FINANCIAL RESULTS FOR THE QUARTER TO 30 JUNE 2018 Disclaimer This - - PowerPoint PPT Presentation

FINANCIAL RESULTS FOR THE QUARTER TO 30 JUNE 2018

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 opinions 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

• ut 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

• f the relevant laws of such jurisdiction nor should it be taken or transmitted into such jurisdiction.

Because consolidated financial information for the Company is not available prior to the year ended March 31, 2016, unless otherwise indicated, financial information presented in this presentation for periods prior to March 31, 2016 is that of Amigo Loans Ltd. Amigo Loans Ltd is the Company’s primary operating subsidiary and represented 99.9% of the Company’s consolidated revenue for the three months ended June 30, 2018, and differences between the consolidated financial information for the Company and financial information of Amigo Loans Ltd for periods prior to March 31, 2016 would be negligible.

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Today’s presenters

Glen Crawford CEO Simon Dighton CFO Nick Beal Director of Legal and Compliance

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Agenda

• Introduction
• Key Highlights
• Financial Review
• Regulatory Update
• Outlook
• Appendix

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Introduction Who is Amigo?

£638m Net Loan Book (+37% y.o.y)¹ #1 Guarantor lender 98% brand awareness3 9.4 Trustpilot rating7

• c. 194,000 borrowers7

✓ Founded in 2005 and pioneered the guarantor loan concept ✓ Provides guarantor loans from £500-£10,000 with a 1-5 year term ✓ Combines the returns of a non-standard lender with enhanced asset

quality given the guarantor support

✓ Full FCA authorisation

Amigo Today (Q1 2019)

Source: Company (Amigo Holdings PLC), Google analytics, Broadcasters’ Audience Research Board (BARB) ¹ Loan Book excludes loans that are six or more payments in arrears, which are charged-off of our statement of financial position; 2 Three months to June 2018; 3 Percentage of UK adults that have seen an Amigo advert at least once (BARB); 4 Calculated as impairments over revenue for the 3 months to June 2018; 5 Average number of website sessions for the 3 months to June 2018 (a session is defined as a group of interactions one user takes within 30 minutes), one user can have multiple sessions per month; 6 Excluding impairment charge; 7 As at June 2018; 8 Adjusted PAT is defined as profit after tax plus post-tax shareholder loan note interest and IPO costs and related finance less incremental tax expense. This adjustment is made because the shareholder loan notes have been converted to shares at time of IPO and this interest charge is non-recurring.

Impairment / Revenue: 25%4 Cost income ratio: 17.5%6 £21.8m Adjusted PAT8 c.£37m avg. monthly originations2 >800k monthly website hits5

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Synonymous with guarantor lending – c.88% product share Credit enhancement through guarantor Leverages a personal relationship One of the fastest growing products in UK consumer finance Purpose-built operating platform scaled for growth Automated proprietary underwriting based on c.600,000 customer records Refined model proven through the cycle

Introduction A compelling investment opportunity

The product Amigo

Significant untapped potential with a non- standard population of 10m-12m Demonstrated regulatory support for the product and Amigo Focus on treating customers fairly

Source: Company (Amigo Holdings Limited); ONS; Financial Inclusion Annual Monitoring Report 2015, University of Birmingham; Bank of England; Insolvency Statistics; Debt Camel; Registry Trust; Association

• f Business Recovery Professionals; NMG surveys

Note: Market size determined by comparing latest reported Net loan book to market size sourced from FCA’s High-Cost Credit Review, published July 2017

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Introduction Amigo pioneered the guarantor loan concept for the non-standard market

Being turned away by mainstream lenders Transparency and no fees or charges Strong brand recognition A desire to improve credit score To support friends/relatives Trust in their friends/relatives Creditworthy but unable to lend themselves Help borrower to rebuild credit files

Why is the product appealing? Why does this work for Amigo? Why do customers go to Amigo? Why do guarantors support borrowers?

Source: Company information

Fast pay-outs in under 24 hours Loan sizes between £500 and £10,000 with a term of one to five years Straight-forward with one APR and no fees or charges Option for early repayment with no penalty Introduces a personal relationship into the lending process Separates the “won’t pays” from the “can’t pays” Implicit credit check from guarantor, who has closer knowledge of the borrower than any lender can achieve Borrower is more incentivised to prioritise debt attached to a friend or relative

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Key Highlights

Growth in customer numbers underpins long term growth 1 Net Loan Book growth of 37% even after the effect of IFRS 9 on

• pening balance sheet of 1 April 2018

2 Impairment for 2018 on IFRS 9 basis and at lower end of market guidance 3 Increasing loan book and economies of scale driving profit 4

Adjusted PAT1 (£m) Net Loan Book2 (£m) Customer Numbers (‘000) Impairments as a % of revenue

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61.9 81.9 120.0 26.3 35.9 2016 2017 2018 3m Jun-17 3m Jun-18 102.1 128.6 210.8 42.9 62.9 2016 2017 2018 3m Jun-17 3m Jun-18

Financial Review Significant increases in revenue and Adjusted EBITDA reflects increased interest income driven by a 37% growth in the Net Loan Book year on year.

charged off loans that had previously been written off in Amigo Holdings PLC’s statement of financial position. Although we plan to continue to sell charged off loans from time to time in the future, this was the first such sale. The three months to June 17 includes a further £0.5m from our second such sale.

REVENUE1: 47% increase year on year increase driven by

• rigination growth (£m)

Adjusted EBITDA1,2: 37% increase reflecting increased loan book and operating leverage (£m)

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Financial Review

ORIGINATION:

126.6 142.6 276.8 470.1 109.7 109.7 64.1 61.8 104.0 139.5 34.6 36.1 23.9 35.4 70.3 124.3 27.2 32.3 38.6 45.4 102.5 206.3 48.0 41.2 2015 2016 2017 2018 3m June 2017 3m June 2018 Direct Third party introducers Repeat

ORIGINATION: Up 2% on prior year Q4 with managed increase in underlying risk (£m)

80.8 109.7 128.5 124.2 107.7 109.7 22.4 26.1 27.9 26.5 28.5 26.9 17.9 22.2 22.4 20.1 15.6 16.9 17.9 21.7 24.6 33.5 37.6 38.6 8.7 12.6 14.1 18.7 16.0 18.4 13.9 27.1 39.5 25.4 10.0 8.9 Q4 FY 16/17 Q1 FY 17/18 Q2 FY 17/18 Q3 FY 17/18 Q4 FY 17/18 Q1 FY 18/19 New origination Homeowner Repeat homeowner New origination with non-homeowner guarantor Repeat Non-homeowner Pilot Lending

Commentary

• Managed originations in Q1 as

pilot lending restricted to reduce impairment while increasing new customers compared to prior year

• Strong and continued loan book

growth at this level of

• rigination
• Approximately £25m of
• rigination per month required

to maintain net loan book compared to average monthly

• riginations of £37m in Q1
• Pilot lending represented 8% of
• riginations in Q1 down from

22% in previous financial year

• Q2 of prior year saw high value

pilot lending at its peak

• Consistent with targeting a high

teens net loan book annual growth rate in the near term easing to low teens in the medium term

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0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 10 20 30 40 50 60 70 Q1 16/17 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/18 Q2 17/18 Q3 17/18 Q4 17/18 Q1 18/19 £m Impairment charge Revenue Impairment/Revenue

Financial Review Impairment as % of revenue at lower end of expectations

Impairment charge as % of revenue Commentary

• Impairment charge for Q1 reflects

implementation of IFRS 9

• Credit scorecard adjustments and

eligibility criteria changes on lending pilots have reduced the volume of cohorts with higher impairments

• IFRS 9 impairment is front loaded with

provision made on day one

• Impairments partially driven by

continued strong loan book growth with loans more likely to go into arrears in the first 12-18 months

• Consistent with targeting an

impairment to revenue ratio in the high twenties under IFRS 9

IAS 39 IFRS 9 10

Financial Review Continued improvement in operational leverage

Direct costs as % of net loan origination (years ending 31 March) Cost income ratio trends including and excluding impairment

• There is a downward trend in

the cost income ratio (excluding impairment) - key drivers being

• perational leverage
• Increased advertising spend in

Q1 2018

• Direct costs shown exclude

broker fees as these are amortised through the income line

Commentary

• Exc. Impairment
• Inc. Impairment

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171 198 247 383 79 121 50 100 150 200 250 300 350 400 450 2015 2016 2017 2018 Q1 FY17/18 Q1 FY18/19

Financial Review

Free cash flow excluding loan originations1: 54% increase in underlying cash flow prior to new loan originations (£m)

• Free cash flow increased by 54% in the quarter to 30 June compared to Q1 FY17/18
• High cash flows reduce gearing even with strong loan book growth
• Monthly collections exceed originations by £17m in Q1 2018/19

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Net Loan Book

Impact of IFRS 9

A reduction of approximately 7% of the carrying value of the loan book is anticipated as a result of the transition to IFRS 9

• The Group adopted IFRS 9 on 1 April 2018 moving from the ‘incurred loss’ model of IAS 39 to an ‘expected credit loss’ model
• The IFRS 9 provision is calculated using estimates of future defaults and results in the recognition of impairment provisions earlier in the life of an

loan

• Over the life of a loan the total impairment charge remains unchanged and the Group’s cash flows are unaffected by the transition
• Impairment charge cover covenant limit increased to 17.5% as a result of the implementation of IFRS 9
• Revenue and impairment for credit impaired Stage 3 assets are offset in the Income Statement with nil net impact on profit.

Bad debt provision

March 2018 31-Mar-18 01-Apr-18 01-Apr-18 Closing IFRS 9 Impact Opening £m £m £m Gross loan book 668.1

• 668.1

Provision (21.2) (44.2) (65.4) Loan book 646.9 (44.2) 602.7 Capitalised Broker fees 19.4 (1.4) 18.0 Other receivables 2.3 2.3 Cash at bank and in hand 12.2 12.2 Non-current assets 0.7 7.9 8.6 Total Assets 681.5 (37.7) 643.8 Total Liabilities (687.8)

• (687.8)

Net assets / (liabilities) (6.3) (37.7) (44.0) Net borrowings / Tangible equity 2.3 0.5 2.8

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Recent areas of focus by regulators / government

Regulatory product focus Other key FCA focus areas

Persistent / long-term debt (FCA Credit Card Market Review & High Cost CreditReview) Affordability Remuneration and Incentives in Consumer Credit Forbearance

• Amigo’s product helps to improve

borrowers’ credit scores enabling them to obtain prime finance over time

• Amigo‘s current processes are broadly

in line with FCA published final

• guidance. Minor changes will be made

to ensure compliance in advance of new rules on 1 October 2018

• Amigo works with both borrowers and

guarantors to find a solution if a loan goes intoarrears

FCA to review guarantor loans

• Expected to focus on guarantor understanding

responsibilities Amigo already highlights these responsibilities:

• Calls with every guarantor
• Plain English T&C’s
• Initial payment made directly to guarantor
• Letters to guarantors
• Regular reminders through life of loan

Other FCA areas of product focus:

• Credit Cards (FCA Credit Card Market Study)
• FCA published final rules relating to persistent debt on

credit cards

• Motor finance (FCA Annual Business Plan 2017)
• Focus on affordability assessments and PCP
• Market Study into Credit Reference Agencies (FCA Annual

Business Plan 2018)

• Review of Credit Brokers and commissions (FCA Annual

Business Plan 2018)

• Logbook lending (Government Goods Mortgages Bill)

Government Consultation

• Financial Guidance and Claims Act passed and HM

Treasury expected to carry out further consultation

• n statutory breathing space

Focus area Amigo approach

• Amigo's currentprocess is broadly in

line with FCA rules for enhanced creditworthiness and affordability

• assessments. Amigo will be fully

compliant with the new rules ahead of 1 Nov 2018

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Outlook

Strong Q1 performance, seeing continuation of recent trends

1 2 4

Operationally and financially in line with expectations Performance provides opportunities for organic reinvestment and shareholder distributions

3

Continue to be a responsible lender of guarantor loans within the mid-cost credit market

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Q&A

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Covenant Position

Source: Company

² Net SSRCF is SSRCF less cash available.

Bonds 400.0 SSRCF 70.0 Less: Cash available (11.9) Debt for banking purposes 458.1 Less: Unamortised bond/SSRCF fees (9.5) Net Debt 448.6 Gross loan book3 710.2 LTM EBITDA 129.5 Actual Covenant Net debt1 / Gross loan book 64.5% 80.0% SSRCF2 / Gross loan book 8.2% 17.5% Fixed charge cover ratio 3.8 x 2.5 x LTM Impairment / Gross loan Book 7.7% 17.5% As of 30 June 2018 (£m) 17

Reconciliation of the Group results to ALGL

Group - consolidated AH PLC - standalone company Consolidation adjustment ALGL - consolidated 3 mths 3 mths 3 mths 3 mths to to to to 30-Jun-18 30-Jun-18 30-Jun-18 30-Jun-18 £m £m £m £m Revenue 62.9

• - 62.9

Interest payable and funding facility fees (9.0)

• -

(9.0) Shareholder loan note interest (6.0) (6.0)

• 0.0

Impairment charge (16.0)

• -

(16.0) Operating expenses (11.0) (0.0) 0.1 (11.1) IPO costs and related financing (3.9) (2.4) (0.1) (1.4) Profit before tax 17.0 (8.5)

• 25.5

Tax on profit (4.7) 0.4

• (5.1)

Profit attributable to equity shareholders

• f the Company

12.3 (8.1)

• 20.4

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Reconciliation of the Group results to ALGL

• 0.5

• 7.7

• 656.7

• 1.5

• 11.8

• 670.1

• (25.2)

• (16.5)

• (41.7)

• (460.5)

• (0.0)

• (667.7)

• (460.5)

• (502.2)

• 0.0

• (300.0)

• 174.2

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Reconciliation of the Group results to ALGL

CONSOLIDATED STATEMENT OF CASH FLOWS

£m £m £m £m Profit for the period 12.3 (8.0)

• 20.3

Adjustments for: Impairment provision 16.0 0.0

• 16.0

Income tax expense 4.7 (0.4)

• 5.1

Shareholder loan note interest accrued 6.0 6.0

• 0.0

Interest expense 9.0 0.0

• 9.0

Interest charged on loan book (69.2) 0.0

• (69.2)

Depreciation of PPE 0.1 0.0

• 0.1

Operating cash flows before movements in working capital (21.1) (2.4)

• (18.8)

Net movement in working capital 3.3 1.8

• 1.5

Tax paid (2.9) 0.0

• (2.9)

Interest paid (0.8) 0.0

• (0.8)

Net proceeds /(repayment) of intercompany funding (0.4) 0.6

• (0.9)

Proceeds from external funding 17.0 0.0

• 17.0

Repayment of external funding (12.0) 0.0

• (12.0)

Net cash used in operating activities before loans issued and collections on loans (16.8) (0.0)

• (16.9)

Loans issued (109.8) 0.0

• (109.8)

Collections 126.4 0.0

• 126.4

Net cash used in operating activities (0.3) (0.0)

• (0.3)

Investing activities Purchases of PPE 0.0 0.0

• 0.0

Net cash used in investing activities 0.0 0.0

• 0.0

Net increase/(decrease) in cash and cash equivalents (0.3) (0.0)

• (0.3)

Cash and cash equivalents at beginning of period 12.2 0.1

• 12.1

Cash and cash equivalents at end of period 11.9 0.1

• 11.8

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Key Contacts

Simon Dighton – Chief Finance Officer Email: simon.dighton@amigo.me Telephone: +44 (0)7791 221499 Harriet Shaw – Executive PA Email: harriet.shaw@amigo.me Telephone: +44 (0)7734 778862 Victoria Ainsworth – Hawthorn Advisors Email: v.ainsworth@hawthornadvisors.com Telephone: +44 (0)20 3745 3815

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