Amigo Holdings PLC Financial results for the year Financial results - - PowerPoint PPT Presentation

SLIDE 1

Financial results for the year to 31 March 2020

Financial results for the three months to 30 June 2020

Amigo Holdings PLC

SLIDE 2

Disclaimer

This presentation has been prepared by Amigo Holdings PLC (“the Company”) and includes the results of Amigo Loans Group Ltd (“ALGL”) solely for informational purposes. A reconciliation of the results between the Company and ALGL is shown in the Appendix. For the purposes of this disclaimer, the presentation shall mean and include the slides that follow, the oral presentation of the slides by the Company or any person on their behalf, any question-and-answer session that follows the oral presentation, hard copies of this document and any materials distributed in connection with the presentation. By attending the meeting at which the presentation is made, dialing into the teleconference during which the presentation is made or reading the presentation, you will be deemed to have agreed to all of the restrictions that apply with regard to the presentation and acknowledged that you understand the legal and regulatory sanctions attached to the misuse, disclosure or improper circulation of the presentation. The Company has included non-IFRS financial measures in this presentation. These measurements may not be comparable to those of other companies. Reference to these non-IFRS financial measures should be considered in addition to IFRS financial measures but should not be considered a substitute for results that are presented in accordance with IFRS. The information contained in this presentation has not been subject to any independent audit or review. Certain of the information contained in this document is based on estimates or expectations of the Company, and there can be no assurance that these estimates or expectations are or will prove to be accurate. The Company has not verified the accuracy of such information, data or predictions contained in this report. In addition, past performance of the Company is not indicative of future

• performance. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of this presentation or the
• pinions contained herein.

The future performance of the Company will depend on numerous factors which are subject to uncertainty. Certain statements contained in this document are forward-looking statements, including, without limitation, any statements preceded by, followed by or including the words “targets,” “believes,” “expects,” “aims,” “intends,” “may,” “anticipates,” “would,” “could” or similar expressions or the negative thereof, notwithstanding that such statements are not specifically identified. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict and outside of the control of the management of the Company. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The Company has based these assumptions on information currently available, if any one or more of these assumptions turn out to be incorrect, actual market results may differ from those predicted. While the Company does not know what impact any such differences may have on its business, if there are such differences, the Company’s future results of operations and financial condition, and the market price of the notes, could be materially adversely affected. You should not place undue reliance on these forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements referenced above. Forward-looking statements speak only as of the date on which such statements are made. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any of the information in this presentation to reflect events or circumstances after the date on which this presentation was made, or to reflect the occurrence of unanticipated events. The presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue, or the solicitation of an offer to purchase, subscribe to or acquire the Company or the Company’s securities, or an inducement to enter into investment activity in any jurisdiction in which such offer, solicitation, inducement or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of such jurisdiction. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation is not for publication, release or distribution in any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction nor should it be taken or transmitted into such jurisdiction.

SLIDE 3

Nayan V. Kisnadwala

Chief Financial Officer

SLIDE 4

Agenda

4

Financial Review Regulatory Update Summary and Outlook Q&A’s

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

SLIDE 5

Business headlines

5

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

Return to profit despite Covid-19 challenges Q1 collections at 87% of pre Covid expectations; adequate liquidity, funding and capital Advanced preparations underway to resume lending by the end of this calendar year On track to meet complaints VReq deadline; FCA investigation continuing Key appointees to the Board demonstrate intent to build a sustainable business for the long term

SLIDE 6

Financial Headlines

Net Loan Book1 Cost:income ex- complaints Statutory Profit after Tax Impairment:revenue Cash

Net loan book of £553.1m, a 24.1% decrease year on year Impairment:revenue ratio up 7.4ppts to 37.9% (Q1FY20: 30.5%); ex Covid-19 ratio at 15% £145.2m of cash and cash equivalents; (Q1FY20: £27.5m) Complaints provision broadly flat at £116.4m with £6.8m charge in Q1 Statutory profit after tax £3.0m; (Q1FY20: £18.1m)

1Net loan book represents total outstanding loans less provision for impairment excluding deferred broker costs.

Complaints provision

Operating cost:income ratio, excluding complaints, increased to 23.0% (Q1FY20: 20.6%)

6

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

Gearing

Net borrowings/adjusted tangible equity of 1.8x, improved from 2.4x at year end, flat YoY

SLIDE 7

P&L: return to profit

• Declining revenue is driven by the combination of a 24.1%

reduction in net loan book and the recognition of a £12.9m modification loss relating to Covid-19 related payment holidays (see

• verleaf)
• Excluding changes to economic assumptions and modification loss

accounting, impairment was 15% of revenue in the quarter. The combination of a £3.1m modification loss, due to payment holidays, and an £8.1m impact from the revised economic scenario weightings, resulted in an increased reported ratio of 37.9%

• Operating expense:revenue of 23.0% reflects continued efficiency
• f the business model
• Complaints P&L cost of £6.8m; balance sheet provision of £116.4m

at 30 June 2020, broadly flat with the year end provision

• Cost of strategic review and FSP is £3.5m in the period
• Net borrowings / adjusted tangible equity at 1.8x, improved from

2.4x at the full year and flat year on year

Commentary

7

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook 3 Months Ended 3 Months Ended £'millions 30-Jun-20 30-Jun-19 Net Loan Book 553.1 728.4 (24.1%) Customer numbers ('000) 199.0 210.0 (5.2%) Total Revenue 48.8 71.5 (31.7)% Total interest payable (7.4) (10.4) (28.8)% Impairments (18.5) (21.8) (15.1)% Operating expenses (11.2) (14.7) (23.8)% Complaints (6.8) (2.0) 240.0% Exceptional Items (3.5)

• NM

Profit before tax 1.4 22.6 (93.8)% Tax on profit 1.6 (4.5) (135.6)% Profit after tax 3.0 18.1 (83.4)% Senior Secured Note buybacks

• 0.5

RCF Fees 0.7 2.2 Strategic Review 3.5

• Tax Provision

(2.5)

• Less Tax

(0.8) (0.4) Adjusted profit after tax 3.9 20.4 (80.9)% EPS (Pence) 0.6 3.8 (84.2%) Adjusted EPS (Pence) 0.8 4.3 (81.4%) Net Borrowings/ adj. tangible equity 1.8 1.8 0.0% % Change

SLIDE 8

Covid-19 – impact on revenue

Commentary Revenue impact from Modification Loss

• Covid-19 related payment holidays have been granted to

approximately 47,000 customers in the quarter

• Payment holidays offered both a payment and interest

holiday of up to three months

• The loan term has been extended with no increase in

monthly payments. No interest or principal is waived

• Deferring contractual repayments without charging

interest or increasing the value of future monthly instalments reduces the present value of the future cash flows and results in a modification loss under IFRS 9 accounting requirements

• The total modification loss in the quarter was £16.0m with

£12.9m recognised in revenue and £3.1m recognised in impairment

• Revenue yield falls substantially as a result of the £12.9m

modification loss but is broadly in line with historical levels if revenue is normalised to exclude the loss

• Post quarter end, extensions to Covid-19 payment holidays

for a further period of up to three months have been

• ffered to customers in line with revised regulatory
• requirements. The timing impact of these changes will be

reflected in Q2 results

8

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

SLIDE 9

Covid-19 – impact on impairment

Commentary Impairment charge as a % of revenue1

1 Impairment charge as a % of revenue presented excludes debts sales of £2.1m in Q1 FY20, £2.6m in Q3 FY20 and £4.7m in Q4 FY20

• Underlying impairment : revenue ratio of 15%.

Reported at 37.9% due to Covid-19 impact

• Q1 includes a £3.1m modification loss, an estimated

impact to impairment arising from the deferring of future customer payments under Covid-19 related payment holidays

• The economic assumptions in the provision have been

revised to reflect the deteriorating macro-economic

• utlook in light of recent external forecasts, the impact

in the period is £8.1m

• The economic outlook remains highly uncertain and

the assumptions will continue to be monitored

9

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

15.0% Imp:Revenue 37.9% Imp:Revenue

SLIDE 10

Impact of Covid-19 results in higher provision levels

Loan book ageing Provision transition

• Provision coverage has increased to 15.1% of gross loan book
• Provision coverage is 2x for greater than 31 days past due

receivables

• The macro-economic assumptions have been revised to reflect

equal likelihood of an impact of moderate, high or extremely high severity, amended from a probability of 75%, 20% or 5% for each respectively at the full year. The duration weighting is unchanged

• The stage 2 and 3 provisions declined during Q1 in line with the

contracting loan book. The stage 1 provision remains broadly in line with year end, as the majority of the £8.1m impact of the revised scenario weightings offset the declining loan book

10

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook 3 months 6 months 12 months Duration weighting 33% 33% 33% Moderate High Extremely High Severity weighting 33% 33% 33%

Macro economic assumptions

£'million Q1 FY21 Q1 FY20 Current 523.1 698.6 1-30 days 80.1 63.5 31 - 60 days 13.5 14.4 > 61 days 34.5 33.0 Gross Loan Book 651.2 809.5 Provision (98.1) (81.1) Net Loan book 553.1 728.4 Provision coverage 15.1% 10.0% > 31 days past due coverage 2.0 1.7

SLIDE 11

Collections remain robust despite Covid-19 impact

Collections1 Commentary

• Total of £121.3m cash collected in Q1 FY21
• Collections remain robust despite the impact of the

pandemic at c.87% of pre-Covid-19 forecast projections in Q1 FY21, this includes a portion of early settlements

• 21% of customers were on specific Covid-19 related relief

plans as at end of Jun-20. This equates to 29% of the gross loan book on a balance basis

11

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

1 Chart is UK only, does not include Ireland

SLIDE 12

Complaints provision broadly unchanged

Complaints Provision Commentary

• The level of provision on the balance sheet has been

maintained at a similar level to the full year given the uncertainty regarding future complaints volumes

• The provision includes a combination of estimated redress

for known open cases and an allowance for future claims

• The Q1 complaints cost on the income statement was £6.8m
• The £0.6m discount unwind relates to three months of

release of the discount applied to the provision for future complaints, which is discounted to NPV and creates an equivalent interest charge

• The Complaints team has been further resourced and

upskilled

• We remain on target to meet the Complaints VReq deadline

12

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

SLIDE 13

Cost: income ratio

Cost:income ratio trends Commentary

• Operating cost:income ratio (ex. complaints) is

23.0%, in line with expectations

• The complaints function has been significantly

increased in headcount capacity and experience

The cost:income ratio is defined as operating expenses divided by revenue, does not include exceptional costs

13

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

SLIDE 14

Positive cashflow

Pro forma Cash flow statement Commentary

• Significant positive cashflow of £80.9m in the quarter
• Amigo continues to conserve cash during this

uncertain and unprecedented period by cancelling dividends, pausing lending and controlling expenses

• £11.5m of securitisation facility repaid in the period
• Collections exceeded the minimal originations by

£120.9m in the period

• The cash out flow for complaints in Q1 was £4.4m
• Cash balance of £145.2m as at 30 June 2020

compared to £27.5m in the prior year.

Includes Ireland

14

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

3 Months Ended 3 Months Ended £'millions 30-Jun-20 30-Jun-19 Profit after tax 3.0 18.1 (83%) Tax (5.3) (6.0) (12%) Finance costs 6.1 8.1 (25%) Complaints 6.8 2.0 NM Movements in working capital (7.8) (2.3) NM Operating cash flow (excluding loan book movements) 2.8 19.9 (86%) Loans issued (0.4) (115.1) (100%) Collections 121.3 146.4 (17%) Interest accrued (52.5) (76.0) (31%) Impairment 18.5 21.8 (15%) Other Loan Book Movements 6.5 1.5 333% Net movement in loan book 93.4 (21.4) (536%) Net cash generated in operating activities 96.2 (1.5) (6513%) Purchases of Senior Secured Notes

• (29.1)

NM Purchase of PPE/Lease Principle Payments (0.2) (0.2) NM Dividend paid

• NM

Proceeds from/Repayments to external funding (11.5) 43.1 (127%) Restricted cash held for repayment of borrowings (3.6)

• Net cash used in investing and financing activities

(15.3) 13.8 (211%) Net increase in cash 80.9 12.3 558% Cash at beginning of period 64.3 15.2 323% Cash at end of period 145.2 27.5 428% % Change

SLIDE 15

Current funding structure

RCF and securitisation amounts excluding capitalised fees; Securitisation is a 3 year revolving term with 4 year amortisation period

Current Facilities and Borrowings (£m) Commentary

• The RCF was cancelled in May-20 as Amigo continues to
• ptimise its capital structure. The cancellation saves £1.3m of

annualised non-utilisation fee.

• Senior secured notes (Jan-24) carry coupon of 7.625% and

became callable from Jan-20, at premium of 3.8%

• The securitisation facility was £300m at 30 June, however

under the terms of the waiver period there was temporary suspension of performance triggers and drawdowns agreed in response to Covid-19.

• On 17 August an extension to the waiver period was agreed

until 18 December 2020. During this period performance triggers remain waived and all collections from securitised assets will be used to pay down the outstanding borrowings. The facility was also downsized to £250m in parallel.

• Sufficient cash to enable a prudent restart of lending
• Continue to evaluate optimisation of funding structure to

facilitate a further expansion of lending in due course

15

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

SLIDE 16

Nicholas Beal

Chief Regulatory and Public Affairs Officer

SLIDE 17

Regulatory update

17

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

Affordability and Forbearance July 2020: feedback received from FCA on affordability and forbearance. Many affordability recommendations already implemented - rest will be in place before we restart lending Relending FCA review published August 2020 to encourage firms to make changes to relending operations. Amigo updated top-up eligibility criteria in August 2019, significantly reducing relending levels FCA Regular engagement To understand and comply with evolving regulation To promote a better understanding of our product and our goal of financial inclusion for all Investigation End May 2020: investigation initiated into Amigo’s creditworthiness assessment process, and governance of this process, from November 2018 to date Vulnerability FCA published delayed guidance for consultation, expected to be finalised in early 2021 Post Covid-19 increase in vulnerable customers

• expected. Amigo offers specialist support

SLIDE 18

Nayan V. Kisnadwala

Chief Financial Officer

SLIDE 19

Summary & Outlook

19

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

Key appointees to the Board demonstrate intent to build a sustainable business for the long term Advanced preparations underway to restart lending by the end of this calendar year Q1 collections at 87% of pre Covid expectations; adequate liquidity, funding and capital Material uncertainties remain but long-term drivers of the business are unchanged - our business model serves an important purpose in providing financial inclusion We have strong teams in place and a clear focus on the challenges and opportunities we face

SLIDE 20

Q&A

SLIDE 21

Key Contacts

Nayan Kisnadwala – Chief Financial Officer Email: nayan.kisnadwala@amigo.me Telephone: +44 (0)7384 876094 Kate Patrick – Head of Investor Relations Email: kate.patrick@amigo.me Telephone: +44 (0)7785 512539 Harriet Shaw – Executive PA Email: harriet.shaw@amigo.me Telephone: +44 (0)7734 778862 Lorna Cobbett – Hawthorn Advisors Email: l.cobbett@hawthornadvisors.com Telephone: +44 (0)20 3745 3812

SLIDE 22

Appendix

SLIDE 23

Lending Pause in Q1 FY21

23

• Increased portion of repeat lending in Q1 FY21 however lending

volume under effective pause

• Effective lending pause in Q1 FY21 with lending only to key workers.

Reduced lending in Q4 FY20 is due to the implementation of enhanced lending policy for new business alongside a pause in lending as a response to the Covid-19 pandemic

Amigo UK only

Lending Mix (£m) Channel mix (%)

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

SLIDE 24

Ireland: Loan Book & Customer decline during lending pause

Ireland Gross loan book Commentary

• First loans offered in Feb-19
• Lending paused end of Mar-20 in response to Covid-19
• Loan Book and customers have declined due to lending

pause

• Gross loan book of €7.2m as at Jun-20

24

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

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

SLIDE 25

Reconciliation of the Group results to ALGL

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

25

£'m Group - consolidated AH PLC - standalone company Consolidation adjustment ALGL - consolidated Total Revenue 48.8

• - 48.8

Interest payable and funding facility fees (7.4)

• -

(7.4) Total interest payable (7.4)

• -

(7.4) Impairment of amounts receivable from customers & investment in subsidiaries (18.5)

• -

(18.5) Administrative and other operating expenses (11.2) (1.8)

• (9.4)

Complaints expense (6.8)

• (6.8)

Total operating expenses (18.0) (1.8)

• (16.2)

Strategic review, formal sales process and related financing costs (3.5) (3.5)

• -

Profit before tax 1.4 (5.3)

• 6.7

Tax on profit 1.6 0.3 1.3 Profit attributable to equity shareholders of the Company 3.0 (5.0)

• 8.0

3 Months Ended 30-Jun-20

SLIDE 26

Reconciliation of the Group results to ALGL

Statement of financial position (£’m)

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

26

£'m

Group - consolidated AH PLC - standalone company Consolidation adjustment ALGL - consolidated

Non-current assets Amounts receivable from customers 254.4

• 254.4

Property, plant and equipment 1.3 179.0 (179.0) 1.3 Right of use asset 1.1

• 1.1

Intangibles 0.1

• 0.1

Deferred tax asset 6.4

• 6.4

263.3 179.0 (179.0) 263.3 Current assets Amounts receivable from customers 315.8

• 315.8

Other receivables 5.7 (66.6)

• 72.3

Current tax asset 27.2 0.7

• 26.5

Hedging asset 0.1

• 0.1

Cash at bank and in hand 145.2

• 145.2

494.0 (65.9)

• 559.9

Total assets 757.3 113.1 (179.0) 823.2 Current liabilities Trade and other payables (18.7) (1.8) (16.9) Lease liability (0.3)

• (0.3)

Provision (106.4)

• (106.4)

(125.4) (1.8)

• (123.6)

Non-current liabilities Borrowings (450.3)

• (450.3)

Lease liability (1.1)

• (1.1)

Provision (10.0)

• (10.0)

(461.4)

• (461.4)

Total liabilities (586.8) (1.8)

• (585.0)

Net assets / (liabilities) 170.5 111.3 (179.0) 238.2 Capital and reserves Share capital 1.2 1.2

• Share premium

207.9 207.9 (302.0) 302.0 Merger reserve (295.2) 4.8

• (300.0)

Retained earnings 256.6 (102.6) 123.0 236.2 Shareholder equity 170.5 111.3 (179.0) 238.2 3 Months Ended 30-Jun-20

SLIDE 27

Reconciliation of the Group results to ALGL

Consolidated statement of cash flows (£m)

Results Overview Regulatory Update Financial Review Appendix Summary & Outlook

27

Profit for the period

3.0 (5.0) 8.0

Adjustments for:

• Impairment provision

18.5

• 18.5

Complaints provision

6.8

• 6.8

Income tax expense

(1.6) (0.3) (1.3)

Interest expense

7.4

• 7.4

Interest charged on loan book

(52.5)

• (52.5)

Share-based payment

0.2 0.2 (0.2) 0.2

Depreciation of property, plant and equipment

0.3

• 0.3

Operating cash flows before movements in working capital

(17.9) (5.1) (0.2) (12.6)

(Increase)/decrease in receivables

(0.6) (0.2) 0.2 (0.6)

Increase/(decrease) in payables

1.0 1.0

• Complaints redress

(8.5)

• (8.5)

Tax paid

(3.7)

• (3.7)

Interest paid

(1.3)

• (1.3)

Proceeds from intercompany funding

• 4.3

(4.3)

Net cash used in operating activities before loans issued and collections on loans

(31.0)

• (31.0)

Loans issued

(0.4)

• (0.4)

Collections

121.3

• 121.3

Post charge-off recoveries

0.1

• 0.1

(Increase)/decrease in deferred broker costs

3.4

• 3.4

Complaints Interest Refunds

2.8

• 2.8

Net cash used in operating activities

96.2

• 96.2

Investing activities Purchases of Property, Plant and Equipment

(0.1)

• (0.1)

Net cash used in investing activities

(0.1)

• (0.1)

Financing activities Lease principal payments

(0.1)

• (0.1)

Cash held for repayment of borrowings

(3.6) (3.6)

Repayment of external funding

(11.5)

• (11.5)

Net cash from financing activities

(15.2)

• (15.2)

Net increase / (decrease) in cash and cash equivalents

80.9

• 80.9

Cash and cash equivalents at beginning of period

64.3

• 64.3

Cash and cash equivalents at end of period

145.2

• 145.2

Group - consolidated AH PLC - standalone company Consolidation adjustment ALGL - consolidated

3 Months Ended 30-Jun-20