Half-year Report

Notes to the condensed consolidated financial statements

 

1. Accounting policies

1.1 Basis of preparation of financial statements

 

General information

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 (the "Group") of companies. The principal activity of the Amigo Loans Group is to provide loans to individuals. Previously, its principal activity was to provide individuals with guarantor loans from £2,000 to £10,000 over one to five years. No new advances on this lending have been made since November 2020. Following FCA approval to return to lending, in October 2022, Amigo has launched, initially on a two-month pilot basis, a new guarantor loan as well as an unsecured loan product which feature dynamic pricing to reward on-time payment with lower rates and penalty-free annual payment holidays. The new products have been released under the RewardRate brand.

 

The condensed interim financial statements do not constitute the statutory financial statements of the Group within the meaning of section 434 of the Companies Act 2006. The statutory financial statements for the year ended 31 March 2022 were approved by the board of directors on 8 July 2022 and have been delivered to the Registrar of Companies. The consolidated financial statements of the Group as at and for the year ended 31 March 2022 are available upon request from the Company's registered office at Nova Building, 118-128 Commercial Road, Bournemouth, United Kingdom, BH2 5LT. Those accounts have been reported on by the Company's previous auditor, KPMG. The report of the auditor:

 

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

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

 

The condensed interim financial statements for the six months ended 30 September 2022 have been reviewed, not audited, by the incumbent auditor, MHA Macintyre Hudson, and were approved by the board of directors on 29 November 2022.

 

Accounting policies

 

The interim financial statements have been prepared applying the accounting policies and presentation that were applied in the

preparation of the Company's published consolidated annual report for the year ended 31 March 2022.

 

Basis of preparation

 

The condensed interim financial statements for the six months ended 30 September 2022 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted for use in the United Kingdom (UK). The condensed interim financial statements should be read in conjunction with the statutory financial statements for the year ended 31 March 2022. The comparative figures for the financial year ended 31 March 2022 are not the Group's statutory accounts for that financial year, but are an extract from those statutory accounts for interim reporting.

 

These interim financial statements have been prepared on a going concern basis 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.

 

Going concern

 

In determining the appropriate basis of preparation for these financial statements, the Board has undertaken an appropriate review 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 (Scheme). The interim financial statements have been prepared on a going concern basis which the Directors believe to be appropriate for the following reasons.

 

On 26 May the High Court sanctioned Amigo's Scheme of Arrangement ("the Scheme") which allowed the Company to return to solvency.  The Preferred Solution of the Scheme allows Amigo to resume lending, subject to making agreed payments into a Scheme fund and meeting two New Business Conditions.  Failure to meet these requirements would place Amigo into a managed wind-down.  The New Business Conditions are: FCA approval to return to lending to be received by 26 February 2023 and issue of 19 new shares in Holdings Plc for every one ordinary share in issue, to be achieved by 26 May 2023.

 

On 13 October 2022, FCA approval for a return to lending was received. Amigo commenced lending on a pilot basis in October 2022. Following the end of the pilot lending phase, the FCA will consider the impact on consumers of Amigo returning to lending on a wider scale, and whether the results of the outcomes testing demonstrate that Amigo is able to continue to meet FCA expectations. Amigo is limited to a maximum of £35.0m cumulative net originations until successful completion of the required dilutory share issue and payment of a further £15.0m into the Scheme. Failure to meet the Scheme conditions represent a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern and, therefore, to continue realising its assets and discharging its liabilities in the normal course of business.

 

Should these conditions remain unsatisfied within the required timeframes, under the terms of the Scheme the business will revert to a managed wind-down.  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 having been received, and new lending originations commencing, in October 2022

·      balance adjustments and refunds resulting from complaints in the Scheme are consistent with the assumptions that underpin the complaints provision reported as at 30 September 2022 (see note 2.2.2)

·      at least the minimum committed amount of £112.0m is paid out as cash redress in the Scheme, being £97.0m from existing resources and future collections plus an additional £15.0m following the equity raise

·      additional new funding is received beyond the equity raise to facilitate future growth of the business

·      collections on the existing loan book continue in line with expectation

 

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 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 stressing the Group's liquidity position alongside increasing cash refunds given to customers that are upheld in the Scheme for payments collected over the Scheme period

•     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.

 

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.

 

  

 

Status of Scheme Conditions

Payment of £60m into Scheme Fund by	Complete
Payment of £37m into Scheme Fund by 26th February 2023	The Group currently has, and is forecast to continue to have, sufficient cash to meet this requirement
FCA permission to return to lending by 26th February 2023	Complete. The Company continues to work with the FCA toward a full return to lending
Issue and sell at least 19 ordinary shares in Holdings Plc for every 1 share in issue by 26th May 2023	The Company announced, on 28 September 2022, its intention to raise new capital in combination of debt and equity with includes this requirement and is actively marketing to potential investors
Payment of £15m into Scheme Fund within 10 business days of completion of the share issue	Contingent on completion of share issue above
Payment of any further net proceeds from collection of the legacy Amigo loan book ("The Turnover Amount") to the Scheme Fund	Contingent on performance of the Legacy book over the period

 

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 shortly. If the enforcement process is not completed before the proposed capital raise, 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 they deem it appropriate and so the potential impact of the investigation on the business is extremely difficult to predict and quantify 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.

 

Conclusion

Accounting standards require an entity to prepare financial statements on a going concern basis unless the Directors either intend to liquidate the entity or to cease trading or has no realistic alternative but to do so.  Accordingly, the Directors believes that it remains appropriate to prepare the financial statements on a going concern basis.

 

However, the Directors also recognise that, at the date of approval of these financial statements, significant uncertainty remains. The Scheme requires the meeting of capital raise conditions, and the business will require a full return to lending, which are at least in part outside of the control of the Group. Additionally, the final outcome of the FCA investigation remains highly uncertain. 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.

 

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 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.

 

At the reporting date, the Group only held guarantor loans on balance sheet.  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 assessed that its key sensitivity was in relation to expected credit losses on customer loans and receivables. The matrix of nine scenarios used in September 2021 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 (see note 2.1.3).

 

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

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

 

v) Derecognition

Receivable from customers are derecognised when the entity's contractual rights to the financial asset's cash flows have expired.

 

vi) Definition of default

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

 

vii) Forbearance

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

 

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

 

 

·      IFRS 9 - measurement of ECLs:

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

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

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

·      Complaints provisions:

·      Judgement is involved in estimating the probability, timing and amount of any outflows (note 2.2.1).

·      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).

·      Accounts receivable from customers:

·      Judgement is applied in assessing whether the contractual cash flows are SPPI, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

 

Estimates

Areas which include a degree of estimation uncertainty are:

·      IFRS 9 - measurement of ECLs:

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

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

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

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

·      Complaints provisions:

·      Calculation of uphold rate. This calculation evaluates current and historical data, and assumptions and expectations of future outcomes (note 2.2.1).

·      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 is 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.

 

2.1.2 Assessment of significant increase in credit risk (SICR)

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

 

1) The primary indicator of whether a significant increase in credit risk has occurred for an asset is determined by considering the presence of certain payment status flags on a 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 significant increase in credit risk assessments.

 

The Group reassesses the flag status of all loans at each month end and remeasures the proportion of the book which has demonstrated a significant increase in credit risk based on the latest payment flag data. An account transitions from stage 2 to stage 1 immediately when a payment flag is removed from the account.

 

2.1.3 Forward-looking information

The Group assesses the impact of forward-looking information on its measurement of ECLs. 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 remain high 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 the 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 £30.1m if each of the three scenarios are given a probability weighting of 100%.

	Impact
Base	-1.7m
Downside	+0.4m
Severe downside	+1.0m

 

The scenarios above demonstrate a range of ECL provisions from £28.4m to £31.1m.

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

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

2.1.4 Application of a management overlay to the impairment provision calculation

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

 

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

 

 

2.2 Complaints provisions

2.2.1 Complaints provision - estimation uncertainty

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

 

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

 

These calculations involve significant, complex management judgement and estimation. As the Scheme closing date draws near, however, the key assumption with the most potential for variability is the 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.

 

The calculation of the complaints provision as at 30 September 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 £97.0m post-Scheme. A further contribution of £15.0m is expected to be made from the proceeds of the proposed capital raise, plus a top-up if net collections exceed those forecast in the Scheme scenarios.

 

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

 

As at 30 September 2022, the Group has recognised a complaints provision totalling £191.4m in respect of customer complaints redress and associated costs. Utilisation in the period totalled £4.7m. The liability has decreased by £152.9m compared to 30 September 2021. £141.1m 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 £25.7m. The level of balance adjustments has declined due to customers paying down their loan and customers charging off the loan book. This has been partly offset by an increase in the assumed volume of customers coming forward in the Scheme.

 

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

 

	Assumption used	Sensitivity applied	Sensitivity (£m)
Average uphold rate per customer1	70%	+/- 20 ppts	+18.9m	-18.9m

 

1.        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.

 

The table above shows the increase or decrease in total provision charge resulting from reasonably possible changes in the key uphold rate assumption. The Board considers that this sensitivity analysis covers the full range of reasonably possible alternative assumptions.

It is possible that the eventual outcome may differ materially from the current estimate and could materially impact the financial statements as a whole, given the Group's only activity is guarantor-backed consumer credit. This is due to the risks and inherent uncertainties surrounding the assumptions used in the provision calculation.

3. Revenue and segment reporting

Revenue 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.

 

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.

 

Revenue is derived primarily from a single segment. The Group has one operating segment based on the geographical location of its operations, being the UK. IFRS 8 requires segment reporting to be based on the internal financial information reported to the chief operating decision maker. The Group's chief operating decision maker is deemed to be the Group's Executive Committee ("ExCo") whose primary responsibility is to support the Chief Executive Officer ("CEO") in managing the Group's day-to-day operations and analyse trading performance.

 

Amigo Loans Ireland Limited, registered in Ireland, is not a reportable operating segment, as they are not separately included in the reports provided to the strategic steering committee. The results of these operations are included in the 'other segments' column. Amigo Loans Ireland Limited, was, in prior years, reported as a separate segment but it no longer meets the criteria for separate segment reporting.

 

The table below presents the Group's performance on a segmental basis for the six months to 30 September 2022 in line with reporting to the chief operating decision maker:

 

6 months to 30 September 2022	Period to 30 Sep 22 £m UK	Period to 30 Sep 22 £m Other segments	Period to 30 Sep 22 £m Total
Revenue	15.7	0.1	15.8
Interest payable and funding facility fees	(1.8)	-	(1.8)
Interest receivable	0.3	-	0.3
Impairment of amounts receivable from customers	0.1	0.1	0.2
Administrative and other operating expenses	(15.6)	(0.3)	(15.9)
Provision expenses	(11.3)	-	(11.3)
Total operating expenses	(26.9)	(0.3)	(27.2)
Loss before tax	(12.6)	(0.1)	(12.7)
Tax credit on loss	-	-	-
Loss and total comprehensive loss attributable to equity shareholders of the Group	(12.6)	(0.1)	(12.7)

 

		30 Sep 22	30 Sep 22	30 Sep 22
		£m	£m	£m
		UK	Other segments	Total
	Gross loan book1	110.3	0.4	110.7
	Less impairment provision	(30.0)	(0.1)	(30.1)
	Net loan book2	80.3	0.3	80.6

 

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

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

 

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

6 months to 30 September 2021		Period to 30 Sep 21 £m UK		Period to 30 Sep 21 £m Ireland		Period to 30 Sep 21 £m Total
Revenue		55.9		0.6		56.5
Interest payable and funding facility fees		(9.8)		-		(9.8)
Interest receivable		0.1		-		0.1
Impairment of amounts receivable from customers		(26.1)		0.2		(25.9)
Administrative and other operating expenses		(13.2)		(0.3)		(13.5)
Provision expenses		(5.3)		-		(5.3)
Total operating expenses		(18.5)		(0.3)		(18.8)
Profit before tax		1.6		0.5		2.1
Tax credit on profit1		1.2		-		1.2
Profit and total comprehensive income attributable to equity shareholders of the Group		2.8		0.5		3.3

 

 

		30 Sep 21	30 Sep 21	30 Sep 21
		£m	£m	£m
		UK	Ireland	Total
	Gross loan book2	286.8	2.4	289.2
	Less impairment provision	(64.6)	(0.5)	(65.1)
	Net loan book3	222.2	1.9	224.1

 

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

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

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

 

 

 

4. Interest payable and funding facility fees

	Period to	Period to	Year to
	30 Sep 22	30 Sep 21	31 Mar 22
	Unaudited	Unaudited	Audited
	£m	£m	£m
Senior secured notes interest payable	1.9	9.0	14.9
Funding facility fees	(0.1)	0.1	1.0
Securitisation interest payable	-	0.2	0.2
Other finance costs	-	0.5	0.6
	1.8	9.8	16.7

 

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

 

5. Modification of financial assets

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

The carrying value of historical modification losses at the period end was £1.7m (H1 2022: £9.4m).

	Period to	Period to	Year to
	30 Sep 22	30 Sep 21	31 Mar 22
	Unaudited	Unaudited	Audited
	£m	£m	£m
Modification release recognised in revenue	0.2	-	1.2
Modification release recognised in impairment	0.3	-	4.1
Total modification release	0.5	-	5.3

 

 

6. Taxation

The applicable corporation tax rate for the period to 30 September 2022 was 19.0% (H1 2022: 19.0%) and the effective tax rate is 0.0% (H1 2022: 57.1% positive).

 

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.

 

The Group's loss-making position and the ongoing uncertainty over the Group's future profitability meant that it is no longer considered probable that future taxable profits would be available against which to recognise deferred tax assets. Consequently, no tax assets were recognised in respect of losses in the year, which are driven primarily by the recognition of complaints provision as at 30 September 2022.

 

7. Earnings per share

Basic earnings per share is calculated by dividing the profit for the period attributable to equity shareholders by the

weighted average number of ordinary shares outstanding during the period.

 

Diluted earnings per share calculates the effect on profit per share assuming conversion of all dilutive potential

ordinary shares. Dilutive potential ordinary shares are calculated as follows:

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

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

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

	30 Sep 22	30 Sep 21	31 Mar 22
	Unaudited	Unaudited	Audited
	Pence	Pence	Pence
Basic (loss)/earnings per share	(2.7)	0.7	35.7
Diluted (loss)/earnings per share	(2.7)	0.7	35.7
Basic adjusted (loss)/earnings per share (basic and diluted)1	(2.7)	0.4	2.8

 

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

 

 

 

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

	30 Sep 22	30 Sep 21	31 Mar 22
	Unaudited	Unaudited	Audited
	£m	£m	£m
(Loss)/profit for basic EPS	(12.7)	3.3	169.6
Release of complaints provision	-	-	(156.6)
Senior secured notes redemption	-	-	0.7
Write-off of unamortised securitisation fees	-	-	0.5
Tax provision release	-	(0.8)	(0.8)
Tax refund due	-	(0.5)	-
Less tax impact	-	-	(0.1)
(Loss)/profit for basic adjusted EPS1	(12.7)	2.0	13.3
Basic weighted average number of shares (m)	475.3	475.3	475.3
Dilutive potential ordinary shares (m)2	-	1.1	-
Diluted weighted average number of shares (m)	475.3	476.4	475.3

 

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

2.        Although the Group has issued further options under the employee share schemes, upon assessment of the dilutive nature of the options, some options are not considered dilutive as at 30 September 2022 as they would not meet the performance conditions. Those dilutive shares included are in relation to the employee October 2020 SAYE scheme.

 

 

8. Customer loans and receivables

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

	30 Sep 22	30 Sep 21	31 Mar 22
	Unaudited	Unaudited	Audited
	£m	£m	£m
Stage 1	74.8	209.0	128.8
Stage 2	20.0	45.6	32.4
Stage 3	15.9	34.6	24.2
Gross loan book	110.7	289.2	185.4
Deferred broker costs1 - stage 1	0.6	4.3	1.5
Deferred broker costs1 - stage 2	0.2	0.9	0.4
Deferred broker costs1 - stage 3	0.1	0.7	0.3
Loan book inclusive of deferred broker costs	111.6	295.1	187.6
Provision	(30.1)	(65.1)	(47.4)
Customer loans and receivables	81.5	230.0	140.2

 

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

As at 30 September 2022, £50.5m 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 (H1 2022: £132.5m). See note 17 for further details of this structured entity.

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

	30 Sep 22	30 Sep 21	31 Mar 22
	Unaudited	Unaudited	Audited
	£m	£m	£m
Current	76.8	210.5	132.1
1-30 days	12.9	32.6	21.1
31-60 days	5.1	11.5	8.0
>60 days	15.9	34.6	24.2
Gross loan book	110.7	289.2	185.4

 

 

The following table further explains changes in the gross carrying amount of loans receivable from customers to explain their

significance to the changes in the loss allowance for the same portfolios.

 

Period ended 30 September 2022	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total £m
Gross carrying amount as at 31 March 2022	128.8	32.4	24.2	185.4
Deferred brokers fees	1.5	0.4	0.3	2.2
Loan book inclusive of deferred broker costs	130.3	32.8	24.5	187.6
Changes in gross carrying amount attributable to:
Transfer to stage 1	4.4	(4.3)	(0.1)	-
Transfer to stage 2	(11.6)	12.3	(0.7)	-
Transfer to stage 3	(6.6)	(5.8)	12.4	-
Passage of time1	(26.3)	(6.2)	(1.4)	(33.9)
Customer settlements	(14.9)	(2.4)	(0.6)	(17.9)
Loans charged off	(2.0)	(6.2)	(18.8)	(27.0)
Net movement in modification loss relating to Covid-19 payment holidays	3.0	0.2	0.9	4.1
Net movement in deferred broker fees	(0.9)	(0.2)	(0.2)	(1.3)
Loan book inclusive of deferred broker costs as at 30 September 2022	75.4	20.2	16.0	111.6

 

 

 

Period ended 30 September 2021	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total £m
Gross carrying amount as at 31 March 2021	311.5	61.4	50.0	422.9
Deferred brokers fees	7.2	1.4	1.1	9.7
Loan book inclusive of deferred broker costs	318.7	62.8	51.1	432.6
Changes in gross carrying amount attributable to:
Transfer to stage 1	22.9	(22.3)	(0.6)	-
Transfer to stage 2	(47.9)	49.0	(1.1)	-
Transfer to stage 3	(10.3)	(19.2)	29.5	-
Passage of time1	(45.6)	(6.6)	0.5	(51.7)
Customer settlements	(25.5)	(5.0)	(1.0)	(31.5)
Loans charged off	(2.3)	(11.4)	(41.2)	(54.9)
Net movement in modification loss relating to Covid-19 payment holidays	6.3	(0.3)	(1.5)	4.5
Net movement in deferred broker fees	(3.0)	(0.5)	(0.4)	(3.9)
Loan book inclusive of deferred broker costs as at 30 September 2021	213.3	46.5	35.3	295.1

 

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 £295.1m to £111.6m at 30 September 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:

Period ended 30 September 2022	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total £m
Loan loss provision as at 31 March 2022	18.1	8.9	20.4	47.4
Changes in loan loss provision attributable to:
Transfer to stage 1	0.6	(0.9)	(0.1)	(0.4)
Transfer to stage 2	(1.6)	3.7	(0.6)	1.5
Transfer to stage 3	(0.9)	(1.7)	10.2	7.6
Passage of time1	(3.7)	(1.5)	(1.1)	(6.3)
Customer settlements	(2.0)	(0.6)	(0.5)	(3.1)
Loans charged off	(0.3)	(2.5)	(15.4)	(18.2)
Management overlay	0.1	0.1	0.5	0.7
Net movement in modification loss relating to Covid-19 payment holidays	0.4	-	0.1	0.5
Remeasurement of ECLs	0.8	(0.5)	0.1	0.4
Loan loss provision as at 30 September 2022	11.5	5.0	13.6	30.1

 

Period ended 30 September 2021	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total £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 to stage 1	1.6	(1.9)	(0.5)	(0.8)
Transfer to stage 2	(3.3)	8.8	(0.9)	4.6
Transfer to stage 3	(0.7)	(4.3)	24.6	19.6
Passage of time1	(3.2)	(0.7)	0.4	(3.5)
Customer settlements	(1.7)	(0.7)	(0.9)	(3.3)
Loans charged off	(0.2)	(4.7)	(34.4)	(39.3)
Net movement in modification loss relating to Covid-19 payment holidays	0.8	-	(0.2)	0.6
Remeasurement of ECLs	11.6	(0.2)	(6.2)	5.2
Loan loss provision as at 30 September 2021	25.9	10.4	28.8	65.1

 

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 £65.1m at 30 September 2021 to £30.1m at 30 September 2022. The overall provision has reduced in line with the amortisation of the loan book in the absence of any originations.

  

The following table splits the gross loan book by arrears status, and then by stage respectively for the year ended 30 September 2022.

	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total £m
Up to date	69.6	7.2	-	76.8
1-30 days	5.2	7.7	-	12.9
31-60 days	-	5.1	-	5.1
> 60 days	-	-	15.9	15.9
	74.8	20.0	15.9	110.7

 

The following table splits the gross loan book by arrears status, and then by stage respectively for the year ended 30 September 2021:

	Stage 1 £m	Stage 2 £m	Stage 3 £m	Total £m
Up to date	193.8	16.7	-	210.5
1-30 days	15.2	17.4	-	32.6
31-60 days	-	11.5	-	11.5
> 60 days	-	-	34.6	34.6
	209.0	45.6	34.6	289.2

 

 

 

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.

 

	30 Sep 22	30 Sep 21	31 Mar 22
	Unaudited	Unaudited	Audited
Customer loans and receivables	£m	£m	£m
Due within one year	65.5	177.4	113.0
Due in more than one year	15.1	46.7	25.0
Net loan book	80.6	224.1	138.0
Deferred broker costs1
Due within one year	0.7	4.0	1.8
Due in more than one year	0.2	1.9	0.4
Customer loans and receivables	81.5	230.0	140.2

 

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

 

9. 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).

 

 

 

 

		30 Sept 22			30 Sep 21			31 Mar 22
	Fair value hierarchy	Carrying amount £m	Fair value £m		Carrying amount £m	Fair value £m		Carrying amount £m	Fair value £m
Financial assets not measured at fair value1
Amounts receivable from customers2	Level 3	81.5	75.1		230.0	214.4		140.2	125.0
Other receivables	Level 3	2.0	2.0		2.1	2.1		1.6	1.6
Cash and cash equivalents (restricted)	Level 1	70.3	70.3		2.0	2.0		7.6	7.6
Cash and cash equivalents	Level 1	128.4	128.4		234.5	234.5		133.6	133.6
		282.2	275.8		468.6	453.0		283.0	267.8
Financial liabilities not measured at fair value1
Other liabilities	Level 3	(6.9)	(6.9)		(10.6)	(10.6)		(6.7)	(6.7)
Senior secured notes3	Level 1	(49.8)	(47.3)		(232.4)	(224.3)		(49.7)	(48.7)
		(56.7)	(54.2)		(243.0)	(234.9)		(56.4)	(55.4)

1.       The Group has disclosed the fair values of financial instruments such as short-term trade receivables and payables at their carrying value because it considers this 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 30 September 2022, the gross principal amount outstanding was £50.0m (H1 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. There are no derivative assets in the current or prior period.

The Group's activities expose it to a variety of financial risks, which can be 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.

	30 Sep 22		30 Sep 21	31 Mar 22
	Unaudited		Unaudited	Audited
	£m		£m	£m
Maturity analysis of financial liabilities
Analysed as:
- due within one year
Other liabilities	(6.9)		(10.6)	(6.7)
- due in one to two years
Senior secured note liability	(49.8)		-	-
- due in two to three years
Senior secured note liability	-		(232.4)	(49.7)
	(56.7)		(243.0)	(56.4)

 

10. Other receivables

	30 Sep 22	30 Sep 21	31 Mar 22
	Unaudited	Unaudited	Audited
	£m	£m	£m
Current
Other receivables	0.6	0.7	0.6
Prepayments and accrued income	1.4	1.3	1.0
	2.0	2.0	1.6

 

11. Trade and other payables

	30 Sep 22	30 Sep 21	31 Mar 22
	Unaudited	Unaudited	Audited
	£m	£m	£m
Current
Accrued senior secured note interest	0.8	3.7	0.8
Trade payables	0.4	0.2	0.4
Taxation and social security	0.4	0.7	0.4
Other creditors	0.9	0.8	1.1
Accruals and deferred income	4.4	5.2	4.0
	6.9	10.6	6.7

 

12. Bank and other borrowings

	30 Sep 22	30 Sep 21	31 Mar 22
	Unaudited	Unaudited	Audited
	£m	£m	£m
Current and non-current liabilities
Amounts falling due in 1-2 years
Senior secured notes	49.8	-	49.7
Amounts falling due 2-3 years
Senior secured notes	-	232.4	-
	49.8	232.4	49.7

 

The Group's facilities are:

·      Senior secured notes in the form of £49.8m high yield bonds with a coupon rate of 7.625% which expire in January 2024 (H1 2022: £232.4m). The senior secured notes are presented in the financial statements net of unamortised fees. As at 30 September 2022, the gross principal amount outstanding was £50.0m. On 20 January 2017, £275.0m of notes were issued at an interest rate of 7.625%. The high yield bond was tapped for £50.0m in May 2017 and again for £75.0m in September 2017 at a premium of 3.8%. £350.0m of notes have been repurchased in the open market/redeemed in prior financial years (2022: £184.1m; 2020: £85.9m; 2019: £80.0m). The remaining £50.0m gross principal amount outstanding is due in January 2024.

 

13. 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.

 

	30 Sep 22			30 Sep 21			31 Mar 2022
	Complaints	Restructuring	Total	Complaints	Restructuring	Total	Complaints	Restructuring	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Opening provision	179.8	-	179.8	344.6	-	344.6	344.6	1.0	345.6
Provisions made during period	16.3	-	16.3	5.3	-	5.3	(156.6)	-	(156.6)
Net utilisation of the provision	(4.7)	-	(4.7)	(5.6)	-	(5.6)	(8.2)	(1.0)	(9.2)
Closing provision	191.4	-	191.4	344.3	-	344.3	179.8	-	179.8
Non-current	-	-	-	-	-	-	97.0	-	97.0
Current	191.4	-	191.4	344.3	-	344.3	82.8	-	82.8
	191.4	-	191.4	344.3	-	344.3	179.8	-	179.8

 

Customer complaints redress

As at 30 September 2022, the Group has recognised a complaints provision totalling £191.4m in respect of customer complaints redress and associated costs. Utilisation in the period totalled £4.7m. The liability has decreased by £152.9m compared to 30 September 2021. £141.1m 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 £25.7m. The level of balance adjustments has declined due to customers paying down their loan and customers charging off the loan book. This has been partly offset by an increase in the assumed volume of customers coming forward in the Scheme

 

Contingent liability

FCA investigation

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

 

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

 

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

 

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

 

Following the Court sanction of the Scheme the Company is obliged to enter into a capital raise for the purposes of recapitalising the business for future lending by 26 May 2023. If this capital raise is successful a further £15.0m cash contribution must be made to the Scheme. The successful raising of sufficient capital relies on a number of uncertain events, not least market appetite which may be influenced by a number of external factors beyond the Company's control.

 

14. 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.

 

	Ordinary Number	Total Number
At 31 March 2022	475,333,760	475,333,760
At 30 September 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.

 

Due to the Asset Voluntary Requirement entered into with the FCA, prior approval by the FCA will be required to pay dividends to shareholders. The Board decided that it would not propose a final dividend payment for the year to 31 March 2022 or an interim dividend for the period to 30 September 2022. Total cost of dividends paid in the period is £nil (2021: £nil).

 

15. Immediate and ultimate parent undertaking

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

 

16. Share-based payments

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's savings-related share option schemes referred to as Save As You Earn ("SAYE") and the Share Incentive Plan ("SIP").

 

The number of LTIP instruments has been reduced since the prior year, with the tranche of LTIP's that matured in September 2022 having lapsed.

 

Share-based payment transactions in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity settled share-based payments. At the grant date, the fair value of the share-based payment is recognised by the Group as an expense, with a corresponding entry in equity, over the period in which the employee becomes unconditionally entitled to the awards. The fair value of the awards granted is measured based on Company specific observable market data, considering the terms and conditions upon which the awards were granted. The charge to the consolidated statement of comprehensive income was £0.1m in the six months to 30 September 2022 (H1 2022: charge of £0.5m).

 

17. Investment in subsidiaries and structured entities

Amigo Loans Group Limited (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 30 September 2022 and includes 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) Limited which is an orphaned structured entity.

 

Name		Country of incorporation		Class of Shares held	Ownership  2022	Ownership 2021	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.

 

 

 

18. Related party transactions

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

 

19. Post Balance Sheet events

 

FCA approval for pilot lending - In a letter to the Company from the FCA, dated 13 October 2022, the FCA has confirmed that it is satisfied that Amigo has met the threshold conditions required for Amigo to return to lending, initially through the operation of a pilot lending scheme, which would limit the level of new loans issued for at least two months. Under the terms of the FCA's notice, Amigo will undertake further customer outcomes' testing, led by a third party, during the initial two-month pilot lending phase and a required period for assessment. If the FCA is satisfied with the outcome of this pilot phase, Amigo will still be limited to a maximum of £35.0m cumulative net originations until a further minimum £15.0m Scheme contribution from the proposed capital raise is paid into the Scheme fund, by no later than 26 May 2023.  

Under its new RewardRate brand, Amigo will offer a revised guarantor loan product and a non-guarantor unsecured loan, both of which have been specifically designed for its target market.

Securitisation structure - The securitisation structure for the facility paid down in September 2021 was closed in November 2022.