision of £4.2m 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 £1.3m (related
expense of £1.8m), 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, £0.5m had been paid and £1.3m 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 £0.1m relates to Amigo's
Luxembourg entity.
Profit
Loss before tax was £34.7m for the year (FY 2022: profit of £167.9m) with
loss after tax of £34.8m (FY 2022: profit of £169.6m) 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 £9.3m (FY 2022: profit of £13.3m).
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 £50m 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
£15m 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) (£m) 31 Mar 23 31 Mar 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 £62.4m at 31 March 2023 (FY
2022: £83.9m), 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 £97m
Scheme contribution into a Scheme fund and the repayment of the senior secured
notes, offset by continued strong collections. Restricted cash is £107.2m,
which includes the £97m 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 £121m after repayment of the
senior secured notes and withdrawal from Scheme Co and current restricted cash
is over £62m.
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 23 31 Mar 22
Notes £m £m
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 £0.1m 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 23 31 Mar 22
Notes £m £m
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 £ 107.2m (2022: £7.6m)
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
£m £m £m £m £m £m
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 23 31 Mar 22
£m £m
(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 (49.1) (64.6)
loans
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 £107.2 m (2022: £7.6m). 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 £2,000 to £10,000 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 £ million (£m) 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 £18.0m 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 £17.1m to
£18.5m.
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 £97.1m, 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
£195.9m in respect of customer complaints redress and associated costs.
Utilisation in the period totalled £3.0m, primarily relating to the cost
incurred in processing decisioning on Scheme claims. The liability has
increased by £16.1m 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 £27m, 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 used Sensitivity applied Sensitivity (£m)
Average uphold rate per customer(1) 81% +/- 5 ppts +5.0 -5.0
Cash redress provision(2) £97.1m +/- 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 ended 31 March 2023 Year to Year to Year to
31 Mar 23 31 Mar 23 31 Mar 23
£m £m £m
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 (36.2) 1.4 (34.8)
shareholders of the Group
31 Mar 23 31 Mar 23 31 Mar 23
£m £m £m
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 22 31 Mar 22 31 Mar 22
£m £m £m
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 169.1 0.5 169.6
the Group
31 Mar 22 31 Mar 22 31 Mar 22
£m £m £m
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
£m £m
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 23 31 Mar 22
£m £m
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 £0.5m 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 £0.6m (2022: £5.9m).
Year to Year to
31 Mar 23 31 Mar 22
£m £m
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
Year to Year to
The main categories of expenditure included in administrative and other
operating expenses are employee costs £17.3m (2022: £13.6m), legal,
professional and consultancy fees £10.9m (2022: £5.1m) and licence fees
£2.5m (2022: £1.9m).
31 Mar 23 31 Mar 22
Other operating expenses include: £m £m
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 23 31 Mar 22
£m £m
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 23 31 Mar 23 31 Mar 23 31 Mar 22 31 Mar 22 31 Mar 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 23 31 Mar 22
£m £m
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
£1,417,007 inclusive of employers' National Insurance payments, of which
£630,000 related to loss of office payments (2022: £745,005 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 £nil due to an
election being made for payment in lieu of pension (2022: £nil).
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 23 31 Mar 22
£m £m
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 23 31 Mar 22
£m £m
(Loss)/profit before tax (34.7) 167.9
(Loss)/profit before tax multiplied by the standard rate of corporation tax in (6.6) 31.9
the UK of 19% (2022: 19%)
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 £41.8m at the substantively enacted rate of 25%
(FY22: £35.3m 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 £36.3m (FY22: £28.5m) in relation to £145m
(FY22: £114m) of unutilised tax losses and £5.6m (FY22: £6.8m) in relation
to other timing differences of £22.3m (FY22: £27m).
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 23 31 Mar 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 23 31 Mar 22
£m £m
(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 EPS1 (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 23 31 Mar 22
£m £m
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 23 31 Mar 22
£m £m
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.
Year ended 31 March 2023 Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
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
Year ended 31 March 2022 Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
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 £187.6m to £63.7m 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:
Year ended 31 March 2023 Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
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
Year ended 31 March 2022 Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
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 £47.4m at
31 March 2022 to £18.0m 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 1 Stage 2 Stage 3 Total
£m £m £m £m
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 1 Stage 2 Stage 3 Total
£m £m £m £m
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 23 31 Mar 22
Customer loans and receivables £m £m
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 costs1
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 £m £m £m £m
Financial assets not measured at fair value1
Amounts receivable from customers2 Level 3 45.7 -17.2 140.2 125.0
Held for sale assets Level 3 1.1 1.1 - -
Other receivables Level 3 1.5 1.5 1.6 1.6
Cash and cash equivalents (restricted) Level 1 107.2 107.2 7.6 7.6
Cash and cash equivalents Level 1 62.4 62.4 133.6 133.6
217.9 189.4 283.0 267.8
Financial liabilities not measured at fair value1
Other liabilities Level 3 (6.0) (6.0) (6.7) (6.7)
Senior secured notes(3) Level 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 £0m (2022: £50.0m). 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 £2,181 (2022:
£2,540), and for the pilot lending £5,238 (2022: £nil). 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
£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 23 31 Mar 22
£m £m
Maturity analysis of financial liabilities
Analysed as:
Due within one year
Other liabilities (6.0) (6.7)
Due in one to two years - (49.7)
Senior secured notes
(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 £m £m £m £m
Other liabilities 6.0 - 6.0 6.0
Carrying
0-1 year 2-5 years Total Amount
As at 31 March 2022 £m £m £m £m
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 23 31 Mar 22
£m £m
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 23 31 Mar 22
£m £m
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 £1.3m 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 £1.8m which is greater than the
economic benefits (actual achieved and forecast) of the potential RR loan book
sale (expected to be £1.5m). At 31 March 2023 £0.5m has already been paid
and £1.3m 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 23 31 Mar 22
£m £m
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 23 31 Mar 22
£m £m
Opening Group borrowings 49.7 296.5
Repayment of external funding (50.0) (248.5)
Interest expense relating to Group borrowings 4.8 19.6
Interest paid relating to Group borrowings (4.5) (17.9)
Closing Group borrowings - 49.7
The Group's Senior secured notes in the form of £49.7m 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
£m £m £m £m £m £m
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 4.5 200.4 179.8 - 179.8
Non-current - - - 97.0 - 97.0
Current 195.9 4.5 200.4 82.8 - 82.8
195.9 4.5 200.4 179.8 - 179.8
Customer complaints redress
As at 31 March 2023, the Group has recognised a complaints provision totalling
£195.9m in respect of customer complaints redress and associated costs.
Utilisation in the period totalled £3.0m. The liability has increased by
£16.1m 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 £27m, 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
£4.5m 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.
Right-of-use assets 2023 2022
£m £m
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
£m £m
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
£m £m
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 £0.3m (£0.2m in relation to depreciation and impairment and
£0.1m in relation to interest expense) was charged to the consolidated
statement of comprehensive income in relation to leases (2022: £0.3m). 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 £207.2m. No additional shares
were issued subsequent to conversion of the shareholder loan notes.
Allotted and called up shares at par value
31 Mar 23
£'000
Total
41,000 deferred ordinary shares of £0.24 each 10
475,333,760 ordinary shares of 0.25p each 1,188
1,198
31 Mar 22
£'000
Total
41,000 deferred ordinary shares of £0.24 each 10
475,333,760 ordinary shares of 0.25p each 1,188
1,198
Ordinary A Ordinary B Ordinary C Ordinary 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 £0.24.
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: £nil).
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 £0.4m (2022: credit of £0.4m) for the Group and
Company.
A summary of the awards issued under each scheme is set out below:
31 Mar 2023 31 Mar 2022
Aug 2021 LTIPs Feb/Mar 2021 LTIPs Dec 2020 LTIP Sep 2019 LTIP Aug 2021 LTIPs Feb/Mar 2021 LTIPs Dec 2020 LTIP Sep 2019 LTIP
Performance condition Yes Yes Yes Yes Yes Yes Yes Yes
Method of settlement accounting Equity Equity Equity Equity Equity Equity Equity Equity
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 SAYE Sep 2019 SAYE
SAYE SAYE
Performance condition No No No No
Method of settlement accounting Equity Equity Equity Equity
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
Number of instruments - 2,552,822(1)
Vesting period N/A 3 years 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 £0.4m (2022:
£0.4m).
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 £0.1m. Consideration for the disposal was £1. Prior to
disposal, Amigo Loans Ireland Limited contributed revenue of £0.1m and a loss
of £0.6m to the Group's results in the year ending 31 March 2023.
Class of
Name Country of incorporation shares held Ownership2023 Ownership2022 Principal activity
Direct holding
Amigo Loans Group Ltd1 United Kingdom Ordinary 100% 100% Holding company
ALL Scheme Ltd1 United Kingdom Ordinary 100% 100% Special purpose
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) Ltd3* United Kingdom n/a - SE Special purpose 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 £50.7m 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 23 31 Mar 22
Notes £m £m
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 £25.6m (2022:loss of
£47.4m)
(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
capital premium reserve 1 earnings equity
£m £m £m £m £m
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 23 31 Mar 22
£m £m
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 £2,000 to £10,000 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 23 31 Mar 22
£m £m
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 £0.9m (2022: £26.1m).
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.
Assumption Sensitivity
£m
+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 23 31 Mar 22
£m £m
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. £nil dividends were paid in the year (2022: £nil).
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: £nil).
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 FR PPUGUMUPWPWQRecent news on Amigo Holdings
See all newsREG - Amigo Holdings PLC - General Meeting
AnnouncementREG - Amigo Holdings PLC - Admission of Shares
AnnouncementREG - Amigo Holdings PLC - Appointment of strategic consultant
AnnouncementREG - Amigo Holdings PLC - Interim Financial Results
AnnouncementREG - Amigo Holdings PLC - Notice of Results
Announcement