25 August 2022

Amigo Holdings PLC

First Quarter Financial Results for the three-month period ended 30 June 2022

Amigo Holdings PLC, ("Amigo" or the "Company"), provider of mid-cost credit in the UK, announces results for the three-month period ended 30 June 2022.

Gary Jennison, Chief Executive Officer commented:

"We continue to engage positively with the FCA around our return to lending. This is the next step in our recovery, ahead of a proposed capital raise and would enable a new start for the business having taken on board the learnings from the past.

"Our new lending proposition, under the RewardRate brand, aims to offer a more affordable, responsible and flexible option to underserved customers who currently have very few choices. By allowing customers who make their loan payments on time to reduce their APR by up to 15 percentage points, we aim to help customers achieve a better credit rating and move towards cheaper credit. We believe fair and responsible non-standard lending choices are vital to creating greater financial inclusion and mobility."

Headlines

·   On 26 May 2022, the Board's preferred proposed Scheme of Arrangement ("Scheme"), was sanctioned by the High Court. The Scheme seeks to deliver the best possible outcome to Scheme creditors to address Amigo's historical lending complaints liability.

·   The "preferred" solution under the Scheme is contingent on lending restarting by 26 February 2023 and Amigo completing a capital raise by 26 May 2023.If either of the conditions is not met, the Scheme will revert to the "fallback" solution and the business will be wound down.

·   Engagement with the Financial Conduct Authority ("FCA") continues to be positive with Amigo's new platform, processes and procedures being assessed to satisfy the FCA that all conditions are being met to enable a return to lending.

·   Volumes of complaints received to date in the Scheme process are within expectations. A report from Scheme supervisors, PWC, will be published in early September 2022.

·   Subject to FCA consent, Amigo will return to lending with a revised guarantor loan as well as an unsecured non-guarantor loan product which will both feature dynamic pricing to encourage and reward on-time payment with lower rates and penalty-free annual payment holidays. The new products will be released under the RewardRate brand, representing a new start for the business.

·   The Board expects that the proposed capital raise will require shareholder approval and that the proceeds will be used both to fund the minimum £15m Scheme contribution and to support future lending. While the quantum is yet to be determined, the Board is currently working with advisers to determine the overall structure of the capital raise in a way that seeks to facilitate existing shareholders' participation whilst balancing this with the need to ensure the success of the capital raise for the purposes of, and in the timeframe required under, the Scheme.  Further details are expected to be announced in due course.

·   The FCA investigations, initiated in 2020 and 2021, into Amigo's creditworthiness assessment and complaints handling respectively, are ongoing. The Board recognises the importance of a resolution to the investigations in the context of the capital raise and is working towards obtaining this as soon as possible.

·   On 6 June 2022, Danny Malone was appointed Chief Financial Officer, having performed the role on an interim basis since February 2022.

·   Post period end, the Board appointed Peel Hunt LLP as financial adviser and sole corporate broker and Ashcombe Advisers LLP as financial adviser. Both will be instrumental in assisting with the required fund raising in the coming months.

Financial headlines

·   Net loan book reduction of 63.3% to £105.9m (Q1 FY2022: £288.7m, FY2022: £138.0m) due to the run-off of the legacy loan book and the continued pause in lending.

·   Revenue reduction of 68.0% to £10.4m (Q1 FY2022: £32.5m) due to the reduction in the loan book and ongoing pause in lending throughout the period.

·   Complaints provision down 47.7% to £176.9m (Q1 FY2022: £338.0m, FY2022: £179.8m). The complaints provision has been replaced with a reduced provision for Scheme redress. The significant release in complaints provision occurred at year end and therefore had no impact on the income statement in this quarter.

·   With no additional Scheme provision recognised in the quarter, and a decline due to the reduction in the size of the loan book, reported statutory profit before tax for the period was £2.2m (Q1 FY2022: £15.0m). No tax impact or profit adjustments made in the period.

·   Overall collections, including early repayments and recoveries from written-off accounts, have remained robust despite the continued rise in delinquency expected from a book in run-off.

·   Ongoing focus on controlling costs.

·   £102.4m of unrestricted cash and cash equivalents as at 30 June 2022 (Q1 FY2022: £201.2m, FY2022: £133.6m), following the payment of the £60m initial Scheme contribution, reflects continued strong cash generation. Current unrestricted cash balance of over £115m, following payment ofthe bi-annual senior secured note coupon payment in July 2022.

·   Net assets of £50.2m at 30 June 2022 (Q1 FY2022: net liabilities of £105.2m, FY2022: £47.9m). Substantially all the Group's net assets, excluding c.£8m of working capital, are committed within the Scheme.

·   Net unrestricted cash of £52.6m at 30 June 2022 (Q1 FY2022: net debt of £56.2m, FY2022: £83.9m) driven by the continued collection of the back book while originations remained suspended.

Notes to summary financial table:

¹Number of customers represents the number of accounts with a balance greater than zero, exclusive of charged off accounts.  

²Net loan book represents total outstanding loans less provision for impairment excluding deferred broker costs.  

³Profit after tax otherwise known as profit/(loss) and total comprehensive income/(loss) to equity shareholders of the Group as per the financial statements.

⁴Adjusted profit after tax excludes items due to their exceptional nature including: senior secured note, RCF fees, securitisation facility fees write off, tax provision release, tax asset write off and strategic review and write-back of complaints provision. None are business-as-usual transactions. Hence, removing these items is deemed to give a view of underlying profit adjusting for non-business-as-usual items within the financial year.

⁵Basic adjusted profit/earnings per share is a non-IFRS measure and the calculation is shown in note 7. Adjustments to profit/earnings are described in footnote 4 above.

⁶Net unrestricted cash/(debt) is defined as borrowings less unamortised fees and unrestricted cash and cash equivalents.

⁷Net unrestricted cash(debt)/gross loan book: this measure shows whether the cash andborrowings' year-on-year movement is in line with changes in the loan book. 

*Detailed definitions and calculations of these alternative performance measures (APMs) can be found in the APM section of these condensed financial statements

Analyst, investor and bondholder conference call and webcast

Amigo will be hosting a live webcast for investors and bondholders today at 10:30am (London time) which will be available at: https://www.amigoplc.com/investors/results-centre. A conference call is also available for those unable to join the webcast (Dial in: + 020 3936 2999; Access code: 159756). A replay will be available on Amigo's website after the event. The presentation pack for the webcast shows the reconciliation between the PLC results and Amigo Loans Group Limited (the 'Bond Group').

Contacts:

Amigo  

Danny Malone, Chief Financial Officer

Kate Patrick, Head of Investor Relations                                                     [email protected]

Lansons                                                                                                              [email protected]

Tom Baldock                                                                                                      07860 101715

Ed Hooper                                                                                                          07783 387713

About Amigo Loans

Amigo is a public limited company registered in England and Wales with registered number 10024479. The Amigo Shares are listed on the Official List of the London Stock Exchange. Whilst not currently lending, Amigo has provided guarantor loans in the UK since 2005, offering access to mid‐cost credit to those who are unable to borrow from traditional lenders due to their credit histories. The guarantor loan concept introduces a second individual to the lending relationship, typically a family member or friend with a stronger credit profile than the borrower. This individual acts as guarantor, undertaking to make loan payments if the borrower does not. Amigo was founded in 2005 and grew to become the UK's largest provider of guarantor loans. In the process, Amigo's guarantor loan product has allowed borrowers to rebuild their credit scores and improve their ability to access credit from mainstream financial service providers in the future. Amigo Loans Ltd and Amigo Management Services Ltd are authorised and regulated in the UK by the Financial Conduct Authority.

Forward looking statements

This report contains certain forward-looking statements. These include statements regarding Amigo Holdings PLC's intentions, beliefs or current expectations and those of our officers, Directors and employees concerning, amongst other things, our financial condition, results of operations, liquidity, prospects, growth, strategies, and the business we operate. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will or may occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, Amigo Holdings PLC has no obligation to update the forward-looking statements or to correct any inaccuracies therein.

Chief Executive's Statement

Performance

The three months ended 30 June 2022 have seen considerable progress in addressing Amigo's historical complaints liability and in re-establishing Amigo as a provider of responsible finance to meet the needs of a growing underserved population. The sanctioning of Amigo's Scheme of Arrangement by the High Court on 26 May 2022 represents a turning point for the business. The approval of the Scheme will deliver the best possible outcome for creditors and enable Amigo to continue to play an important role in the mid-cost credit sector, at a time when the UK is facing an unprecedented rise in the cost of living and a further tightening of credit availability.

Amigo's pause in lending continued throughout the reporting period to 30 June 2022 and resulted in a 48.3% decline in customer numbers to 61,000 and a 63.3% reduction in the net loan book to £105.9m. Revenue fell 68.0% to £10.4m, compared to the prior year period, primarily driven by the reduction in the loan book. Overall collections, which have included early repayments and recoveries from written-off accounts, have remained robust despite the anticipated increase in delinquency associated with a loan book in run-off.

The provision for complaints on the balance sheet at 30 June 2022 is broadly in line with the full year and reduced significantly, down 47.7%, on the prior year. This follows the sanctioning of the Scheme and the introduction of a reduced Scheme provision. The significant release in complaints provision occurred at year end and therefore had no impact on the income statement in this quarter. With no additional complaints provision recognised in the quarter, reported statutory profit before tax for the period was £2.2m (Q1 FY2022: £15.0m). No tax impact or profit adjustments were made in the period.

The reduced provision on the balance sheet has resulted in a net asset position of £50.2m. However, as we noted at year end, although we have returned to balance sheet solvency, substantially all the Shareholders' Equity in the business, excluding a small working capital amount of c.£8m, is committed to Scheme creditors under the Scheme.

Our cash position remains strong with unrestricted cash at 30 June 2022 of £102.4m after payment of the initial £60m Scheme contribution and current cash of over £115m, after payment of the bi-annual coupon on our senior secured notes.

Scheme of Arrangement Update

The Scheme was sanctioned by the High Court on 26 May 2022. Under the "preferred" solution of the Scheme, Amigo will make an initial cash contribution of £97m to the Scheme fund, of which £60m was paid in June 2022. £37m is due to be paid to the Scheme fund by 26 February 2022. A further contribution of at least £15m is expected to be made from the proceeds of the proposed capital raise, in accordance with the terms of the Scheme. In order to secure the best possible result for Scheme creditors in the circumstances, the Scheme includes a mechanism for additional monies to be paid to Scheme creditors in the event that the existing loan book generates a better return than anticipated. The judgment, passed down toAmigo on 30 May 2022, is available onwww.amigoscheme.co.uk.

The "preferred" solution under the Scheme is contingent on Amigo returning to lending, with FCA consent, by 26 February 2023. It is also contingent on Amigo completing a capital raise by 26 May 2023. If Amigo fails to meet these conditions, the Scheme will revert to the "fallback" solution which is an orderly wind-down of the Amigo Loans Ltd business.

Return to lending

We have made significant progress in preparing to return to lend. While the Scheme condition is that we return to lending by 26 February 2023, we aim to do so far sooner. Engagement with the FCA has continued to be positive and we remain grateful for the considerable amount of time that the teams at the FCA have afforded us as we test our new platform, processes and procedures to satisfy them that threshold conditions are met and we are ready to return to lending. We will initiate lending with a limited pilot, building to a maximum of £35m net originations untilthe capital raise has been completed. The initial £35m of planned new lending will be funded by existing resources.

We will not return to lending with our Amigo brand. Our revised guarantor loan product and new non-guarantor unsecured loan will be released under our new brand, RewardRate. This represents a new start for our business. We have designed our RewardRate products to meet the needs of a large underserved market, offering affordable, responsible, and flexible finance to an eligible segment of the estimated 12 million adults in the UK who currently have few options to borrow. Our products aim to help customers achieve a better credit rating and move towards cheaper credit by enabling those that make their loan payments on time to reduce the effective APR by up to 15 percentage points. The personal loan will start at 49.9% APR while the guarantor product will begin at 39.9% APR, with both products offering the borrower the opportunity to reduce the interest rate to equivalent 34.9% APR and take an interest free payment holiday once a year, with no penalties.

This new proposition has been shaped through learnings from Amigo's past and all new lending is designed to meet the FCA's proposed new Consumer Duty outcomes. There will be an improved underwriting process with enhanced affordability checks for customers. We have invested in soft search application capability enabling targeted and accurate quotes to be presented to customers who match our target customer profile without impacting their credit file. When we return to lending, open banking, or an equivalent, will be used in all affordability assessments. To support our new products, we will be deploying a new technology environment. The new technologies are cloud-based and built around market-leading solutions tailored to our products and customer needs. Working with best-in-class third parties, such as Mambu, Mulesoft and Salesforce, the platform provides quality system solutions that are scalable and easily configured to suit our and our customers' needs, now and as they change. Third-party supporting services are being integrated using open application programming interfaces ("API") technologies which both speed up and simplify the build. We continue to build and own several key services such as our underwriting decision engines and our websites. These will be fully integrated into the overall architecture alongside our third-party partners. Alongside this, our new data environment is being purpose-built to give us more flexibility and scalability for both data storage and reporting.

Capital Raise

Amigo expects to propose a capital raise to fund both the minimum £15m additional Scheme contribution required under the "preferred" solution of the Scheme and to support future lending. The Scheme requires Amigo to issue at least 19 new shares for every existing share in issue. Whilst the final amount of the capital raise is yet to be determined and will be subject to market conditions at the time, the Board is currently working with advisers to determine the overall structure of the capital raise in a way that seeks to facilitate existing shareholders' participation whilst balancing this with the need to ensure the success of the capital raise for the purposes of, and in the timeframe required under, the Scheme. In addition, Amigo plans to raise additional debt to fulfil total funding requirements. No final decision has been made on quantum or structure. The Board has appointed Peel Hunt LLP as financial adviser and sole corporate broker and Ashcombe Advisers LLP as financial adviser. Both will be instrumental in assisting with the required fund raising in the coming months. Amigo expects to publish further details on the capital raise in due course.

The Board recognises the importance of a resolution to the ongoing FCA investigations into complaints handling and affordability processes in the context of the capital raise and is working towards obtaining this as soon as possible. The FCA has stated that the levying of any fine would be considered in the context of the Scheme and its impact on creditors. In the event that the investigations have not concluded or that they have concluded with an adverse outcome, either of which causes the proposed capital raise not to proceed, the Scheme will revert to the "fallback" solution and the business will be wound down.

ESG

The proper and effective governance of Amigo is fundamentally important. During the period, Amigo's Responsible Business Council, was established. The Council meets monthly and reports quarterly to the Board, advising on key ESG matters. It acts as a sounding board, challenger, innovator and adviser to the Board and business leaders responsible for defining, planning and executing Amigo's ESG strategy. Priority areas include setting Amigo's ESG vision, goals and targets, driving diversity, equity and inclusion, climate-change related matters and ourstrategy for charity and communityengagement. It has undertaken a culture review in partnership with the risk function to identify how Amigo performs across six key categories - leadership, competency, governance, decisions, relationships, and ethics. This will help drive the values, behaviours, and attitudes the Council wants to embed in the business, which will support the business' future growth as well as its impact on customers, employees, and the wider community. The Responsible Business Council is working on defining the core metrics it wants to influence and have an impact on over the next year. This will guide the solutions it champions and proposes to the wider business.

Amigo has also recently selected four priority UN Sustainable Development Goals which align to our strategic pillars, our values and our purpose, following a materiality assessment and review by the Responsible Business Council. Over the coming year, we will be setting targets and metrics against each goal and will report on these in future annual reports.

Board

Danny Malone, who joined Amigo in February as Interim CFO, was appointed to the Board and as CFO on 6 June 2022, subject to approval under the FCA's Senior Managers and Certification Regime. Danny is a Chartered Accountant and has extensive business and regulatory experience gained from working predominantly in the specialist consumer finance sector and having co-founded Everyday Loans in 2006.

Maria Darby-Walker, who joined the Board in October 2020, was appointed Senior Independent Director, subject to approval under the FCA's Senior Managers and Certification Regime on 6 June 2022.

Summary and Outlook

In summary, the sanctioning of the Scheme represents a turning point for Amigo. We have made significant progress as we work with the FCA to bring our new RewardRate products to market. We have appointed advisers who will support us as we seek to raise capital to fund both the minimum Scheme contribution and to support future lending and we are working with them to determine the overall structure of the capital raise. This is critical for the future survival of the business.

The current cash position remains strong at over £115m after payment of the initial £60m Scheme contribution and the bi-annual coupon on our senior secured notes.

Amigo is a very different business to the business of the past. We have a refreshed culture, focused on delivering positive outcomes for all stakeholders, as we pursue our purpose of providing those with few options to borrow the opportunity to achieve financial mobility. The Board is confident that its future lending proposition meets a strong demand in the market for a competitively priced, mid-cost, specialist credit product and that Amigo can be a responsible and valuable contributor to the sector. Amigo is preparing and looking forward to returning to lending as soon as possible and fulfilling its obligations under the Scheme.

Financial Review

In the three months to 30 June 2022, the net loan book reduced by 63.3% to £105.9m (Q1 FY2022: £288.7m, FY2022: £138.0m). Revenue fell by 68.0% year on year to £10.4m (Q1 FY2022: £32.5m), reflecting the pause in lending and loan book reduction. Customer numbers reduced by 48.3% compared to the prior year to 61,000 (Q1 FY2022: 118,000). With no additional complaints provision recognised in the quarter, reported statutory profit before tax for the period was £2.2m (Q1 FY2022: £15.0m). There was no tax impact in the quarter or profit adjustments made in the period.

Net assets at 30 June 2022 were £50.2m (Q1 FY2022: net liabilities of £105.2m, FY 2022: £47.9m). Although the results show a strong shareholder equity position, substantially all the existing net assets of the business will be delivered to the Scheme creditors by way of the Scheme. After the costs of administering the Scheme and collecting out the remaining portfolio are paid, only a small working capital amount of c.£8m will remain. This will not be sufficient to support future lending beyond the initial period; future lending will be funded, in part, by way of a capital raise to be completed by 26 May 2023.

Impairment

The impairment charge for the period was £0.3m (Q1 FY2022: £7.6m), with the impairment:revenue ratio decreasing significantly to 2.9%. The ongoing pause in originations and consequent reduction in the size of the loan book drove the lower impairment charge, partly owing to the upfront expected credit loss methodology of IFRS 9. As the book runs off, the gross loan book is increasingly provided for under lifetime loss assumptions. There were also no key judgements revisions in the period.

The impairment provision decreased to £37.6m (Q1 FY2022: £62.2m), primarily due to the decline of the loan book, representing 26.2% of the gross loan book (Q1 FY2022: 23.4%, FY 2022: 25.6%). The increase in coverage is due to the expected increase in delinquency, within modelled levels, as the book runs off.

Scheme provision

At year end, the Board believed there to be sufficient certainty to account for claims redress on a Scheme basis. This was confirmed following the High Court decision to sanction the Scheme in May 2022. The provision on the balance sheet at 30 June 2022 is broadly in line with the year-end provision, at £176.9m (FY 2022: £179.8m; Q1 FY2022 £338.0), with all material judgements and assumptions remaining unchanged. The reduction from year end is primarily due to the payment of Scheme administration costs over the period. There was no impact on the income statement in the quarter.

A key consideration will be uptake and volumes of complaints in the Scheme. Volumes of complaints received to date are within Scheme provision assumptions. Under the terms of the Scheme, customers have until 26 November 2022 to submit a claim.

Sensitivity analysis of the key assumptions, including the volume of claims, is set out in note 2.2 to these financial statements.

Tax

Whilst the three months ended 30 June 2022 were profitable, no tax charge has been recognised on profits as the Group has sufficient losses brought forward.

Funding and liquidity

Net cash was £52.6m at 30 June 2022 (Q1 FY2022: net debt of £56.2m) as the back book continued to be collected while originations remained suspended. Unrestricted cash and cash equivalents at 30 June 2022 was £102.4m (Q1 FY2022: £201.2m, FY 2022: £133.6m) following the payment of the £60m initial Scheme contribution in June 2022. Restricted cash is £70.2m which includes the £60m Scheme contribution as well as  estimated set-off held in escrow for customers with existing complaints who continue to make payments. Current unrestricted cash, after payment of the interest due on the senior secured notes, is over £115m.

The group has £50.0m outstanding 7.625% senior secured notes due in January 2024.

Going concern

Despite the sanctioning of the Scheme, the Board has concluded that a material uncertainty over going concern remains (see note 1 to the financial statements for further information). However, the Board considers that it is appropriate to prepare these financial statements on a going concern basis, as the sanctioning of the Scheme and the potential to successfully meet the conditions of the "preferred solution" under the Scheme provide a realistic alternative to a managed wind-down or insolvency.

Condensed consolidated statement of comprehensive income

for the 3 months ended 30 June 2022

The profit is derived from continuing activities.

The accompanying notes form part of these financial statements.

1 There was less than £0.1m of other comprehensive income during any other period, and hence no consolidated statement of other comprehensive income is presented.

Condensed consolidated statement of financial position

as at 30 June 2022

The accompanying notes form part of these financial statements.

¹Cashand cash equivalents (restricted) of £70.2m (Q1 2021: £6.8m) includes (at 30 June 2022) the £60m initial payment to the Scheme Fund. This amount will be returned to the Group if the Scheme Fallback solution is activated and the Group goes into runoff. The remainder materially relates to restricted cash held in a Trust Account for the benefit of those customers with an open complaint, who may later have their complaints upheld in the Scheme, who continued to make payments on their loan from 1 December 2021 to the Scheme effective date.

The financial statements of Amigo Holdings PLC were approved and authorised for issue by the Board and were signed on its behalf by:

Danny Malone

Director

25 August 2022

Company no. 10024479

Condensed consolidated statement of changes in equity

for the 3 months to 30 June 2022

The accompanying notes form part of these financial statements.

1       Thetranslation reserve is due to the effect of foreign exchange rate changes on translation of financial statements of the Irish entities.

2       The merger reserve was created as a result of a Group reorganisation in 2017 to create an appropriate holding company structure. The restructure was

within a wholly owned group, constituting a common control transaction.

Condensed consolidated statement of cash flows

for the3 months to 30 June 2022

The accompanying notes form part of these financial statements.

1Total cash is inclusive of cash and cash equivalents (restricted) of £70.2m (Q1 2021: £6.8m). Cash and cash equivalents (restricted) includes (at 30 June 2022) the £60m initial payment to the Scheme Fund. This amount will be returned to the Group if the Scheme Fallback solution is activated and the Group goes into runoff. The remainder materially relates to restricted cash held in a Trust Account for the benefit of those customers with an open complaint, who may later have their complaints upheld in the Scheme, who continued to make payments on their loan from 1 December 2021 to the Scheme effective date.

1. Accounting policies

1.1 General information and basis of preparation of financial statements

Amigo Holdings PLC is a public company limited by shares (following IPO on 4 July 2018), listed on the London Stock Exchange (LSE: AMGO). The Company is incorporated and domiciled in England and Wales and its registered office is Nova Building, 118-128 Commercial Road, Bournemouth, United Kingdom BH2 5LT.

The principal activity of the Company is to act as a holding company for the Amigo Loans Group of companies. The principal activity of the Amigo Loans Group is to provide individuals with guarantor loans from £2,000 to £10,000 over one to five years.

These unaudited condensed consolidated Group financial statements for the three months ended 30 June 2022 have been prepared on a going concern basis and approved by the Directors in accordance with UK-adopted International Financial Reporting Standards ("IFRS"). There has been no departure from the required IFRS standards. The unaudited condensed interim financial statements do not constitute the statutory financial statements of the Group within the meaning of section 434 of the Companies Act 2006.

The consolidated financial statements have been prepared under the historical cost convention, except for financial instruments measured at amortised cost or fair value.

The presentational currency of the Group is GBP, the functional currency of the Company is GBP and these unaudited condensed financial statements are presented in GBP. All values are stated in £ million (£m) except where otherwise stated.

These interim financial statements have not been prepared fully in accordance with IAS 34 Interim Financial Reporting. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of Amigo Holdings PLC (the 'Group') as at and for the year ended 31 March 2022.

The interim financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated annual report for the year ended 31 March 2022. Changes to significant accounting policies are described in notes 1.2 and 2.

The consolidated financial statements of the Group as at and for the year ended 31 March 2022 are available upon request from the Company's registered office at Nova Building, 118-128 Commercial Road, Bournemouth, United Kingdom, BH2 5LT.

In preparing the financial statements, the Directors are required to use certain critical accounting estimates and are required to exercise judgement in the application of the Group and Company's accounting policies. See note 2 for further details.

The comparative figures for the financial year ended 31 March 2022 are not the Group's statutory accounts for that financial year, but are an extract from those statutory accounts for interim reporting. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was not qualified and:

i)             drew attention to the material uncertainty related to going concern referenced in the financial statements; and

ii)            did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

These condensed interim financial statements for the three months ended 30 June 2022 were approved by the board of directors on 25 August 2022.

Going concern

In determining the appropriate basis of preparation for these financial statements, the Board has undertaken an assessment of the Group and Company's ability to continue as a going concern for a period of at least twelve months from the date of approval of these financial statements. This has taken into account the Group's business plan and the principal risks and uncertainties facing the Group, including the success of the Scheme of Arrangement ("the Scheme"). The financial statements have been prepared on a going concern basis which the Directors believe to be appropriate for the following reasons.

Following the sanctioning by the High Court on 26 May of the Scheme of Arrangement ("the Scheme") the Group now has a clear path to returning to lending over the next twelve months.  Failure to meet the conditions of the Scheme however remains a key risk faced by the Group.  The relevant conditions are:

• approval before 26 February 2023 by the Financial Conduct Authority for Amigo to resume lending; and

• issuance and sale of at least 19 shares for every 1 share in issue before 26 May 2023

Should either of these conditions remain unsatisfied within the required timeframes, under the terms of the Scheme the business will revert to a managed wind-down and neither the Group nor Company will be a going concern.  Projections show the business has sufficient resources for a solvent wind-down in this context.

However, the Directors have a reasonable expectation that these conditions can be met and, therefore, have modelled a 'Base scenario' and 'Severe but plausible downside Scheme scenario' which the Directors believe are realistic alternatives to the managed wind-down scenario.

Base scenario - business plan assumptions

The Base scenario assumes that:

·     the conditions of the Scheme (explained above) are met in the required timescales, with FCA approval to commence re-lending being received

·     balance adjustments resulting from complaints in the Scheme are consistent with the assumptions that underpin the complaints provision reported as at 31 March 2022 (see note 2.2.1)

·     at least the minimum committed amount of £112m is paid out as cash redress in the Scheme, being £97m from existing resources and future collections plus an additional £15m following the capital raise

·     new lending originations commence as soon as possible

·     collections on the existing loan book continue in line with recent experience

This scenario indicates that the Group will have sufficient funds to enable it to operate within its available facilities and settle its liabilities as they fall due for at least the next twelve months.

Severe but plausible downside Scheme scenario

The Directors have prepared a severe but plausible downside scenario.  This assumes the conditions of the Scheme are met and also that the Group is able to successfully obtain new debt financing to enable it to repay its non-current borrowings as they fall due in January 2024, but considers the potential impact of:

·     an increased number of upheld complaints. Whilst this sensitivity does not increase the cash liability, which is capped under the Scheme, the number of customers receiving balance write downs will increase, thus reducing future collections and adversely impacting the Group's liquidity position.

·     increased credit losses as a result of the cost of living crisis and the inability of an increased number of the Group's customers to continue to make payments.

·     halving of forecast origination volumes, whether arising due to delays in new product launch or market conditions.

·     halving of new capital raised (whilst still meeting the dilution conditions of the Scheme)

This severe but plausible downside Scheme scenario indicates that the Group's available liquidity headroom would reduce but would be sufficient to enable the Group to continue to settle its liabilities as they fall due for at least the next twelve months.

FCA investigation

The Group is currently under investigation by the FCA in relation to historical lending and complaints management processes. If the enforcement process is not completed by then and this prevents the capital raise from being successful, then Amigo could fail to comply with one of the Scheme conditions and is likely to revert to the "fallback" solution or some form of insolvency. There are a number of avenues of sanction open to the FCA should it deem it appropriate and so the potential impact of the investigation on the business is extremely difficult to predict and quantify, so has not been provided for in the financial statements and is not modelled in the business plan or stress scenario.  In mitigation, the FCA has stated that the levying of any fine would be considered in the context of the Scheme and its impact on creditors.In the event that the investigations have not concluded or that they have concluded with an adverse outcome, either of which causes the capital raise not to proceed, the Scheme will revert to the "fallback" solution and the business will be wound down.

Conclusion

Approval by the High Court of the Scheme provides the Group with a clear path to return to lending under a business plan which has been the subject of extensive external scrutiny as a result of the Court process. Based on the severe but plausible scenario the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operation for at least the next twelve months. Accounting standards require an entity to prepare financial statements on a going concern basis unless the Board either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so. Accordingly, the Board believes that it remains appropriate to prepare the financial statements on a going concern basis.

However, the Board also recognises that at the date of approval of these financial statements significant uncertainty remains. The Scheme requires the meeting of conditions, being approval for a return to lending before 26 February 2023 and issuance and sale of at least 19 shares for every 1 share in issue before 26 May 2023.  Additionally, the successful delivery of the Group's business plan depends on raising sufficient equity and/or debt funding and the final outcome of the FCA investigations remains highly uncertain. These conditions are outside of the control of the Group. These matters indicate the existence of a material uncertainty related to events or conditions that may cast significant doubt over the Group and Company's ability to continue as a going concern and, therefore, that the Group and Company may be unable to realise their assets and discharge their liabilities in the normal course of business. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate. 

1.2 Amounts receivable from customers

i) Classification

IFRS 9 requires a classification and measurement approach for financial assets which reflects how the assets are managed and their cash flow characteristics. IFRS 9 includes three classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income ("FVOCI") and fair value through profit and loss ("FVTPL"). Note, the Group does not hold any financial assets that are equity investments; hence the below considerations of classification and measurement only apply to financial assets that are debt instruments. A financial asset is measured at amortised cost if it meets both of the following conditions (and is not designated as at FVTPL):

·     it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

·     its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest ("SPPI") on the principal amount outstanding.

Business model assessment

In the assessment of the objective of a business model, the information considered includes:

·     the stated policies and objectives for the loan book and the operation of those policies in practice, in particular whether management's strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets;

·     how the performance of the loan book is evaluated and reported to the Group's management;

·     the risks that affect the performance of the business model (and the financial assets held within that business model) and its strategy for how those risks are managed;

·     how managers of the business are compensated (e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected); and

·     the frequency, volume and timing of debt sales in prior periods, the reasons for such sales and the Group's expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Group's stated objective for managing the financial assets is achieved and how cash flows are realised.

The Group's business comprises primarily loans to customers that are held for collecting contractual cash flows. Debt sales of charged off assets are not indicative of the overall business model of the Group. The business model's main objective is to hold assets to collect contractual cash flows.

Assessment of whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, "principal" is defined as the fair value of the financial asset on initial recognition. "Interest" is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time, as well as profit margin.

In assessing whether the contractual cash flows are SPPI, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. The Group has deemed that the contractual cash flows are SPPI and hence, loans to customers are measured at amortised cost under IFRS 9.

ii) Impairment

IFRS 9 includes a forward-looking expected credit loss ("ECL") model with regards to impairment. IFRS 9 requires an impairment provision to be recognised on origination of a financial asset. Under IFRS 9, a provision is made against all stage 1 (defined below) financial assets to reflect the expected credit losses from default events within the next twelve months. The application of lifetime expected credit losses to assets which have experienced a significant increase in credit risk results in an uplift to the impairment provision.

iii) Measurement of ECLs

Under IFRS9 financial assets fall into one of three categories:

Stage 1 - financial assets which have not experienced a "significant" increase in credit risk since initial recognition;

Stage 2 - financial assets that are considered to have experienced a "significant" increase in credit risk since initial recognition; and

Stage 3 - financial assets which are in default or otherwise credit impaired.

Loss allowances for stage 1 financial assets are based on twelve month ECLs; that is the portion of ECLs that result from default events that are estimated within twelve months of the reporting date and are recognised from the date of asset origination. Loss allowances for stage 2 and 3 financial assets are based on lifetime ECLs, which are the ECLs that result from all default events over the expected life of a financial instrument.

In substance the borrower and the guarantor of each financial asset have equivalent responsibilities. Hence, for each loan there are two obligors to which the entity has equal recourse. This dual borrower nature of the product is a key consideration in determining the staging and the recoverability of an asset.

The Group performs separate credit and affordability assessments on both the borrower and guarantor. After having passed an initial credit assessment, most borrowers and all guarantors are contacted by phone and each is assessed for their creditworthiness and ability to afford the loan. In addition, the guarantor's roles and responsibilities are clearly explained and recorded. This is to ensure that while the borrower is primarily responsible for making the repayments, both the borrower and the guarantor are clear about their obligations and are also capable of repaying the loan.

When a borrower misses a payment, both parties are kept informed regarding the remediation of the arrears. If a missed payment is not remediated within a certain timeframe, collection efforts are switched to the guarantor and if arrears are cleared the loan is considered performing.

The Group assessed that its key sensitivity was in relation to expected credit losses on customer loans and receivables. The matrix of nine scenarios used in the prior year for calculating the ECL provision has been simplified into base, downside and severe downside scenarios. In prior years nine macroeconomic scenarios were applied and weighted. However, given the impact of the Covid-19 pandemic is better known and already to an extent has been realised, this methodology was reviewed and simplified down to three scenarios - a base, downside and severe downside scenario, to determine the ECL provision (see note 2.1.3).

Previously the IFRS 9 provision was segmented into the Group's seven legacy risk segments. Due to the impact of Covid-19 these segments no longer have discernible credit risk profiles. Instead, and in line with information used by management in internal decision making and review, the book is bifurcated into customers who have had a Covid-19 forbearance plan and those who have not. Refer to note 2.1.1 for further detail of the judgements and estimates used in the measurement of ECLs and note 2.1.3 for detail on impact of forward-looking information on the measurement of ECLs.

iv) Assessment of significant increase in credit risk (SICR)

In determining whether the credit risk (i.e. risk of default) of a financial instrument has increased significantly since initial recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort, including both quantitative and qualitative information and analysis. The qualitative customer data used in this assessment is payment status flags, which occur in specific circumstances such as a short-term payment plans, breathing space or other indicators of a change in a customer's circumstances. See note 2.1.2 for details of how payment status flags are linked to staging, and judgements on what signifies a significant increase in credit risk.

v) Derecognition

Historically, the Group offered, to certain borrowers, the option to top up existing loans subject to internal eligibility criteria and customer affordability. The Group pays out the difference between the customer's remaining outstanding balance and the new loan amount at the date of top up. The Group considers a top up to be a derecognition event for the purposes of IFRS 9 on the basis that a new contractual agreement is entered into by the customer replacing the legacy agreement. The borrower and guarantor are both fully underwritten at the point of top up and the borrower may use a different guarantor from the original agreement when topping up.

vi) Modification

Aside from top ups and Covid-19 payment holidays, no formal modifications are offered to customers. In some instances, forbearance measures are offered to customers. These are not permanent measures; there are no changes to the customer's contract and the measures do not meet derecognition or modification requirements.

vii) Definition of default

The Group considers an account to be in default if it is more than three contractual payments past due, i.e. greater than 61 days, which is a more prudent approach than the rebuttable presumption in IFRS 9 of 90 days and has been adopted to align with internal operational procedures. The Group reassesses the status of loans at each month end on a collective basis. When the arrears status of an asset improves so that it no longer meets the default criteria for that portfolio, it is immediately cured and transitions back from stage 3 within the Group's impairment model.

viii) Forbearance

Where the borrower indicates to the Group that they are unable to bring the account up to date, informal, temporary forbearance measures may be offered. There are no changes to the customer's contract at any stage. Depending on the forbearance measure offered, an operational flag will be added to the customer's account, which may indicate significant increase in credit risk and trigger movement of this balance from stage 1 to stage 2 in impairment calculation. See note 2.1.2 for further details.

2. Critical accounting assumptions and key sources of estimation uncertainty

Preparation of the financial statements requires management to make significant judgements and estimates.

Judgements

The preparation of the consolidated Group financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the consolidated statement of financial position date and the reported amounts of income and expenses during the reporting period. The most significant uses of judgements and estimates are explained in more detail in the following sections:

·     IFRS 9 - measurement of ECLs:

o Assessing whether the credit risk of an instrument has increased significantly since initial recognition (note 2.1.2).

o Definition of default is considered by the Group to be when an account is three contractual payments past due (note 1.2.vii).

o Multiple economic scenarios - the probability weighting of base, downside and severe downside scenarios to the ECL calculation (note 2.1.3). These scenarios replaced the nine different economic scenarios used in the prior year.

o Application of a management overlay - A judgemental overlay has been applied to the impairment provision to approximate the potential short-term impact on the ageing of the loan book (note 2.1.4).

·     Complaints provisions:

o Judgement is involved in determining whether a present constructive obligation exists and in estimating the probability, timing and amount of any outflows (note 2.2.1).

·     Going concern:

o Judgement is applied in determining if there is a reasonable expectation that the Group adopts the going concern basis in preparing these financial statements (note 1.1).

Estimates

Areas which include a degree of estimation uncertainty are:

·     IFRS 9 - measurement of ECLs:

o Adopting a collective basis for measurement in calculation of ECLs in IFRS 9 calculations (note 2.1.1).

o Probability of default ("PD"), exposure at default ("EAD") and loss given default ("LGD") (note 2.1.1).

o Forward-looking information incorporated into the measurement of ECLs (note 2.1.3).

o Incorporating a probability weighted estimate of external macroeconomic factors into the measurement of ECLs (note 2.1.3).

o Calculation of the management overlay which has been applied to the impairment provision (note 2.1.4).

·     Complaints provisions:

o Calculation of balance adjustments involve management's best estimate of Scheme uptake, uphold rate and average redress. The calculation of these evaluates current and historical data, and assumptions and expectations of future outcomes (note 2.2.1).

·     Valuation of the investment in subsidiaries held by parent company Amigo Holdings PLC.

·     Carrying amount of current and deferred taxation assets and liabilities

o The current uncertainty over the Group's future profitability means that it is no longer considered probable that future taxable profits will be available against which to recognise deferred tax assets.

2.1 Credit impairment

2.1.1 Measurement of ECLs

The Group has adopted a collective basis of measurement for calculating ECLs. In the current year the loan book is bifurcated into those customers who have had a Covid-19 forbearance plan and those who have not. In the prior year, the loan book was divided into portfolios of assets with shared risk characteristics including whether the loan was new business, repeat lending or part of a lending pilot as well as considering if the customer was a homeowner or not. These portfolios of assets were further divided by contractual term and monthly origination vintages. These portfolios are no longer considered to have discernible credit risk profiles due to the impact of Covid-19.

The allowance for ECLs is calculated using three components: PD, LGD and EAD. The ECL is calculated by multiplying the PD (twelve month or lifetime depending on the staging of the loan), LGD and EAD and the result is discounted to the reporting date at the original EIR.

The twelve month and lifetime PDs represent the probability of a default occurring over the next twelve months or the lifetime of the financial instruments, respectively, based on historical data and assumptions and expectations of future economic conditions.

EAD represents the expected balance at default, considering the repayment of principal and interest from the balance sheet date to the default date. LGD is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the Group expects to receive.

The Group assesses the impact of forward-looking information on its measurement of ECLs. The Group has analysed the effect of a range of economic factors and identified the most significant macroeconomic factor that is likely to impact credit losses as the rate of unemployment and the rate of inflation.

In prior years nine macroeconomic scenarios were applied and weighted. However, given the impact of the Covid-19 pandemic is better known and already to an extent has been realised, this methodology was reviewed and simplified down to three scenarios - a base, downside and severe downside scenario, to determine the ECL provision (see note 2.1.3).

2.1.2 Assessment of significant increase in credit risk (SICR)

To determine whether there has been a significant increase in credit risk the following two step approach has been taken:

1) The primary indicator of whether a significant increase in credit risk has occurred for an asset is determined by considering the presence of certain payment status flags on a customers' account. This is the Group's primary qualitative criteria considered in the assessment of whether there has been a significant increase in credit risk. If a relevant operational flag is deemed a trigger indicating the remaining lifetime probability of default has increased significantly, the Group considers the credit risk of an asset to have increased significantly since initial recognition. Examples of this include operational flags for specific circumstances such as short-term payment plans and breathing space granted to customers.

2) As a backstop, the Group considers that a significant increase in credit risk occurs no later than when an asset is two contractual payments past due (equivalent to 30 days), which is aligned to the rebuttable presumption of more than 30 days past due. This is the primary quantitative information considered by the Group in a significant increase in credit risk assessments.

The Group reassesses the flag status of all loans at each month end and remeasures the proportion of the book which has demonstrated a significant increase in credit risk based on the latest payment flag data. An account transitions from stage 2 to stage 1 immediately when a payment flag is removed from the account. Each quarter a flag governance meeting is held, to review operational changes which may impact the use of operational flags in the assessment of a significant increase in credit risk.

2.1.3 Forward-looking information

The Group assesses the impact of forward-looking information on its measurement of ECLs. The Group has analysed the effect of a range of economic factors and identified the most significant macroeconomic factor that is likely to impact credit losses as the rate of unemployment.

The Group has modelled and weighted three different macroeconomic scenarios - a base, a downside and a severe downside scenario.

·     The base scenario broadly represents probability of defaults whereby there is no significant deviation of delinquency beyond the current run-rate. The base scenario captures an element of stress to reflect current inflationary pressures. A weighting of 25% has been applied to reflect the Group's assumption that the current macroeconomic environment is more likely than not due to worsen, given the inflationary pressures facing the Group's customer base. Historical trends of prior inflationary increases showed no statistical relationship to the Group's customers propensity to make payments, so the base scenario appears reasonable.

·     The downside scenario uplifts the base scenario probability of default by approximately 50%. Based on recent Office for Budgetary Reporting (OBR) forecasts, inflation rates , which are already at 40-year highs, are expected to rise further in the short-term. Although there are no historical indications of a statistical relationship between inflationary rises and customers' propensity to make payments, a weighting of 50% has been applied to reflect a prudent approach and expectation that customers will be, in some form, adversely impacted.

·     The severe downside applies a further uplift of 25% to the probability of default in the downside scenario, reflecting a significant impact from macroeconomic factors. Whilst the economic outlook is not set to return to more normal levels in the near term, the Group's loan book does not have significant time left to run off. Judgement has been made to weight this scenario at 25%. Given the lack of statistical relationship and level of uncertainty around the impact on customers' payment behaviour, the Group believes this weighting is fair and reasonable, but will evolve over time as the cost of living crisis plays out.

The following table details the absolute impact on the current ECL provision of £37.6m if each of the three scenarios are given a probability weighting of 100%.

The scenarios above demonstrate a range of ECL provisions from £35.5m to £38.7m.

In prior years nine macroeconomic scenarios were applied and weighted. However, given the impact of the Covid-19 pandemic is better known and already to an extent has been realised, this methodology was reviewed and simplified down to three scenarios - a base, downside and severe downside scenario, to determine the ECL provision.

As with any economic forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different to those projected.

2.1.4 Application of a management overlay to the impairment provision calculation

In the prior year management overlay was used to enhance the modelled outcome to take account of increasing credit risk indicators that were potentially masked by payment holidays granted due to Covid-19. This is no longer relevant as all impacted accounts have reverted to a tailored collections approach captured by status flag.

As noted in 2.1.3, the Board notes that forward looking information carries a degree of uncertainty, particularly in relation to the impact of the forecast cost of living crisis.  However, in the view of the Board, the use of a sufficiently severe downside scenario in the modelled approach negates the requirement for further management overlay in the impairment estimation.

2.2 Complaints provisions

2.2.1 Complaints provision - estimation uncertainty

Provisions included in the statement of financial position refers to a provision recognised for customer complaints. The provision represents an accounting estimate of the expected future outflows arising from certain customer-initiated complaints, using information available as at the date of signing these financial statements.

Identifying whether a present obligation exists and estimating the probability, timing, nature and quantum of the redress payments that may arise from past events require judgements to be made on the specific facts and circumstances relating to the individual complaints. Management evaluates on an ongoing basis whether complaints provisions should be recognised, revising previous judgements and estimates as appropriate; however, there is a wide range of possible outcomes.

The key assumptions in these calculations which involve significant, complex management judgement and estimation relate primarily to the projected costs of potential future complaints, where it is considered more likely than not that customer redress will be appropriate. These key assumptions are:

·     future estimated volumes - estimates of future volumes of complaints;

·     uphold rate (%) - the expected average uphold rate applied to future estimated volumes where it is considered more likely than not that customer redress will be appropriate;

·     average balance adjustments (£) - the estimated balance adjustments for future upheld complaints included in the provision; and

·     portion of complaints on gross loan book (%) - whether these are customers on the existing loan book remediated via balance adjustment or whether redress is achieved via the Scheme cash pot.

The calculation of the complaints provision as at 30 June 2022 is based on Amigo's best estimate of the future obligation at the Scheme effective date. The revised complaints cash redress provision will be £97m post-Scheme. A further contribution of £15m is expected to be made from the proceeds of the proposed capital raise, plus a top-up if net collections exceed those forecast in the Scheme scenarios.

The capital raise is a critical component of the preferred solution under the Scheme succeeding, and while the provision is being accounted for on the basis that the Scheme is successful, it is currently determined that the capital raise contribution component cannot be accrued as it cannot be justified as more likely than not to occur at today's date.

As at 30 June 2022, the Group has recognised a complaints provision totalling £176.9m in respect of customer complaints redress and associated costs. Utilisation in the period totalled £2.9m. The liability has decreased by £161.1m compared to Q1 in the prior year. £128.8m 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 £36.7m. The level of balance adjustments has declined due to customers paying down their loan and customers charging off the loan book. This has been partly offset by an increase in the assumed volume of customers coming forward in the Scheme.

The following table details the effect on the complaints provision considering incremental changes on key assumptions, should current estimates prove too high or too low. Sensitivities are modelled individually and not in combination.

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. Revenue and segment reporting

Revenue consists of interest income and is derived primarily from a single segment in the UK, but also from Irish entity Amigo Loans Ireland Limited. The Group has two operating segments based on the geographical location of its operations, being the UK and Ireland. IFRS 8 requires segment reporting to be based on the internal financial information reported to the chief operating decision maker. The Group's chief operating decision maker is deemed to be the Group's Executive Committee ("ExCo") whose primary responsibility is to support the Chief Executive Officer ("CEO") in managing the Group's day-to-day operations and analyse trading performance. The table below presents the Group's performance on a segmental basis for the 3 months to 30 June 2022 in line with reporting to the chief operating decision maker:

1.        Gross loan book represents total outstanding loans and excludes deferred broker costs.

2.        Net loan book represents gross loan book less provision for impairment.

The carrying value of property, plant and equipment and intangible assets included in the consolidated statement of financial position materially all relates to the UK; hence the split between UK and Ireland has not been presented. The results of each segment have been prepared using accounting policies consistent with those of the Group as a whole.

1.        The tax credit for the UK primarily relates to the recognition of a £0.4m tax asset and the impact of the release of a tax provision no longer required .

2.        Gross loan book represents total outstanding loans and excludes deferred broker costs.

3.        Net loan book represents gross loan book less provision for impairment.

4. Interest payable and funding facility fees

No interest was capitalised by the Group during the period. Funding facility fees include non-utilisation fees and amortisation of initial costs of the Group's senior secured notes.

5. Modification of financial assets

Covid-19 payment holidays and any subsequent extensions were assessed as non-substantial financial asset modifications under IFRS 9.

The Group stopped granting new payment holidays in March 2021; hence no additional modification losses have been recognised in the period. All payment holidays ended by 31 July 2021.

The carrying value of historical modification losses at the period end was £4.3m (Q1 2021: £11.1m).

6. Taxation

The applicable corporation tax rate for the period to 30 June 2022 was 19.0% (Q1 2021: 19.0%) and the effective tax rate is 0.0% (Q1 2021: negative 6.7%).

7. Earnings per share

Basic earnings per share is calculated by dividing the profit for the period attributable to equity shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share calculates the effect on profit per share assuming conversion of all dilutive potential ordinary shares. Dilutive potential ordinary shares are calculated as follows: 

i)     For share awards outstanding under performance-related share incentive plans such as the Share Incentive Plan (SIP) and the Long Term Incentive Plans (LTIPs), the number of dilutive potential ordinary shares is calculated based on the number of shares which would be issuable if the end of the reporting period is assumed to be the end of the schemes' performance period. An assessment over financial and non-financial performance targets as at the end of the reporting period has therefore been performed to aid calculation of the number of dilutive potential ordinary shares.   

ii)    For share options outstanding under non-performance-related schemes such as the two Save As You Earn schemes (SAYE), a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated is compared with the number of share options outstanding, with the difference being the dilutive potential ordinary shares.

Potential ordinary shares are treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share or increase earnings per share.

1.        Basic adjusted earnings per share and earnings for basic adjusted profit/(loss) per share are non-GAAP measures.

The Directors are of the opinion that the publication of the adjusted earnings per share is useful as it gives a better indication of ongoing business performance. Reconciliations of the earnings used in the calculations are set out below.

1.         Basic adjusted earnings per share and earnings for basic adjusted earnings per share are non-GAAP measures.

2.    Although the Group has issued further options under the employee share schemes, upon assessment of the dilutive nature of the options, some options are not considered dilutive as at 30 June 2021 as they would not meet the performance conditions. Those dilutive shares included are in relation to the employee October 2020 SAYE scheme.

8. Customer loans and receivables

The table shows the gross loan book and deferred broker costs by stage, within the scope of the IFRS 9 ECL framework.

1.        Deferred broker costs are recognised within customer loans and receivables and are amortised over the expected life of those assets using the effective interest rate ("EIR") method.

As at 30 June 2022, £66.2m of loans to customers had their beneficial interest assigned to the Group's special purpose vehicle (SPV) entity, namely AMGO Funding (No. 1) Ltd, as collateral for securitisation transactions (Q1 2021: £153.3m).

Ageing of gross loan book (excluding deferred brokers' fees and provision) by days overdue:

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.

1.    Deferred broker costs are recognised within customer loans and receivables and are amortised over the expected life of those assets using the effective interest rate ("EIR") method.

9. Other receivables

10. Trade and other payables

11. Bank and other borrowings

The Group's facilities are:

·     Senior secured notes in the form of £49.8m high yield bonds with a coupon rate of 7.625% which expires in January 2024 (Q1 2021: £232.3m). The senior secured notes are presented in the financial statements net of unamortised fees. As at 30 June 2022, the gross principal amount outstanding was £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%. £350.0m of notes have been repurchased in the open market in prior financial years (2022: £184.1m; 2020: £85.9m; 2019: £80.0m). The remaining £50.0m gross principal amount outstanding is due in January 2024.

·     During the year ended 31 March 2022 the Group fully repaid the securitisation facility, although at the period end the structure remained in place. With effect from 24 September 2021, all rights, obligations and securitisation liabilities of the Lead Arranger, Facility Agent and Senior Noteholder, as defined in the securitisation facility documents, were taken over and assumed by Amigo.

12. Provisions

Provisions are recognised for present obligations arising as the consequence of past events where it is more likely than not that a transfer of economic benefit will be necessary to settle the obligation, which can be reliably estimated.

Customer complaints redress

As at 30 June 2022, the Group recognised a complaints provision totalling £176.9m (Q1 2021:£338.0m) in respect of customer complaints redress and associated costs. Utilisation in the period totalled £2.9m. The liability has decreased by £161.1m compared to prior year.  £128.8m 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 £36.7m. The level of balance adjustments has declined due to customers paying down their loan and customers charging off the loan book. This has been partly offset by an increase in the assumed volume of customers coming forward in the Scheme.

Restructuring provision

As at 31 March 2021, the Group recognised a restructuring provision totalling £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 30 June 2022 is £nil.

Contingent liability

FCA investigation

On 29 May 2020 the FCA commenced an investigation into whether the Group's creditworthiness assessment process, and the governance and oversight of this, was compliant with regulatory requirements. The FCA investigation will cover lending for the period from 1 November 2018 to date. There is significant uncertainty around the impact of this on the business, the assumptions underlying the complaints provision and any future regulatory intervention.

The Group was informed on 15 March 2021 that the FCA has decided to extend the scope of its current investigation so that it can investigate whether the Group appropriately handled complaints after 20 May 2020 and whether the Group deployed sufficient resource to address complaints in accordance with the Voluntary Requirement ("VReq") announced on 27 May 2020 and the subsequent variation announced on 3 July 2020.

The FCA investigation will consider whether those complaints have been handled appropriately and whether customers have been treated fairly in accordance with Principle 6 of the FCA's Principles for Business. The Group will continue to co-operate fully with the FCA.

If the enforcement process is not completed and prevents the capital raise from being successful, then Amigo could fail to comply with one of the Scheme conditions and is likely to revert to the "fallback" solution or some form of insolvency. There are a number of avenues of sanction open to the FCA should it deem it appropriate and so the potential impact of the investigation on the business is extremely difficult to predict and quantify, so has not been provided for in the financial statements and is not modelled in the business plan or stress scenario.  In mitigation, the FCA has stated that the levying of any fine would be considered in the context of the Scheme and its impact on creditors.In the event that the investigations have not concluded or that they have concluded with an adverse outcome, either of which causes the capital raise not to proceed, the Scheme will revert to the "fallback" solution and the business will be wound down.

Following the Court sanction of the Scheme the Company is obliged in the next twelve months to enter into a capital raise for the purposes of recapitalising the business for future lending. If this capital raise is successful a further £15.0m cash contribution must be made to the Scheme. The successful raising of sufficient capital relies on a number of uncertain events, not least market appetite which may be influenced by a number of external factors beyond the Company's control.

13. Immediate and ultimate parent undertaking

The immediate and ultimate parent undertaking is Amigo Holdings PLC, a company incorporated in England and Wales. The consolidated financial statements of the Group as at and for the year ended 31 March 2022 are available upon request from the Company's registered office at Nova Building, 118-128 Commercial Road, Bournemouth, United Kingdom, BH2 5LT.

14. Share-based payments

Share-based payment transactions in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity settled share-based payments. At the grant date, the fair value of the share based payment is recognised by the Group as an expense, with a corresponding entry in equity, over the period in which the employee becomes unconditionally entitled to the awards. The fair value of the awards granted is measured based on Company specific observable market data, considering the terms and conditions upon which the awards were granted. The Group recognised an expense of £0.2m in the three months to 30 June 2022 (Q1 2021: £0.2m).

15. Related party transactions

The Group had no related party transactions during the three month period to 30 June 2022 that would materially affect the performance of the Group. Details of the transactions for the year ended 31 March 2022 can be found in note 24 of the Amigo Holdings PLC financial statements.

16. Post balance sheet events

Post period end, the Board appointed Peel Hunt LLP as financial adviser and sole corporate broker and Ashcombe Advisers LLP as financial adviser. Both will be instrumental in assisting with the required fund raising in the coming months.

This financial report provides alternative performance measures (APMs) which are not defined or specified under the requirements of International Financial Reporting Standards. The Board believes these APMs provide readers with important additional information on the Group. To support this, details of the APMs used, how they are calculated and why they are used are set out below.

Key performance indicators

Other financial data

Amendments to alterative performance measures

¹Net unrestricted cash/(debt), net (unrestricted cash)/debt over gross loan book and net (unrestricted cash)/debt over equity - the definitions of these alternative performance measures (APMs) have been amended from net cash/(debt), net (cash)/debt over gross loan book and net (cash)/debt over equity to highlight that restricted cash is excluded from these definitions.

1.Average gross loan book

¹Gross 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.

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:

¹Gross loan book represents total outstanding loans and excludes deferred broker costs.

²Provision for impairment represents the Group's estimate of the portion of loan accounts that are not in arrears or are up to five payments in arrears for which the Group will not ultimately be able to collect payment. Provision for impairment excludes loans that are six or more payments in arrears, which are charged off of the statement of financial position and are therefore no longer included in the loan book.

³Net loan book represents gross loan book less provision for impairment.

4. "Net unrestricted cash/(debt)"is comprised of:

This is deemed useful to show total cash/(debt) if unrestricted cash available at the period end was used to repay borrowings.

5.The Group defines "loan to value" ("LTV") as net (unrestricted cash)/debt divided by gross loan book. This measure shows if the borrowings' year-on-year movement is in line with loan book growth.

6. Net (unrestricted cash)/debt over equity

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.

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.

Risk adjusted revenue is not a measurement of performance under IFRS, and is not an alternative to profit before tax as a measure of the Group's operating performance, Group's ability to meet its cash needs or as any other measure of performance under IFRS.

9.The Group defines "risk adjusted margin" as risk adjusted revenue divided by the average of gross loan book.

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.

Adjusted net interest margin, being net interest income divided by average gross loan book, is also presented below:

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.

This measure is used by the Group to monitor the cost of funds and impact of diversification of funding.

12. Impairment charge as a percentage of revenue "impairment:revenue ratio" represents the Group's impairment charge for the period divided by revenue for the period.

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.

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.

This measure allows review of cost management.

15. Operating cost:income ratio, defined as the cost:income ratio excluding the complaints provision, is:

16.The following table sets forth a reconciliation of profit after tax to "adjusted profit after tax" for the 3 months to 30 June 2022, 2021 and year to 31 March 2022.

The above items were all excluded due to their exceptional nature. The Directors believe that adjusting for these items is useful in making year-on-year comparisons.

·     Write back of the complaints provision is due to cash redress liability being reduced to the £97.0m contribution as per the Scheme.

·     Senior secured note redemption adjustments relate to the accelerated bond cost and premium write off triggered by the early bond redemption in January 2022. Senior secured note buybacks are not underlying business-as-usual transactions.

·     Following the renegotiation of the securitisation facility on 14 August 2020 a substantial modification of the facility occurred; as such all previous capitalised fees relating to the facility have been written off. This has been adjusted for above as it was a one-off event in the period.

·     The tax provision release refers to the release of a tax provision no longer required. These adjustments result in a tax charge for the year despite the large loss-making position as at 31 March 2021 and hence have been adjusted for in the calculation.

None are business-as-usual transactions. Hence, removing these items is deemed to give a view of underlying profit adjusting for non-business-as-usual items within the financial year.

17. "Return on assets" ("ROA")refers to annualised profit after tax as a percentage of average assets.

18. "Adjusted return on assets" refers to annualised adjusted profit after tax as a percentage of average assets

19. "Return on equity" ("ROE")is calculated as annualised profit after tax divided by the average of equity at the beginning of the period and the end of the period.

20. "Adjusted return on equity"is calculated as annualised adjusted profit after tax divided by the average of equity at the beginning of the period and the end of the period.

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