Amigo Holdings PLC

Annual report and accounts 2023

Amigo Holdings PLC Annual report and accounts 2023

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 as we sought to deliver the

best outcome for creditors, colleagues and shareholders.

It is with great sadness that the Board took the decision in March 2023

to commence the solvent wind down of the business. This will regrettably

result in no value for our shareholders. The Board is deeply sorry for

this outcome.

The economic and market environment moved against us considerably

after May 2022 when our Scheme of Arrangement, formulated between

late 2021 and early 2022, was sanctioned. This severely impacted our

ability to raise capital.

Our priority now is to undertake an orderly wind down of both the

Amigo Loans Ltd business and the wider Group, in which we maximise

returns for Scheme creditors and look after our people as we move

through the process. I would like to thank my colleagues for the

considerable commitment they have shown over a long and dicult

period and all our shareholders and wider stakeholders who have

supported us.

Danny Malone

Chief Executive Officer

Amigo Holdings PLC

Annual report and accounts 2023

Strategic report

1 About Amigo

2 Headlines

3 Business model

4 Chair’s statement

6 Chief Executive Ocer’s review

9 Strategy

10 Stakeholder engagement and section 172

16 Sustainability

24 Financial review

26 KPIs

28 Risk management

29 Our risks

32 Emerging risks

34 Going concern and viability statement

Corporate governance

35 Chair’s introduction

36 Board of Directors and Company Secretary

38 Executive Committee (“ExCo”) members

39 Corporate governance statement

40 Governance report

46 Audit Committee report

50 Nomination Committee report

52 Risk Committee report

54 Directors’ remuneration report

73 Directors’ report

79 Directors’ responsibilities statement

Financial statements

81 Independent auditor’s report to the

members of Amigo Holdings PLC

88 Consolidated statement of

comprehensiveincome

89 Consolidated statement of ﬁnancial position

90 Consolidated statement of changes in equity

91 Consolidated statement of cash ﬂows

92 Notes to the consolidated ﬁnancial statements

118 Company statement of ﬁnancial position

119 Company statement of changes in equity

120 Company statement of cash ﬂows

121 Notes to the ﬁnancial statements – Company

123 Appendix: alternative performance

measures (unaudited)

123 Glossary

126 Information for shareholders

About Amigo

Amigo provided mid-cost credit in the

UKto those who would otherwise ﬁnd

itdicult to access ﬁnancial services.

On23 March 2023 Amigo stopped

oering new loans and started an 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, oering

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 o or sold 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.

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 return 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

•

Net loan book reduction of 67.1% to £45.4m

(FY22:£138.0m) and revenue reduction of 78.4%

to£19.3m (FY22: £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 wind down strategy and

FallbackScheme requirements.

•

Complaints provision year-on-year increase of 8.9% to

£195.9m at 31 March 2023 (FY22: £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, (FY22: profit of £167.9m).

Loss after tax was £34.8m (FY22: 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

(FY22: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.

Headlines

Strategic report

Amigo Holdings PLC

Annual report and accounts 2023

Strategic report

Business model

Amigo’s business model, driven by our purpose of

providing those with few options to borrow the opportunity to

achieve financial mobility, offered accessible and affordable

loans to customers who have limited access to mainstream

finance. Through our customer-first approach, digital platform

and online or telephone customer journey, and in the context

of a robust conduct and risk framework, we sought to create

value for our stakeholders with strong cash generation and

efficient operations. We also aimed to support our customers

in improving their financial mobility through products that

rewarded regular, on-time payments, designed in collaboration

with a respected debt charity and with the FCA’s

Consumer Duty regulation in mind.

In October 2022, Amigo returned to lending with a new

brand and innovative lending proposition, significantly

improved processes, and a culture of responsible operation

todrive positive outcomes for all stakeholders. Unfortunately,

due to the inability to raise sufficient funds to meet the

conditions of Amigo’s Scheme of Arrangement, the Company

was placed into an orderly wind down on 23March 2023,

and new lending was stopped. The orderly wind down is

expected to be substantively complete within approximately

twelve months from its initiation. During this time, Amigo

will remain guided by its values and committed to strong

governance and regulatory compliance. We continue to

focus on delivering the best outcomes possible for our

customers, supporting our people and managing costs

tomaximise redress for our Scheme creditors.

Amigo Holdings PLC

Annual report and accounts 2023

Strategic report

Our values

1 3

We put customers first

We are passionate about delivering

positive outcomesthatmeet our

customers’ needs.

We act with integrity

We are open and honest.

We aim to do what is right

andfair. Always.

We own the outcome

We find solutions and

deliverexcellence.

We question and challenge

thestatus quo.

We are human

We are welcoming and

embracediversity.

We respect and listen

toeach other.

Amigo Holdings PLC

Annual report and accounts 2023

Chair’s statement

Strategic report

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, market

conditions moved against us 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.

Jonathan Roe

Chair

Strategic report

Amigo Holdings PLC

Annual report and accounts 2023

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