Amigo Regulatory News (AMGO)

27 July 2023

Amigo Holdings PLC

 Financial Results for the year ended 31 March 2023

Amigo Holdings PLC, ("Amigo" or the "Company"), a provider of mid-cost credit in the UK that is currently progressing through an orderly solvent wind down of its business, announces results for the year ended 31 March 2023.

Danny Malone, Chief Executive Officer commented:

"These results come at a very sad time for Amigo. Despite the hard work and dedication of all of Amigo's employees, economic and market conditions made it impossible for the company to raise the capital required to continue lending. Our priority now is to progress the orderly wind down of the business, ensuring we are able to maximise payments to redress creditors, whilst continuing to provide the best level of service possible to our customers and support for our staff. I am grateful to our employees who are giving their all at a very difficult time.

"I regret that market conditions caused us to be unable to move forward with the new Amigo business. As we announced in June, while we have been engaging with potential providers of investment to allow the business to restart, the Board of Amigo considers the likelihood of success to be very low.

"I have been proud to both serve as Amigo's CEO and of the many hurdles we overcame despite the final outcome. Whilst there is still work ahead as we complete the wind down, I would like to take this opportunity to thank all our people for their continuing dedication and, as they prepare to leave the business in the months ahead, wish them well for the future."

Operational Headlines

· On 23 March 2023 Amigo's Scheme of Arrangement ("Scheme"), sanctioned by the High Court in May 2022, switched to the Fallback Solution, which is an orderly wind down of the Amigo Loans Ltd business. All new lending ceased with immediate effect. As a result, the Board has determined that the financial statements will no longer be prepared on a going concern basis (see note 1 of the financial statements).

· This followed the Board concluding that it would not be able to raise sufficient commitments for funds to meet both the Scheme requirement of an additional £15m redress payment and to provide working capital to enable the business to continue as a going concern by 26 May 2023.

· The existing loan books, including both the legacy loans and new RewardRate loans, will continue to be collected or will be sold. This is expected to be substantively completed by early 2024.

· The FCA Enforcement action concluded on 14 February 2023 with a fine of £72.9m reduced to nil by the FCA in order to not threaten Amigo's ability to meet its commitments to redress creditors identified under the Scheme.

· The priorities now are to ensure the orderly wind down of the business as outlined under the Fallback Solution, and the realisation of assets to maximise returns for scheme creditors, whilst looking after the wellbeing of our employees. A number of roles will be required as we continue to service our existing customers and manage the wind down. Consultation for the redundancy of all roles is ongoing. 

· The wind down will leave no value for shareholders. While we have continued to engage with potential providers of finance to allow the business to restart, the Board considers the likelihood of success to be low.

· Post period end, in line with the wind down strategy, Chief Executive ("CEO") Danny Malone resigned from his role as CEO and Director, subject to a six-month notice period, ending 15 November 2023.

Financial headlines

*NM = not meaningful

· Net loan book reduction of 67.1% to £45.4m (FY 2022: £138.0m) and revenue reduction of 78.4% to £19.3m (FY 2022: £89.5m), due to the ongoing run-off of the legacy loan book and very limited new lending during the period. All new lending has now stopped in line with the Fallback Solution requirements.

· Complaints provision year-on-year increase of 8.9% to £195.9m at 31 March 2023 (FY 2022: £179.8m). This reflects the higher final number of claims received and higher expected uphold rate which has been revised in line with observed third-party decisioning. The increase in the provision substantially accounts for the income statement charge of £19.1m.

· Year-on-year costs increase of £11.6m owing primarily to RewardRate development and restructuring costs.

· The reduction in revenue as the book runs off, alongside the increase in complaints provision, led to a reported loss before tax of £34.7m, (FY 2022: profit of £167.9m). Loss after tax was £34.8m (FY 2022: profit of £169.6m). The significant profit in the prior year related to the release of a substantial proportion of the complaints provision, following the sanctioning of the Scheme. 

· Overall, collections have remained robust despite the increased cost of living and the continued, but expected, rise in delinquency as the book runs-off. This has been driven by continued strong post-charge-off recoveries.

· The remaining £50m of senior secured notes was repaid in full, at par, in March 2023.

· Net unrestricted cash of £62.4m at 31 March 2023 (FY 2022: net unrestricted cash of £83.9m) driven by the continued collection of the back book and limited originations in the period. The reduction from the prior year reflects the payment of the £97m Scheme contribution, £51m of which has been repaid to Amigo post year-end as part of the Fallback Solution. All net cash is committed to the Scheme, other creditors and expenses, with no residual value attributable to shareholders.

Notes to summary financial table:

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.

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

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

5 Basic adjusted (loss)/earnings per share is a non-IFRS measure and the calculation is shown in note 12 of the financial statements. Adjustments to (loss)/profit are described in footnote 4 above.

6Net unrestricted cash is defined as unrestricted cash and cash equivalents less borrowings and unamortised fees.

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

Analyst, investor and bondholder conference call and webcast

Amigo will be hosting a live webcast for shareholders today at 1.00pm (London time) which will be available at: https://www.amigoplc.com/investors/results-centre. A conference call is also available for those unable to join the webcast Dial in: + 020 4587 0498; Access code: 687268. A replay will be available on Amigo's website after the event. The presentation pack will be available at: https://www.amigoplc.com/investors/results-centre.

Contacts: 

Amigo 

Kerry Penfold, Chief Financial Officer

Kate Patrick, Investor Relations Director investors@amigo.me 

Lansons amigoloans@lansons.com

Tony Langham 07979 692287

Ed Hooper 07783 387713

About Amigo Loans

Amigo is a public limited company registered in England and Wales with registered number 10024479. The Amigo Shares are listed on the Official List of the London Stock Exchange. On 23 March 2023 Amigo announced that it has ceased offering new loans, with immediate effect, and would start the orderly solvent wind down of the business. Amigo provided guarantor loans in the UK from 2005 to 2020 and unsecured loans under the RewardRate brand from October 2022 to March 2023, offering access to mid‐cost credit to those who are unable to borrow from traditional lenders due to their credit histories. Amigo's back book of loans is in the process of being run off with all net proceeds due to creditors under a Court approved Scheme of Arrangement. Amigo Loans Ltd and Amigo Management Services Ltd are authorised and regulated in the UK by the Financial Conduct Authority

Forward looking statements

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

Chair Statement

It is with great sadness that I introduce this year's annual financial results for the year ended 31 March 2023. The past twelve months have been an extraordinarily challenging period. We made significant progress during the first nine months, firstly achieving sanction for our Scheme of Arrangement ("Scheme") and then securing permission from our regulator, the Financial Conduct Authority ("FCA"), to return to lending with the pilot launch of our new RewardRate products. Unfortunately, with markets becoming some of the most challenging they have been in years, and despite securing offers for the required debt funding, we were unable to raise sufficient interest to underwrite the required equity funding to pay a further £15m contribution to Scheme creditors and continue as a going concern. As a result, on 23 March 2023, the Board announced that it had taken the difficult decision to switch the Scheme from its Preferred Solution to the Fallback Solution, which requires Amigo to wind down its Amigo Loans Ltd business. As this is the only revenue-generating business within the Group, it is envisaged that the whole Group will be liquidated. The Board is deeply sorry for the impact this will have on Scheme creditors (who will receive less compensation), our shareholders and employees.

While an agreement has been signed with a shareholder who approached management regarding seeking investment in the Company or its subsidiaries, the Board considers that establishing a new business and potentially creating value for shareholders in the longer term has significant execution risks and would require regulatory approval. We are pursuing all avenues in line with our Directors' duties, under the Companies Act, to consider the interests of all stakeholders, including creditors, shareholders and employees. However, as a result of Amigo's Scheme of Arrangement switch to the Fallback Solution (the orderly wind down of the Amigo Loans Ltd business), the Board has determined that the financial statements will no longer be prepared on a going concern basis (note 1 of the financial statements). Under the Fallback Solution, there is no expected residual value for shareholders. The Board currently intends to ask shareholders to vote at the AGM in September on proposals to delist the PLC shares unless discussions with potential investors progress towards a successful conclusion.

Culture and conduct

In February, the FCA Enforcement proceedings into the Group's historic lending practices and complaints handling were concluded. Although Amigo was not required to pay a financial penalty, were it not for Amigo's financial position, we would have been subject to a penalty of £72.9m. In reaching agreement on the level of the final penalty, the FCA recognised that any penalty would cause Amigo serious financial hardship and would threaten the Company's ability to meet its commitments to its Scheme creditors. 

We are cognisant of the time afforded to Amigo by the FCA throughout the Scheme process and grateful for its recognition of the significant programme of change Amigo has undertaken to deliver improvements to the way in which our business operates, including providing fair outcomes to customers. Amigo has made great strides in setting a culture where the needs of our customers are paramount, where we operate in an open and constructive manner, and monitor and measure conduct and outcomes. As we move through the wind down process, we remain committed to delivering the highest standards of corporate oversight with diligence and integrity.

Our people

Our people are our greatest asset and the resilience and adaptability they have shown has been remarkable. On behalf of the Board, I would like to thank all our teams, both current and those that have left the business already, for their unerring commitment and energy over an immensely difficult period. A key priority for us is the wellbeing of our teams. We are committed to looking after those that remain with us as we progress through the wind down and complete the Scheme, and to preparing our colleagues for their onward journey as they leave the business.

Board

On 23 September 2022, Gary Jennison stepped down from his role as Chief Executive Officer ("CEO") and as a Director of the Board. In order to provide an appropriate transition, Gary remained employed by Amigo until 31 December 2022. Gary was replaced as CEO by Danny Malone, then Chief Financial Officer ("CFO"), who in turn was replaced by Kerry Penfold as CFO. Kerry moved from the internal position of Head of Finance and has previously held senior positions at other financial institutions.

On 27 March 2023, Senior Independent Director, Maria Darby-Walker and Non-Executive Director Jerry Loy, both resigned from the Board with immediate effect, following the wind down announcement. In line with the wind down strategy, on 15 May 2023 Danny Malone resigned from his role as CEO and Director, subject to serving out his six-month notice period to support the orderly wind down of the business.

I would like to thank each for their considerable contributions, support, insight and counsel.

Looking ahead

The orderly wind down of the Amigo business is expected to be substantively completed by the end of the coming financial year. During the wind down process, we will remain guided by our values with a strong focus on governance and oversight as we seek to support all our stakeholders through the process. It is with deep regret that there will be no residual value from the wind down for our shareholders. We will seek to maximise returns for Scheme creditors, support our customers for the remainder of their relationship with us and safeguard the wellbeing of our employees.

The economic environment and resultant tightening of credit availability, coupled with the ongoing cost-of-living crisis, means there is an increasing need for companies like Amigo to provide mid-cost financial products to the financially underserved. With more and more companies in the sector failing, action needs to be taken to fill this gap and provide the opportunity of financial mobility to all. 

Jonathan Roe

Chair

27 July 2023

Chief Executive's Statement

Performance

Amigo's legacy book continued to unwind over the year, resulting in a reduction in revenue and number of customers of 78.4% and 60.3% respectively, compared to the prior year. The net loan book, at 31 March 2023, was £45.4m. Collections have remained resilient, driven in part by recoveries achieved on charged off accounts. Increases to the expected final number of claims and uphold rate within the Scheme resulted in an increase in the complaints provision. The associated uplift in complaints expense in the income statement, coupled with the reduction in revenue, led to a reported loss after tax for the period of £34.8m, (FY 2022: profit of £169.6m). The significant profit in the prior year reflected the release of a substantial proportion of the complaints provision following the sanctioning of the Scheme in May 2022. As a result of the wind down decision, the Board considers that Amigo is no longer a going concern (note 1 of the financial statements). However, we are effecting a solvent wind down of the Amigo business and at 31 March 2023 the business had unrestricted cash of £62.4m. Current unrestricted cash is over £121m. Substantially all net assets are committed to the Scheme with, regrettably, no value attributable to shareholders.

Scheme of Arrangement

Amigo's Scheme contained both a Preferred Solution and a Fallback Solution. The Preferred Solution included an initial payment of £97m to Scheme creditors and was conditional on Amigo returning to lending by 26 February 2023 and the completion of a minimum 19:1 capital raise by 26 May 2023, followed by the contribution of a minimum £15m payment to the Scheme fund for creditor redress. If these conditions were not met, or there was no expectation that they could be met, the Fallback Solution would be triggered. The Fallback Solution requires an orderly wind down of the business. Both scenarios include a mechanism to return all residual cash from the business to Scheme creditors.

On 13 October 2022, Amigo received permission from the FCA to return to lending with its new RewardRate products under a pilot test phase. This fulfilled the first Preferred Solution condition. Once Amigo returned to lending, we were able to commence marketing to fulfil the second Preferred Solution condition. The Board fought hard to complete a successful capital raise with the strong belief that doing so, and continuing with the Preferred Scheme, would be in the best interests of not only its shareholders, but also Scheme creditors, employees and wider stakeholders, including those in society that do not have access to mainstream credit options. With the help of our financial advisors, over 200 private and institutional investors were approached to support a capital raise of £45m, which comprised the Scheme contribution of £15m and £30m of working capital, without which we would be unable to continue as a going concern. This was undertaken against an increasingly challenging economic backdrop in the UK which, in turn, negatively impacted capital markets and the outlook for consumer credit. Despite receiving indicative proposals sufficient to finance our debt requirements, we were only able to secure indications of interest for £11m in ordinary share capital and £10m in exchangeable notes. On 10 March 2023, having lost the last material potential investor from the process, the Board announced that it believed it could not raise the total £45m equity requirement by 26 May 2023. The main concerns investors cited included: current affordability challenges for UK households, particularly in our sector of the market; the history of regulatory intervention in the non-standard credit market and the proposed implementation of a consumer duty of care; the ability to write the loan volumes in the business plan given the market backdrop; and the impact of having to make a significant upfront payment to Scheme creditors as part of the capital raise.

We have been asked many times why we did not seek investment from our existing shareholder base. We looked into ways in which we might be able to ascertain the amount our almost entirely retail shareholder base would be able and willing to provide. The first challenge was to identify the c.8,000 shareholders who hold their share interests predominantly through third-party brokers. Even with this information, we would have been unable to approach our investors to solicit investment without producing a prospectus. Without underwriters for the raise, we were unable to produce a prospectus with an unqualified working capital statement. We considered capturing indications of interest through a survey of our retail investors but had no way to verify responses. A Board decision to pursue the capital raise, with its associated high costs, with no certainty of success and based on unverifiable survey responses could have contravened the Directors' duties to creditors. The indication that we were given by market experts was that existing shareholders might contribute approximately £5m to the raise. This was the best estimate that we could attain and was not sufficient to continue the process. It excludes one shareholder who had made a significant offer, already factored into the £11m of indicated interest

To enable a continuation of the Preferred Solution, the Board then explored the potential of pursuing a new scheme, to eliminate the £15m Scheme commitment. A new scheme would be the only way possible of making amendments to the existing Scheme. Cognisant of our duties to shareholders and our wider stakeholders, including Scheme creditors, the Board was resolute that we must explore all options to find a go-forward solution that would retain some value for shareholders and where Scheme creditors would benefit to a greater degree than within the Fallback Solution.

In exploring the possibility of successfully completing a new scheme, the Board took legal advice from several firms of solicitors and King's Counsel in its consideration of a number of factors including the ability to implement a new scheme which secures creditor approval, is not objected to by the FCA and receives High Court sanction, all within the required time. It also considered the additional costs of implementing a new scheme and the confidence that the capital, albeit a lower quantum, could still be raised against the challenging ongoing market backdrop and sentiment around the sector in which Amigo operates. As part of that, it also took into account that the indications of interest for £11m of equity and £10m of exchangeable notes received were indications only and not firm commitments. In light of the advice that it received, and the significant potential costs, the Board reluctantly concluded that pursuing a new Scheme and subsequent capital raise had such a low chance of success it could not be considered to be in the best interests of Scheme creditors. We also considered that while conversion rates under the RewardRate pilot lending scheme had improved as we progressed through the pilot, the business model was not yet proven and, although there was strong potential demand, affordability challenges for UK households meant most customer applications were rejected. As a result, on 23 March 2023, the Board announced that it had taken the very difficult decision to switch the Scheme from the Preferred to the Fallback Solution. 

The Fallback Solution requires that the trading subsidiary, Amigo Loans Ltd ("ALL") stopped lending with immediate effect and was placed into an orderly wind down, with the Court order requirement that all surplus assets after the wind down are transferred to the Scheme creditors. In due course, ALL will be liquidated. As ALL is the only revenue-generating business within the Group, it is envisaged that the whole Group will be liquidated, with significant inter-group debts due to ALL being unpaid. Amigo's two authorised businesses, ALL and Amigo Management Services Ltd ("AMSL"), will ultimately require their authorised status to be removed by the FCA. The authorised status must be retained for the duration of any regulated activities including collections from the existing loan book.

The wind down of the business, during which the existing loan book will continue to be collected, will last for approximately twelve months and, as such, will require a number of existing roles. All employees were placed at risk of redundancy and consultation began on 24 March 2023. This is a solvent wind down and any services provided by our suppliers will be paid for in accordance with contractual terms.

The Scheme claims process is unaffected. However, as noted previously, there will be an impact to the total compensation Scheme creditors will receive in terms of pence in the pound as they will not receive a share of the minimum £15m Scheme contribution that was to be raised from investors, and the turnover provision from the new business scheme will be replaced by the residual surplus under the Fallback Solution, which will result in a smaller pool of distributable funds. Regrettably, there will be no value attributable to the ordinary shares of the Company in the Fallback Solution.

On 9 June 2023, we announced that the Company had been approached by shareholder Michael Fleming seeking an exclusivity agreement in relation to the business (the "Agreement") which Amigo agreed to. This is to allow Mr Fleming to explore finding and completing investment in the Company or its subsidiaries. The period of exclusivity expires on 6 September 2023. The Agreement will not stop the Company or its subsidiaries progressing with the disposal of assets under its wind down plan or acting on any transaction governed by the Takeover Code. Shareholders should note that there remain significant impediments to any new capital being made available to the business. In addition, establishing a new business and potentially creating value for shareholders in the longer term, has significant execution risks and will require regulatory approval. The Board believes there to be a low likelihood of a successful conclusion to any discussions arising from this Agreement but is pursuing the Agreement in line with its duties under the Companies Act to consider the interests of all stakeholders, including creditors, shareholders and employees.

Wind down strategy

As Amigo is now progressing with the orderly wind down of the business, our strategic objectives have changed. However, our previously reported strategic pillars remain relevant within the wind down strategy, as we seek to maximise returns to Scheme creditors with a strong focus on costs, whilst maintaining good governance and operating responsibly to meet our customers' needs for the remainder of their relationship with us. The wellbeing of our people will also remain a focus throughout the wind down, as we retain key roles and provide support for our people throughout the process.

As at the end of March 2023, we had c.29k legacy borrowers with open loan positions, the average loan balance being c.£2.2k, and c.500 RewardRate borrowers with an average loan balance of c.£5.2k. By optimising collections activity and other value realisation options, including the sale of all residual loans, we will seek to maximise the amount payable to Scheme creditors. Claims assessment, adjudication and the payment of redress is unaffected by the wind down.

In order to maximise returns to Scheme creditors, specific cash conservation measures have been, and will continue to be, taken. Non-critical supplier contracts have been terminated and a head office move to smaller premises was completed in May 2023. The redemption in full of Amigo's senior secured notes in March 2023 was executed to save interest payments and the management buy-out of Amigo's Irish business was completed in February 2023. While proceeds of the buy-out were nominal (£1), Ireland was not actively lending, and the sale resulted in an ultimate saving to Amigo by eliminating premises and operational costs.

Effective governance and open dialogue with our Regulator will be maintained throughout the wind down process as we focus on delivering the best outcome possible for all our stakeholders.

Our people

Our people have always been what make Amigo special. Many of our teams have been with us for a significant part of, if not all, their careers. It is our priority to support our colleagues, both while they remain with us and in their preparation and search for their next role outside Amigo. I am incredibly proud of, and grateful for, the resilience they have shown and their determination to continue to perform at their best in support of our customers and each other. On behalf of the Board, I should like to thank all our people for their continued efforts.

Summary and outlook

The current Board came into Amigo because we believe passionately that there is a need in the market for a regulated mid-cost lender that meets the demand of financially excluded people who deserve access to regulated credit. We have fought hard to deliver the best outcome for creditors, colleagues and shareholders and have left no stone unturned. I am deeply sorry that we have been unable to successfully complete the capital raise and continue as a going concern, and for the outcome for shareholders who have supported us.

Our priority now is to complete an orderly wind down of both the Amigo Loans Ltd business and the wider Group in which we maximise returns for Scheme creditors and support our customers and our people as we move through the process.

Danny Malone

Chief Executive Officer

27 July 2023

Financial Review

The decision to wind down the Amigo Loans Ltd business ("ALL"), in line with the Court order associated with the Fallback Solution of Amigo's Scheme of Arrangement, was announced on 23 March 2023. As ALL is the only revenue-generating business within the Group, it is envisaged that all businesses within the Group will be liquidated. This process has begun and is likely to be substantially completed by the first quarter of calendar year 2024, following completion of the Scheme redress process. Over the course of the wind down, we will continue to either collect out or dispose of both the remaining legacy loan book and newer RewardRate loans. The wind down is an orderly, solvent process and the business remains in a positive net asset position. However, all net assets, after the cost of collecting the loan book, are committed to Scheme creditors.

Overall performance

In the year to 31 March 2023, the net loan book reduced by 67.1% to £45.4m (FY 2022: £138.0). Revenue fell by 78.4% year-on-year to £19.3m (FY 2022: £89.5m), reflecting the loan book reduction with limited new lending over the period. Collections continue to perform well, and ahead of expectations, despite the wind down announcement and cost of living backdrop. The complaints provision increased from the prior year, primarily due to the expected higher uphold rate as claims are assessed. The associated increase in complaints cost, alongside diminishing revenues and higher operational costs, led to a reported loss before tax of £34.7m (FY 2022: profit of £167.9m). The significant profit in the prior year reflected the release of a substantial proportion of the complaints provision following the sanctioning of the Scheme in May 2022.

Revenue

Revenue declined 78.4% to £19.3m over the 12-month period, owing primarily to the pause in lending until October 2022 and minimal lending thereafter. All lending was stopped on 23 March 2023, following the wind down announcement. The decline in revenue is reflected in customer numbers which fell 60.3% to 29,000 (FY 2022: 73,000).

The pause in lending drove a 65.8% reduction in the gross loan book year-on-year to £63.4m (FY 2022: £185.4m). The net loan book reduced by 67.1% year-on-year to £45.4m (FY 2022: £138.0m). This reduction is reflective of both the decline in the gross loan book and impairment coverage which increased to 28.4% (FY 2022: 25.6%) at the year end.

Revenue yield in the year decreased significantly from the prior year to 15.5% (FY 2022: 29.4%), primarily due to the non-recognition of estimated interest generated from prospective upheld Scheme complaints. The Group defines revenue yield as annualised revenue over the average of the opening and closing gross loan book for the period.

Impairment

A credit in the period was recognised of £3.4m (Q3 FY 2022: charge of £37.0m) primarily due to post-charge-off recoveries, which have improved throughout the period, and continued robust standard collections, alongside the gross loan book being increasingly provided for under lifetime loss assumptions.

The impairment provision decreased to £18.0m (FY 2022: £47.4m), representing 28.4% of the gross loan book (FY 2022: 25.6%). This reduction reflects the amortisation of the loan book over the period,

Scheme provision

The Scheme provision has increased from the prior year to £195.9m (FY 2022: £179.8), owing both to the now known final number of claims received which was higher than originally anticipated, and to the increase in the projected uphold rate to just over 80%. Approximately 90% of the claims' population have now been assessed by a third party and we therefore have greater certainty in this figure. Following the passing of the Scheme deadline to submit a claim, the final volume of claims is known to be just under 210k. This includes some duplication where both guarantor and borrower have claimed on the same loan agreement. The provision includes both cash redress and balance adjustments. Scheme creditors are expected to receive cash redress toward the end of this calendar year which we estimate to be in the region of 17p to the pound. With claims still to be reviewed, this remains an estimate and the final outcome is subject to change. 

The increase in the provision has resulted in a corresponding charge to the income statement of £19.1m (FY 2022: credit of £156.6m). There remains a degree of uncertainty in the final complaints outturn. Sensitivity analysis of the key assumptions is set out in note 2.2 to these financial statements.

Cost management

Administrative and other operating costs of £36.2m increased by £11.6m, (47.2%) year-on-year. The main categories of expenditure included in administrative and other operating expenses are employee costs of £17.3m (2022: £13.6m), legal, professional and consultancy fees of £10.9m (2022: £5.1m) and licence fees of £2.5m (2022: £1.9m). The substantial increase year-on-year relates both to higher employee costs alongside development requirements for the RewardRate platform. Employee costs increased by £3.7m to £17.3m due to the provision of £4.2m for estimated staff exit costs arising from the orderly wind down, in which all employees will exit the business.

RewardRate development spend in the year was composed of both incremental licence spend alongside internal staff and external developer costs. The level of spend was required to facilitate an accelerated lending platform with which to begin lending, as we did in October 2022. A flexible and scalable IT platform was key to demonstrating proof-of-concept for prospective investors in the capital raise process. An onerous contract provision of £1.3m (related expense of £1.8m), has been made in relation to the RewardRate product, which has a number of associated supplier contracts that either cannot be terminated or a termination fee has been negotiated to end the contract early. As at 31 March 2023, £0.5m had been paid and £1.3m remains payable. 

Increased expenditure was partially offset by reductions in variable costs, including communications, print, post and stationery, and bank charges with declining volumes aligned to the reducing customer base.

Tax

A tax charge for the year ended 31 March 2023 of £0.1m relates to Amigo's Luxembourg entity.

Profit

Loss before tax was £34.7m for the year (FY 2022: profit of £167.9m) with loss after tax of £34.8m (FY 2022: profit of £169.6m) driven primarily by the increase in complaints provision over the financial year. Excluding the complaints charge, restructuring expense and onerous contract provision, adjusted loss after tax was £9.3m (FY 2022: profit of £13.3m).

Our adjusted basic loss per share for the year was loss of 2.0p (FY 2022: earnings of 2.8p), and basic loss per share for the year was loss of 7.3p (FY 2022: earnings of 35.7p).

Funding and liquidity

The Group's remaining £50m of outstanding 7.625% senior secured notes were redeemed, at par, in March 2023, ahead of expiration in January 2024, resulting in a net interest saving. Funding to the Group is now entirely in cash.

The proposed capital raise to fulfil the Scheme condition of a further minimum £15m payment to Scheme creditors and to provide working capital necessary for the continuation of the business was unsuccessful. The Scheme was switched to the Fallback Solution as a result.

1Figures presented above are net of unamortised fees.

With no remaining debt, net unrestricted cash was £62.4m at 31 March 2023 (FY 2022: £83.9m), comprising unrestricted cash and cash equivalents, as the back book continued to be collected and originations were limited. The year-on-year reduction of cash and cash equivalents reflects the payment of the full £97m Scheme contribution into a Scheme fund and the repayment of the senior secured notes, offset by continued strong collections. Restricted cash is £107.2m, which includes the £97m Scheme contribution paid to the Scheme Fund as well as estimated set-off held in escrow for customers with existing complaints who continued to make payments up to the Scheme Effective Date. Since the year end, and in accordance with the Fallback Solution conditions, Scheme Co has returned funds to ALL to ensure it is well funded for an orderly wind down of operations. Current unrestricted cash is over £121m after repayment of the senior secured notes and withdrawal from Scheme Co and current restricted cash is over £62m.

Summary

It is extremely disappointing to be executing the wind down of the Amigo business. Despite this, collections are performing well and the wind down strategy, whilst early in its execution, is on track to deliver the expected contribution to Scheme creditors. This is a testament to the dedication and hard work of all teams at Amigo of which I am immensely proud.

Kerry Penfold

Chief Financial Officer

27 July 2023

Consolidated statement of comprehensive income

for the year ended 31 March 2023

The(loss)/profit is derived from continuing activities.

The accompanying notes form part of these financial statements.

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

Consolidated statement of financial position

as at 31 March 2023

The accompanying notes form part of these financial statements.

1 Cash and cash equivalents (restricted) of £ 107.2m (2022: £7.6m) materially relates to cash held for the benefit of customers in relation to payments arising out of the Scheme of Arrangement.

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

Kerry Penfold

Director

27 July 2023

Company no. 10024479

Consolidated statement of changes in equity

for the year ended 31 March 2023

The accompanying notes form part of these financial statements.

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

2 The merger reserve was created as a result of a Group reorganisation in 2017 to create an appropriate holding company structure. The restructure was within a wholly owned group, constituting a common control transaction.

Consolidated statement of cash flows

for the year ended 31 March 2023

The accompanying notes form part of these financial statements.

1 Total cash is inclusive of cash and cash equivalents (restricted) of £107.2 m (2022: £7.6m). This restricted cash materially relates to cash held for the benefit of customers in relation to payments arising out of the Scheme of Arrangement.

Notes to the consolidated financial statements

for the year ended 31 March 2023

1. Accounting policies

1.1 Basis of preparation of financial statements

Amigo Holdings PLC is a public company limited by shares (following IPO on 4 July 2018), listed on the London Stock Exchange (LSE: AMGO). The Company is incorporated and domiciled in England and Wales. With effect from 15 June 2023 the Company's registered office is Unit 11a, The Avenue Centre, Bournemouth, Dorset, United Kingdom BH2 5RP.

The principal activity of the Company is to act as a holding company for the Amigo Loans Group of companies. The principal activity of the Amigo Loans Group is to provide loans to individuals. Previously, its principal activity was to provide individuals with guarantor loans from £2,000 to £10,000 over one to five years. No new advances on these products have been made since November 2020. Following FCA approval to return to lending, in October 2022, Amigo launched, on a pilot basis, a new guarantor loan as well as an unsecured loan product which featured dynamic pricing to reward on-time payment with lower rates and penalty-free annual payment holidays. The new products were released under the RewardRate brand. With the Fallback Solution being implemented, leading to a cessation of trade and implementation of a wind down plan, new lending has been stopped in the current year.

These consolidated Group and Company financial statements have been prepared on a basis other than going concern and approved by the Directors in conformity with the requirements of the Companies Act 2006 and these Group and Company financial statements were also in accordance with International Financial Reporting Standards ("IFRS") as adopted by the UK. There has been no departure from the required IFRS standards.

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

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

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

In determining the appropriate basis of preparation for these financial statements, the Board has undertaken an assessment of the Group and Company's ability to continue as a going concern for a period of at least twelve months from the date of approval of the financial statements.

The Directors believe there is no general dispensation from the measurement, recognition and disclosure requirements of IFRS despite the Group not continuing as a Going Concern. Therefore, IFRS is applied accordingly throughout the financial statements. The relevant accounting standards for each part of the Financial Statements have been applied on the conditions that existed and decisions that had been taken by the Board as at or prior to 31 March 2023.

In undertaking a Going Concern review, the Directors considered the Group's decision to switch the Scheme from the Preferred to the Fallback Solution, announced on 23 March 2023.

The switch to the Fallback Solution required that the trading subsidiary, Amigo Loans Ltd ("ALL"), stopped lending with immediate effect and be placed into an orderly wind down, with the result that all surplus assets after the wind down will be transferred to the Scheme creditors. A further requirement of the Fallback Solution is that ALL be placed into liquidation within two months of payment of the final Scheme dividend. No value will be attributed to the ordinary shares of the Company in this scenario.

Given the cessation of trading on 23 March 2023, alongside no apparent realistic strategic capital raise or viable alternative solutions, and the requirement dictated by the Scheme to ultimately liquidate Amigo Loans Ltd (the Group's sole cash-generating unit), the Board have determined that the Annual Report and Financial Statements for FY23 will be prepared on a basis other than Going Concern.

The Board has prepared a set of financial projections for the solvent wind down following the cessation of new lending in March. Alongside a base scenario which indicates ample liquidity available through the course of wind down, a downside scenario has been collated that stresses the primary cash flow risks to the Group that are considered severe but plausible. Stresses have been applied to:

• The collect out of the legacy Amigo loan book

• Removal of any prospective debt sales

• Increased Scheme liabilities 

• Increased overhead spend

Despite the stresses applied, the Group maintains sufficient liquidity in the period. It is therefore considered only a marginal risk that the Group is unable to remain solvent during the orderly wind down. The key risks that would prevent this from being achieved can be considered the risks applied in the downside scenario alongside potential regulatory action or intervention.

The consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in shareholders' equity, consolidated statement of cash flows and notes to the financial statements include the financial statements of the Company and all of its subsidiary undertakings inclusive of structured entities ("SEs"); see note 28 for a full list of subsidiaries and SEs. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns through its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The vehicle ALL Scheme Ltd was incorporated on 6 January 2021 and is a wholly owned and controlled subsidiary of the Group included in the consolidated financial statements for the years ended 31 March 2023 and 31 March 2022. The Group reviews complaint claims through this vehicle and, where appropriate, will pay cash redress to customers that have been affected by historical issues in the UK business. There was no activity through this vehicle in the prior financial year.

The Group's securitisation facility was established in November 2018. The Company fully repaid the facility in September 2021, and the securitisation structure was subsequently closed in November 2022 (see note 18 for further details). The structured entity AMGO Funding (No. 1) Ltd was set up in this process. The Group had both power and control over that structured entity, as well as exposure to variable returns from the special purpose vehicle ("SPV)"; hence, this is included in the consolidated financial statements. SEs are fully consolidated based on the power of the Group to direct relevant activities, and its exposure to the variable returns of the SE. In assessing whether the Group controls an SE, judgement is exercised to determine the following: whether the activities of the SE are being conducted on behalf of the Group to obtain benefits from the SE's operation; whether the Group has the decision-making powers to control or to obtain control of the SE or its assets; whether the Group is exposed to the variable returns from the SE's activities; and whether the Group is able to use its power to affect the amount of returns. The Group's involvement with SEs is detailed in note 25.

All intercompany balances and transactions are eliminated fully on consolidation. The financial statements of the Group's subsidiaries (including SEs that the Group consolidates) are prepared for the same reporting period as the Group and Company, using consistent accounting policies.

1.2 Amounts receivable from customers

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.

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

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

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

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

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

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

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

In light of the decision to enter into the Fallback Solution and the trigger for an orderly wind down of the business the Board re-evaluated this business model assessment, noting also that any reclassification of financial assets identified as requiring reclassification is the first day of the next accounting period. The assessment was no longer considered appropriate for the RewardRate portfolio for which a decision has been made to sell as a result of the wind down strategy and has been classified as Held for Sale as at 31 March 2023 (see note 14). The RewardRate portfolio has been reclassified under fair value through other comprehensive income with effect from 1 April 2023.

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.

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.

Under IFRS 9 financial assets fall into one of three categories:

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

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

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

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

At the reporting date, the Group held both guarantor and personal loans on balance sheet. In relation to the guarantor loans, in substance the borrower and the guarantor of each financial asset have equivalent responsibilities. Hence, for each loan there are two obligors to which the entity has equal recourse. This dual borrower nature of the product is a key consideration in determining the staging and the recoverability of an asset. The new guarantor and unsecured loan products under the RewardRate brand have been disclosed as held for sale assets at 31 March 2023 and therefore does not attract ECL impairments.

The Group has assessed that ECLs on customer loans and receivables is a key sensitivity, refer to note 2.1.1 for further detail of the judgements and estimates used in the measurement of ECLs and note 2.1.3 for detail on impact of forward-looking information on the measurement of ECLs.

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.

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

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.

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

1.3 Revenue

Revenue comprises interest income on amounts receivable from customers. Loans are initially measured at fair value (which is equal to cost at inception) plus directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest rate method. Revenue is presented net of amortised broker fees which are spread over the expected behavioural lifetime of the loan as part of the effective interest rate method. Revenue is also presented net of modification adjustments recognised in the period, where no historical event suggesting a significant increase in credit risk has occurred on that asset (see notes 1.12.1.d for further details).

The effective interest rate ("EIR") is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument (or a shorter period where appropriate) to the net carrying value of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument and includes any incremental costs that are directly attributable to the instrument, but not future credit losses.

1.4 Operating expenses

Operating expenses include all direct and indirect costs. Where loan origination and acquisition costs can be referenced directly back to individual transactions (e.g. broker costs), they are included in the effective interest rate in revenue and amortised over the behavioural life of the loan rather than recognised in full at the time of acquisition.

1.5 Interest payable and funding facilities

Interest expense and income, excluding bond premium, is recognised as it accrues in the consolidated statement of comprehensive income using the EIR method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instruments and recognised over the behavioural life of the liability. The bond premium is amortised over the life of the bond. Amortised facility fees are charged to the consolidated statement of comprehensive income over the term of the facility using the effective interest rate method. Non-utilisation fees are charged to the consolidated statement of comprehensive income as incurred.

Where an existing debt instrument is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. All capitalised fees relating to the prior debt instrument are written off to the consolidated statement of comprehensive income at the date of derecognition.

Senior secured note premiums and discounts are part of the instrument's carrying amount and therefore are amortised over the expected life of the notes. Where senior secured notes are repurchased in the open market resulting in debt extinguishment, the difference between the carrying amount of the liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the consolidated statement of comprehensive income.

1.6 Dividends

Equity dividends payable are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised on the earlier of their approval or payment date.

1.7 Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

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.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Should circumstances arise where the Group concludes it is no longer considered probable that future taxable profits will be available against which temporary differences can be utilised, deferred tax assets will be written off and charged to the consolidated statement of comprehensive income.

The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they are unlikely to reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the consolidated statement of financial position date.

1.8 Property, plant and equipment ("PPE")

PPE is stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Where parts of an item of PPE have different useful lives, they are accounted for as separate items of property, plant and equipment. Repairs and maintenance are charged to the consolidated statement of comprehensive income during the period in which they are incurred.

Depreciation is charged to the consolidated statement of comprehensive income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:

• Leasehold improvements 10% straight line

• Fixtures and fittings 25% straight line

• Computer equipment 50% straight line

• Office equipment 50% straight line

• Motor vehicles 25% straight line

Depreciation methods, useful lives and residual values are reviewed, and adjusted if appropriate, at each consolidated statement of financial position date.

1.9 Intangible assets

Intangible assets are recognised at historical cost less accumulated amortisation and accumulated impairment losses. Intangible assets are amortised from the date they are available for use. Amortisation is charged to the consolidated statement of comprehensive income.

Acquired software costs incurred are capitalised and amortised on a straight-line basis over the anticipated useful life, which is normally four years.

Amortisation methods, useful lives and residual values are reviewed at each consolidated statement of financial position date.

1.10 Held for sale assets

A non-current asset or disposal group is classified as held-for-sale when its carrying amount will be recovered principally through a sale transaction. This is the case when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset and its sale is highly probable. On initial classification as held-for-sale non-current assets are measured at the lower of their carrying amount and the fair value less costs to sell.

1.11 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the consolidated statement of financial position date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. For more details see note 2.2 and note 19.

Contingent liabilities are possible obligations arising from past events, whose existence will be confirmed only by uncertain future events, or present obligations arising from past events that are not recognised because either an outflow of economic benefits is not probable, or the amount of the obligation cannot be reliably measured. Contingent liabilities are not recognised in the consolidated statement of financial position but information about them is disclosed unless the possibility of any economic outflow in relation to settlement is remote. See note 19 for further details.

1.12 Financial instruments

The Group primarily enters into basic financial instruments transactions that result in the recognition of financial assets and liabilities, the most significant being amounts receivable from customers and senior secured notes in the form of high yield bonds. During the year the Group utilised a securitisation facility which has been fully repaid at the balance sheet date.

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.

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.

Cash and cash equivalents (restricted) materially relate to cash held for the benefit of customers in relation to payments arising out of the Scheme of Arrangement.

Where modifications to financial asset terms occur, for example, modified payment terms following granting of a Covid-19 payment holiday to customers, the Group evaluates from both quantitative and qualitative perspectives whether the modifications are deemed substantial. If the cash flows are deemed substantially different, then the contractual rights to cash flows from the original asset are deemed to have expired and the asset is derecognised (see 1.12.1.e) and a new asset is recognised at fair value plus eligible transaction costs.

For non-substantial modifications the Group recalculates the gross carrying amount of a financial asset based on the revised cash flows and recognises a modification loss in the consolidated statement of comprehensive income. The modified gross carrying amount is calculated by discounting the modified cash flows at the original effective interest rate. For customer loans and receivables, where the modification event is deemed to be a trigger for a significant increase in credit risk or occurs on an asset where there were already indicators of significant increase in credit risk, the modification loss is presented together with impairment losses. In other cases, it is presented within revenue.

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.

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.

Debt instruments (other than those wholly repayable or receivable within one year), i.e. borrowings, are initially measured at fair value less transaction costs and subsequently at amortised cost using the effective interest method.

Debt instruments that are payable within one year, typically trade payables, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. These include liabilities recognised for the expected cost of repurchasing customer loans and receivables previously sold to third parties, where a lending decision complaint has since been upheld in the customer's favour. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in case of an outright short-term loan not at market rate, the financial liability is measured, initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. See note 1.5 for details of treatment of premiums/discounts on borrowings.

Short-term payables are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or has expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in the consolidated statement of comprehensive income.

1.13 Securitisation

The Group securitised certain financial assets via the sale of these assets to a special purpose entity, which in turn issued securities to investors. All financial assets continue to be held on the Group's consolidated statement of financial position, together with debt securities in issue recognised for the funding. Securitised loans are not derecognised for the purposes of IFRS 9 on the basis that the Group retains substantially all the risks and rewards of ownership. The securitisation structure was closed in November 2022. See note 25 for further details.

1.14 Merger reserve

The merger reserve was created as a result of a Group reorganisation in 2017 to create an appropriate holding company structure. With the merger accounting method, the carrying values of the assets and liabilities of the parties to the combination are not required to be adjusted to fair value, although appropriate adjustments shall be made through equity to achieve uniformity of accounting policies in the combining entities. The restructure was within a wholly owned group, constituting a common control transaction.

1.15 Leases

IFRS 16 distinguishes between leases and service contracts on the basis of whether the use of an identified asset is controlled by the Group. Control is considered to exist if the Group has:

• the right to obtain substantially all of the economic benefits from the use of an identified asset; and

• the right to direct the use of that asset.

Where control, and therefore a lease, exists, a right-of-use asset and a corresponding liability are recognised for all leases where the Group is the lessee, except for short-term assets and leases of low-value assets. Short-term assets and leases of low-value assets are expensed to the consolidated statement of comprehensive income as incurred.

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.

For each lease liability a corresponding right-of-use asset is recorded in the consolidated statement of financial position.

The right-of-use asset is initially measured at cost and subsequently measured at cost less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset, with the depreciation charge presented under administrative and operating expenses. The Group's right-of-use assets relate to two property leases for offices in Bournemouth.

1.16 Foreign currency translation

Items included in the financial statements of each of the Group's subsidiaries are measured using the currency of the primary economic environment in which the subsidiary operates (the functional currency). The Group's subsidiaries primarily operate in the UK and Republic of Ireland. The Irish subsidiaries were disposed of in February 2023. The consolidated and the Company financial statements are presented in Sterling, which is the Group and Company's presentational currency.

Transactions that are not denominated in the Group's presentational currency are recorded at an average exchange rate for the month. Monetary assets and liabilities denominated in foreign currencies are translated into the relevant presentational currency at the exchange rates prevailing at the consolidated statement of financial position date. Non-monetary items carried at historical cost are translated using the exchange rate at the date of the transaction. Differences arising on translation are charged or credited to the consolidated statement of comprehensive income.

1.17 Defined contribution pension scheme

The Group operates a defined contribution pension scheme. Contributions payable to the Group's pension scheme are charged to the consolidated statement of comprehensive income on an accruals basis.

1.18 Share-based payments

The Company grants options under employee savings-related share option schemes (typically referred to as Save As You Earn schemes ("SAYE")) and makes awards under the Share Incentive Plans ("SIP") and the Long Term Incentive Plans ("LTIP"). All of these plans are equity settled.

The fair value of the share plans is recognised as an expense over the expected vesting period with a corresponding entry to retained earnings, net of deferred tax. The fair value of the share plans is determined at the date of grant. The fair value of the awards granted is measured based on Company-specific observable market data, taking into account the terms and conditions upon which the awards were granted.

Non-market-based vesting conditions (i.e. earnings per share and absolute total shareholder return targets) are taken into account in estimating the number of awards likely to vest, which is reviewed at each accounting date up to the vesting date, at which point the estimate is adjusted to reflect the actual awards issued.

The grant by the Company of options and awards over its equity instruments to the employees of subsidiary undertakings is treated as an investment in the Company's financial statements.

1.19 Items presented separately within the consolidated statement of comprehensive income

Complaints expense is presented separately on the face of the consolidated statement of comprehensive income. This item is deemed exceptional because of its size, nature or incidence and which the Directors consider should be disclosed separately to enable a full understanding of the Group's results.

1.20 Share capital

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Group's ordinary shares are classified as equity instruments. 

2. Critical accounting assumptions and key sources of estimation uncertainty

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

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

· IFRS 9: measurement of ECLs:

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

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

· Multiple economic scenarios - the probability weighting of base, downside and severe downside scenarios to the ECL calculation (note 2.1.3).

· Complaints provision:

· Estimating the probability, timing and amount of any outflows (note 2.2.1).

· Restructuring provision:

· Required resource plan and subsequent timing of staff exits

· Assessing supplier requirements and recognition of onerous contracts

· Accounts receivable from customers:

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

· Held for sale assets:

· Assessing probability and timing of an asset's prospective sale (note 14)

Areas which include a degree of estimation uncertainty are:

· IFRS 9: measurement of ECLs:

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

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

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

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

· Complaints provisions:

· Calculation of the uphold rate for customers on the gross loan book and/or customers that have made payments post the Scheme Effective Date. These calculations evaluate current and historical data, and assumptions and expectations of future outcomes (note 2.2.1).

· Estimation of the cash liability is based on assumptions around net future collections which uses assumptions around credit losses, valuation of impaired debt and operating expenses.

· Valuation of the investment in subsidiaries held by parent company Amigo Holdings PLC (note 2a of Company financial statements).

· Restructuring provision:

· Severance costs of staff exits which are contingent on the timing of exit and therefore contingent on future resource required.

· Held for sale asset:

· Estimate of expected fair value less costs to sell, valued via a market approach (note 14).

2.1 Credit impairment

The Group has adopted a collective basis of measurement for calculating ECLs. The loan book is bifurcated into those customers who have had a Covid-19 forbearance plan and those who have not. The allowance for ECLs is calculated using three components: PD, LGD and EAD. The ECL is calculated by multiplying the PD (twelve month or lifetime depending on the staging of the loan), LGD and EAD and the result is discounted to the reporting date at the original EIR.

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

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

To determine whether there has been a SICR the following two-step approach has been taken:

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

2) As a backstop, the Group considers that a significant increase in credit risk occurs no later than when an asset is two contractual payments past due (one payment past due is equivalent to 30 days past due), which is aligned to the IFRS 9 rebuttable presumption of more than 30 days past due. This is the primary quantitative information considered by the Group in significant increase in credit risk assessments.

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

The Group assesses the impact of forward-looking information on its measurement of ECLs. While the Group has historically analysed effects of a range of macro-economic variables it believes the most significant factors likely to impact future credit losses will be unemployment and inflation. These factors are considered on a qualitative basis in estimating PDs and weighting scenarios and ultimately reflect The Group's expectations of future credit losses. 

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

· The base scenario broadly represents probability of defaults whereby historic performance is extrapolated with an expectation for future deterioration applied on a judgemental qualitative basis relating to expectations on the aforementioned macroeconomic factors. A weighting of 25% has been applied to reflect the Group's assumption that whilst the current macroeconomic environment has the potential to improve based on recent Office for Budgetary Reporting ("OBR") forecasts, the rate of inflation is likely to remain high throughout the remaining life of the loan book and therefore likely to impact customers in an adverse manner. Further consideration has been given to the rise in interest rates, which are expected to remain materially above recent prior year averages.

· The downside scenario uplifts the base scenario probability of default by an average of 17%. Incremental to the base scenario assumptions, further consideration has been given to the uncertainty surrounding macroeconomic forecasts and the potential for a range of outcomes. In the downside scenario, the uplift to PDs is modelled based on a further potential deterioration in the economy and the macroeconomic factors that may impact the Group's customer base, for example inflation and unemployment spike, which would result in an income shock and rise in defaults. A weighting of 50% has been applied to this scenario to reflect a prudent judgement on future credit losses given the high level of uncertainty in economic forecasts.

· The severe downside applies a further uplift of 25% to the downside scenario, weighted at 25%. This scenario captures the income shock outlined in the downside scenario along with incremental credit losses the Group may reasonably expect to experience in the managed wind down of the business. 

The following table details the absolute impact on the current ECL provision of £18.0m if each of the three scenarios are given a probability weighting of 100%.

The scenarios above demonstrate a range of ECL provisions from £17.1m to £18.5m.

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

2.2 Complaints provisions

2.2.1 Complaints provision - estimation uncertainty

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

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

These calculations involve significant, complex management judgement and estimation. The key assumption with the most potential for variability is the uphold rate (%) - the expected average uphold rate applied to future undecisioned Scheme claims.

The calculation of the complaints provision as at 31 March 2023 is based on Amigo's best estimate of the future obligation. The Scheme cash redress provision is £97.1m, which is estimated based on future financial projections of the orderly wind down of the Group, which therefore inherently carries a degree of uncertainty. This estimate assumes, as per the Scheme, that all assets of the business are committed to Scheme claimants.

As at 31 March 2023, the Group has recognised a complaints provision totalling £195.9m in respect of customer complaints redress and associated costs. Utilisation in the period totalled £3.0m, primarily relating to the cost incurred in processing decisioning on Scheme claims. The liability has increased by £16.1m compared to prior year. The closing provision is comprised of balance adjustments which have decreased with the passage of time, due to the collection of customer balances, and an estimate of refunds to upheld Scheme claimants for collections made since Scheme effective date, which will be redressed in full and attract compensatory interest.

On an underlying basis the liability for customer redress has increased approximately £27m, which is reflective of both increased volume of claims, now known, and the estimated rate of the claims that are upheld. The uphold rate in prior year was estimated at 65% based primarily on empirical evidence from comparable schemes, this has been revised to 81% as at 31 March 2023 based on actual decisioning data from a material portion of the claimant population.

The following table details the effect on the complaints provision considering incremental changes on the key assumption, should current estimates prove too high or too low.

1. Uphold rate. Sensitivity analysis shows the impact of a 5 percentage point change in the applied uphold rate on both the current and forward-looking elements of the provision.

2. Cash redress. Sensitivity analysis shows the impact of a 5 percentage point change in the amount of the cash redress provision.

The table above shows the increase or decrease in total provision charge resulting from reasonably possible changes in the key uphold rate assumption. The Board considers that this sensitivity analysis covers the full range of likely outcomes based on the fact that a significant portion of claims has been decisioned already.

It is possible that the eventual outcome may differ materially from the current estimate and could materially impact the financial statements as a whole. This is due to the risks and inherent uncertainties surrounding the assumptions used in the provision calculation.

3. Segment reporting

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

Amigo Loans Ireland Limited, registered in Ireland, is not a reportable operating segment, as it is not separately included in the reports provided to the strategic steering committee. The results of these operations are included in the "other segments" column. Amigo Loans Ireland Limited was, in prior years, reported as a separate segment but it no longer meets the criteria for separate segment reporting. Amigo Loans Ireland Limited was sold by the Group to the CEO of the business in a management buy-out on 28 February 2023.

The table below presents the Group's performance on a segmental basis for the year to 31 March 2023 in line with reporting to the chief operating decision maker:

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

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

The carrying value of property, plant and equipment and intangible assets included in the consolidated statement of financial position materially all relates to the UK. The results of each segment have been prepared using accounting policies consistent with those of the Group as a whole.

1 The tax credit for the UK reflects an adjustment for prior years and a tax refund received during the year.

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

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

4. Revenue

Revenue consists of interest income and is derived primarily from a single segment in the UK, but also from Irish entity Amigo Loans Ireland Limited (see note 3 for further details).

5. Interest payable and funding facility fees

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

Other finance costs in the prior year largely represent non-utilisation fees of £0.5m relating to the securitisation facility. 

6. Modification of financial assets

Covid-19 payment holidays and any subsequent extensions were assessed as non-substantial financial asset modifications under IFRS 9. The carrying value of historical modification losses at the year end was £0.6m (2022: £5.9m). 

7. Operating expenses

1 Other assurance services includes reviews of interim financial statements and other assurance services. In 2023, audit fees were paid to MHA, and in 2022 they were paid to KPMG.

8. Employees

1 Restructuring provision relates to the cost of redundancies (see note 19 for further details)

The average monthly number of employees employed by the Group (including the Directors) during the year, analysed by category, was as follows:

Operations roles are customer supporting roles such as collections and complaints handling teams. Support teams include but are not limited to: IT, HR, finance and legal. 

Average headcount decreased by 48 in the current year as compared to prior year, reflecting the reduction in size of book over the year.  

9. Key management remuneration

The remuneration of the Executive and Non-Executive Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

During the year retirement benefits were accruing for one Director (2022: one) in respect of defined contribution pension schemes. There are no other benefits relating to key management personnel except for those disclosed above.

The highest paid Director in the current year received remuneration of £1,417,007 inclusive of employers' National Insurance payments, of which £630,000 related to loss of office payments (2022: £745,005 inclusive of employers' National Insurance payments).

The value of the Group's contributions paid to a defined contribution pension scheme in respect of the highest-paid Director amounted to £nil due to an election being made for payment in lieu of pension (2022: £nil).

10. Taxation

The applicable corporation tax rate for the period to 31 March 2023 was 19.0% (2022: 19.0%) and the effective tax rate is negative 0.3% (2022: negative 1.0%).

A reconciliation of the actual tax charge/(credit), shown above, and the (loss)/profit before tax multiplied by the standard rate of tax, is as follows:

The Finance Act 2021 increased the UK corporation tax rate from 19% to 25% with effect from 1 April 2023. While this change does not affect the current tax position for the year, it will affect future periods.

11. Deferred tax

A deferred tax asset is recognised to the extent that it is expected that it will be recovered in the form of economic benefits that will flow to the Group in future periods. In recognising the asset, management judgement on the future profitability and any uncertainties surrounding the profitability is required to determine that future economic benefits will flow to the Group in which to recover the deferred tax asset that has been recognised. Further details of the assessment performed by management and the key factors included in this assessment can be found under the going concern considerations in note 1.1.

A deferred tax asset of £41.8m at the substantively enacted rate of 25% (FY22: £35.3m at 25%) has not been recognised given that the Group is now being wound down, and there is no expectation of suitable future taxable profits. This is comprised of £36.3m (FY22: £28.5m) in relation to £145m (FY22: £114m) of unutilised tax losses and £5.6m (FY22: £6.8m) in relation to other timing differences of £22.3m (FY22: £27m).

The UK statutory rate for FY23 is 19% (FY22: 19%). Finance Act 2021 increased the UK corporation tax rate from 19% to 25% with effect from 1 April 2023, which impacts the deferred tax position in the current period.

12. (Loss)/earnings per share

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

Diluted (loss)/earnings per share calculates the effect on (loss)/earnings per share assuming conversion of all dilutive potential ordinary shares. In the current year, following the closure of the performance-related share incentive plans and non-performance-related schemes, there are no dilutive potential ordinary shares. Dilutive potential ordinary shares in the prior year were calculated as follows: 

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

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

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

1 The effects of anti-dilutive potential ordinary shares are ignored in calculating diluted loss per share.

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

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

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

2. Although the Group issued further options' under the employee share schemes in the prior year, upon assessment of the dilutive nature of the options, some options are not considered dilutive as they would not meet the performance conditions. Those dilutive shares included are in relation to the employee October 2020 SAYE scheme and time apportioned for the year. Please see note 22 for further details.

13. Customer loans and receivables

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

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.

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

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.

1 Passage of time relates to amortisation of loan balances over the course of the financial year, due to cash payments partially offset by interest accruals.

As shown in the table above, the loan book inclusive of deferred broker cost decreased from £187.6m to £63.7m at 31 March 2023. This was primarily driven by the effect of passage of time (loan balances amortising throughout the period), customer settlements and no originations on these loans in the year. The originations in the year related to the RewardRate brand. These are shown as held for sale assets (note 14).

The following tables explain the changes in the loan loss provision between the beginning and the end of the period:

1 Passage of time relates to amortisation of loan balances over the course of the financial year, due to cash payments partially offset by interest accruals.

As shown in the above tables, the allowance for ECL decreased from £47.4m at 31 March 2022 to £18.0m at 31 March 2023. The overall provision has reduced as the book amortises and ages in the absence of new originations on these loans.

The following table splits the gross loan book by arrears status, and then by stage respectively for the year ended 31 March 2023.

The following table splits the gross loan book by arrears status, and then by stage respectively for the year ended 31 March 2022.

The following table further explains changes in the net carrying amount of loans receivable from customers to explain their significance to the changes in the loss allowance for the same portfolios.

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

14. Held for sale assets

Following FCA approval to return to lending, in October 2022, Amigo launched, on a pilot basis, a new guarantor loan as well as an unsecured loan product which feature dynamic pricing to reward on-time payment with lower rates and penalty-free annual payment holidays. The new products were released under the RewardRate brand. Following the implementation of the wind down plan on 23 March 2023, new lending immediately ceased. It is considered that, under IFRS 5, the RewardRate loan book meets the criteria as a held for sale asset. This conclusion has been reached in the assessment of the following criteria outlined in IFRS 5:

• Carrying amount to be recovered principally through the sale - given the loan book will run for approximately five years based on loan term, this far exceeds the current wind down plan timeline and any period that would be economical to collect. The only reasonable solution to maximise creditor returns is to sell the RewardRate loan book rather than collect it to term. 

• Asset is available for immediate sale - The loan book is considered to be available for sale reasonably imminently.

• Sale is highly probable It is considered given the nascency of the book and the robustness of creditworthiness, alongside initial indications of interest, a sale is more likely than not.

Given the Group expects to sell the loan book at a discount (i.e. below carrying value) it will be measured at the fair value less costs to sell.

It is not expected to incur costs to sell the asset and therefore can recognise the asset at fair value - i.e. the price it expects to receive from a third party purchasing the asset.

15. Financial instruments

The below tables show the carrying amounts and fair values of financial assets and financial liabilities, including the levels in the fair value hierarchy. The tables analyse financial instruments into a fair value hierarchy based on the valuation technique used to determine fair value:

a) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

b) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

c) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

1 The Group has disclosed the fair values of financial instruments such as short-term trade receivables and payables at their carrying value because it considers this is a reasonable approximation of fair value.

2 The unobservable inputs in the fair value calculation of amounts receivable from customers are balance adjustments arising from upheld Scheme claims, expected credit losses, forecast cash flows and discount rate. As both balance adjustments and lifetime expected credit losses are embedded in the calculation, this results in a fair value lower than the carrying amount. 

3 Senior secured notes are presented in the financial statements net of unamortised fees. As at 31 March 2023, the gross principal amount outstanding was £0m (2022: £50.0m). The fair value reflects the market price of the notes at the financial year end.

Financial instruments not measured at fair value

The fair value of amounts receivable from customers has been estimated using a net present value calculation using discount rates derived from the blended effective interest rate of the instruments. As these loans are not traded on an active market and the fair value is therefore determined through future cash flows, they are classed as Level 3 under IFRS 13: Fair Value Measurement.

The fair value of senior secured notes has been taken at the Bloomberg Valuation Service ("BVAL") market price.

All financial instruments are held at amortised cost. There are no derivative assets in the current or prior period.

The Group's activities expose it to a variety of financial risks, which are categorised under credit risk and treasury risk. The objective of the Group's risk management framework is to identify and assess the risks facing the Group and to minimise the potential adverse effects of these risks on the Group's performance. Financial risk management is overseen by the Group Risk Committee alongside other principal risks: operational, regulatory, strategic and conduct risks.

Credit risk

Credit risk is the risk that the Group will suffer loss in the event of a default by a customer or a bank counterparty. A default occurs when the customer or bank fails to honour repayments as they fall due. Amigo defines both borrowers and, where applicable, guarantors as customers.

a) Amounts receivable from customers

Whilst Amigo currently has only a single product in a single market for the legacy lending, and two products for the pilot lending (solo and guarantor), there is a limited concentration of risk to individual customers with an average customer balance outstanding on the legacy lending of £2,181 (2022: £2,540), and for the pilot lending £5,238 (2022: £nil). The carrying amount of the loans represents the Group's maximum exposure to credit risk.

The Group carried out an affordability assessment on the customer before a loan could be paid out. As a separate exercise, each potential loan undergoes a creditworthiness assessment based on the customer's credit history.

The Group managed credit risk at origination by actively managing the blend of risk in its portfolio to achieve the desired impairment rates in the long term. This objective was achieved by managing application scorecards and the maximum exposure to individual customers depending on their circumstance and credit history. Credit risk exposure at origination has been minimal in the year due to the low value of lending during the pilot period for the new RewardRate product.

Credit risk continues to be managed post-origination via ongoing monitoring and collection activities. When payments are missed, regular communication with customers commences. We will contact the borrower and, where applicable, the guarantor from day one to advise them of the missed payment and seek to agree a resolution with the borrower. For loans supported by a guarantor, if we are unable to resolve with the borrower, then we will turn to the guarantor for payment after fourteen days. Throughout this whole process, operational flags will be added to the account to allow monitoring of the status of the account. Operational flags are used within the Group's impairment model in the assessment of whether there has been a significant increase in credit risk on an account (see note 2.1.2 for further details).

Risk segmentation - Previously the IFRS 9 provision was segmented into Amigo's risk segments. It is apparent that due to the impact of Covid-19 these segments no longer have discernible credit risk profiles. Instead, and with a view for simplicity, the book is bifurcated into customers who have had a Covid-19 forbearance plan and those that have not, along with the lending pilot.

This credit risk is managed by the Group's key management personnel. This risk is deemed to be low; derivative financial instruments held are immaterial to the Group, and cash deposits are only placed with high quality counterparties such as tier 1 bank institutions.

Treasury risk

Interest rate risk

Interest rate risk is the risk of a change in external interest rates which leads to an increase in the Group's cost of borrowing. The Group seeks to limit the net exposure to changes in interest rates. Interest rate risk has diminished in the period as debt with a variable interest rate has been paid off.

Foreign exchange risk

Foreign exchange rate risk is the risk of a change in foreign currency exchange rates leading to a reduction in profits or equity. There is no significant foreign exchange risk to the Group. The Group does incur some operating costs in US Dollar and Euro, which it does not hedge as there would be minimal impact on reported profits and equity. Amigo Luxembourg S.A. is a GBP functional currency entity and gives no foreign exchange exposure upon consolidation. During the year the Group was exposed to foreign exchange risk through its Amigo Ireland operation, but this was considered immaterial; as at 31 March 2022 the Irish net loan book represented 0.7% of the Group's consolidated net loan book. During the year the Group disposed of its Irish operation. Hence, foreign exchange risk is deemed immaterial. 

Liquidity risk

Liquidity risk is the risk that the Group will have insufficient liquid resources to fulfil its operational plans and/or meet its financial obligations as they fall due. Liquidity risk is managed by the Group's central finance department through daily monitoring of expected cash flows and ensuring sufficient funds are available to meet obligations as they fall due. The unrestricted cash and cash equivalents balance at 31 March 2023 was £62.4m

Since entering the Fallback solution the management of cash balances has changed substantially in line with obligations under the Court approved Scheme of Arrangement. The Scheme was designed to ensure the Group could carry out an orderly wind down, which includes having access to sufficient liquidity from previously restricted balances. This sufficiently mitigates the risk that would otherwise arise due to the Group having no immediately accessible debt facilities.

Since entering the Fallback Solution the Board is no longer actively seeking new capital to sustain the business.

Maturity analysis of contractual cash flows of financial liabilities