REG - Amigo Holdings PLC - Financial results for the year ended 31 March 2022
08/07/2022 07:00
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RNS Number : 8176R Amigo Holdings PLC 08 July 2022
8 July 2022
Amigo Holdings PLC
Financial results for the year ended 31 March 2022
Amigo Holdings PLC, ("Amigo" or the "Company"), provider of guarantor loans in
the UK, announces results for the year ended 31 March 2022.
Gary Jennison, Chief Executive Officer commented:
"The profit we are reporting today of £170m should not be taken as an
indication of Company performance or shareholder benefit. It is a result of
the recent Court ruling in favour of our Scheme of Arrangement to pay out
compensation to customers who were mis-sold loans. Prior to the ruling, Amigo
was insolvent and the only change is that the complaints provision has been
replaced with a Scheme provision of just under £170m, resulting in a credit
of £157m to the P&L. The adjusted profit after tax was £13.3m. It's
important to make clear that the Shareholder Equity we have reported today
will be substantially absorbed by future costs of the Scheme and administering
the legacy portfolio, leaving working capital of c£8m. The success of the
Scheme and the ability of Amigo to lend in the future therefore remain
dependent on a successful capital raise by May 2023 and FCA approval.
"We are continuing to engage with the FCA on the terms of Amigo's return to
lending, and we are thankful to them for working closely with us over such a
long period of time. As a company, we have learnt the lessons of the past. Our
executive team has changed the culture of the company and we have developed
new lending products built to serve the needs of a clearly defined set of
customers, for whom having access to credit can lead to better long-term
financial outcomes. There are not enough providers left in the non-standard
lending sector, and we believe it's vital that a fair and responsible offering
exists to help the millions of adults in the UK who can't get a loan from a
mainstream lender."
Headlines
· Throughout the year, the Board pursued a Scheme of Arrangement
("Scheme") to deliver the best possible outcome to Scheme creditors as it
sought to address Amigo's historical lending complaints liability. The Board's
preferred Scheme, the New Business Scheme ("NBS"), was sanctioned by the High
Court in May 2022, after year end.
· The "preferred" outcome under the NBS is contingent on lending
restarting within nine months of the Scheme effective date, 26(th) May 2022,
and Amigo completing a successful equity raise within twelve months.
· Subject to FCA consent, Amigo will return to lending with a new
guarantor loan as well as an unsecured loan product which will both feature
dynamic pricing to encourage and reward on-time payment with lower rates and
penalty-free annual payment holidays. The new products will be released under
the RewardRate brand, representing a new start for the business.
· Under the terms of the "preferred" outcome under the NBS, Amigo
will make a cash contribution of at least £97m from internally generated
resources, of which £60m was paid into the Scheme fund in June 2022 and £37m
is due to be paid by 26 February 2023. A further contribution of at least
£15m has been committed, being part of the proceeds from a new equity and
capital raise.
· Details of a new capital raise are expected to be announced in
the second half of the current calendar year. The "preferred" outcome under
the NBS requires Amigo to issue at least 19 new shares for every existing
share in issue, resulting in a significant dilution for existing shareholders
who are unable or do not want to take up their rights entitlements or sell
their entitlements in the market.
· Whilst the quantum of the fundraising has not yet been
determined, we are cognisant that minimising the equity raised by utilising
higher gearing will make it more feasible for existing shareholders to
participate in any rights issue. Amigo will publish equity raise specifics as
well as detail of its future business plan and new lending performance ahead
of a shareholder vote to approve the raise.
· The FCA investigations initiated in 2020 and 2021, into Amigo's
creditworthiness assessment and complaints handling respectively, are ongoing.
· Following year end, on 6 June 2022, Danny Malone was appointed
Chief Financial Officer, having performed the role on an interim basis since
February 2022.
Financial headlines
Figures in £m, unless otherwise stated Year ended Year ended Change %
31 March 2022 31 March 2021
Number of customers(1) '000 73.0 136.0 (46.3)
Net loan book(2) 138.0 340.9 (59.5)
Revenue 89.5 170.8 (47.6)
Impairment: revenue 41.3% 35.5% 16.3
Complaints provision (balance sheet) (179.8) (344.6) (47.8)
Complaints credit/(debit) (income statement) 156.6 (318.8) 149.1
Profit/(loss) before tax 167.9 (283.6) 159.2
Profit/(loss) after tax(3) 169.6 (289.1) 158.7
Adjusted Profit/loss) after tax(4) 13.3 (279.8) 104.8
Basic EPS Pence 35.7 (60.8)p 158.7
EPS (Basic, adjusted)(5) Pence 2.8 (58.9)p 104.8
Net cash/(debt)(6) 83.9 (118.6) 170.7
Net cash/(debt) to Gross loan book(7) 45.3% (28.0)% (261.8)
Despite the sanctioning of the Scheme, the Board has concluded that a material
uncertainty over going concern remains (see note 1 to the financial statements
for further information). However, the Board considers that it is appropriate
to prepare these financial statements on a going concern basis, as the
sanction of the Scheme and the potential to successfully meet the conditions
of the "preferred" outcome under the NBS provide a realistic alternative to a
managed wind-down or insolvency.
· Reported statutory profit before tax for the year ended 31 March
2022 was £167.9m (FY 2021: loss of £283.6m) driven by a credit of £156.6m
from the complaints provision following Scheme sanction. Adjusted profit after
tax of £13.3m (FY 2021: loss of 279.8m).
· Complaints provision down 47.8% at £179.8m (FY 2021: £344.6m).
The complaints provision release resulted in a credit in the income statement
of £156.6m (FY 2021: debit of £318.8m).
· Net loan book reduction of 59.5% to £138.0m (FY 2021: £340.9m)
due to the run-off of the back book and the continued pause in new lending
throughout the period as well as an increase in impairment coverage to 25.6%
(FY 2021: 19.4%).
· Revenue reduction of 47.6% to £89.5m (FY 2021: £170.8m) due to
the ongoing pause in lending throughout the year.
· Despite an increasing trend in delinquency, overall collections,
including early repayments and recoveries from written-off accounts, have
remained robust.
· Continued strong focus on controlling costs.
· £133.6m of unrestricted cash and cash equivalents as at 31 March
2022 (FY 2021: £177.9m) reflects continued strong cash generation. Current
unrestricted cash balance of over £100m, following payment of £60m initial
Scheme contribution to the Scheme fund in June 2022.
· Net assets of £47.9m as at 31 March 2022 (FY 2021: net
liabilities of £121.4m). Substantially all of the Group's net assets,
excluding c.£8m of working capital, are committed to Scheme creditors.
· In September 2021, Amigo's securitisation facility was repaid in
full, from internal resources. The facility structure is now in the process of
being closed.
· In January 2022, Amigo redeemed £184.1m of the £234.1m
outstanding 7.625% senior secured notes due in 2024. The remaining £50.0m
gross principal amount outstanding is due in January 2024. The resulting
interest saving will form part of the Scheme contribution.
· Positive net cash/(debt) of £83.9m at 31 March 2022 (FY 2021:
(£118.6m)) driven by the continued collection of the back book while
originations remained suspended.
· While all Covid-19 payment holidays had concluded by July 2021,
we continue to assist customers experiencing financial difficulty with
alternative payment arrangements.
Notes to summary financial table:
(1)Number of customers represents the number of accounts with a balance
greater than zero, exclusive of charged off accounts.
(2)Net loan book represents total outstanding loans less provision for
impairment excluding deferred broker costs.
(3)Profit/(Loss) after tax otherwise known as profit/(loss) and total
comprehensive income/(loss) to equity shareholders of the Group as per the
financial statements.
(4) Adjusted profit/(loss) after tax excludes items due to their exceptional
nature including: senior secured note, RCF fees, securitisation facility fees
write off, tax provision release, tax asset write off and strategic review and
formal sale process costs and write-back of complaints provision. None are
business-as-usual transactions. Hence, removing these items is deemed to give
a view of underlying profit/(loss) adjusting for non-business-as-usual items
within the financial year.
(5) Adjusted basic profit/earnings per share is a non-IFRS measure and the
calculation is shown in note 8. Adjustments to profit/earnings are described
in footnote 4 above.
(6)Net cash/(debt) is defined as borrowings less unamortised fees and
unrestricted cash and cash equivalents.
(7)Net cash(debt)/gross loan book. Net cash/(debt) over gross loan book: this
measure shows whether the cash and borrowings' year-on-year movement is in
line with changes in the loan book.
*Detailed definitions and calculations of these alternative performance
measures (APMs) can be found in the APM section of these condensed financial
statements
Analyst, investor and bondholder conference call and webcast
Amigo will be hosting a live webcast for investors and bondholders today at
10:30 (London time) which will be available at:
https://www.amigoplc.com/investors/results-centre. A conference call is also
available for those unable to join the webcast (Dial in: + 020 3936 2999;
Access code: 812692). A replay will be available on Amigo's website after the
event. The presentation pack for the webcast shows the reconciliation between
the PLC results and Amigo Loans Group Limited (the 'Bond Group').
Investor video
There is an investor video available to view here
(https://www.amigoplc.com/investors/messages-from-our-ceo) , with an update
from Amigo's CEO, Gary Jennison.
Contacts:
Amigo
Danny Malone, Chief Financial Officer
Kate Patrick, Head of
Investor Relations
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. Whilst not currently lending, Amigo has provided
guarantor loans in the UK since 2005, offering access to mid‐cost credit to
those who are unable to borrow from traditional lenders due to their credit
histories. The guarantor loan concept introduces a second individual to the
lending relationship, typically a family member or friend with a stronger
credit profile than the borrower. This individual acts as guarantor,
undertaking to make loan payments if the borrower does not. Amigo was founded
in 2005 and grew to become the UK's largest provider of guarantor loans. In
the process, Amigo's guarantor loan product has allowed borrowers to rebuild
their credit scores and improve their ability to access credit from mainstream
financial service providers in the future. Amigo Loans Ltd and Amigo
Management Services Ltd are authorised and regulated in the UK by the
Financial Conduct Authority.
Forward looking statements
This report contains certain forward-looking statements. These include
statements regarding Amigo Holdings PLC's intentions, beliefs or current
expectations and those of our officers, Directors and employees concerning,
amongst other things, our financial condition, results of operations,
liquidity, prospects, growth, strategies, and the business we operate. These
statements and forecasts involve risk, uncertainty and assumptions because
they relate to events and depend upon circumstances that will or may occur in
the future. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by these
forward-looking statements. These forward-looking statements are made only as
at the date of this announcement. Nothing in this announcement should be
construed as a profit forecast. Except as required by law, Amigo Holdings PLC
has no obligation to update the forward-looking statements or to correct any
inaccuracies therein.
Chair Statement
I am pleased to introduce this year's financial results at what is an
important juncture in our business' trajectory. After a significant effort,
for which I would like to thank all my colleagues, our customers and our
regulator, the Financial Conduct Authority ("FCA"), our preferred Scheme of
Arrangement, the New Business Scheme, was sanctioned by the High Court on 26
May 2022. The sanctioning of the Scheme will enable Amigo to redress creditors
in the fullest way possible and paves the way for Amigo to return to providing
a much-needed service to the those underserved by mainstream lenders.
Culture and conduct
The governance of our business is fundamentally important, and we are
committed to delivering the highest standards of corporate oversight with
diligence and integrity. To ensure the issues of the past are not repeated, we
undertook a thorough root cause analysis and have used the results of that
analysis to inform initiatives to transform our culture and the way that we
work.
Our focus has been on creating a culture of open and constructive feedback,
both downwards and upwards, to allow for responsible and transparent decision
making. Employees are encouraged to speak out through regular surveys and a
programme of engagement implemented this year from Board level down.
We have developed a new culture framework to allow Amigo to measure, monitor
and improve its internal culture. Coupled with this, we have taken some
important steps towards formulating our environmental, social and governance
("ESG") strategy. In May 2022, we established our employee-led Responsible
Business Council. This is part of our ongoing mission to improve inclusivity
and to create a forum that encourages diversity of thought, creating a
workplace where people feel empowered to ask questions, be curious and share
their views, enabling innovation, fresh thinking and creativity to flourish.
The Council will meet monthly and report quarterly to the Board, advising on
key ESG matters as we define and execute Amigo's ESG strategy. We have also
selected four priority UN Sustainable Development Goals ("UN SDGs"), following
a materiality assessment and review by the Responsible Business Council, which
align to our strategic pillars, our values and our purpose. Over the coming
year, we will be setting targets and metrics against each goal and will report
on these in next year's Annual Report. One of our priority goals is "Climate
Action" and this year we have reported against the Task Force on
Climate-related Financial Disclosures ("TCFD") recommendations for the first
time. We are early in this journey and as such, do not yet comply with all the
recommendations but we have set out a roadmap of the steps we plan to take to
achieve full disclosure.
There are increased and improved opportunities for employees to learn the
"right way of working". Initiatives include Lean Six Sigma training,
apprenticeships, conduct training for all employees and continual development
of online learning, including the launch this year of risk management
awareness and mandatory conduct risk training.
It is critical that, as we prepare to return to lending, we are confident that
our products and processes will deliver the best outcomes for our customers.
We are mindful of the adverse impact of increasing inflation and the cost of
living upon borrowers. This is being factored into affordability assessments
in both current forbearance and our future lending approach. We will be
returning to lending with new products, built to serve the needs of a clearly
defined set of customer profiles for whom having the loan will allow them to
meet their financial goals. The ability to be able to afford repayments and
meet other commitments is a key part of the definition of the target customer
groups. A distribution strategy using real-time quotations and soft credit and
income verification, as well as open banking technology and tighter
eligibility criteria, will drive lending decisions so that our products are
only presented and sold to customers whose needs they meet.
The FCA's proposed new Consumer Duty will underpin our customer outcomes. New
lending products have been designed, built and are being tested to ensure
customers have the very best possible likelihood of being able to attest: "My
loan worked for me because..." The new RewardRate products will contain
in-built payment holiday features enabling customers to freeze their loan and
interest for one month each year without question if they, for instance,
experience an income or expense shock. This is in addition to a range of more
traditional forbearance options.
Business performance will be measured against metrics designed to drive good
organisational conduct and alignment of interests with the customers who we
serve. These will be embedded from the top down and include Net Promoter Score
("NPS") surveys and reviews and will measure the difference in the financial
health of customers at the outset and end of their journey with us.
A new Customer Outcome Committee chaired by the Chief Customer Officer with
representation from across the business will undertake an ongoing review of
products and markets, and the management of relationships with distribution
partners to ensure Amigo products are represented accurately in a way that is
clear, fair and not misleading. It will ensure governance arrangements are in
place to oversee the design, approval, distribution and management of
products, journeys, tools and features throughout the product life cycle and
that systems and controls are in place to ensure that products are sold
responsibly and deliver appropriate customer and market outcomes.
This is a turning point for Amigo and I am confident that we can move forward
responsibly, creating value for all our stakeholders.
Board
I joined Amigo in August 2020 and have built a strong team who I would like to
thank for their tireless work over the last year. I am deeply grateful to our
Board who have committed a significant amount of time to resolving the issues
of the past and who bring a considerable amount of expertise to the table.
On 24 January, Amigo announced that Chief Financial Officer ("CFO"), Mike
Corcoran would leave the business with immediate effect. Mike formally stepped
down as a Director on 19 February 2022. The Board wishes to thank Mike for his
significant contribution to the development of the Scheme proposals and for
leading the Finance team through a challenging period.
I am pleased to announce that Danny Malone, who joined us in February as
Interim CFO, has taken up the role permanently, subject to approval under the
FCA's Senior Managers and Certification Regime. Danny joined the Board on 6
June 2022. Danny is a Chartered Accountant and has extensive business and
regulatory experience gained from working predominantly in the specialist
consumer finance sector and having co-founded Everyday Loans in 2006.
Maria Darby-Walker, who joined the Board in October 2020, was appointed Senior
Independent Director, subject to approval under the FCA's Senior Managers and
Certification Regime on 6 June 2022.
Looking ahead
With a challenging economic backdrop and credit availability tightening as a
result, it is now, more than ever, critical that companies like Amigo are able
to fulfil an increasing need for mid-cost financial products for those
underserved by mainstream lenders. With financial vulnerability increasing, we
must move forward responsibly. As a Board we are committed to driving a
culture of strong governance and fair treatment of customers. We seek to
deliver positive outcomes for all stakeholders as we pursue our purpose of
providing those with few options to borrow the opportunity to achieve
financial mobility.
Chief Executive's Statement
On 26 May 2022, after the reporting period end, the High Court sanctioned our
preferred New Business Scheme of Arrangement ("NBS"). This is an important
step in addressing the liabilities that arose from historical lending
practices under previous management and towards our business surviving. The
approval of the Scheme will deliver the best possible outcome for creditors
and enable us to continue to play an important role in the specialist lending
sector, at a time when the UK is facing an unprecedented rise in the cost of
living and a further tightening of credit availability. This would not have
been possible without the hard work of all our people who have shown
remarkable resilience and commitment to both our business and our customers.
For this I would like to, wholeheartedly, thank each and every one of our
Amigos. This would also not have been possible without the hard work and
understanding of the FCA. I would like to reinforce to our customers our
commitment to delivering the best possible outcome to them as we implement the
NBS and to assure all our stakeholders that the mistakes of the past will not
be repeated as we move forward responsibly to rebuild a business we can all be
proud of.
Performance
The sanctioning of our Scheme means that £164.8m of the provision for
complaints held on our balance sheet at 31 December 2021 has been released.
This has resulted in a write back to the income statement of £156.6m and a
reported profit before tax for the period ended 31 March 2022 of £167.9m. It
is important to note that, while the release of the provision has resulted in
a significant profit, this must be viewed alongside our Shareholder Equity
position; although we have returned to balance sheet solvency, substantially
all of the Shareholder Equity from the business, excluding a small working
capital amount of c.£8m, is committed to Scheme creditors under the agreed
NBS. Statutory profit after tax was £169.6m owing to a £1.7m tax credit in
the period. This statutory profit is also put in context when viewed against
last year, when we posted a loss before tax of £283.6m. Adjusted profit after
tax for the year was £13.3m (FY2021: loss of £279.8m).
Whilst we pursued Scheme sanction, which continued throughout the financial
year ended 31 March 2022, Amigo's pause in lending was maintained. This led to
a 46.3% decline in customer numbers over the period and a corresponding
reduction in revenue of 47.6%. The net loan book fell 59.5% to £138.0m
reflecting both the pause in lending and higher impairment charge and coverage
ratio. Despite an increasing trend in delinquency, overall collections, which
have included early repayments and recoveries from written-off accounts, have
remained robust.
Scheme of Arrangement
The sanction of our preferred Scheme of Arrangement is the culmination of a
huge amount of hard work from all at Amigo. I would also like to thank both
the FCA, for the considerable amount of time that was afforded to us as we
worked to present a new and much improved solution to our customers, and our
customers for their patience and the trust they have put in us to complete the
Scheme, which will enable us to return to providing a much-needed service to
those underserved by mainstream lenders.
Over the last year, we took many steps to address the concerns highlighted by
the Judge at the first Scheme sanction hearing, including forming an
Independent Customer Committee ("ICC") to provide redress creditors with the
opportunity to help shape the new Scheme. As a result of this communication,
we were able to put two Scheme options to the Court: a New Business Scheme and
a Wind-Down Scheme. The "preferred" outcome under the NBS is contingent on new
lending restarting and Amigo completing a successful equity raise. The
Wind-Down Scheme was a managed wind-down of the Amigo Loans Ltd business under
a Scheme framework. Both options were submitted to the Court for sanction. If
the Judge had not sanctioned the NBS, the Judge would have been asked to
sanction the Wind-Down Scheme at the same hearing.
The proposed new Schemes, as recognised by the FCA in its letter of 8 April
2022, were significantly improved compared with the first Scheme considered by
the Court in May 2021. While the Scheme is not expected to satisfy the
liability owed to redress creditors with valid claims in full, the
contribution to the new Scheme has been significantly increased from that of
the original Scheme. Under the "preferred" outcome, Amigo will make an initial
cash contribution of £97m to the NBS. A further contribution of at least
£15m will be made from the proceeds of a new equity raise. In order to secure
the best result for redress creditors possible in the circumstances, the NBS
will also include a mechanism for additional monies to be paid to redress
creditors to be made in the event that the existing loan book generates a
better return than currently anticipated. The initial cash contribution
compares to an amount of up to £35m in the previous Scheme proposal. A
number of factors, including the greater clarity the business now has on the
impact of Covid-19, contributed to our ability to significantly raise the
initial cash contribution. The initial cash contribution also reflects the
lower expected balance adjustments resulting from continued collections
on the loan book compared with last year and interest savings of £28m from
the early redemption, in January 2022, of a significant proportion of our
outstanding senior secured notes.
A Scheme creditors meeting was convened and creditors were asked to vote on
both Scheme options. To ensure that creditors fully understood the Schemes
presented, we contacted via SMS and email all past and present borrowers and
guarantors for whom we had contact details. We created a dedicated website,
www.amigoscheme.co.uk, for all legal documents, explainer videos and FAQ, and
we held frequent Q&A sessions on social media. As a result, we were able
to double the number of creditors that took part in the vote. Of the creditors
who chose to vote, 88.8% by number representing 90.0% by value, voted in
favour of the NBS. In total, the Company received 145,532 votes in favour of
and 18,401 votes against the NBS, with values of £459,526,003 in favour
and £50,894,131 against. And, of the creditors who chose to vote, 83.1% by
number representing 81.7% by value, voted in favour of the Wind-Down Scheme.
In total, the Company received 134,677 votes in favour of the Wind-down Scheme
and 27,363 votes against the Wind-Down Scheme, with values
of £411,849,382 in favour and £92,231,859 against. Consequently, both
Schemes were presented to the Court at the sanction hearing on 23 May 2022.
The Court order sanctioning the NBS became effective on 26 May 2022 and the
judgment, passed down to Amigo on 30 May 2022, is available on
www.amigoscheme.co.uk (http://www.amigoscheme.co.uk/) .
The "preferred" outcome under the NBS is contingent on Amigo returning to
lending, with FCA consent, within nine months of the Scheme effective date, 26
May 2022. It is also contingent on Amigo completing an equity raise within
twelve months. If Amigo fails to meet these conditions, the Scheme will revert
to a wind-down of the Amigo Loans Ltd business.
Equity raise
Amigo will be proposing an equity raise to fund both the minimum £15m
additional Scheme contribution required under the "preferred" outcome of the
NBS and future lending. In order to fulfil the expectations of the Judge who
presided over our first Scheme and who provided clear direction to the design
of our subsequent Scheme, the "preferred" outcome under the NBS requires Amigo
to issue at least 19 new shares for every existing share in issue,
resulting in a significant dilution of the existing shares. Market sentiment
has undergone significant change since we made our announcement on 6 December
2021 that "the £15m contribution to the Scheme is expected to be funded from
an equity raise and new capital commitments of between £120m and £300m,
of which it is hoped to raise a minimum of £70m in new equity". Whilst the
quantum of the fundraising has not yet been determined, we are cognisant that
minimising the equity raised by utilising higher gearing will make it more
feasible for existing shareholders to participate in any rights issue.
There is no doubt that the impact on our shareholders is significant for those
who are not able or decide they do not want to participate in the equity raise
associated with the proposed NBS. Given the legally binding priority ranking
of all creditors over shareholders, we must deliver as much value as we can to
our creditors before retaining any equity value. However, rather than see
equity holders lose all economic interest, the "preferred" outcome under the
NBS enables some economic value to remain with shareholders. It allows all
existing shareholders to participate, if they choose and are able to do so,
and leaves them with a maximum 5% equity holding if they do not take up their
rights. While difficult, the alternative would be no value if Amigo fails to
complete the equity raise and the NBS reverts to a managed wind-down of the
business.
The decision in favour of a single equity raise to fund future lending
alongside the minimum £15m additional Scheme contribution has been well
considered. One reason for this approach is that without further funds
supporting the business, we would not be able to provide evidence of
sufficient working capital as required in an FCA-approved equity raise
prospectus. As all the back-book run-off cash collected, net of the collection
costs, will be paid to unsecured Scheme creditors, there would be no existing
resources to sustain a new lending business in the longer term. As part of the
NBS, we have agreed a £35m cap on new business lending before the Scheme
funds are settled, designed to allow proof of concept of the new business
model and to protect secured and unsecured creditors in the event that the
required new equity funding cannot be raised and the fallback element of the
NBS is triggered. The £35m of planned new lending will be funded by our
existing bonds and does not, therefore, imply available equity resources. In
addition, the complexity of completing two raises in short succession would
significantly increase the cost of the transaction. We have not yet taken a
decision with our advisors as to the exact amount of capital required, in a
single raise, in order to maximise the success of both the raise and the
business it will fund. This will be announced in due course.
Once we have presented our future business plan and provided details of the
proposed equity raise, shareholders will be asked to approve the raise. We
also recognise that it will be important to have a resolution to the ongoing
FCA investigations into complaints handling and affordability processes before
we seek shareholder approval for the raise. The FCA has stated that the
levying of any fine would be considered in the context of the Scheme and its
impact on creditors.
Strategy
A new brand to better meet customer needs
When we return to lending, we will do so with an attractive new product
proposition designed to meet strong demand in a large and growing addressable
market. Encouraging better money management and financial resilience, we want
to help our customers improve their credit health and support their long-term
financial wellbeing.
We will not return to lending with our Amigo brand. Instead, our revised
guarantor loan product and new non-guarantor unsecured loan will be released
under our new brand, RewardRate. This represents a new start for our business.
Our innovative new products have been designed in collaboration with a
respected charitable organisation and feature dynamic pricing to reward and
encourage good payment behaviour with penalty-free annual payment holidays to
provide customers with greater flexibility. We have invested in soft search
application capability enabling targeted and accurate quotes to be presented
to customers who match our target customer profile without impacting their
credit file. Open banking, or an equivalent, will be used in all affordability
assessments. Our products are designed to be inclusive, provide flexibility
and help our customers build a brighter financial future.
We are also ready to respond when needs change and ensuring borrowers get the
right help and support, when they need it, is a priority. Whilst regulatory
Covid-19 support has ended, Amigo continues to offer a range of forbearance
measures to customers facing financial difficulty.
Investing in our people
I continue to be immensely impressed with the quality of people that we have
been able to attract and retain during what has been a significant period of
uncertainty for the business. I am extremely grateful to all our people who
have continued to believe in our purpose and have supported the Board and our
customers throughout the year. To ensure the issues of the past do not
reoccur, we have invested in training to provide a thorough understanding of
the root causes of past issues. The Board has collectively and individually
spent a lot of time engaging with our employees to be transparent on the
challenges we have faced and encourage employees to ask questions and
challenge decisions. To understand better what affects our people and how we
can improve their working life, we also perform monthly surveys. I am proud
that, despite the difficulties we have experienced this year, we have been
able to increase our engagement score, which measures sentiment based on
questions on workplace and product, from 7.3 in March 2021 to 8.0 by the end
of the financial year.
As we have emerged from the Covid-19 pandemic we have introduced hybrid
working for all employees to provide the flexibility that best suits each
individual. Employees are encouraged to attend the office at least twice in a
working week. We have also halved the median gender pay gap from 10% to 5% and
will continue to focus on creating a work environment that promotes diversity,
equity and inclusion.
Enhance efficiencies
A continued focus on driving efficiencies through all areas of the business is
delivering better customer outcomes and reducing costs. We have implemented
initiatives designed to identify, quantify and evaluate what our customers
need and want from us, leading to improvements in the customer journey and
enhancing product and customer service. Teams across functions are trained in
lean working practices to drive efficiency improvements by reducing waste and
variation in processes, optimise resources and roll out best practice.
Projects over the year have focused on driving operational efficiencies in
Collections, Complaints, Quality Assurance and Customer Self-Service and on
increasing awareness of vulnerability to improve the support available.
We are also designing, building and deploying a new technology environment to
support a return to lending with new products. The new technologies are
cloud-based and built around market-leading solutions. Third-party supporting
services are being integrated using open application programming interfaces
("API") technologies which both speed up and simplify the build.
Operate responsibly
To move forward responsibly, we need to have understood where we have gone
wrong in the past. We have therefore performed a thorough root cause analysis
and held mandatory training for all employees to ensure past mistakes are not
repeated. Policies, standards and practices have been rewritten ahead of our
return to lending and a cultural assessment framework has been established to
challenge and guide the right behaviours. In the coming year, we will undergo
independent reviews of key controls to provide further assurance to our
stakeholders.
Setting our ESG strategy
As a publicly listed company, Amigo understands its responsibility to drive
forward positive change in society and has ambitions to go above and beyond
what is expected in terms of corporate responsibility. The new Amigo is
different from the Amigo of the past. This does not mean that we turn our back
on everything that came before. We are hugely proud of charity initiatives
this business has passionately pursued in the past. We have also taken steps
to reduce waste in the office and minimise our carbon footprint.
The establishment of Amigo's Responsible Business Council, in May 2022,
provides a real opportunity for our employees to shape the business we will be
in the future. It will act as a sounding board, challenger, innovator and
advisor to the Board and business leaders responsible for defining, planning
and executing Amigo's ESG strategy. Priority areas include setting Amigo's ESG
vision, goals and targets, driving diversity, equity and inclusion,
climate-change related matters and our strategy for charity and community
engagement. With these foundations in place, we are now moving towards
formulating our ESG strategy and will be setting goals and targets aligned to
our recently selected priority UN Sustainable Development Goals in the current
financial year.
Summary and Outlook
In summary, the sanctioning of our NBS represents a turning point for Amigo.
The Board believes that the NBS provides the best outcome for redress
creditors and I am pleased that we can now work towards bringing it to
fruition. The Board is grateful to the FCA for the time it has afforded the
business, to our customers and to our people who have all contributed to
getting us to this position.
The current cash position remains strong at over £100m. Hurdles remain before
we can finally secure the continuation of the business, including FCA
agreement to restart lending, reaching a satisfactory resolution of the FCA
investigations and the completion of a significant capital raise. We continue
to work constructively to satisfy the FCA that we meet threshold conditions
and are in a position to return to lending.
Amigo is a very different business to the business of the past. We will move
forward responsibly, with a refreshed culture, focused on delivering positive
outcomes for all stakeholders. The Board is confident that its future lending
proposition meets a strong demand in the market for a competitively priced,
mid-cost, specialist credit product and that Amigo can be a responsible and
valuable contributor to the sector.
Gary Jennison
Chief Executive Officer
8 July 2022
Financial Review
I am pleased to present my first full year Financial Review as Chief Financial
Officer ("CFO"). I joined Amigo as Interim CFO in February 2022 and I am
delighted to have taken up the role permanently from 6 June 2022, subject to
FCA authorisation.
The twelve month period ended 31 March 2022 was a challenging year with the
Group committed to addressing liabilities from historical lending practices.
With the Scheme now sanctioned, the Board is confident we can move forward
with new systems, policies and procedures in place and innovative new products
that meet customer needs and a strong demand in the market.
Amigo's key performance indicators, shown in this report, have been considered
when reviewing business performance within the financial year. For detailed
definitions and calculations of all alternative performance measures ("APMs")
mentioned, please see the APMs section at the back of this report.
Overall financial performance
At year end, the Board believed there to be sufficient certainty to account
for claims redress on a Scheme basis. This has been confirmed following the
High Court decision to sanction the New Business Scheme. This has led to a
credit of £156.6m in relation to the claims provision in the consolidated
statement of comprehensive income. This is the main driver behind the Group
showing a return to profitability in the year.
With the pause in lending continuing, revenues have decreased from £170.8m in
the prior year to £89.5m. However, management has retained a tight control on
costs and, excluding the release of part of the complaints provision and other
non-business as usual items in the year, the Group made an adjusted profit
after tax of £13.3m.
The continued strong collection of the back book has allowed the partial
repayment of the senior secured notes in January 2022, and has led to a
positive net cash balance of £83.9m at 31 March 2022, compared to a net debt
position of £118.6m in the prior year.
Although the results show a healthy Shareholder Equity position at 31 March
2022, in reality the value of the business is being delivered to the creditors
by way of the Scheme. Once the costs of administering the Scheme and
collecting out the remaining portfolio are paid, then substantially all of the
value will have been delivered to creditors. The remaining working capital
will not be sufficient to support future lending which will be funded, in
part, by way of an expected equity raise during the twelve months following
the Scheme effective date.
Revenue
The ongoing pause in lending throughout the year was the primary driver of the
47.6% decline in revenue year-on-year to £89.5m (FY 2021: £170.8m). This
decline was mirrored in the customer numbers which fell by 46.3% to 73,000 (FY
2021: 136,000).
The pause in lending drove a 56.2% reduction in the gross loan book
year-on-year to £185.4m (FY 2021: £422.9m). The net loan book reduced by
59.5% year-on-year to £138.0m (FY 2021: £340.9m). This reduction is
reflective of both the decline in the gross loan book and impairment coverage
which increased to 25.6% (FY 2021: 19.4%) at the year end.
Revenue yield in the year was similar to the prior year at 29.4% (FY 2021:
29.1%). The Group defines revenue yield as annualised revenue over the average
of the opening and closing gross loan book for the period.
Impairment
The impairment charge for the year was £37.0m (FY 2021: £60.7m), with the
impairment:revenue ratio increasing to 41.3%. At 31 March 2022 the
impairment provision stood at £47.4m (FY 2021: £82.0m) representing 25.6% of
the gross loan book (FY 2021: 19.4%).
Both the impairment charge and year-end provision are driven by two competing
dynamics. The ongoing pause in originations and consequent reduction in the
size of the loan book drove a lower impairment charge, partly owing to the
upfront expected credit loss methodology of IFRS 9. Counteracting this,
reforecast expected credit losses, to reflect the increasing trend in the
level of arrears which has persisted through the period, resulted in increased
levels of impairment held against the existing loan book.
Whilst unemployment trends are favourable, the cost-of-living crisis is
expected to have an impact on our customer base. Significant uncertainty
remains in respect of future customer behaviour and collections as the cost of
living increases and the loan book diminishes. Further details on the key
judgements and estimates in the IFRS 9 impairment model are set out in
note 2 to the financial statements.
Complaints provision
At year end, the Board believed there to be sufficient certainty to account
for claims redress on a Scheme basis. This has been confirmed following the
High Court decision to sanction the New Business Scheme. This has led to a
credit of £156.6m in relation to the claims provision in the consolidated
statement of comprehensive income.
This has resulted in a complaints provision of £179.8m as at 31 March 2022
(FY 2021: £344.6m), after net utilisation of £8.2m in the year.
Sensitivity analysis of the key assumptions, including the volume of claims,
is set out in note 2.2 to these financial statements.
Cost management
Administrative and other operating costs decreased by £19.9m (44.7%)
year-on-year; however, with revenue declining by 47.6% over the same period
the operating cost:income ratio (exclusive of complaints) increased to 27.5%
(FY 2021: 26.1%). The composition of the cost remained similar to the prior
year. With the pause in lending, savings were made in discretionary
advertising and marketing costs. There was also a reduction in other
variable costs including communications, print, post and stationery, and bank
charges through a combination of targeted efficiency initiatives and declining
volumes aligned to the reducing customer base. Employee costs fell
significantly following the difficult but necessary decision to restructure
the staff cost base through two formal redundancy programmes, announced in the
prior year. In the prior year a restructuring provision of £1.0m was included
in the financial results in respect of the redundancies, and this was fully
utilised in the current year.
Year-on-year legal and professional fees have reduced primarily due
to classification of advisory services related to the Scheme of
Arrangement, now being capitalised within the complaints provision
figure, whereas in prior year advisory costs were primarily disclosed in
operating expenses. There had also been an absolute reduction in the cost of
contractors handling complaints due to the pause in case review whilst the
business pursued a Scheme of Arrangement.
Year to Year to
31 Mar 22 31 Mar 21
£m £m
Advertising and marketing - 0.4
Communication costs 0.4 1.1
Credit scoring costs 0.2 1.7
Employee costs 13.6 21.1
Legal and professional fees 5.1 13.4
Print, post and stationery 0.5 0.8
Bank charges 0.7 1.2
Other 4.1 4.8
24.6 44.5
Tax
Whilst the twelve months ended 31 March 2022 were profitable, no tax charge
has been recognised on profits as the Group has sufficient losses brought
forward. A tax credit of £1.7m was applied in the period reflecting the
release of a historical tax liability and tax refund.
Profit
Profit before tax was £167.9m for the year (FY 2021: loss of £283.6m) with
profit after tax of £169.6m (FY 2021: loss of £289.1m) driven primarily by
the complaints provision release and related credit of £156.6m. Adjusting for
non-recurring items defined in note 8 of the notes to the summary financial
table, adjusted profit after tax was £13.3m (FY 2021: loss of £279.8m).
Our adjusted basic earnings/(loss) per share for the year was earnings of
2.8p (FY 2021: loss of 58.9p), and basic earnings/(loss) per share for the
year was earnings of 35.7p (FY 2021: loss of 60.8p).
Funding and liquidity
Funding facilities as at year end (£m) 31 Mar 22 31 Mar 21
Senior secured notes (2024) 50.0 234.1
Securitisation 0 250.0
50 484.1
The securitisation facility in place during the year was fully repaid on 24
September 2021. The Board intends to wind down the securitisation structure as
it does not believe that it will be appropriate for the future needs of the
business.
The senior secured notes are presented in the financial statements net of
unamortised fees. As at 31 March 2022, the gross principal amount outstanding
was £50.0m. During the current year, on 4 January 2022, Amigo served notice
of the early redemption, at par, of £184.1m of the £234.1m outstanding
7.625% senior secured notes due in 2024 with a redemption date of 15 January
2022. The remaining £50.0m gross principal amount outstanding is due in
January 2024.
The Group's average cost of funds, calculated as interest payable as a
percentage of average gross loan book, has increased to 5.5% compared to 4.3%
at the same time last year due to the reducing gross loan book, partially
offset by a reduction in finance costs.
Net cash / (debt) (£m) 31 Mar 22 31 Mar 21
Senior secured notes(1) (49.7) (232.1)
Securitisation - (64.4)
Cash and cash equivalents 133.6 177.9
Net cash/(debt) 83.9 (118.6)
(1)Figures presented above are net of unamortised fees.
Net cash was £83.9m as at 31 March 2022 (FY 2021: net debt of £118.6m) as
the back book continued to be collected while originations remained suspended.
Unrestricted cash and cash equivalents as at 31 March 2022 decreased to
£133.6m (FY 2021: £177.9m) following the early redemption of £184.1m of the
senior secured notes due in 2024.
Summary
After a challenging year for Amigo and its stakeholders, following the
sanctioning of the New Business Scheme by the High Court and subject to
agreement from the FCA, the Board expects to recommence lending in the second
half of this calendar year. The outcome of the FCA investigations is pending
and a significantly dilutive equity issue is needed to fund the Scheme. This
will also be used to part recapitalise the ongoing business.
The Board believes that the approval of the Scheme delivers the best outcome
for creditors, and Amigo's return to lending will allow the Group to play an
important role in the specialist lending sector, at a time of unprecedented
rising living costs.
The need for financial inclusion is greater than ever and the dearth of
mid-cost lenders in Amigo's core customer market presents a significant
opportunity for the launch of Amigo's new lending proposition, RewardRate. It
is on this basis that we look to the future with the cautious optimism that
Amigo can soon return to its core purpose of providing those with few
options to borrow the opportunity to achieve financial mobility.
Danny Malone
Chief Financial Officer
8 July 2022
Consolidated statement of comprehensive income
for the year ended 31 March 2022
Year to Year to
31 Mar 22 31 Mar 21
Notes £m £m
Revenue 4 89.5 170.8
Interest payable and funding facility fees 5 (16.7) (27.5)
Interest receivable 0.1 0.1
Impairment of amounts receivable from customers (37.0) (60.7)
Administrative and other operating expenses 7 (24.6) (44.5)
Complaints provision release/(expense) 19 156.6 (318.8)
Total operating income/(expense) 132.0 (363.3)
Strategic review, formal sale process and related financing costs 8 - (3.0)
Profit/(loss) before tax 167.9 (283.6)
Tax credit/(charge) on profit/(loss) 11 1.7 (5.5)
Profit/(loss) and total comprehensive profit/(loss) attributable to equity
Shareholders of the Group1 169.6 (289.1)
The profit/(loss) is derived from continuing activities.
Earnings/(loss) per share
Basic earnings/(loss) per share (pence) 13 35.7 (60.8)
Diluted earnings/(loss) per share (pence) 13 35.7 (60.8)
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 2022
31 Mar 22 31 Mar 21
Notes £m £m
Non-current assets
Customer loans and receivables 14 25.4 125.5
Property, plant and equipment 0.5 1.1
Right-of-use lease assets 20 0.8 1.0
26.7 127.6
Current assets
Customer loans and receivables 14 114.8 225.1
Other receivables 16 1.6 1.6
Current tax asset 0.7 -
Derivative asset - 0.1
Cash and cash equivalents (restricted)(1) 7.6 6.3
Cash and cash equivalents 133.6 177.9
258.3 411.0
Total assets 285.0 538.6
Current liabilities
Trade and other payables 17 (6.7) (15.9)
Borrowings 18 - (64.4)
Lease liabilities 20 (0.3) (0.3)
Complaints provision 19 (82.8) (344.6)
Restructuring provision 19 - (1.0)
Current tax liabilities - (0.8)
(89.8) (427.0)
Non-current liabilities
Borrowings 18 (49.7) (232.1)
Lease liabilities 20 (0.6) (0.9)
Complaints provision 19 (97.0) -
(147.3) (233.0)
Total liabilities (237.1) (660.0)
Net assets/(liabilities) 47.9 (121.4)
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 133.9 (35.3)
Shareholder equity 47.9 (121.4)
The accompanying notes form part of these financial statements.
(1) Cash and cash equivalents (restricted) of £7.6m (2021: £6.3m) materially
relates to restricted cash held in a Trust Account for the benefit of those
customers with an open complaint, who may later have their complaints upheld
in the Scheme, who continued to make payments on their loan from 1 December
2021 to the Scheme effective date. In the prior year, restricted cash and cash
equivalents represented restricted cash held in the structured entity AMGO
Funding (No. 1) Ltd bank account due to contractual obligations at that time.
The financial statements of Amigo Holdings PLC were approved and authorised
for issue by the Board and were signed on its behalf by:
Danny Malone
Director
8 July 2022
Company no. 10024479
Consolidated statement of changes in equity
for the year ended 31 March 2022
Share Share Translation Merger Retained Total
capital premium reserve(1) reserve(2) earnings equity
£m £m £m £m £m £m
At 1 April 2020 1.2 207.9 - (295.2) 253.5 167.4
Total comprehensive loss - - - - (289.1) (289.1)
Share-based payments - - - - 0.3 0.3
At 31 March 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
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 2022
Year to Year to
31 Mar 22 31 Mar 21
£m £m
Profit/(loss) for the period 169.6 (289.1)
Adjustments for:
Impairment expense 37.0 60.7
Complaints provision (156.6) 318.8
Restructuring provision - 1.0
Tax (credit)/charge (1.7) 5.5
Interest expense 16.7 27.5
Interest receivable (0.1) (0.1)
Interest recognised on loan book (97.0) (185.3)
Share-based payment (0.4) 0.3
Depreciation of property, plant and equipment 0.5 1.1
Operating cash flows before movements in working capital (32.0) (59.6)
Decrease/(increase) in receivables 0.1 (0.9)
(Decrease) in payables (6.3) (0.3)
Complaints cash expense (8.1) (64.6)
Tax refunds 0.2 23.6
Interest paid (18.5) (22.8)
Net cash (used in) operating activities before loans issued and collections on (64.6) (124.6)
loans
Loans issued - (0.4)
Collections 263.0 402.5
Other loan book movements (0.4) (0.6)
Decrease in deferred brokers' costs 7.5 10.8
Net cash from operating activities 205.5 287.7
Investing activities
Proceeds from sale of property, plant and equipment 0.3 -
Purchases of property, plant and equipment - (0.5)
Net cash from/(used in) investing activities 0.3 (0.5)
Financing activities
Lease principal payments (0.3) (0.2)
Repayment of external funding (248.5) (167.2)
Net cash (used in) financing activities (248.8) (167.4)
Net (decrease)/increase in cash and cash equivalents (43.0) 119.8
Effects of movement in foreign exchange - 0.1
Cash and cash equivalents at beginning of period 184.2 64.3
Cash and cash equivalents at end of period(1) 141.2 184.2
The accompanying notes form part of these financial statements.
1 Total cash is inclusive of cash and cash equivalents (restricted)
of £7.6m (2021: £6.3m). This materially relates to restricted cash held in a
Trust Account for the benefit of those customers with an open complaint, who
may later have their complaints upheld in the Scheme, who continued to make
payments on their loan from 1 December 2021 to the Scheme effective date. In
the prior year, restricted cash and cash equivalents represented restricted
cash held in the structured entity AMGO Funding (No. 1) Ltd bank account due
to contractual obligations at that time.
Notes to the consolidated financial statements
for the year ended 31 March 2022
1. Accounting policies
1.1 Basis of preparation of financial statements
Amigo Holdings PLC is a public company limited by shares (following IPO on 4
July 2018), listed on the London Stock Exchange (LSE: AMGO). The Company is
incorporated and domiciled in England and Wales and its registered office is
Nova Building, 118-128 Commercial Road, Bournemouth, United Kingdom BH2 5LT.
The principal activity of the Company is to act as a holding company for the
Amigo Loans Group of companies. The principal activity of the Amigo Loans
Group is to provide individuals with guarantor loans from £2,000 to £10,000
over one to five years.
These consolidated Group and Company financial statements have been prepared
on a going concern basis and approved by the Directors in accordance with UK
-adopted International Financial Reporting Standards ("IFRS"). There has been
no departure from the required IFRS standards.
The 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.
The consolidated Group and Company financial statements for the year ended 31
March 2022 were approved by the Board of Directors on 8 July 2022.
The Group's principal accounting policies used in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006, which have been consistently applied to all years
presented unless otherwise stated, are set out below.
Going concern
In determining the appropriate basis of preparation for these financial
statements, the Board has undertaken an assessment of the Group and Company's
ability to continue as a going concern for a period of at least twelve months
from the date of approval of these financial statements. This has taken into
account the Group's business plan and the principal risks and uncertainties
facing the Group, including the success of the Scheme of Arrangement ("the
Scheme"). The financial statements have been prepared on a going concern basis
which the directors believe to be appropriate for the following reasons.
Following the sanctioning by the High Court on 26 May of the Scheme of
Arrangement ("the Scheme") the Group now has a clear path to returning to
lending over the next twelve months. Failure to meet the conditions of the
Scheme however remains a key risk faced by the Group. The relevant
conditions are:
• approval before 26 February 2023 by the Financial Conduct Authority for
Amigo to resume lending;
• issuance and sale of at least 19 shares for every 1 share in issue before
26 May 2023
Should either of these conditions remain unsatisfied within the required
timeframes, under the terms of the Scheme the business will revert to a
managed wind-down and neither the Group nor Company will be a going concern.
Projections show the business has sufficient resources for a solvent wind-down
in this context.
However, the Directors have a reasonable expectation that these conditions can
be met and, therefore, have modelled a 'Base scenario' and 'Severe but
plausible downside Scheme scenario' which the Directors believe are realistic
alternatives to the managed wind-down scenario.
Base scenario - business plan assumptions
The Base scenario assumes that:
· the conditions of the Scheme (explained above) are met in the
required timescales, with FCA approval to commence re-lending being received
in Summer 2022
· balance adjustments resulting from complaints in the Scheme are
consistent with the assumptions that underpin the complaints provision
reported as at 31 March 2022 (see note 2.2.2)
· at least the minimum committed amount of £112m is paid out as
cash redress in the Scheme, being £97m from existing resources and future
collections plus an additional £15m following the equity raise
· new lending originations commence as soon as possible in summer
2022
· collections on the existing loan book continue in line with
recent experience
This scenario indicates that the Group will have sufficient funds to enable it
to operate within its available facilities and settle its liabilities as they
fall due for at least the next twelve months.
Severe but plausible downside Scheme scenario
The Directors have prepared a severe but plausible downside scenario. This
assumes the conditions of the Scheme are met and also that the Group is able
to successfully obtain new debt financing to enable it to repay its
non-current borrowings as they fall due in January 2024, but considers the
potential impact of:
• an increased number of upheld complaints. Whilst this sensitivity
does not increase the cash liability, which is capped under the Scheme, the
number of customers receiving balance write downs will increase, thus reducing
future collections and adversely impacting the Group's liquidity position.
• increased credit losses as a result of the cost of living crisis
and the inability of an increased number of the Group's customers to continue
to make payments.
• halving of forecast origination volumes, whether arising due to
delays in new product launch or market conditions.
• halving of new equity funding raised (whilst still meeting the
dilution conditions of the Scheme)
This severe but plausible downside Scheme scenario indicates that the Group's
available liquidity headroom would reduce but would be sufficient to enable
the Group to continue to settle its liabilities as they fall due for at least
the next twelve months.
FCA investigation
The Group is currently under investigation by the FCA in relation to
historical lending and complaints management processes. We are hopeful that
the outcome of these investigations will be known within the next twelve
months. If the enforcement process is not completed within twelve months,
then Amigo could fail to comply with one of the Scheme conditions and is
likely to revert to the fallback solution or some form of insolvency.
There are a number of avenues of sanction open to the FCA should it deem it
appropriate and so the potential impact of the investigation on the business
is extremely difficult to predict and quantify, so has not been provided for
in the financial statements, and is not modelled in the business plan or
stress scenario. In mitigation, the FCA has stated that the levying of any
fine would be considered in the context of the Scheme and its impact on
creditors. However, if the FCA were to impose a significant fine it would
significantly reduce the Group's available liquidity headroom and the Group
may potentially need to source additional financing to maintain adequate
liquidity and to continue to operate.
Conclusion
Approval by the High Court of the Scheme provides the Group with a clear path
to return to lending under a business plan which has been the subject of
extensive external scrutiny as a result of the Court process. Based on the
severe but plausible scenario the Directors have a reasonable expectation that
the Group and Company have adequate resources to continue in operation for at
least the next twelve months. Accounting standards require an entity to
prepare financial statements on a going concern basis unless the Board either
intends to liquidate the entity or to cease trading or has no realistic
alternative but to do so. Accordingly, the Board believes that it remains
appropriate to prepare the financial statements on a going concern basis.
However, the Board also recognises that at the date of approval of these
financial statements significant uncertainty remains. The Scheme requires the
meeting of conditions, being approval for a return to lending before 26(th)
February 2023 and issuance and sale of at least 19 shares for every 1 share in
issue before 26 May 2023. Additionally, the successful delivery of the
Group's business plan depends on raising sufficient equity and/or debt funding
and the final outcome of the FCA investigations remains highly uncertain.
These conditions are outside of the control of the Group. These matters
indicate the existence of a material uncertainty related to events or
conditions that may cast significant doubt over the Group and Company's
ability to continue as a going concern and, therefore, that the Group and
Company may be unable to realise their assets and discharge their liabilities
in the normal course of business. The financial statements do not include any
adjustments that would result from the basis of preparation being
inappropriate.
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 2022 and 31 March 2021.
There has been no activity through this vehicle in either financial year. The
Group intends to review complaint claims through this vehicle and, where
appropriate, to pay cash redress to customers that have been affected by
historical issues in the UK business.
The Group's securitisation facility was established in November 2018, During
the year ended 31 March 2022 the Company fully repaid the facility, although
at the year end the structure remained in place (see note 18 for further
details). The structured entity AMGO Funding (No. 1) Ltd was set up in this
process. The Group has 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 a 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 comprises primarily loans to customers that are held for
collecting contractual cash flows. Debt sales of charged off assets are not
indicative of the overall business model of the Group. The business model's
main objective is to hold assets to collect contractual cash flows.
Assessment of whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, "principal" is defined as the fair value
of the financial asset on initial recognition. "Interest" is defined as
consideration for the time value of money and for the credit risk associated
with the principal amount outstanding during a particular period of time, as
well as profit margin.
In assessing whether the contractual cash flows are SPPI, the Group considers
the contractual terms of the instrument. This includes assessing whether the
financial asset contains a contractual term that could change the timing or
amount of contractual cash flows such that it would not meet this condition.
The Group has deemed that the contractual cash flows are SPPI and hence, loans
to customers are measured at amortised cost under IFRS 9.
ii) Impairment
IFRS 9 includes a forward-looking expected credit loss ("ECL") model with
regards to impairment. IFRS 9 requires an impairment provision to be
recognised on origination of a financial asset. Under IFRS 9, a provision is
made against all stage 1 (defined below) financial assets to reflect the
expected credit losses from default events within the next twelve months. The
application of lifetime expected credit losses to assets which have
experienced a significant increase in credit risk results in an uplift to the
impairment provision.
iii) Measurement of ECLs
Under IFRS 9 financial assets fall into one of three categories:
stage 1 - financial assets which have not experienced a "significant" increase
in credit risk since initial recognition;
stage 2 - financial assets that are considered to have experienced a
"significant" increase in credit risk since initial recognition; and
stage 3 - financial assets which are in default or otherwise credit impaired.
Loss allowances for stage 1 financial assets are based on twelve-month ECLs;
that is the portion of ECLs that result from default events that are estimated
within twelve months of the reporting date and are recognised from the date of
asset origination. Loss allowances for stage 2 and 3 financial assets are
based on lifetime ECLs, which are the ECLs that result from all default events
over the expected life of a financial instrument.
In substance the borrower and the guarantor of each financial asset have
equivalent responsibilities. Hence, for each loan there are two obligors to
which the entity has equal recourse. This dual borrower nature of the product
is a key consideration in determining the staging and the recoverability of an
asset.
The Group performs separate credit and affordability assessments on both the
borrower and guarantor. After having passed an initial credit assessment, most
borrowers and all guarantors are contacted by phone and each is assessed for
their creditworthiness and ability to afford the loan. In addition, the
guarantor's roles and responsibilities are clearly explained and recorded.
This is to ensure that while the borrower is primarily responsible for making
the repayments, both the borrower and the guarantor are clear about their
obligations and are also capable of repaying the loan.
When a borrower misses a payment, both parties are kept informed regarding the
remediation of the arrears. If a missed payment is not remediated within a
certain timeframe, collection efforts are switched to the guarantor and if
arrears are cleared the loan is considered performing.
The Group assessed that its key sensitivity was in relation to expected credit
losses on customer loans and receivables. The matrix of nine scenarios used in
the prior year for calculating the ECL provision has been simplified into
base, downside and severe downside scenarios. In prior years nine
macroeconomic scenarios were applied and weighted. However, given the impact
of the Covid-19 pandemic is better known and already to an extent has been
realised, this methodology was reviewed and simplified down to three scenarios
- a base, downside and severe downside scenario, to determine the ECL
provision (see note 2.1.3).
Previously the IFRS 9 provision was segmented into the Group's seven legacy
risk segments. Due to the impact of Covid-19 these segments no longer have
discernible credit risk profiles. Instead, and in line with information used
by management in internal decision making and review, the book is bifurcated
into customers who have had a Covid-19 forbearance plan and those who have
not. Refer to note 2.1.1 for further detail of the judgements and estimates
used in the measurement of ECLs and note 2.1.3 for detail on impact of
forward-looking information on the measurement of ECLs.
iv) Assessment of significant increase in credit risk ("SICR")
In determining whether the credit risk (i.e. risk of default) of a financial
instrument has increased significantly since initial recognition, the Group
considers reasonable and supportable information that is relevant and
available without undue cost or effort, including both quantitative and
qualitative information and analysis. The qualitative customer data used in
this assessment is payment status flags, which occur in specific circumstances
such as a short-term payment plans, breathing space or other indicators of a
change in a customer's circumstances. See note 2.1.2 for details of how
payment status flags are linked to staging, and judgements on what signifies a
significant increase in credit risk.
The Group has offered payment holidays to customers in response to Covid-19.
These measures were introduced on 31 March 2020 and last granted by 31 March
2021, although some customers continued in their existing payment holidays
into the 2022 financial year. The granting of a payment holiday, or the
extension of a payment holiday at the customer's request, does not
automatically trigger a significant increase in credit risk. Customers granted
payment holidays are assessed for other indicators of SICR and are classified
as stage 2 if other indicators of a SICR are present. This is in line with
guidance issued by the International Accounting Standards Board ("IASB") and
Prudential Regulation Authority ("PRA") which noted that the extension of
government-endorsed payment holidays to all borrowers, in particular classes
of financial instruments, should not automatically result in all those
instruments being considered to have suffered a significant increase in credit
risk. See note 2.1.2 for further detail on SICR considerations for Covid-19
payment holidays.
v) Derecognition
Historically, the Group offered, to certain borrowers, the option to top up
existing loans subject to internal eligibility criteria and customer
affordability. The Group pays out the difference between the customer's
remaining outstanding balance and the new loan amount at the date of top-up.
The Group considers a top-up to be a derecognition event for the purposes of
IFRS 9 on the basis that a new contractual agreement is entered into by the
customer replacing the legacy agreement. The borrower and guarantor are both
fully underwritten at the point of top-up and the borrower may use a different
guarantor from the original agreement when topping up.
vi) Modification
Aside from top-ups and Covid-19 payment holidays, no formal modifications are
offered to customers. In some instances, forbearance measures are offered to
customers. These are not permanent measures; there are no changes to the
customer's contract and the measures do not meet derecognition or modification
requirements. See policy 1.11 for more details on the Group's accounting
policies for modification of financial assets.
vii) Definition of default
The Group considers an account to be in default if it is more than three
contractual payments past due, i.e. greater than 61 days, which is a more
prudent approach than the rebuttable presumption in IFRS 9 of 90 days and has
been adopted to align with internal operational procedures. The Group
reassesses the status of loans at each month end on a collective basis. When
the arrears status of an asset improves so that it no longer meets the default
criteria for that portfolio, it is immediately cured and transitions back from
stage 3 within the Group's impairment model.
viii) Forbearance
Where the borrower indicates to the Group that they are unable to bring the
account up to date, informal, temporary forbearance measures may be offered.
There are no changes to the customer's contract at any stage. 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 (see note
2.2 for further details). 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
1.11.1.e 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 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.
1.11 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.
1.11.1 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 relates to restricted cash
held in a Trust Account for the benefit of those customers with an open
complaint, who may later have their complaints upheld in the Scheme, who
continued to make payments on their loan from 1 December 2021 to the Scheme
effective date.
In the prior year, restricted cash and cash equivalents represented restricted
cash held in the structured entity AMGO Funding (No. 1) Ltd bank account due
to contractual obligations at that time. During the year the size of the
securitisation facility decreased from £250m to £100m in June 2021 before
being fully repaid on 24 September 2021. Although the structure exists at the
period end all rights, obligations and liabilities of the Noteholders and Lead
Arranger have been novated to ALL Scheme Limited and there is consequently no
comparable cash restriction.
d) Derivative assets
Derivative assets held for risk management purposes are recognised on a fair
value through profit and loss ("FVTPL") basis, with movement in fair value
being included under interest expenses in the consolidated statement of
comprehensive income.
e) 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
1.11.1.f) 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.
f) 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.
g) 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.
1.11.2 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.
1.12 Securitisation
The Group securitises certain financial assets via the sale of these assets to
a special purpose entity, which in turn issues 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. Since the novation of the securitisation structure to Amigo in
September 2021, and the elimination of Noteholders, no additional risks are
considered to arise from the remaining structure. See note 25 for further
details.
1.13 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.
1.14 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.
The Group and Company did not make any material adjustments during the year.
1.15 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 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.
1.16 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.
1.17 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. 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.
1.18 Items presented separately within the consolidated statement of comprehensive income
Complaints expense and strategic review, formal sale process and related
financing costs are presented separately on the face of the consolidated
statement of comprehensive income. These items are deemed exceptional because
of their size, nature or incidence and which the Directors consider should be
disclosed separately to enable a full understanding of the Group's results.
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.vii).
· Multiple economic scenarios - the probability weighting of base,
downside and severe downside scenarios to the ECL calculation (note 2.1.3).
These scenarios replaced the nine different economic scenarios used in the
prior year. Application of a management overlay -A judgemental overlay has
been applied to the impairment provision to approximate the potential
short-term impact on the ageing of the loan book (note 2.1.4).
· Complaints provisions:
· Judgement is involved in calculating the balance adjustments and
in estimating the probability, timing and amount of any outflows (note 2.2.2).
· Going concern:
· Judgement is applied in determining if there is a reasonable
expectation that the Group adopts the going concern basis in preparing these
financial statements (note 1.1)
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).
· Calculation of the management overlay which has been applied to
the impairment provision (note 2.1.4).
· Complaints provisions:
· Calculation of balance adjustments involve management's best
estimate of Scheme uptake, uphold rate and average redress. The calculation of
these evaluates current and historical data, and assumptions and expectations
of future outcomes (note 2.2.2).
· Valuation of the investment in subsidiaries held by parent
company Amigo Holdings PLC (note 2a of Company financial statements).
· Carrying amount of current and deferred taxation assets and
liabilities
· The current uncertainty over the Group's future profitability
means that it is no longer considered probable that future taxable profits
will be available against which to recognise deferred tax assets.
2.1 Credit impairment
2.1.1 Measurement of ECLs
The Group has adopted a collective basis of measurement for calculating ECLs.
In the current year the loan book is bifurcated into those customers who have
had a Covid-19 forbearance plan and those who have not. In the prior year, the
loan book was divided into portfolios of assets with shared risk
characteristics including whether the loan was new business, repeat lending or
part of a lending pilot as well as considering if the customer was a homeowner
or not. These portfolios of assets were further divided by contractual term
and monthly origination vintages. These portfolios are no longer considered to
have discernible credit risk profiles due to the impact of Covid-19.
The allowance for ECLs is calculated using three components: PD, LGD and EAD.
The ECL is calculated by multiplying the PD (twelve month or lifetime
depending on the staging of the loan), LGD and EAD and the result is
discounted to the reporting date at the original EIR.
The twelve month and lifetime PDs represent the probability of a default
occurring over the next twelve months or the lifetime of the financial
instruments, respectively, based on historical data and assumptions and
expectations of future economic conditions.
EAD represents the expected balance at default, considering the repayment of
principal and interest from the balance sheet date to the default date. LGD is
an estimate of the loss arising in the case where a default occurs at a given
time. It is based on the difference between the contractual cash flows due
and those that the Group expects to receive.
The Group assesses the impact of forward-looking information on its
measurement of ECLs. The Group has analysed the effect of a range of economic
factors and identified the most significant macroeconomic factors that are
likely to impact credit losses as the rate of unemployment and the rate of
inflation.
In prior years nine macroeconomic scenarios were applied and weighted.
However, given the impact of the Covid-19 pandemic is better known and already
to an extent has been realised, this methodology was reviewed and simplified
down to three scenarios - a base, downside and severe downside scenario, to
determine the ECL provision (see note 2.1.3).
2.1.2 Assessment of significant increase in credit risk ("SICR")
To determine whether there has been a 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 space granted to customers.
2) As a backstop, the Group considers that a significant increase in credit
risk occurs no later than when an asset is two contractual payments past due
(equivalent to 30 days), which is aligned to the rebuttable presumption of
more than 30 days past due. This is the primary quantitative information
considered by the Group in a significant increase in credit risk assessments.
The Group reassesses the flag status of all loans at each month end and
remeasures the proportion of the book which has demonstrated a significant
increase in credit risk based on the latest payment flag data. An account
transitions from stage 2 to stage 1 immediately when a payment flag is removed
from the account. Each quarter a flag governance meeting is held, to review
operational changes which may impact the use of operational flags in the
assessment of a significant increase in credit risk.
2.1.3 Forward-looking information
The Group assesses the impact of forward-looking information on its
measurement of ECLs. The Group has analysed the effect of a range of economic
factors and identified the most significant macroeconomic factors that are
likely to impact credit losses as the rate of unemployment and the rate of
inflation.
The Group has modelled and weighted three different macroeconomic scenarios -
a base, a downside and a severe downside scenario.
· The base scenario broadly represents probability of defaults
whereby there is no significant deviation of delinquency beyond the current
run-rate. The base scenario captures an element of stress to reflect current
inflationary pressures. A weighting of 25% has been applied to reflect the
Group's assumption that the current macroeconomic environment is more likely
than not due to worsen, given the inflationary pressures facing the Group's
customer base. Historical trends of prior inflationary increases showed no
statistical relationship to the Group's customers propensity to make payments,
so the base scenario appears reasonable.
· The downside scenario uplifts the base scenario probability of
default by approximately 50%. Based on recent Office for Budgetary Reporting
("OBR") forecasts, inflation rates, which are already at 40-year highs, are
expected to rise further in the short-term. Although there are no historical
indications of a statistical relationship between inflationary rises and
customers' propensity to make payments, a weighting of 50% has been applied to
reflect a prudent approach and expectation that customers will be, in some
form, adversely impacted.
· The severe downside applies a further uplift of 25% to the
probability of default in the downside scenario, reflecting a significant
impact from macroeconomic factors. Whilst the economic outlook is not set to
return to more normal levels in the near term, the Group's loan book does not
have significant time left to run off. Judgement has been made to weight this
scenario at 25%. Given the lack of statistical relationship and level of
uncertainty around the impact on customers' payment behaviour, the Group
believes this weighting is fair and reasonable, but will evolve over time as
the cost of living crisis plays out.
The following table details the absolute impact on the current ECL provision
of £47.4m if each of the three scenarios are given a probability weighting of
100%.
Impact
Base -2.7m
Downside +0.6m
Severe downside +1.5m
The scenarios above demonstrate a range of ECL provisions from £44.7m to
£48.9m.
In prior years nine macroeconomic scenarios were applied and weighted.
However, given the impact of the Covid-19 pandemic is better known and already
to an extent has been realised, this methodology was reviewed and simplified
down to three scenarios - a base, downside and severe downside scenario, to
determine the ECL provision. As with any economic forecasts, the projections
and likelihoods of occurrence are subject to a high degree of inherent
uncertainty and therefore the actual outcomes may be significantly different
to those projected.
2.1.4 Application of a management overlay to the impairment provision
calculation
In the prior year management overlay was used to enhance the modelled outcome
to take account of increasing credit risk indicators that were potentially
masked by payment holidays granted due to Covid-19. This is no longer
relevant as all impacted accounts have reverted to a tailored collections
approach captured by status flag.
As noted in 2.1.3, the Board notes that forward looking information carries a
degree of uncertainty, particularly in relation to the impact of the forecast
cost of living crisis. However, in the view of the Board, the use of a
sufficiently severe downside scenario in the modelled approach negates the
requirement for further management overlay in the impairment estimation.
2.2 Complaints provisions
2.2.1 Key judgements - Scheme of Arrangement
On 21 December 2020, the Group announced its intention to agree a Scheme of
Arrangement to address customer redress claims with the aim that all customers
are treated equitably. The vehicle ALL Scheme Ltd ("SchemeCo") was
incorporated on 6 January 2021 and is a wholly owned subsidiary through which
the Group intends to review claims and, where appropriate, pay redress to
customers that have been affected as a result of historical issues in the UK
business.
IAS 37: Provisions, Contingent Liabilities and Contingent Assets requires that
the measurement of provisions is not adjusted for future events, such as the
approval of an alternative Scheme of Arrangement, unless there is sufficient
objective evidence that the future event will occur.
Following the sanctioning by the High Court of the New Business Scheme and
considering that the subsequent conditions precedent for return to lending and
capital raise will be satisfied, Amigo believes that the IAS 37 conditions for
recognising a provision will be met. As a result the complaints provision has
been calculated on a Scheme basis. This means that the provision will be
reduced to the level of estimated balance adjustments plus the cash redress
promised in the Scheme.
2.2.2 Complaints provision - estimation uncertainty
Provisions included in the statement of financial position refers to a
provision recognised for customer complaints. The provision represents an
accounting estimate of the expected future outflows arising from certain
customer-initiated complaints, using information available as at the date of
signing these financial statements.
Identifying whether a present obligation exists and estimating the
probability, timing, nature and quantum of the redress payments that may arise
from past events require judgements to be made on the specific facts and
circumstances relating to the individual complaints. Management evaluates on
an ongoing basis whether complaints provisions should be recognised, revising
previous judgements and estimates as appropriate; however, there is a wide
range of possible outcomes.
The key assumptions in these calculations which involve significant, complex
management judgement and estimation relate primarily to the projected costs of
potential future complaints, where it is considered more likely than not that
customer redress will be appropriate. These key assumptions are:
· future estimated volumes - estimates of future volumes of
complaints;
· uphold rate (%) - the expected average uphold rate applied to
future estimated volumes where it is considered more likely than not that
customer redress will be appropriate;
· average balance adjustments (£) - the estimated balance
adjustments for future upheld complaints included in the provision;
· portion of complaints on gross loan book (%) - whether these are
customers on the existing loan book remediated via balance adjustment or
whether redress is achieved via the Scheme cash pot.
The calculation of the complaints provision as at 31 March 2022 is based on
Amigo's best estimate of the future obligation at the Scheme effective date.
The revised complaints cash redress provision will be £97m post Scheme. There
is an additional £15m payable resulting from the contingent equity raise,
plus a top-up if net collections exceed those forecast in the Scheme
scenarios.
The capital raise is a critical component of the preferred solution under the
New Business Scheme succeeding, and while the provision is being accounted for
on the basis that the Scheme is successful, it is currently determined that
the equity raise contribution component cannot be accrued as it cannot be
justified as more likely than not to occur at today's date.
As at 31 March 2022, the Group has recognised a complaints provision totalling
£179.8m in respect of customer complaints redress and associated costs.
Utilisation in the period totalled £8.2m. The liability has decreased by
£164.8m compared to prior year. £126.5m of the decrease is due to the cash
redress liability being reduced to the £97.0m contribution as per the Scheme.
The other main component of the reduction is a decrease in the balance
adjustments on the loan book of £47.3m. The level of balance adjustments has
declined due to customers paying down their loan and customers charging off
the loan book. This has been partly offset by an increase in the assumed
volume of customers coming forward in the Scheme.
The following table details the effect on the complaints provision considering
incremental changes on key assumptions, should current estimates prove too
high or too low. Sensitivities are modelled individually and not in
combination.
Assumption used Sensitivity applied Sensitivity (£m)
Future complaint volumes(1) 115,321 +/- 5% +6.6 -6.6
Average uphold rate per customer(2) 65% +/- 20 ppts +15.6 -15.6
Average balance adjustment per valid complaint(3) £2,600 +/- £500 +8.8 -8.8
Portion of complaints on gross loan book(4) 21% +/- 10 ppts +21.3 -21.3
( )
1. Future estimated volumes. Sensitivity analysis shows the impact of a 5%
change in the number of complaints estimated in the provision.
2. Uphold rate. Sensitivity analysis shows the impact of a 20 percentage
point change in the applied uphold rate on both the current and
forward-looking elements of the provision.
3. Average balance adjustment. Sensitivity analysis shows the impact of a
£500 change in average balance adjustment on the provision. In prior years,
average redress was used as a key assumption, but average balance adjustment
is now considered more appropriate with the provision being calculated on a
Scheme basis.
4. Portion of complaints on gross loan book. Sensitivity analysis shows
the impact of a 10 percentage point change in the portion of total current and
future upheld complaints on the Gross Loan Book.
The table above shows the increase or decrease in total provision charge
resulting from reasonably possible changes in each of the key underlying
assumptions. The Board considers that this sensitivity analysis covers the
full range of reasonably possible alternatives assumptions.
It is possible that the eventual outcome may differ materially from the
current estimate and could materially impact the financial statements as a
whole, given the Group's only activity is guarantor-backed consumer credit.
This is due to the risks and inherent uncertainties surrounding the
assumptions used in the provision calculation.
3. Segment reporting
The Group has two operating segments based on the geographical location of its
operations, being the UK and Ireland. IFRS 8 requires segment reporting to be
based on the internal financial information reported to the chief operating
decision maker. The Group's chief operating decision maker is deemed to be the
Group's Executive Committee ("ExCo") whose primary responsibility is to
support the Chief Executive Officer ("CEO") in managing the Group's day-to-day
operations and analyse trading performance. The Group's segments comprise
Ireland (Amigo Loans Ireland Limited and Amigo Loans International Limited)
and UK businesses (the rest of the Group). The table below illustrates the
segments reported in the Group's management accounts used by the ExCo as the
primary means for analysing trading performance. The table below presents the
Group's performance on a segmental basis for the year to 31 March 2022 in line
with reporting to the chief operating decision maker:
Year ended 31 March 2022 Year to Year to Year to
31 Mar 22 31 Mar 22 31 Mar 22
£m £m £m
UK Ireland 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 Ireland 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.
The carrying value of property, plant and equipment and intangible assets
included in the consolidated statement of financial position materially all
relates to the UK; hence, the split between the UK and Ireland has not been
presented. The results of each segment have been prepared using accounting
policies consistent with those of the Group as a whole.
Year to Year to Year to
31 Mar 21 31 Mar 21 31 Mar 21
£m £m £m
Year ended 31 March 2021 UK Ireland Total
Revenue 168.5 2.3 170.8
Interest payable and funding facility fees (27.5) - (27.5)
Interest receivable 0.1 - 0.1
Impairment of amounts receivable from customers (60.1) (0.6) (60.7)
Administrative and other operating expenses (43.2) (1.3) (44.5)
Complaints expense (318.8) - (318.8)
Total operating expenses (362.0) (1.3) (363.3)
Strategic review, formal sale process and related financing costs (3.0) - (3.0)
(Loss)/ profit before tax (284.0) 0.4 (283.6)
Tax (charge) on (loss)/profit(1) (5.3) (0.2) (5.5)
(Loss)/profit and total comprehensive (loss)/ income attributable to equity (289.3) 0.2 (289.1)
shareholders of the Group
31 Mar 21 31 Mar 21 31 Mar 21
£m £m £m
UK Ireland Total
Gross loan book(2) 419.2 3.7 422.9
Less impairment provision (81.0) (1.0) (82.0)
Net loan book(3) 338.2 2.7 340.9
( )
(1) The tax charge for Ireland is primarily reflective of the write-off of a
corporation tax asset in the period. The tax charge for the UK primarily
relates to the write-off of tax assets net with impact of the release of a tax
provision no longer required.
(2) Gross loan book represents total outstanding loans and excludes deferred
broker costs.
(3) Net loan book represents gross loan book less provision for impairment.
4. 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 22 31 Mar 21
£m £m
Interest under amortised cost method 88.2 197.7
Modification of financial assets (note 6) 1.2 (27.2)
Other income 0.1 0.3
89.5 170.8
5. Interest payable and funding facility fees
Year to Year to
31 Mar 22 31 Mar 21
£m £m
Senior secured notes interest payable 14.9 17.8
Funding facility fees 1.0 0.4
Securitisation interest payable 0.2 2.8
Complaints provision discount unwind (note 19) - 2.0
Other finance costs 0.6 4.5
16.7 27.5
No interest was capitalised by the Group during the period. Funding facility
fees include non-utilisation fees and amortisation of initial costs of the
Group's senior secured notes.
Other finance costs largely represent non-utilisation fees of £0.5m (2021:
£0.9m) relating to the securitisation facility.
In the prior year, other finance costs also included written off fees
totalling £3.6m, following cancellation of the Group's revolving credit
facility and substantial modification of 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 Group stopped granting Covid-19 payment holidays in March 2021; hence, no
additional modification losses have been recognised in the year. All payment
holidays ended by 31 July 2021. The carrying value of historical modification
losses at the year end was £5.9m (2021: £13.9m).
Year to Year to
31 Mar 22 31 Mar 21
£m £m
Modification release/(loss) recognised in revenue 1.2 (27.2)
Modification release/(loss) recognised in impairment 4.1 (8.3)
Total modification release/(loss) 5.3 (35.5)
7. Operating expenses
Year to Year to
31 Mar 22 31 Mar 21
£m £m
Advertising and marketing - 0.4
Communication costs 0.4 1.1
Credit scoring costs 0.2 1.7
Employee costs (note 9) 13.6 21.1
Legal and professional fees 5.1 13.4
Print, post and stationery 0.5 0.8
Non-interest related bank charges 0.7 1.2
Other 4.1 4.8
24.6 44.5
Year to Year to
31 Mar 22 31 Mar 21
Other operating expenses include: £m £m
Fees payable to the Company's auditor and its associates for:
- audit of these financial statements 0.3 0.2
- audit of financial statements of subsidiaries 0.9 0.7
- audit-related assurance services1 0.4 0.3
Depreciation of property, plant and equipment 0.5 1.1
Depreciation and interest expense on leased assets 0.3 0.3
Defined contribution pension cost 0.4 0.6
1 Other assurance services include reviews of interim financial
statements.
8. Strategic review, formal sale process and related financing costs
Strategic review, formal sale process and related financing costs are
disclosed separately in the financial statements because the Directors
consider it necessary to do so to provide further understanding of the
financial performance of the Group. There has been no strategic review, formal
sales process and related finance costs in the year to 31 March 2022. Prior
period costs are material items of expense that have been shown separately due
to the significance of their nature and amount.
Year to Year to
31 Mar 22 31 Mar 21
£m £m
Strategic review and formal sale process costs - 3.0
The costs above relate to advisor and legal fees in respect of the strategic
review and formal sale process announced on 27 January 2020 and its
termination was announced on 8 June 2020.
9. Employees
Year to Year to
31 Mar 22 31 Mar 21
£m £m
Employee costs
Wages and salaries 11.1 16.6
Social security costs 1.4 2.0
Cost of defined contribution pension scheme (note 23) 0.4 0.6
Share-based payments (note 22) (0.4) 0.3
Restructuring provision(1) (note 19) - 1.0
Other (termination payments) 1.1 0.6
13.6 21.1
1. In the prior year the restructuring provision related to the costs
of staff 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 22 31 Mar 22 31 Mar 22 31 Mar 21 31 Mar 21 31 Mar 21
UK Ireland Total UK Ireland Total
Employee numbers
Operations 151 7 158 305 13 318
Support 97 5 102 103 6 109
248 12 260 408 19 427
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 167 in the current year as compared to prior
year, reflecting the execution of the restructuring process during the year,
which was announced in the prior year, on 25 February 2021 and 31 March 2021.
10. 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 22 31 Mar 21
£m £m
Key management emoluments including social security costs 1.6 1.8
Termination payments - 0.4
1.6 2.2
During the year retirement benefits were accruing for one Director (2021:
three) in respect of defined contribution pension schemes.
The highest paid Director in the current year received remuneration of
£745,005 inclusive of employers' National Insurance payments (2021: £766,691
inclusive of employers' National Insurance payments, of which £319,350
related to loss of office 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 (2021: £nil).
11. Taxation
The applicable corporation tax rate for the period to 31 March 2022 was 19.0%
(2021: 19.0%) and the effective tax rate is negative 1.0% (2021: negative
1.9%).
Year to Year to
31 Mar 22 31 Mar 21
£m £m
Corporation tax
Current tax on profit for the year (0.3) -
Adjustments in respect of previous periods (1.4) (0.9)
Total current tax (credit) (1.7) (0.9)
Deferred tax
Origination and reversal of temporary differences - (0.1)
Adjustments in respect of prior periods - 6.5
Taxation (credit)/charge on profit/(loss) (1.7) 5.5
A reconciliation of the actual tax (credit)/charge, shown above, and the
profit/(loss) before tax multiplied by the standard rate of tax, is as
follows:
Year to Year to
31 Mar 22 31 Mar 21
£m £m
Profit/(loss) before tax 167.9 (283.6)
Profit/(loss) before tax multiplied by the standard rate of corporation tax in 31.9 (54.0)
the UK of 19% (2021: 19%)
Effects of:
Expenses not deductible for tax purposes 0.7 0.7
Non-taxable income (0.6) -
Transfer pricing adjustments - 0.1
Adjustments to tax charge in respect of prior periods (1.4) 5.6
Current-year profits/(losses) for which no deferred tax asset is recognised (32.3) 53.1
Total tax (credit)/charge for the year (1.7) 5.5
Effective tax charge (1.0)% (1.9)%
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.
12. 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.
31 Mar 22 31 Mar 21
£m £m
At 1 April 2021/1 April 2020 - 6.6
(Charge) to the consolidated statement of comprehensive - (6.6)
income
At 31 March 2022/31 March 2021 - -
A deferred tax asset has not been recognised in relation to unutilised tax
losses of £114.0m and other timing differences of £27.0m on the basis of
recent historic losses and being unable to reliably forecast sufficient,
suitable taxable profits in the foreseeable future.
The UK statutory rate for FY22 is 19% (FY21: 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.
13. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the profit/(loss)
for the period attributable to equity shareholders by the weighted average
number of ordinary shares outstanding during the period.
Diluted earnings/(loss) per share calculates the effect on earnings/(loss) per
share assuming conversion of all dilutive potential ordinary shares. Dilutive
potential ordinary shares are calculated as follows:
i) For share awards outstanding under performance-related share
incentive plans such as the Share Incentive Plan ("SIP)" and the Long Term
Incentive Plans ("LTIPs"), the number of dilutive potential ordinary shares is
calculated based on the number of shares which would be issuable if the end of
the reporting period is assumed to be the end of the schemes' performance
period. An assessment over financial and non-financial performance targets as
at the end of the reporting period has therefore been performed to aid
calculation of the number of dilutive potential ordinary shares.
ii) For share options outstanding under non-performance-related
schemes such as the two Save As You Earn schemes ("SAYE"), a calculation is
performed to determine the number of shares that could have been acquired at
fair value (determined as the average annual market share price of the
Company's shares) based on the monetary value of the subscription rights
attached to outstanding share options. The number of shares calculated is
compared with the number of share options outstanding, with the difference
being the dilutive potential ordinary shares.
Potential ordinary shares are treated as dilutive when, and only when, their
conversion to ordinary shares would decrease earnings per share or increase
loss per share.
31 Mar 22 31 Mar 21
Pence Pence
Basic earnings/(loss) per share 35.7 (60.8)
Diluted earnings/(loss) per share1 35.7 (60.8)
Adjusted earnings/(loss) per share (basic and diluted)2 2.8 (58.9)
1 The effects of anti-dilutive potential ordinary shares are ignored
in calculating diluted loss per share.
2 Adjusted basic earnings/(loss) 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
earnings/(loss) 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 22 31 Mar 21
£m £m
Profit/(loss) for basic EPS 169.6 (289.1)
Release of complaints provision (156.6) -
Senior secured notes redemption 0.7 -
Strategic review, formal sale process and related financing costs - 3.0
Write-off of revolving credit facility ("RCF") fees - 0.7
Write-off of unamortised securitisation fees 0.5 1.2
Tax provision release (0.8) (2.5)
Tax asset write-off - 7.8
Less tax impact (0.1) (0.9)
Profit/(loss) for adjusted basic EPS1 13.3 (279.8)
Basic weighted average number of shares (m) 475.3 475.3
Dilutive potential ordinary shares (m)(2) - 0.5
Diluted weighted average number of shares (m) 475.3 475.8
1. Adjusted basic profit/(loss) per share and earnings for adjusted
basic (loss) per share are non-GAAP measures.
Although the Group has issued further options' under the employee share
schemes, upon assessment of the dilutive nature of the options, some options
are not considered dilutive as at 31 March 2022 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.
14. 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 22 31 Mar 21
£m £m
Stage 1 128.8 311.5
Stage 2 32.4 61.4
Stage 3 24.2 50.0
Gross loan book 185.4 422.9
Deferred broker costs1 - stage 1 1.5 7.2
Deferred broker costs1 - stage 2 0.4 1.4
Deferred broker costs1 - stage 3 0.3 1.1
Loan book inclusive of deferred broker costs 187.6 432.6
Provision (47.4) (82.0)
Customer loans and receivables 140.2 350.6
(1)Deferred broker costs are recognised within customer loans and receivables
and are amortised over the expected life of those assets using the effective
interest rate ("EIR") method.
As at 31 March 2022, £86.8m of loans to customers had their beneficial
interest assigned to the Group's special purpose vehicle ("SPV") entity,
namely AMGO Funding (No. 1) Ltd, as collateral for securitisation transactions
(2021: £180.3m). See note 25 for further details of this structured entity.
Ageing of gross loan book (excluding deferred brokers' fees and provision) by
days overdue:
31 Mar 22 31 Mar 20
£m £m
Current 132.1 315.5
1-30 days 21.1 41.4
31-60 days 8.0 16.0
>60 days 24.2 50.0
Gross loan book 185.4 422.9
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 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
Year ended 31 March 2021 Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
Gross carrying amount at 1 April 2020 601.1 106.8 42.0 749.9
Deferred broker fees 16.5 2.9 1.1 20.5
Loan book inclusive of deferred broker costs at 1 April 2020 617.6 109.7 43.1 770.4
Changes in gross carrying amount attributable to:
Transfer of loans receivable to stage 1 16.0 (15.6) (0.4) -
Transfer of loans receivable to stage 2 (31.2) 32.1 (0.9) -
Transfer of loans receivable to stage 3 (34.7) (11.0) 45.7 -
Passage of time1 (82.9) (12.9) 2.0 (93.8)
Customer settlements (121.6) (13.0) (2.7) (137.3)
Loans charged off (21.9) (24.7) (35.5) (82.1)
Modification loss relating to Covid-19 payment holidays (note 6) (13.5) (0.3) (0.2) (14.0)
Net new receivables originated 0.2 - - 0.2
Net movement in deferred broker fees (9.3) (1.5) - (10.8)
Loan book inclusive of deferred broker costs as at 31 March 2021 318.7 62.8 51.1 432.6
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 £432.6m to £187.6m at 31 March 2022. This was primarily
driven by the effect of passage of time (loan balances amortising throughout
the period), customer settlements and no originations in the year.
The following tables explain the changes in the loan loss provision between
the beginning and the end of the period:
Year ended 31 March 2022 Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
Loan loss provision as at 31 March 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 (note 2.1.4) 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
Year ended 31 March 2021 Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
Loan loss provision as at 31 March 2020 55.1 20.1 31.6 106.8
Changes in loan loss provision attributable to:
Transfer of loans receivable to stage 1 1.4 (2.3) (0.3) (1.2)
Transfer of loans receivable to stage 2 (2.8) 10.6 (0.7) 7.1
Transfer of loans receivable to stage 3 (3.1) (2.3) 34.4 29.0
Passage of time1 (7.6) (1.7) 1.5 (7.8)
Customer settlements (11.1) (2.4) (2.2) (15.7)
Loans charged off (2.2) (7.6) (26.4) (36.2)
Management overlay (note 2.1.4) (0.5) 1.3 5.2 6.0
Modification loss relating to Covid-19 payment holidays (note 6) (1.2) (0.2) (0.1) (1.5)
Remeasurement of ECLs (7.0) (1.4) 3.9 (4.5)
Loan loss provision as at 31 March 2021 21.0 14.1 46.9 82.0
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 £82.0m at
31 March 2021 to £47.4m at 31 March 2022. The overall provision has reduced
as the book amortises and ages in the absence of new originations.
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 Group stopped granting payment holidays in March 2021; hence, no
additional modification losses have been recognised in the period. All payment
holidays ended by 31 July 2021. £5.2m of modification losses were released
in respect of loan agreements that settled or charged off in the period to 31
March 2022. The carrying value of historical modification losses at the period
end was £5.9m. £3.3m of this relates to up to date accounts, £1.2m to 1-30
days, £0.4m to 31-60 days and £1.0m to >60 days.
The following table splits the gross loan book by arrears status, and then by
stage respectively for the year ended 31 March 2021.
Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
Up to date 289.2 26.3 - 315.5
1-30 days 22.3 19.1 - 41.4
31-60 days - 16.0 - 16.0
>60 days - - 50.0 50.0
311.5 61.4 50.0 422.9
The following table further explains changes in the net carrying amount of
loans receivable from customers to explain their significance to the changes
in the loss allowance for the same portfolios.
31 Mar 22 31 Mar 21
Customer loans and receivables £m £m
Due within one year 113.0 218.9
Due in more than one year 25.0 122.0
Net loan book 138.0 340.9
Deferred broker costs1
Due within one year 1.8 6.2
Due in more than one year 0.4 3.5
Customer loans and receivables 140.2 350.6
1 Deferred broker costs are recognised within customer loans and
receivables and are amortised over the expected life of those assets using the
effective interest rate ("EIR") method.
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 22 31 Mar 21
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 3 140.2 125.0 350.6 340.6
Other receivables Level 3 1.6 1.6 1.6 1.6
Cash and cash equivalents (restricted) Level 1 7.6 7.6 6.3 6.3
Cash and cash equivalents Level 1 133.6 133.6 177.9 177.9
283.0 267.8 536.4 526.4
Financial assets measured at fair value
Derivative asset Level 2 - - 0.1 0.1
- - 0.1 0.1
Financial liabilities not measured at fair value1
Other liabilities Level 3 (6.7) (6.7) (15.9) (15.9)
Senior secured notes(3) Level 1 (49.7) (48.7) (232.1) (187.6)
Securitisation facility Level 2 - - (64.4) (64.5)
(56.4) (55.4) (312.4) (268.0)
1 The Group has disclosed the fair values of financial instruments
such as short-term trade receivables and payables at their carrying value
because it considers this is a reasonable approximation of fair value.
2 The unobservable inputs in the fair value calculation of amounts
receivable from customers are expected credit losses, forecast cash flows and
discount rates. As lifetime expected credit losses are embedded in the
calculation, this results in a fair value lower than the carrying amount.
3 Senior secured notes are presented in the financial statements net of
unamortised fees. As at 31 March 2022, the gross principal amount outstanding
was £50.0m (2021: £234.1m). The fair value reflects the market price of the
notes at the financial year end.
Financial instruments not measured at fair value
The fair value of amounts receivable from customers has been estimated using a
net present value calculation using discount rates derived from the blended
effective interest rate of the instruments. As these loans are not traded on
an active market and the fair value is therefore determined through future
cash flows, they are classed as Level 3 under IFRS 13: Fair Value Measurement.
The fair value of senior secured notes has been taken at the Bloomberg
Valuation Service ("BVAL") market price.
All financial instruments are held at amortised cost, with the exception of
the derivative asset which was held at fair value through profit or loss
("FVTPL") in the prior year. There are no derivative assets in the current
year.
The fair value of the securitisation facility was estimated in the prior year
using a net present value calculation using discount rates derived from
contractual interest rates, with cash flows assuming weekly principal
repayments in line with the terms of the waiver on the facility, until the
date the facility was forecasted to be repaid in full. During the year ended
31 March 2022 the Company fully repaid the facility, although at the year end
the structure remained in place.
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.
a) Amounts receivable from customers
Whilst Amigo currently has only a single product in a single market, there is
a limited concentration of risk to individual customers with an average
customer balance outstanding of £2,540 (2021: £3,110). The carrying amount
of the loans represents the Group's maximum exposure to credit risk.
The Group carries out an affordability assessment on both borrower and
guarantor before a loan can be paid out. As a separate exercise using the
knowledge and data from its 17- year presence in the guarantor loan sector,
each potential loan undergoes a creditworthiness assessment based on the
applicant's and guarantor's credit history. No formal applicant for a
collateral or guarantees are held against loans on the basis that the borrower
and guarantor are technically and in substance joint borrowers.
Historically, 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 amount individual borrowers are able to borrow
depending on their circumstance and credit history. Credit risk exposure at
origination has been minimal in the year due to a pause on new lending.
Credit risk continues to be managed post-origination via ongoing monitoring
and collection activities. When payments are missed, regular communication
with both the borrower and guarantor commences. We will contact the borrower
and guarantor from day one to advise them of the missed payment and seek to
agree a resolution with the borrower. If we are unable to resolve with the
borrower, then we will turn to the guarantor for payment after 14 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
legacy seven 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 customer's who have
had a Covid-19 forbearance plan and those that have not.
b) Bank counterparties
Counterparty credit risk arises as a result of cash deposits placed with banks
and the use of derivative financial instruments with banks and other financial
institutions which are used to hedge against interest rate risk.
This 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.
Securitisation vehicles
The Group securitises certain financial assets via the sale of these assets to
a special purpose entity, which in turn issues 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. Since the novation of the securitisation structure to Amigo in
September 2021, and the elimination of Noteholders, no additional risks are
considered to arise from the remaining structure. See note 25 for further
details.
The following table shows the carrying value and fair value of the assets
transferred to securitisation vehicles and the related carrying value and fair
value of the associated liability as at 31 March 2021. The difference between
the value of assets and associated liabilities is primarily due to
subordinated funding provided to the SPV. The collateral is not able to be
sold or repurposed by the SPV; it can only be utilised to offset losses. As at
31 March 2022 the fair value has not been disclosed because the Group has a
fully offsetting asset and liability to a captive entity, and the assets are
already fair valued in the customer receivables section.
Carrying Fair
value of Carrying value of Fair
transferred value of transferred value of
assets not associated assets not associated Net fair
derecognised liabilities derecognised liabilities value
AMGO Funding (No. 1) Ltd £m £m £m £m £m
As at 31 March 2021 180.3 64.4 161.6 64.5 97.1
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.
The outstanding senior secured loan note liability is set at a fixed interest
rate of 7.625%.
Amounts receivable from customers are charged at 49.9% APR over a period of
one to five years.
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. Amigo Ireland first lent to customers in February 2019; whilst
its functional currency is Euro, operations are not material to the Group. At
31 March 2022, the Irish net loan book represents 0.7% of the Group's
consolidated net loan book (2021: 0.8%). A 5% movement in the Sterling to Euro
exchange rate would have led to a +/-£0.1m movement in customer receivables
(2021: +/- £0.2m). 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 2022 was
£133.6m. This figure will decrease substantially following Scheme redress
payments but the Group is still forecast to have a positive cash balance
indicating low liquidity risk in the short to medium term.
The Group's forecasts and projections, which cover a period of more than
twelve months from the approval of these financial statements, take into
account expected originations, collections and payments and allow the Group to
plan for future liquidity needs.
Capital management
The Board seeks to maintain a strong capital base in order to maintain
investor, customer and creditor confidence and to sustain future development
of the business. Following the Court sanction of the Scheme the Company is
obliged in the next 12 months to enter into an equity raise for the purposes
of recapitalising the business for future lending.
31 Mar 22 31 Mar 21
£m £m
Maturity analysis of financial liabilities
Analysed as:
Due within one year
Other liabilities (6.7) (15.9)
Securitisation facility - (64.4)
Due in one to two years (49.7) -
Senior secured notes
Due in two to three years
Senior secured notes - (232.1)
(56.4) (312.4)
Maturity analysis of contractual cash flows of financial liabilities
Carrying
0-1 year 1-2 years Total amount
As at 31 March 2022 £m £m £m £m
Other liabilities 6.7 - 6.7 6.7
Bank loans - - - -
Senior secured notes 3.8 53.8 57.6 49.7
Securitisation facility - - - -
10.5 53.8 64.3 56.4
Carrying
0-1 year 2-5 years Total Amount
As at 31 March 2021 £m £m £m £m
Other liabilities 15.9 - 15.9 15.9
Bank loans - - - -
Senior secured notes 17.9 269.8 287.7 232.1
Securitisation facility 64.4 - 64.4 64.4
98.2 269.8 368.0 312.4
16. Other receivables
31 Mar 22 31 Mar 21
£m £m
Current
Other receivables 0.6 0.5
Prepayments and accrued income 1.0 1.1
1.6 1.6
17. Trade and other payables
31 Mar 22 31 Mar 21
£m £m
Current
Accrued senior secured note interest 0.8 3.7
Trade payables 0.4 0.5
Taxation and social security 0.4 0.8
Other creditors 1.1 1.8
Accruals and deferred income 4.0 9.1
6.7 15.9
18. Bank and other borrowings
31 Mar 22 31 Mar 21
£m £m
Current and non-current liabilities
Amounts falling due in less than 2 years
Securitisation facility - 64.4
Senior secured notes 49.7 -
Amounts falling due in 2-3 years
Senior secured notes - 232.1
49.7 296.5
Below is a reconciliation of the Group's borrowing liabilities from 31 March
2022:
£m £m
As at 31 March 2021/31 March 2020 296.5 460.6
Repayment of external funding (248.5) (167.2)
Interest expense relating to Group borrowings 19.6 22.2
Interest paid relating to Group borrowings (17.9) (19.1)
As at 31 March 2022/31 March 2021 49.7 296.5
The Group's facilities are:
· Senior secured notes in the form of £49.7m high yield bonds with
a coupon rate of 7.625% which expires in January 2024 (2021: £232.1m). The
senior secured notes are presented in the financial statements net of
unamortised fees. As at 31 March 2022, the gross principal amount outstanding
was £50m. On 20 January 2017, £275m of notes were issued at an interest rate
of 7.625%. The high yield bond was tapped for £50m in May 2017 and again for
£75m in September 2017 at a premium of 3.8%. £165.9m of notes have been
repurchased in the open market in prior financial years (2020: £85.9m; 2019:
£80.0m). During the current year, on 4 January 2022, Amigo served notice of
the early redemption, at par, of £184.1m of the £234.1m outstanding 7.625%
senior secured notes due in 2024 with a redemption date of 15 January 2022.
The remaining £50.0m gross principal amount outstanding is due in January
2024. Derecognition of the bonds is in line with the accounting policy set out
in note 1.11.2.
During the year ended 31 March 2022 the Company fully repaid the
securitisation facility, although at the year end the structure remained in
place. With effect from 24 September 2021, all rights, obligations and
Securitisation liabilities of the Lead Arranger, Facility Agent and Senior
Noteholder, as defined in the securitisation facility documents, were taken
over and assumed by Amigo.
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.
2022 2021
Complaints Restructuring Total Complaints Restructuring Total
£m £m £m £m £m £m
Balance as at 31 March 2021/31 March 2020 344.6 1.0 345.6 117.5 - 117.5
Provisions (released)/made during year (156.6) - (156.6) 318.8 1.0 319.8
Discount unwind (note 5) - - - 2.0 - 2.0
Utilised during the year (8.2) (1.0) (9.2) (93.7) - (93.7)
Closing provision 179.8 - 179.8 344.6 1.0 345.6
Non-current 97.0 - 97.0 - - -
Current 82.8 - 82.8 344.6 1.0 345.6
179.8 - 179.8 344.6 1.0 345.6
Customer complaints redress
As at 31 March 2022, the Group has recognised a complaints provision totalling
£179.8m in respect of customer complaints redress and associated costs.
Utilisation in the period totalled £8.2m. The liability has decreased by
£164.8m compared to prior year. £126.5m of the decrease is due to the cash
redress liability being reduced to the £97.0m contribution as per the Scheme.
The other main component of the reduction is a decrease in the balance
adjustments on the loan book of £47.3m. The level of balance adjustments has
declined due to customers paying down their loan and customers charging off
the loan book. This has been partly offset by an increase in the assumed
volume of customers coming forward in the Scheme.
The Group continues to monitor its policies and processes to ensure that it
responds appropriately to customer complaints.
The Group will continue to assess both the underlying assumptions in the
calculation and the adequacy of this provision periodically using actual
experience and other relevant evidence to adjust the provisions where
appropriate.
Restructuring provision
As at 31 March 2021, the Group recognised a restructuring provision totalling £1.0m in respect of the expected cost of staff redundancies. This provision was fully utilised by 30 June 2021 and the outstanding balance at 31 March 2022 is £nil.
Contingent liability
FCA investigation
On 29 May 2020 the FCA commenced an investigation into whether or not the
Group's creditworthiness assessment process, and the governance and oversight
of this, was compliant with regulatory requirements. The FCA investigation
will cover lending for the period from 1 November 2018 to date. There is
significant uncertainty around the impact of this on the business, the
assumptions underlying the complaints provision and any future regulatory
intervention.
The Group was informed on 15 March 2021 that the FCA has decided to extend
the scope of its current investigation so that it can investigate whether the
Group appropriately handled complaints after 20 May 2020 and whether the
Group deployed sufficient resource to address complaints in accordance with
the Voluntary Requirement ("VReq") announced on 27 May 2020 and the
subsequent variation announced on 3 July 2020.
The FCA investigation will consider whether those complaints have been
handled appropriately and whether customers have been treated fairly in
accordance with Principle 6 of the FCA's Principles for Business. The Group
will continue to co-operate fully with the FCA.
It is likely but not certain that the outcome of these investigations will be
known within the next twelve months. There are a number of avenues of
sanction open to the FCA should it deem it appropriate and so the potential
impact of the investigation on the business is extremely difficult to predict
and quantify, so has not been provided for in the financial statements, and is
not modelled in the business plan or stress scenario. In mitigation, the FCA
has stated that the levying of any fine would be considered in the context of
the Scheme and its impact on creditors.
Following the Court sanction of the Scheme the Company is obliged in the next
twelve months to enter into an equity raise for the purposes of recapitalising
the business for future lending. If this equity raise is successful a
further £15.0m cash contribution must be made to the Scheme. The successful
raising of sufficient equity relies on a number of uncertain events, not least
market appetite which may be influenced by a number of external factors beyond
the Company's control.
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 2022 2021
£m £m
Cost
At 1 April 2021/1 April 2020 1.4 1.4
Additions - -
At 31 March 2022/31 March 2021 1.4 1.4
Accumulated depreciation and impairment
As at 1 April 2021/1 April 2020 (0.4) (0.3)
Charged to consolidated statement of other comprehensive income (0.2) (0.1)
At 31 March 2022/31 March 2021 (0.6) (0.4)
Net book value at 31 March 2022/31 March 2021 0.8 1.0
Lease liabilities
2022 2021
£m £m
Current 0.3 0.3
Non-current 0.6 0.9
Total 0.9 1.2
A maturity analysis of the lease liabilities is shown below:
2022 2021
£m £m
Due within one year 0.3 0.3
Due between one and five years 0.5 0.8
Due in more than five years 0.2 0.3
Total 1.0 1.4
Unearned finance cost (0.1) (0.2)
Total lease liabilities 0.9 1.2
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 (2021: £0.3m). Lease
liabilities relate to Amigo's offices in Bournemouth.
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 475
million 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 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
31 Mar 21
£'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
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 continues to be focused on addressing Amigo's legacy issues,
restoring confidence in its corporate governance and building a sustainable
business for the long term. The Board has decided that it will not propose a
final dividend payment for the year ended 31 March 2022 (2021: £nil).
22. Share-based payment
The Group issues share options and awards to employees as part of its employee
remuneration packages. The Group operates three types of equity settled share
scheme: Long Term Incentive Plan ("LTIP"), employee 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.
During the year a third SAYE scheme was launched and an additional twelve
individuals received LTIP awards on 27 August 2021. Three LTIPs were awarded
in the prior year.
The credit to the consolidated statement of comprehensive income for the year
to 31 March 2022 was £0.4m (2021: charge of £0.3m) for the Group and
Company.
A summary of the awards under each scheme is set out below:
31 Mar 2022 31 Mar 2021
Aug 2021 LTIPs Feb/Mar 2021 LTIPs Dec 2020 LTIP Sep 2019 LTIP Feb/Mar 2021 LTIPs Dec 2020 LTIP Sep 2019 LTIP
Performance condition Y Y Y Y Y Y Y
Method of settlement accounting Equity Equity Equity Equity Equity Equity Equity
Number of instruments 3,700,000(3) 2,500,000(1) 4,750,000(2) 688,347(1) 4,000,000 14,250,000 1,364,397(1)
Vesting period 3 years 3 years 3 years 3 years 3 years 3 years 3 years
Exercise price - - - - - - -
31 Marr 2022 31 Mar 2021
Oct 2020 Sep 2019 Oct 2020 SAYE Sep 2019 SAYE
SAYE SAYE
Performance condition N N N N
Method of settlement accounting Equity Equity Equity Equity
Number of instruments 2,747,494 37,781 4,812,846 107,959(4)
Vesting period 3.3 years 3.3 years 3.3 years 3.3 years
Exercise price 0.097 0.6368 0.097 0.6368
31 Mar 2022 31 Mar 2021
2019 SIP 2019 SIP
Performance condition N N
Method of settlement accounting Equity Equity
Number of instruments 2,552,822(5) 1,577,758(5)
Vesting period 3 years rolling 3 years rolling
Exercise price - -
1 Number of instruments has reduced since the prior year as a result
of share scheme forfeiture in respect of leavers
2 Number of instruments has reduced since the prior year as a result
of cancellation of CEO awards at his request
3 Number of instruments has reduced since the interim results as a
result of share scheme forfeiture in respect of leavers
4 As at the reporting date, adjusted for known leavers.
5 This figure includes both matching and partnership shares.
Long Term Incentive Plans ("LTIPs")
The LTIPs awards were made on 27 August 2021, 1 March 2021, 26 February 2021,
1 December 2020, 11 September 2019 and 26 July 2019. The LTIP awards were
granted to eligible employees in the form of nil-cost share options and are
subject to performance conditions and continuity of employment. These options
are nil-cost to the employee only. The fair value of the share plans is
recognised by the Group as an expense over the expected vesting period with a
corresponding entry to retained earnings, net of deferred tax. No value is
recognised against the 2019 LTIP as the conditions for vesting are no longer
considered likely to be met. The participants are required to hold any shares
arising at vesting, for a period of two years following the end of the
performance period.
The FY21 and FY22 LTIP criteria are set out below:
Performance condition Applicable terms Performance target over the applicable performance period Weighting (% of award) Vesting schedule (% vesting, threshold - max)
EPS growth Statutory EPS adjusted, at the discretion of the Remuneration Committee, to Growth of 300% over the EPS hurdle over the performance period. 30% 0%-100% straight line above hurdle
remove the impact of provisions for complaints that are not fulfilled over the
period of measurement and for any other non-standard distortions. EPS hurdle is 1p.
Target for full vesting is 4p.
Absolute total shareholder return ("ATSR") Measures the growth in the potential value of an Amigo share over the Growth of ATSR over the ATSR hurdle over the performance period. 40% 0%-100%
performance period - that is, the amount the share price has appreciated plus
the dividends paid. ATSR hurdles are 12p, 14p,16p and 12p for awards on 1 December 2020, 26 straight line above ATSR hurdle
February 2021,1 March 2021 and 27 August 2021 respectively.
Target for full vesting for all is 40p.
Non-financial measures Measures the effectiveness of the steps taken by the awardees to ensure Amigo Test against internal targets for corporate culture, conduct risk matters, 30% 0%-100%
adheres to the standards expected by all stakeholders. diversity and inclusiveness and other ESG measures. Benchmarked against
external expectations over period.
The FY20 LTIP criteria are set out below:
Relative TSR growth compared to the comparator group Proportion of awards subject to TSR condition that vest
Below median 0%
Median 25%
Upper quartile 100%
Absolute TSR growth Proportion of awards subject to absolute TSR condition that vest
Below 6% p.a. 0%
6% p.a. 25%
12% p.a. 100%
EPS growth Proportion of awards subject to EPS condition that vest
Below 8% p.a. 0%
8% p.a. 25%
16% p.a. 100%
27 Aug 2021 1 Mar 2021 26 Feb 2021 1 Dec 2020 11 Sep 2019
Valuation method Monte Carlo model Monte Carlo model Monte Carlo model Monte Carlo model Monte Carlo model
Share price at grant date (£) 0.082 0.1630 0.1204 0.097 0.732
Exercise price (£) nil nil nil nil nil
Shares awarded/under option 3,700,000 1,500,000 1,000,000 4,750,000 688,347
Expected volatility¹ (%) 80.0 80.0 80.0 80.0 50.0
Vesting period (years) 3 3 3 3 3
Weighted average remaining contractual life (years) 2.4 1.9 1.9 1.7 0.5
Expected dividend yield (%) nil nil nil nil nil
Risk-free rate² (%) 0.18 0.169 0.171 0.004 0.47
Fair value per award/option (£) 0.0510 0.1112 0.0792 0.0624 0.4453(3)
1. The expected volatility is normally based on historical share price
volatility; however, as the Company has only been listed since June 2018, the
historical volatility has been calculated for the longest period for which
trading activity is available.
2. The risk-free rate of return is based on the implied yield
available on zero-coupon government issues at the grant date.
3. Prior year numbers have been restated. Fair value per award/option
for 11 September 2019 has been restated from 1.187 to 0.4453.
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.
Share awards outstanding under the SIP schemes at 31 March 2022 had an
exercise price of £nil (2021: £nil) and a total vesting period of 3.0 years
(2021: 3.0 years). The following information is relevant in the determination
of the fair value.
1 Aug 2019
Share price at grant date (£) 0.128
Shares awarded (number)(1) 2,552,822
Vesting period (years) 3 years rolling
Fair value per award/option (£) 0.128
1. This figure includes both matching and partnership shares
2. Based on weighted average share price at grant date, for
all grants since SIP inception; shares are granted once a month following
deduction from participating employees' gross salaries.
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.
Share options outstanding under the SAYE schemes at 31 March 2022 had exercise
prices of £0.0970 per share and £0.6368 per share for the 2020 and 2019
schemes respectively. The schemes have a remaining contractual life of 1.8
years and 0.8 years (2020: 2.8 years and 1.8 years).
The following information is relevant in the determination of the fair value.
9 Oct 2020 23 Sep 2019
Valuation method Black Scholes model Black Scholes model
Share price at grant date (£) 0.1018 0.691
Exercise price (£) 0.097 0.6368
Shares awarded/under option (number)(3) 2,747,494 37,871
Expected volatility¹ (%) 80.0 50.0
Vesting period (years) 3.3 3.3
Expected dividend yield (%) nil 13.49
Risk-free rate² (%) 0.42 0.42
Fair value per award/option (£) 0.046 0.108
1. The expected volatility is normally based on historical share price
volatility; however, as the Company has only been listed since June 2018, the
historical volatility has been calculated for the longest period for which
trading activity is available.
2. The risk-free rate of return is based on the implied yield
available on zero-coupon government issues at the grant date.
3. As at the reporting date, adjusted for known leavers.
Information for the period
The fair value of the equity settled share-based payments has been estimated
as at the date of grant using both the Black Scholes and Monte Carlo models.
A reconciliation of weighted average exercise prices per share ("WAEP") and
award/share option movements during the year is shown below:
Jul 2019-Aug 2021 Oct 2020 Sep 2019 2019
LTIPs SAYE SAYE SIP
Number WAEP Number WAEP Number WAEP Number WAEP
Outstanding at 1 Apr 2020 3,838,416 - - - 1,049,535 0.6368 269,004 -
Awarded/granted 18,250,000 - 5,496,845 0.097 - - 1,308,754 -
Forfeited (2,474,019) - (683,999) - (941,576) - - -
Outstanding at 31 Mar 2021 19,614,397 - 4,812,846 0.097 107,959 0.6368 1,577,758 -
Awarded/granted 4,350,000 - - - - - 975,064 -
Forfeited (2,826,050) - (2,065,352) - (70,088) - - -
Cancelled (9,500,000) - - - - - - -
Outstanding at 31 Mar 2022 11,638,347 - 2,747,494 0.097 37,871 0.6368 2,552,822 -
Exercisable at 31 Mar 2022 - - - - - - - -
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 (2021:
£0.6m).
24. Related party transactions
The Group had no related party transactions during the twelve-month period to
31 March 2022 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 0.58% of the voting
shares of the Company as at 31 March 2022 (2021: 0.65%). The remuneration of
key management is disclosed in note 10.
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 2022. 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).
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.
· Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16)
· 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)
IFRS and interpretations with effective dates after 31 March 2022 relevant to
the Group will be implemented in the financial year when the standards become
effective.
Other standards
· The IASB has also issued the following standards, amendments to
standards and interpretations that will be effective for the Group from 1
April 2022. 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
· Classification of Liabilities as Current or Non-current
(Amendments to IAS 1)
· Accounting Policies, Changes in Accounting Estimates and Errors:
Definition (Amendments to IAS 8)
· Amendments to IAS 1: Presentation of Financial Statements and
IFRS Practice Statement 2: Making Materiality Judgements
27. Immediate and ultimate parent undertaking
The immediate and ultimate parent undertaking as at 31 March 2022 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 is included in the presentation
pack on the Company's website as part of ALGL's senior secured note reporting
requirements.
The following are subsidiary undertakings of the Company at 31 March 2022 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, aside from AMGO Funding (No. 1) Ltd which is an
orphaned structured entity (see note 25).
Class of
Name Country of incorporation shares held Ownership2022 Ownership2021 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) Ltd4 United Kingdom n/a SE 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 Limited3 Ireland Ordinary 100% 100% Holding company
Amigo Loans Ireland Limited3 Ireland Ordinary 100% 100% Trading company
1 Registered at Nova Building, 118-128 Commercial Road, Bournemouth
BH2 5LT, England.
2 Registered at 19, Rue de Bitbourg, L-1273 Luxembourg.
3 Registered at Suite 3, One Earlsfort Centre, Lower Hatch Street,
Dublin 2.
4 Registered at Level 37, 25 Canada Square, London E14 5LQ.
* Previously Amigo Motor Finance Limited. Name changed on 24 August
2021.
** Previously Amigo Car Finance Limited. Name changed on 24 August 2021.
29. Post balance sheet events
Scheme of Arrangement
On 11th April Amigo announced the FCA had written to it, notifying that the
FCA did not intend to oppose the Schemes, subject to any further information
coming to light in the time between that date and the Court hearing. Further
that it believed the Schemes represented a substantial improvement over
previous proposals made in 2021. In the event, the FCA did not oppose the
Schemes.
A Creditors meeting was held on 12th May. Creditors were asked to vote for
one or both of two proposed Schemes of Arrangement, the New Business and the
Wind Down Schemes. To qualify for subsequent Court approval each Scheme
required that more than 50% of all creditors who voted did so in favour, and
the total value of their claims to represent at least 75% of the value of the
claims of all creditors who voted. The following day, Amigo announced that
of the creditors who chose to vote, 88.8% by number representing 90.0% by
value, voted in favour of the New Business Scheme. In total, the Company had
received 145,532 votes in favour of the New Business Scheme and 18,401 votes
against the New Business Scheme, with values of £459,526,003 in favour
and £50,894,131 against. Slightly fewer votes, by number and value, were
received for the Wind Down Scheme.
The High Court hearing was held on 23 May. During the Court hearing, trading
in the Company's shares on the London Stock Exchange was suspended, due to
the risk of asymmetric information in the market at this time. The judge
stated during the hearing that the New Business Scheme would be sanctioned;
this was announced to the market by Amigo that day, and trading in the
Company's shares restored on 24 May. The Scheme became formally effective on
26 May.
On 1 June Amigo Loans Limited made its first payment under the Scheme; a £60m
transfer to ALL Scheme Ltd.
Company statement of financial position
as at 31 March 2022
31 Mar 22 31 Mar 21
Notes £m £m
( )
Non-current assets
Investments 2a 26.1 74.1
26.1 74.1
Total assets 26.1 74.1
Current liabilities
Other payables 3a (69.8) (70.0)
Total liabilities (69.8) (70.0)
Net assets (43.7) 4.1
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 £47.4m (2021: £112.4m)) (257.5) (209.7)
(43.7) 4.1
The parent company financial statements were approved and authorised for issue
by the Board and were signed on its behalf by:
Danny Malone
Director
8 July 2022
Company no. 10024479
The accompanying notes form part of these financial statements.
Company statement of changes in equity
for the year ended 31 March 2022
Share Share Merger Retained Total
capital premium reserve 1 earnings equity
£m £m £m £m £m
At 31 March 2020 1.2 207.9 4.7 (97.6) 116.2
Total comprehensive (loss) - - - (112.4) (112.4)
Share-based payments - - - 0.3 0.3
At 31 March 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 31 March 2022 1.2 207.9 4.7 (257.5) (43.7)
1 The 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 2022
Year to Year to
31 Mar 22 31 Mar 21
£m £m
Loss for the period (47.4) (112.4)
Adjustments for:
Impairment of investment in subsidiaries 48.0 105.1
Income tax credit (1.1) (0.2)
Share-based payment (0.4) 0.3
Operating cash flows before movements in working capital (0.9) (7.2)
Decrease in receivables - 0.3
Increase/(decrease) in payables 0.2 (0.7)
Net cash used in operating activities (0.7) (7.6)
Financing activities
Proceeds from intercompany funding 0.7 7.6
Net cash from financing activities 0.7 7.6
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 2022
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 individuals with guarantor loans up to £10,000 over one
to five years.
The financial statements have been prepared under the historical cost
convention and in accordance with international accounting standards 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
See note 1.1 to the Group financial statements for further details.
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 1.11.
2a. Investments
31 Mar 22 31 Mar 21
£m £m
At 31 March 2021/31 March 2020 74.1 178.9
Impairment of investment (47.6) (105.1)
Movement in share-based payment investment (0.4) 0.3
At 31 March 2022/31 March 2021 26.1 74.1
At 31 March 2022 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 2022 is a readily available
indication of the price for an orderly transaction between market
participants. A share price of 5.4p and market capitalisation of £25.7m
therefore represents the fair value of the investment in subsidiary at 31
March 2022. It has been estimated that costs to sell would represent 5% of the
fair value.
To derive the value in use of the asset, four scenarios regarding Amigo's
future possible scenarios have been modelled: base, downside, orderly wind
down of the loan book and insolvency. Each scenario was assigned probability
weightings to arrive at an expected value. The orderly wind down and
insolvency scenarios generated no value. As a consequence, estimated value in
use for the investment is lower than the fair value and hence the investment
in subsidiary has been measured using fair value less expected costs to sell
as at 31 March 2022. As such an impairment charge of £47.6m was charged as a
result (2021: £105.1m).
The table below demonstrates the sensitivity of the valuation of the
investment in subsidiary to a change in the share price at 31 March 2022.
Assumption Sensitivity
£m
+20%(1) +4.9m
-20%(2) -4.9m
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 22 31 Mar 21
£m £m
Amounts owed to Group undertakings 69.5 69.8
Accruals and deferred income 0.3 0.2
69.8 70.0
4a. Share capital
For details of share capital, see note 21 to the consolidated financial
statements. £nil dividends were paid in the year (2021: £nil).
5a. Share-based payment
For details of share-based payments in the year, see note 22 to the
consolidated financial statements.
6a. Capital commitments
The Company had no capital commitments as at 31 March 2022.
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 10 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
This financial report provides alternative performance measures ("APMs") which
are not defined or specified under the requirements of International Financial
Reporting Standards. The Board believes these APMs provide readers with
important additional information on the Group. To support this, details of the
APMs used, how they are calculated and why they are used are set out below.
With the exception of the below key performance indicators included in the
notes to the financial statements, the remainder of the alternative
performance measures are unaudited.
Key performance indicators
Other financial data
Year to Year to Year to
31 Mar 31 Mar 31 Mar
Figures in £m, unless otherwise stated 22 21 20
Average gross loan book 304.2 586.4 766.5
Gross loan book 185.4 422.9 749.9
Percentage of book <31 days past due 82.6% 84.4% 92.1%
Net loan book 138.0 340.9 643.1
Net cash/(debt)(1) 83.9 (118.6) (396.3)
Net (cash)/debt over gross loan book(1) (45.3)% 28.0% 52.8%
Net (cash)/debt over equity(1) (1.8)x (1.0)x 2.4x
Revenue yield 29.4% 29.1% 38.4%
Risk adjusted revenue 52.5 110.1 181.0
Risk adjusted margin 17.3% 18.8% 23.6%
Net interest margin 15.9% 20.3% 32.7%
Adjusted net interest margin 24.0% 24.5% 34.4%
Cost of funds percentage 5.5% 4.3% 4.0%
Impairment:revenue ratio 41.3% 35.5% 38.5%
Impairment charge as a percentage of loan book 20.0% 14.4% 15.1%
Cost:income ratio (147.5)% 212.7% 63.3%
Operating cost:income ratio (ex. complaints) 27.5% 26.1% 20.2%
Adjusted profit/(loss) after tax 13.3 (279.8) (26.9)
Return on assets 41.4% (44.9)% (3.6)%
Adjusted return on average assets 3.2% (43.5)% (3.6)%
Return on equity 460.9% (1257.0)% (13.2)%
Adjusted return on average equity 36.1% (1216.5)% (13.1)%
Amendments to alterative performance measures
(1)Net cash/(debt), net (cash)/debt over gross loan book and net (cash)/debt
over equity - the definitions of these alternative performance measures (APMs)
have been amended from net borrowings, net borrowings/gross loan book and net
borrowings/equity to net debt, net debt/gross loan book and Net debt/equity
with all comparatives restated accordingly. The term 'net borrowings' was
relevant historically due to the Group having borrowings in excess of cash,
but since this is no longer the case the term 'net cash/(debt)' is now used.
1. Average gross loan book
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Opening gross loan book 422.9 749.9 783.0
Closing gross loan book 185.4 422.9 749.9
Average gross loan book(1) 304.2 586.4 766.5
1 Gross loan book represents total outstanding loans and excludes
deferred broker costs.
2. The percentage of balances up to date or less than 31 days overdue is
presented as this is useful in reviewing the quality of the loan book.
31 Mar 22 31 Mar 21 31 Mar 20
Ageing of gross loan book by days overdue: £m £m £m
Current 132.1 315.5 606.8
1-30 days 21.1 41.4 83.5
31-60 days 8.0 16.0 17.6
>61 days 24.2 50.0 42.0
Gross loan book 185.4 422.9 749.9
Percentage of book <31 days past due 82.6% 84.4% 92.1%
3. "Net loan book" is a subset of customer loans and receivables and
represents the interest yielding loan book when the IFRS 9 impairment
provision is accounted for, comprised of:
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Gross loan book1 (see APM number 2) 185.4 422.9 749.9
Provision2 (47.4) (82.0) (106.8)
Net loan book3 138.0 340.9 643.1
(1) Gross loan book represents total outstanding loans and excludes deferred
broker costs.
(2) Provision for impairment represents the Group's estimate of the portion of
loan accounts that are not in arrears or are up to five payments in arrears
for which the Group will not ultimately be able to collect payment. Provision
for impairment excludes loans that are six or more payments in arrears, which
are charged off the statement of financial position and are therefore no
longer included in the loan book.
(3) Net loan book represents gross loan book less provision for impairment.
4. "Net cash/(debt)" is comprised of:
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Borrowings (49.7) (296.5) (460.6)
Cash and cash equivalents 133.6 177.9 64.3
Net cash/(debt) 83.9 (118.6) (396.3)
This is deemed useful to show total borrowings if unrestricted cash available
at year end was used to repay borrowings.
5. The Group defines "loan to value" ("LTV") as net (cash)/debt divided by
gross loan book. This measure shows if the borrowings' year-on-year movement
is in line with changes in the loan book.
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Net cash/(debt) (see APM number 4) 83.9 (118.6) (396.3)
Gross loan book (see APM number 2) 185.4 422.9 749.9
Net (cash)/debt over gross loan book (45.3)% 28.0% 52.8%
6. Net (cash)/debt over equity
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Shareholder equity 47.9 (121.4) 167.4
Net cash/(debt) (see APM number 4) 83.9 (118.6) (396.3)
Net (cash)/debt over equity (1.8)x (1.0)x 2.4x
This is one of the Group's metrics to assess gearing.
7. The Group defines "revenue yield" as annualised revenue over the average of
the opening and closing gross loan book for the period.
31 Mar 22 31 Mar 21 31 Mar 20
Revenue yield £m £m £m
Revenue 89.5 170.8 294.2
Opening loan book 422.9 749.9 783.0
Closing loan book 185.4 422.9 749.9
Average loan book (see APM number 1) 304.2 586.4 766.5
Revenue yield 29.4% 29.1% 38.4%
This is deemed useful in assessing the gross return on the Group's loan book.
8. The Group defines "risk adjusted revenue" as revenue less impairment
charge.
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Revenue 89.5 170.8 294.2
Impairment of amounts receivable from customers (37.0) (60.7) (113.2)
Risk adjusted revenue 52.5 110.1 181.0
Risk adjusted revenue is not a measurement of performance under IFRS, and is
not an alternative to profit/(loss) before tax as a measure of the Group's
operating performance, Group's ability to meet its cash needs or as any other
measure of performance under IFRS.
9. The Group defines "risk adjusted margin" as risk adjusted revenue divided
by the average of gross loan book.
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Risk adjusted revenue (see APM number 8) 52.5 110.1 181.0
Average gross loan book (see APM number 1) 304.2 586.4 766.5
Risk adjusted margin 17.3% 18.8% 23.6%
This measure is used internally to review an adjusted return on the Group's
loan book.
10. The Group defines "net interest margin" as annualised net interest income
divided by average interest-bearing assets (being both gross loan book and
cash) at the beginning of the period and end of the period.
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Revenue 89.5 170.8 294.2
Interest payable and receivable and funding facility fees (16.6) (27.4) (30.7)
Net interest income 72.9 143.4 263.5
Opening interest-bearing assets (gross loan book plus unrestricted cash) 600.8 814.2 798.2
Closing interest-bearing assets (gross loan book plus unrestricted cash) 319.0 600.8 814.2
Average interest-bearing assets (customer loans and receivables plus 459.9 707.5 806.2
unrestricted cash)
Net interest margin 15.9% 20.3% 32.7%
Adjusted net interest margin, being net interest income divided by average
gross loan book, is also presented below:
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Net interest income 72.9 143.4 263.5
Average gross loan book (see APM number 1) 304.2 586.4 766.5
Adjusted net interest margin 24.0% 24.5% 34.4%
11. The Group defines "cost of funds" as annualised interest payable divided
by the average of gross loan book at the beginning and end of the period.
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Cost of funds 16.7 27.5 30.7
Less complaints discount unwind expense (notes 5 and 19) - (2.0) -
Adjusted cost of funds 16.7 25.5 30.7
Average gross loan book (see APM number 1) 304.2 586.4 766.5
Cost of funds percentage 5.5% 4.3% 4.0%
This measure is used by the Group to monitor the cost of funds and impact of
diversification of funding. The measure has been amended to reflect on true
interest expenses related to borrowings; accounting-related adjustments have
been removed to provide a better understanding for users.
12. Impairment charge as a percentage of revenue, "impairment:revenue ratio",
represents the Group's impairment charge for the period divided by revenue for
the period.
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Revenue 89.5 170.8 294.2
Impairment of amounts receivable from customers 37.0 60.7 113.2
Impairment charge as a percentage of revenue 41.3% 35.5% 38.5%
This is a key measure for the Group in monitoring risk within the business.
13. "Impairment charge as a percentage of loan book" represents the Group's
impairment charge for the period divided by closing gross loan book.
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Impairment of amounts receivable from customers 37.0 60.7 113.2
Closing gross loan book (see APM number 1) 185.4 422.9 749.9
Impairment charge as a percentage of loan book 20.0% 14.4% 15.1%
This allows review of the impairment charge relative to the size of the
Group's gross loan book.
14. The Group defines "cost:income ratio" as operating expenses excluding
strategic review, formal sale process and related financing costs divided by
revenue.
In the current year, operating expenses are negative due to the release of the
complaints provision of £159.9m.
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Revenue 89.5 170.8 294.2
Total operating expenses (132.0) 363.3 186.2
Cost:income ratio (147.5)% 212.7% 63.3%
15. "Operating cost:income ratio", defined as the cost:income ratio excluding
the complaints provision, is:
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Revenue 89.5 170.8 294.2
Administrative and other operating expenses 24.6 44.5 59.4
Operating cost:income ratio 27.5% 26.1% 20.2%
This measure allows review of cost management.
16. The following table sets forth a reconciliation of profit/(loss) after tax
to "adjusted profit/(loss) after tax" for the years to 31 March 2022, 2021 and
2020.
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Reported profit/(loss) after tax 169.6 (289.1) (27.2)
Write back of complaints provision (156.6) - -
Senior secured note buyback 0.7 - (0.3)
Revolving credit facility (RCF) fees - 0.7 2.2
Securitisation fees 0.5 1.2 -
Strategic review and formal sale process costs - 3.0 2.0
Tax provision release (0.8) (2.5) (2.9)
Tax asset write-off - 7.8 -
Less tax impact (0.1) (0.9) (0.7)
Adjusted profit/(loss) after tax 13.3 (279.8) (26.9)
The above items were all excluded due to their exceptional nature. The
Directors' believe that adjusting for these items is useful in making
year-on-year comparisons.
· Write back of the complaints provision is due to the cash redress
liability being reduced to the £97.0m contribution as per the Scheme.
· Senior secured notes redemption adjustments relate to accelerated
bond cost and premium write off triggered by the early bond redemption in
January 2022.Senior secured note buybacks are not underlying business-as-usual
transactions.
· RCF fees relate to fees written off following the modification
and extension of the revolving credit facility in FY20, and in FY21 relates to
fees written off following cancellation of the facility. Modification,
extension and cancellation of the facility were all deemed substantial
modifications of the financial instrument leading to the derecognition of
previously capitalised fees. The facility was cancelled in May 2020 and hence
these amounts have been excluded.
· Following the renegotiation of the securitisation facility on 14
August 2020 a substantial modification of the facility occurred; as such all
previous capitalised fees relating to the facility have been written off. This
has been adjusted for above as it was a one-off event in the period.
· Due to inherent uncertainty surrounding future profitability,
current and deferred tax assets were written off and charged to the
consolidated statement of comprehensive income in the year. The tax provision
release refers to the release of a tax provision no longer required. These
adjustments result in a tax charge for the year despite the large loss-making
position as at 31 March 2021 and hence have been adjusted for in the
calculation.
· In the prior year, strategic review and formal sale process costs
relate to the strategic review and formal sale processes both announced in
January 2020. They are one-off costs and hence have been adjusted.
None are business-as-usual transactions. Hence, removing these items is deemed
to give a view of underlying profit/(loss) adjusting for non-business-as-usual
items within the financial year.
17. "Return on assets" ("ROA") refers to annualised profit/(loss) over tax as
a percentage of average assets.
Adjusted return on assets 31 Mar 22 31 Mar 21 31 Mar 20
Profit/(loss) after tax 169.6 (289.1) (27.2)
Customer loans and receivables at year end 140.2 350.6 663.6
Other receivables and current assets at year end 9.9 8.0 23.2
Cash and cash equivalents at year end 133.6 177.9 64.3
Total 283.7 536.5 751.1
Average assets 410.1 643.8 748.1
Return on assets 41.4% (44.9)% (3.6)%
18. "Adjusted return on assets" refers to annualised adjusted
profit/(loss) over tax as a percentage of average assets
Adjusted return on assets 31 Mar 22 31 Mar 21 31 Mar 20
Adjusted profit/(loss) after tax (see APM number 16) 13.3 (279.8) (26.9)
Customer loans and receivables at year end 140.2 350.6 663.6
Other receivables and current assets at year end 9.9 8.0 23.2
Cash and cash equivalents at year end 133.6 177.9 64.3
Total 283.7 536.5 751.1
Average assets 410.1 643.8 748.1
Adjusted return on assets 3.2% (43.5)% (3.6)%
19. "Return on equity" ("ROE") is calculated as annualised loss/profit after
tax divided by the average of equity at the beginning of the period and the
end of the period.
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Profit/(loss) after tax 169.6 (289.1) (27.2)
Shareholder equity 47.9 (121.4) 167.4
Average equity (36.8) 23.0 206.0
Return on average equity 460.9% (1257.0)% (13.2)%
20. "Adjusted return on equity" is calculated as annualised adjusted
profit/(loss) after tax divided by the average of equity at the beginning of
the period and the end of the period.
31 Mar 22 31 Mar 21 31 Mar 20
£m £m £m
Adjusted profit/(loss) after tax (see APM number 16) 13.3 (279.8) (26.9)
Shareholder equity 47.9 (121.4) 167.4
Average equity (36.8) 23.0 206.0
Adjusted return on average equity 36.1% (1216.5)% (13.1)%
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