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 31 March 2022	Year ended 31 March 2021	Change %
Number of customers1	'000	73.0	136.0	(46.3)
Net loan book2		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 tax3		169.6	(289.1)	158.7
Adjusted Profit/loss) after tax4		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 book7		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:

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/(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.

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

⁷Net 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, 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.

 

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 notes1	(49.7)	(232.1)
Securitisation	-	(64.4)
Cash and cash equivalents	133.6	177.9
Net cash/(debt)	83.9	(118.6)

¹Figures 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	reserve1	reserve2	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 loans	(64.6)	(124.6)
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 period1	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 volumes1	115,321	+/- 5%	+6.6	-6.6
Average uphold rate per customer2	65%	+/- 20 ppts	+15.6	-15.6
Average balance adjustment per valid complaint3	£2,600	+/- £500	+8.8	-8.8
Portion of complaints on gross loan book4	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 31 Mar 22 £m UK	Year to 31 Mar 22 £m Ireland	Year to 31 Mar 22 £m 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 profit1	1.7	-	1.7
Profit and total comprehensive income attributable to equity shareholders of the Group	169.1	0.5	169.6

 

		31 Mar 22	31 Mar 22	31 Mar 22
		£m	£m	£m
		UK	Ireland	Total
	Gross loan book2	184.2	1.2	185.4
	Less impairment provision	(47.1)	(0.3)	(47.4)
	Net loan book3	137.1	0.9	138.0

 

¹The 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)/profit1	(5.3)	(0.2)	(5.5)
	(Loss)/profit and total comprehensive (loss)/ income attributable to equity shareholders of the Group	(289.3)	0.2	(289.1)

 

		31 Mar 21	31 Mar 21	31 Mar 21
		£m	£m	£m
		UK	Ireland	Total
	Gross loan book2	419.2	3.7	422.9
	Less impairment provision	(81.0)	(1.0)	(82.0)
	Net loan book3	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 provision1 (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 the UK of 19% (2021: 19%)	31.9	(54.0)
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 income	-	(6.6)
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

 

¹Deferred 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 notes3	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 Senior secured notes	(49.7)	-
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 £m	2021 £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

3,700,0003

2,500,0001

4,750,0002

688,3471

4,000,000

14,250,000

1,364,3971

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          SAYE		Sep 2019 SAYE	Oct 2020 SAYE	Sep 2019 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	107,9594
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		2,552,8225			1,577,7585
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 remove the impact of provisions for complaints that are not fulfilled over the period of measurement and for any other non-standard distortions.	Growth of 300% over the EPS hurdle over the performance period. EPS hurdle is 1p. Target for full vesting is 4p.	30%	0%-100% straight line above hurdle
Absolute total shareholder return ("ATSR")	Measures the growth in the potential value of an Amigo share over the performance period - that is, the amount the share price has appreciated plus the dividends paid.	Growth of ATSR over the ATSR hurdle over the performance period. ATSR hurdles are 12p, 14p,16p and 12p for awards on 1 December 2020, 26 February 2021,1 March 2021 and 27 August 2021 respectively. Target for full vesting for all is 40p.	40%	0%-100% straight line above ATSR hurdle
Non-financial measures	Measures the effectiveness of the steps taken by the awardees to ensure Amigo adheres to the standards expected by all stakeholders.	Test against internal targets for corporate culture, conduct risk matters, diversity and inclusiveness and other ESG measures. Benchmarked against external expectations over period.	30%	0%-100%

 

 

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	0.44533

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 LTIPs			Oct 2020 SAYE		Sep 2019 SAYE		2019 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 31 Mar 22	Year to 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 £m	31 Mar 21 £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 book1	(45.3)%	28.0%	52.8%
Net (cash)/debt over equity1	(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

¹Net 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 book1	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 unrestricted cash)	459.9	707.5	806.2
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)%