3rd Quarter Results

RNS Number : 6380C

Amigo Holdings PLC

24 February 2022

Amigo Holdings PLC

Financial results for the nine months ended 31 December 2021

Amigo Holdings PLC, ("Amigo" or the "Company"), provider of guarantor loans in the UK, announces results for the nine-month period ended 31 December 2021.

Headlines

· The Amigo Board continues to pursue a Scheme of Arrangement ("Scheme") to deliver the best possible outcome to Scheme creditors as it addresses Amigo's historic lending complaints liability.

· As part of the Board's pursuit of a new Scheme, and after extensive negotiations with its Independent Customer Committee ("ICC"), the Board issued revised Scheme proposals to the ICC on 12 November 2021. The revised offer incorporated two distinct Schemes; the first, the "New Business Scheme", which is contingent on lending restarting and Amigo completing a successful equity raise. The second, a managed wind-down of the Amigo Loans Ltd business under a Scheme framework ("Wind-Down Scheme").

· On 6 December 2021, Amigo announced the ICC's confirmed preference for the New Business Scheme. The Practice Statement Letter ("PSL") explaining both Scheme options was sent to the Scheme creditors in late December 2021.

· For the New Business Scheme, Amigo is proposing initial cash contributions totalling 97m from internally generated resources, alongside a further contribution of 15m, being part of the proceeds from a new equity and capital raise. The equity raise is likely to be undertaken by a rights issue for existing shareholders, with a placing of unsubscribed shares to third party investors. In order to secure the best result for Redress Creditors possible in the circumstances, the New Business Scheme will include a mechanism for an additional payment to Redress Creditors to be made in the event that the existing loan book generates a better return than currently anticipated. The New Business Scheme will also require the Company to issue at least 19 new shares for every existing share in the Company.

· The Board intends to ask creditors to vote on both options, and if both options are approved by creditors, to then submit both options to the Court for sanction. The Court will be asked to consider the New Business Scheme for sanction before it considers the Wind-Down Scheme. If the Court does not sanction the New Business Scheme, the Court will be asked to sanction the Wind-Down Scheme as a fall-back solution.

· The Court Convening hearing will take place on 8 March 2022 and the Court Sanction hearing will take place on 23 and 24 May 2022.

· As noted previously, the sanctioning of a new Scheme is critical. Without an approved Scheme, Amigo expects to have to file for administration or other insolvency process.

· The FCA's position on Amigo's proposed Schemes remains reserved at this time.

Financial headlines

The approval of a Scheme remains subject to the Company reaching key milestones including a second successful creditor vote and approval by the High Court at a sanction hearing. At this point, the Board does not consider there to be enough certainty to account for claims redress on the basis that a Scheme will be sanctioned. In considering the presentation of these results, the Board has concluded that the amount recognised for complaints redress should continue to be included on the basis that known and expected future complaints are settled in full. The Board has concluded there is a material uncertainty over going concern (see note 1 to the financial statements for further information). Despite this, the Board considers that it remains appropriate to prepare these financial statements on a going concern basis, as the continued pursuit of a Scheme provides a realistic alternative to insolvency.

Figures in £m, unless otherwise stated		9 Months ended 31 December 2021	9 Months ended 31 December 2020	Change %
Number of customers¹	'000	86.0	156.0	(44.9)
Net loan book²		180.7	412.2	(56.2)
Revenue		75.7	137.5	(44.9)
Impairment coverage		22.4	18.0	24.4
Complaints provision (balance sheet)		(347.5)	(150.9)	130.3
Complaints cost (income statement)		(9.9)	(116.2)	(91.5)
Profit/(loss) before tax		1.6	(81.3)	102.0
Profit/(loss) after tax³		2.5	(86.8)	102.9
Adjusted Profit/(loss) after tax⁴		1.1	(77.0)	101.4
Basic EPS	Pence	0.5	(18.3)	102.7
EPS (Basic, adjusted)⁵	Pence	0.2	(16.2)	101.2
Net debt⁶		52.9	(179.5)	129.5
Net debt/Gross loan book⁷		(22.7)	35.7	(163.6)

· Net loan book reduction of 56.2% to £180.7m (Q3 2021: £412.2m) due to the runoff of the back book and the continued pause in new lending throughout the period.

· Revenue reduction of 44.9% to £75.7m (Q3 2021: £137.5m).

· Complaints provision broadly unchanged from the full year at £347.5m (FY 2021: £344.6m; Q3 2021: £150.9m). Application of incremental compensatory interest accrued in the period is partially offset by an increase in the estimated portion of known and potential complaint customers charging off the loan book due to the passage of time. Complaints cost in the period of £9.9m (H1 2021: £116.2m).

· Underlying collection levels continue to be better than modelled within the first Scheme projections in December 2020. However, impairment coverage of 22.4% (Q3 2021: 18.0%), driven by the first half reforecast of expected credit losses, reflects an increasing trend in the level of arrears.

· Continued strong focus on controlling costs.

· Reported statutory profit before tax for the nine months to 31 December 2021 was £1.6m (Q3 2021: loss of £81.3m).

· £285.5m of unrestricted cash and cash equivalents as at 31 December 2021 (Q3 2021: £164.6m) reflects continued strong cash generation; current unrestricted cash balance of over £110m, after senior secured note interest paid and the £184.1m partial redemption of the notes in January 2022.

· Net liabilities of £118.1m as at 31 December 2021 (Q3 2021: net assets £80.7m).

· Positive net debt of £52.9m at 31 December 2021 (Q3 2021: (£179.5m)) driven by the continued collection of the back book while originations remained suspended. This enabled the post period end partial redemption of the senior secured notes.

· While all Covid-19 payment holidays had concluded by July 2021, we continue to assist customers experiencing financial difficulty with alternative payment arrangements.

Post Period End

· On 4 January 2022, Amigo served notice of the early redemption of £184.1m of the £234.1m outstanding 7.625% senior secured notes due in 2024 with a redemption date of 15 January 2022. The remaining £50.0m gross principal amount outstanding is due in January 2024. The resulting interest saving will contribute to Amigo's ability to provide a greater cash amount to the new Scheme compared with that of the previous Scheme proposal.

· On 24 January 2022, it was announced that Chief Financial Officer (CFO) Mike Corcoran, would leave the business with immediate effect. Mike formally stepped down as a director on 19 February 2022. Danny Malone was appointed Interim CFO and joined the business on 7 February 2022.

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

Commenting on the Q3 results, Gary Jennison, CEO of Amigo, said:

"Amigo is committed to addressing liabilities that have arisen from historic lending practices under previous management. This Amigo Board recognises that shareholders have suffered greatly as a result. However, we are resolute in our determination to deliver the maximum value possible to redress creditors.

"As we head into a cost-of-living crisis for many households, with inflation at a 30-year high and forecast to move higher, the market needs a product that can service the needs of customers in the non-standard sector. With flexible products that incorporate incentives, we can help customers through difficult times and on towards mainstream financial inclusion. I would like to thank all our employees who continue to support our business during this uncertain period and who share our vision for the future.

"If we can secure the New Business Scheme and return to lending, then I am confident we can move forward with a new business model that meets strong demand in the market. Amigo has the management expertise and is building the infrastructure, policies and procedures required to be a responsible and valuable contributor to the non-standard finance space."

Analyst, investor and bondholder conference call and webcast

Amigo will be hosting a live webcast for investors and bondholders today at 09:30 (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 3936 2999; Access code: 442979). A replay will be available on Amigo's website after the event. The presentation pack for the webcast shows the reconciliation between the PLC results and Amigo Loans Group Limited (the 'Bond Group').

Investor video

There is an investor video available to view here, with an update from Amigo's CEO, Gary Jennison.

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.

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

⁴Adjusted profit/(loss) after tax excludes items due to their exceptional nature including: senior secured note, RCF fees, securitisation facility fees write off, tax provision release, tax asset write off, tax refund due and strategic review and formal sale process costs. None are business-as-usual transactions. Hence, removing these items is deemed to give a view of underlying profit/(loss) adjusting for non-business-as-usual items within the financial year.

⁵Adjusted basic (loss)/earnings per share is a non-IFRS measure and the calculation is shown in note 8. Adjustments to (loss)/earnings are described in footnote 4 above.

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

⁷Net debt/gross loan book. Net debt over gross loan book: this measure shows whether the borrowings' year-on-year movement is in line with loan book growth.

Contacts:

Amigo

Danny Malone, Interim Chief Financial Officer

Kate Patrick, Head of Investor Relations investors@amigo.me

Lansons amigoloans@lansons.com

Tom Baldock 07860 101715

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. Whilst not currently lending, Amigo has provided guarantor loans in the UK since 2005, offering access to mid‐cost credit to those who are unable to borrow from traditional lenders due to their credit histories. The guarantor loan concept introduces a second individual to the lending relationship, typically a family member or friend with a stronger credit profile than the borrower. This individual acts as guarantor, undertaking to make loan payments if the borrower does not. Amigo was founded in 2005 and grew to become the UK's largest provider of guarantor loans. In the process, Amigo's guarantor loan product has allowed borrowers to rebuild their credit scores and improve their ability to access credit from mainstream financial service providers in the future. 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.

Chief Executive's Statement

Performance

Amigo's pause in lending, which has continued throughout the nine-month period to 31 December 2021, led to a 44.9% decline in customer numbers and a 56.2% reduction in the net loan book. Revenue fell by 44.9% compared to the prior year period, primarily driven by the reduction in the loan book.

While underlying collection levels have continued to be better than modelled under our first Scheme projections back in December 2020, an increasing trend in the level of arrears has persisted in the period. In addition, until we have more certainty around the sanction of our proposed Scheme of Arrangement, we continue to calculate the provision for complaints on the basis that known and expected future complaints are settled in full. The complaints provision and associated cost as at 31 December 2021 were £347.5m and £9.9m respectively.

Statutory profit before tax for the nine-month period was £1.6m (Q3 2021: loss of £81.3m) and statutory profit after tax was £2.5m owing to a £0.9m tax credit in the period. Net liabilities as at 31 December 2021 were £118.1m.

Scheme of Arrangement

To address the liabilities for complaints that have arisen from historical lending practices, the Board has presented two Scheme of Arrangement proposals to the Court and to its unsecured, Redress Creditors. The option preferred by both the Board and the ICC is the New Business Scheme in which the Board is proposing an initial contribution of £97m from internal resources alongside a further £15m to be raised from the proceeds of a new equity and capital raise. In order to secure the best result for Redress Creditors possible in the circumstances, the New Business Scheme will also include a mechanism for an additional payment to Redress Creditors to be made in the event that the existing loan book generates a better return than currently anticipated. The proposed equity raise will require the Company to issue at least 19 new shares for every existing share in issue.

The fall back and alternative option is a Wind-Down Scheme in which Amigo Loans Ltd would be wound down and any assets left after operating costs and repayment of the remaining senior secured notes would be paid to Redress Creditors. There is no guaranteed cash contribution in the Wind-Down Scheme. The New Business Scheme is estimated to provide 42 pence in the pound compared with the Wind-Down Scheme which is estimated to provide 33 pence in the pound to the Redress Creditors.

There is no doubt that the impact on our shareholders is significant for those who are not able or decide they do not want to participate in the equity raise associated with the proposed New Business Scheme. The very difficult fact is that we have had to address liabilities that arose from historical lending practices under previous management. To do this, given the legally binding priority ranking of all creditors over shareholders, we must deliver as much value as we can to our creditors before retaining any equity value.

If the Court does not sanction the New Business Scheme, then Amigo Loans Ltd will be wound down or enter administration. In either of these situations, shareholders would almost certainly receive nothing from Amigo Loans Ltd. We will defend in Court the position that equity holders should retain some value, in order not only to raise funds to support future lending but, importantly, to benefit creditors with an additional £15m Scheme contribution. If we can secure the New Business Scheme and return to lending, then we are confident we can move forward with a new business model that meets strong demand in the market for a competitively priced, mid-cost loan product. Amigo has the management expertise and is building the infrastructure, policies and procedures required to be a responsible and valuable contributor to the non-standard finance sector.

Many hurdles remain. The Scheme will require that over 50% of creditors, by number of those who vote and over 75% by claim value, vote in favour of the Scheme. We are making great efforts in our communication with Redress Creditors to ensure that they are provided with all the information they need to make an informed decision ahead of casting their votes on the Scheme proposals. We have published all relevant Scheme documentation on a dedicated website, hosted a Q&A session on social media, issued explanatory videos and will be publishing advertisements in national newspapers to encourage voting.

If the New Business Scheme is sanctioned, Amigo will require FCA consent to recommence lending within nine months of the Scheme effective date. While there is currently no requirement on the firm's lending permission, Amigo has informed and assured the FCA that it will not resume lending without FCA's prior agreement. The FCA confirmed in July 2021 that it would not expect to authorise a return to lending by Amigo until after the sanctioning of a new Scheme by the High Court. Funding will then need to be raised via an equity raise within 12 months of the Scheme effective date. In addition, Amigo will require the satisfactory resolution to the ongoing enforcement investigation into its creditworthiness processes, and governance of those processes, from November 2018 and into complaints handling from May 2020.

At this time, the FCA's position remains reserved. We continue to speak regularly with the FCA, both on our intentions for the Scheme and our future lending proposition and to respond to its information requests.

Future proposition

Our new lending proposition is designed to address the pressing need in the market for a mid-cost product that can underwrite customers in the non-prime sector and through incentive, flexibility and adaptation be a vital contributor to the customer's progress to mainstream financial inclusion. We plan to offer a revised guarantor loan product and a non-guarantor unsecured loan which will feature both an annual payment holiday and dynamic price reductions over the term.

As part of the future business plan, if the New Business Scheme is sanctioned, and if FCA consent is granted, originations are planned to begin shortly after the Scheme effective date. Amigo has agreed with the ICC that the total net new lending under the New Business Scheme will not be more than £35m until £112m (the initial contribution plus the contribution from the equity raise) has been paid into the Scheme fund.

Board

On 24 January, Amigo announced that Chief Financial Officer (CFO), Mike Corcoran, would leave the business with immediate effect. Mike formally stepped down as a director on 19 February 2022. The Board wishes to thank Mike for his significant contribution to the development of the Scheme proposals and for leading the finance team through a challenging period.

Danny Malone, joined Amigo as Interim CFO on 7 February 2022. Danny is a chartered accountant and has extensive experience across multiple financial services companies and banks at Board level, mostly operating in the non-standard consumer finance sector. Danny joins with extensive business and regulatory experience and will be a valuable addition to the senior management team at Amigo whilst we all work to deliver the best outcome we can in the circumstances to our customers, our shareholders and our other stakeholders. As the appointment is on an interim basis, it is not intended that Danny will be appointed as a director of the Company.

Summary and Outlook

The Board has made considerable progress in addressing the concerns raised by the Judge, in May 2021, in the judgment on the first proposed Scheme. It is now presenting two Schemes to the Court and to Redress Creditors of which the Board, and the ICC, believe the New Business Scheme provides the better outcome for Redress Creditors with all effort made to ensure that there is no room for improvement on the offer.

The Board is committed to satisfying its legal obligations to its creditors and to providing the most equitable solution for all other stakeholders that is possible in the circumstances. The Board recognises that this is a very difficult time for shareholders, who legally rank below the Company's creditors. It is proposing that some equity value is retained to enable a further benefit to creditors and to support the future business. The Board is confident that its future lending proposition meets a strong demand in the market for a competitively priced, mid-cost, non-standard finance product and that Amigo can be a responsible and valuable contributor to the sector.

The current cash position remains strong at over £110m, after the January 2022 partial redemption of the bonds. However, significant financial constraints remain with net liabilities of £118.1m at 31 December 2021. The continuation of Amigo as a business is dependent on a successful Scheme outcome, FCA agreement to restart lending, satisfactory resolution of the FCA investigations and our ability to raise both debt and equity capital to support the future business.

Financial review

In the first nine months to 31 December 2021, the net loan book reduced by 56.2% to £180.7m. Revenue fell by 44.9% year on year to £75.7m, reflecting the pause in lending and loan book reduction. Customer numbers reduced by 44.9%% compared to the prior year to 86,000. Despite a complaints cost of £9.9m in the period, the continued revenue generation of the net loan book alongside reduced operating and funding costs, has resulted in a statutory profit before tax for the nine-month period of £1.6m (Q3 2021: loss of £81.3m) and a statutory profit after tax of £2.5m (Q3 2021: loss of £86.8m). Adjusting for non-recurring items defined in note 4 of the summary financial table, adjusted profit after tax was £1.1m (Q3 2021 adjusted loss of £77.0m). Net liabilities at 31 December 2021 were £118.1m.

Impairment

The impairment charge as a percentage of revenue was 40.0% for the nine months to 31 December 2021 (Q3 2021: 30.2%) due primarily to the reduction in revenue with no originations in the period. The coverage ratio, showing the impairment provision as a percentage of the gross loan book, has increased to 22.4% (Q3 2021: 18.0%). The increase to the coverage ratio is driven by the reforecast of expected credit losses effected at the half year to reflect the increasing trend in the level of arrears which has persisted through the period, notably but not exclusively, from customers exiting Covid-19 payment holidays.

Whilst unemployment trends are favourable, inflationary headwinds are expected to have an impact on our customer base. Significant uncertainty remains in respect of future customer behaviour and collections as the cost of living increases, the Amigo Scheme process continues, and the loan book diminishes. Further details on the impairment provision and other key judgements and estimates in the IFRS 9 impairment model are set out in notes 1 and 2 to the financial statements.

Complaints

The Board continues to pursue a new Scheme of Arrangement to address the historical complaints liability. The approval of an alternative Scheme remains subject to reaching the key milestones of a second successful creditor vote and High Court sanctioning. At this point, the Board does not consider there to be enough certainty to account for claims redress on the basis that a Scheme will be sanctioned.

Consequently, claims redress is accounted for on the basis that known and future complaints are settled in full, subject to an applied uphold rate. This has resulted in a complaints provision of £347.5m as at 31 December 2021. A credit to the provision recognised in the period due to the lower number of live loans at 31 December 2021, driven both by settlements and by customer accounts being charged off, was offset by the addition of compensatory interest that has accrued as time has passed. A complaints cost of £9.9m has been recognised in the period as a result.

Tax

Whilst the nine months ended 31 December 2021 were profitable, no tax charge has been recognised on profits as the Group has sufficient losses brought forward. A tax credit of £0.9m was applied in the period reflecting the release of a historic tax liability and anticipated tax refund.

Funding

Net debt was positive at £52.9m as at 31 December 2021 (Q3 2021: (£179.5m)) as the back book continued to be collected while originations remained suspended. Consequently, unrestricted cash and cash equivalents as at 31 December 2021 increased to £285.5m (Q3 2021: £164.6m).

After the period end, Amigo made a partial redemption of £184.1m of the £234.1m outstanding 7.625% senior secured notes due in 2024 with a redemption date of 15 January 2022. The remaining £50.0m gross principal amount outstanding is due in January 2024. Current unrestricted cash, after payment of the interest due on the senior secured notes and the partial redemption, is over £110m. Restricted cash is £3.8m and largely relates to estimated set-off held in escrow for customers with existing complaints.

Going concern

The Board has concluded there is a material uncertainty over going concern. In determining the appropriate basis of preparation for these interim financial statements, the Board has assessed the Group and Company's ability to continue as a going concern for a period of at least twelve months from the date of approval of these financial statements. Despite material uncertainties, the financial statements are prepared on a going concern basis which the Directors believe to be appropriate for the reasons set out in the Going Concern statement included in note 1 to the financial statements.

Condensed consolidated statement of comprehensive income

for the 9 months to 31 December 2021

		9 months ended	9 months ended	Year to
		31 Dec 21	31 Dec 20	31-Mar-21
		Unaudited	Unaudited	Audited
	Notes	£m	£m	£m
Revenue	3	75.7	137.5	170.8
Interest payable and funding facility fees	4	(14.4)	(22.1)	(27.5)
Interest receivable		0.1	-	0.1
Impairment of amounts receivable from customers1		(30.3)	(41.5)	(60.7)
Administrative and other operating expenses		(19.6)	(35.4)	(44.5)
Complaints expense	13	(9.9)	(116.2)	(318.8)
Total operating expenses		(29.5)	(151.6)	(363.3)
Strategic review, formal sale process and related financing costs	6	-	(3.6)	(3.0)
Profit/(loss) before tax		1.6	(81.3)	(283.6)
Tax credit/(charge) on profit/(loss)	7	0.9	(5.5)	(5.5)
Profit/(loss) and total comprehensive income/ (loss) attributable to equity shareholders of the Group2		2.5	(86.8)	(289.1)

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

Profit/(loss) per share
Basic profit/(loss) per share (pence)	8	0.5	(18.3)	(60.8)
Diluted profit/(loss) per share (pence)	8	0.5	(18.2)	(60.8)
Dividends per share³ (pence)		-	-	-

The accompanying notes form part of these financial statements.

1 This line item includes reversals of impairment losses or impairment gains, determined in accordance with IFRS 9. In the period, £nil of previously recognised impairment gains were reversed primarily due to the recognition of the expected cost to repurchase charged off loans previously sold to a third party (Q3 2020: £2.1m reversal of impairment gains).

2 There was less than £0.1m of other comprehensive income during any other period, and hence no consolidated statement of other comprehensive income is presented.

3 On 19 October 2020 Amigo announced that it had entered into an Asset Voluntary Requirement with the Financial Conduct Authority (FCA), meaning prior approval by the FCA is required to permit the transfer of assets outside of the Group in certain circumstances, including dividends to shareholders.

Condensed consolidated statement of financial position

as at 31 December 2021

		31 Dec 21	31 Dec 20	31 Mar 21
		Unaudited	Unaudited	Audited
	Notes	£m	£m	£m
Non-current assets
Customer loans and receivables	9	41.4	175.0	125.5
Property, plant and equipment		0.6	1.3	1.1
Right-of-use lease assets		0.8	1.0	1.0
		42.8	177.3	127.6
Current assets
Customer loans and receivables	9	143.8	249.3	225.1
Other receivables	10	1.5	1.2	1.6
Current tax assets		0.4	-	-
Derivative asset		-	-	0.1
Cash and cash equivalents (restricted)¹		3.8	5.7	6.3
Cash and cash equivalents		285.5	164.6	177.9
		435.0	420.8	411.0
Total assets		477.8	598.1	538.6
Current liabilities
Trade and other payables	11	(14.9)	(20.4)	(15.9)
Borrowings	12	-	-	(64.4)
Lease liabilities		(0.3)	(0.3)	(0.3)
Complaints provision	13	(347.5)	(150.9)	(344.6)
Restructuring provision	13	-	-	(1.0)
Current tax liabilities		-	(0.8)	(0.8)
		(362.7)	(172.4)	(427.0)
Non-current liabilities
Borrowings	12	(232.6)	(344.1)	(232.1)
Lease liabilities		(0.6)	(0.9)	(0.9)
		(233.2)	(345.0)	(233.0)
Total liabilities		(595.9)	(517.4)	(660.0)
Net (liabilities)/assets		(118.1)	80.7	(121.4)
Equity
Share capital		1.2	1.2	1.2
Share premium		207.9	207.9	207.9
Translation reserve		0.1	(0.1)	-
Merger reserve		(295.2)	(295.2)	(295.2)
Retained earnings		(32.1)	166.9	(35.3)
Shareholder equity		(118.1)	80.7	(121.4)

The accompanying notes form part of these financial statements.

¹ Cash and cash equivalents (restricted) of £3.8m materially relates to restricted cash held in Escrow for ongoing open complaints. Historically, restricted cash and cash equivalents related to cash held in the AMGO Funding (No.1) Ltd bank account due to the requirement under the waiver on the securitisation facility to use collection from securitised assets to reduce the outstanding facility balance.

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

Gary Jennison

Director

24 February 2022

Company no. 10024479

Condensed consolidated statement of changes in equity

for the 9 months to 31 December 2021

	Share	Share	Translation	Merger	Retained	Total
	capital	premium	reserve	reserve¹	earnings	equity
	£m	£m	£m	£m	£m	£m
At 31 March 2020 (Audited)	1.2	207.9	-	(295.2)	253.5	167.4
Total comprehensive loss	-	-	-	-	(86.8)	(86.8)
Share-based payments	-	-	-	-	0.2	0.2
Effect of foreign exchange rate changes	-	-	(0.1)	-	-	(0.1)
At 31 December 2020 (Unaudited)	1.2	207.9	(0.1)	(295.2)	166.9	80.7
Total comprehensive loss	-	-	-	-	(202.3)	(202.3)
Share-based payments	-	-	-	-	0.1	0.1
Effect of foreign exchange rate changes	-	-	0.1	-	-	0.1
At 31 March 2021 (Audited)	1.2	207.9	-	(295.2)	(35.3)	(121.4)
Total comprehensive income	-	-	-	-	2.5	2.5
Share-based payments	-	-	-	-	0.7	0.7
Effect of foreign exchange rate changes	-	-	0.1	-	-	0.1
At 31 December 2021 (Unaudited)	1.2	207.9	0.1	(295.2)	(32.1)	(118.1)

The accompanying notes form part of these financial statements.

1 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.

Condensed consolidated statement of cash flows

for the 9 months to 31 December 2021

	9 months to	9 months to	Year to
	31 Dec 21	31 Dec 20	31 Mar 21
	Unaudited	Unaudited	Audited
	£m	£m	£m
Profit/(loss) for the period	2.5	(86.8)	(289.1)
Adjustments for:
Impairment expense	30.3	41.5	60.7
Complaints expense	9.9	116.2	318.8
Restructuring provision	-	-	1.0
Tax (credit)/charge	(0.9)	5.5	5.5
Interest expense	14.4	22.1	27.5
Interest receivable	(0.1)	-	(0.1)
Interest recognised on loan book	(80.1)	(146.6)	(185.3)
Share-based payment	0.7	0.2	0.3
Depreciation of property, plant and equipment	0.6	0.8	1.1
Operating cash flows before movements in working capital	(22.7)	(47.1)	(59.6)
Decrease/(increase) in receivables	0.2	0.3	(0.9)
(Decrease)/increase in payables	(2.0)	2.9	(0.3)
Complaints cash expense	(4.9)	(58.6)	(64.6)
Tax refunds	-	23.6	23.6
Interest paid	(14.2)	(13.1)	(22.8)

Net cash (used in) operating activities before loans issued and collections on loans	(43.6)	(92.0)	(124.6)
Loans issued	-	(0.4)	(0.4)
Collections	209.0	313.8	402.5
Other loan book movements	(1.0)	(3.7)	(0.6)
Decrease in deferred brokers' costs	5.2	8.4	10.8
Net cash from operating activities	169.6	226.1	287.7
Proceeds from sale of property, plant and equipment	0.1	-	-
Purchases of property, plant and equipment	-	(0.4)	(0.5)
Net cash from/(used in) investing activities	0.1	(0.4)	(0.5)
Financing activities
Lease principal payments	(0.2)	(0.2)	(0.2)
Cash held for repayment of borrowings	-	(5.7)	-
Repayment of external funding	(64.4)	(119.5)	(167.2)
Net cash (used in) financing activities	(64.6)	(125.4)	(167.4)
Net increase in cash and cash equivalents	105.1	100.3	119.8
Effects of movement in foreign exchange	-	-	0.1
Cash and cash equivalents at beginning of period	184.2	64.3	64.3
Cash and cash equivalents at end of period	289.3¹	164.6	184.2¹

The accompanying notes form part of these financial statements.

1 31 December 2021 and 31 March 2021 total cash is inclusive of £3.8m and £6.3m restricted cash respectively.

Notes to the condensed consolidated financial statements

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 and its registered office is Nova Building, 118-128 Commercial Road, Bournemouth, United Kingdom BH2 5LT.

The principal activity of the Company is to act as a holding company for the Amigo Loans Group of companies. The "principal" activity of the Amigo Loans Group is to provide individuals with guarantor loans from £2,000 to £10,000 over one to five years.

These consolidated Group and Company financial statements have been prepared on a going concern basis and approved by the Directors in accordance with international accounting standards 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 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.

These interim financial statements have not been prepared fully in accordance with IAS 34 Interim Financial Reporting in conformity with the Companies Act 2006. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of Amigo Holdings PLC (the 'Group') as at and for the year ended 31 March 2021.

The interim financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated annual report for the year ended 31 March 2021. Changes to significant accounting policies are described in notes 1.2 and 2.

The consolidated financial statements of the Group as at and for the year ended 31 March 2021 are available upon request from the Company's registered office at Nova Building, 118-128 Commercial Road, Bournemouth, United Kingdom, BH2 5LT.

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.

The comparative figures for the financial year ended 31 March 2021 are not the Group's statutory accounts for that financial year, but are an extract from those statutory accounts for interim reporting. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor:

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

ii) drew attention to the provision for customer complaints, estimated using the assumption that no Scheme is implemented, by way of emphasis of matter without qualifying their report (see notes 1 and 13); and

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

These interim financial statements were approved by the board of directors on 24 February 2022.

Going concern

In determining the appropriate basis of preparation for these financial statements, the Board has assessed the Group and Company's ability to continue as a going concern for a period of at least twelve months from the date of approval of these financial statements. The financial statements are prepared on a going concern basis which the Directors believe to be appropriate for the following reasons.

Following the ruling on 25 May 2021 in which the High Court did not approve the proposed Scheme of Arrangement despite the positive creditors vote, the Board continues to consider all options for the Group. The Board believes that under all reasonably possible scenarios, without an appropriate Scheme of Arrangement to deal with the complaints, the expected volumes of complaints from current and past customers would exhaust, or at least significantly reduce, the Group's available liquid resources; leaving the Group with insufficient liquid resources to repay its non-current borrowings as they fall due in January 2024.

Accounting standards require an entity to prepare financial statements on a going concern basis unless the Board either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so.

As part of the Board's pursuit of a new Scheme of Arrangement ("Scheme") to address Amigo's historic lending complaints liability, and after extensive negotiations with its Independent Customer Committee ("ICC"), the Board issued a revised Scheme proposal to the ICC on 12 November 2021. The revised offer incorporated two distinct Schemes; the first, the 'New Business Scheme', which is contingent on lending restarting and Amigo completing a successful equity raise. The second, a managed wind-down of the Amigo Loans Ltd business under a Scheme framework ("Wind-Down Scheme").

On 6 December 2021, Amigo announced the ICC's confirmed preference for the New Business Scheme. The Practice Statement Letter ("PSL") explaining both Scheme options was sent to the Scheme creditors in late December 2021.

For the New Business Scheme, Amigo is proposing initial cash contributions totalling 97m from internally generated resources, alongside a further contribution of 15m, being part of the proceeds from a new equity and capital raise. In order to secure the best result for Redress Creditors possible in the circumstances, the New Business Scheme will include a mechanism for an additional payment to Redress Creditors to be made in the event that the existing loan book generates a better return than currently anticipated. The New Business Scheme will also require the Company to issue at least 19 new shares for every existing share in the Company to raise money to fund the further contribution of £15m and raise sufficient funds to provide the capital needed for a return to lending. The quantum of dilution reflects the need to address the concerns of the Court at the original sanction hearing in May 2021. The New Business Scheme can only proceed if the FCA grants approval for the Group to recommence lending.

The Board intends to ask creditors to vote on both options, and if both options are approved by creditors, to then submit both options to the Court for sanction. The Court will be asked to consider the New Business Scheme for sanction before it considers the Wind-Down Scheme. If the Court does not sanction the New Business Scheme, the Court will be asked to sanction the Wind-Down Scheme as a fall-back solution. The Wind-Down Scheme does not involve the Group recommencing lending, accordingly it does not require FCA approval for the same, or require the Company to raise any additional equity capital.

The Court Convening hearing will take place on 8 March 2022 and the Court Sanction hearing will take place on 23 and 24 May 2022.

Funding

The going concern assessment considers the Group's projected liquidity position from existing committed financing facilities throughout the forecast period. The Group is funded through £234.1m of senior secured notes and held an unrestricted cash balance of £285.5m as at 31 December 2021. In both the base and downside scenarios the bond buyback executed in January 2022 of £184m is reflected, with the remainder of the bonds running to term.

'New Business Scheme' scenario

The New Business Scheme projections prepared for the going concern assessment period are derived from the Group's 2021/2022 budget as approved by the Board in March 2021 with certain assumptions refined to reflect more recent information. The New Business Scheme scenario assumes that:

· an alternative Scheme of Arrangement is approved by the High Court and the conditions precedent are met. This would limit the cash redress liability in respect of upheld customer complaints within a Scheme.

· complaints volumes and uphold rates within a Scheme are consistent with the assumptions that underpin the complaints provision reported in the financial statements for Q3 December 2021.

· write downs of customer balances in respect of upheld customer complaints are also consistent with the redress assumptions in the complaints provision, but adjusted for the passage of time to reflect a scheme effective date of April 2022 for open and future complaint customers i.e. balance adjustments on the gross loan book are reduced and applied in the future.

· the FCA grants approval for the Group to recommence lending and lending recommences within 9 months of the sanction of the New Business Scheme, albeit at significantly reduced levels compared with pre-Covid-19 originations, and

· credit losses, and therefore customer collections, remain within moderately stressed levels.

This scenario indicates that the Group will have sufficient funds to enable it to operate within its available facilities and settle its liabilities as they fall due for at least the next twelve months.

'Wind-Down Scheme' scenario

If the Court does not sanction the New Business Scheme, the Court will be asked to sanction the Wind-Down Scheme as a fall-back solution.

This means that if the Wind-Down Scheme is approved by the creditors, the Court will only actually be asked to approve the Wind-Down Scheme if any of the following three things happen:

· 75% by value or 50% by number of those creditors voting do not vote in favour of the New Business Scheme;

· prior to the Court sanction hearing and having taken advice of leading counsel (i.e. a senior lawyer), Amigo considers that the New Business Scheme is unlikely to be approved by the Court and therefore Amigo chooses not to ask the Court to sanction the New Business Scheme; or

· The Court does not approve the New Business Scheme.

No Scheme scenario

The Board recognises that an alternative Scheme of Arrangement such as that considered in the Scheme scenarios requires a second positive creditor vote and a High Court sanction. All outcomes remain uncertain and outside the direct control of the Group. In a scenario where this is not achieved and cash redress to customers is not capped by the terms of a Scheme the Board believes the expected volume of complaints from current and past customers would either exhaust, or at least significantly reduce, the Group's available liquid resources; leaving the Group with insufficient liquid resources to repay its non-current borrowings as they fall due in January 2024. This is reflected in the Group's Consolidated Statement of Financial Position, which includes a complaints provision based on the best estimate of the full settlement of all current and future complaints. In such circumstances the Board believes that there would be no realistic alternative other than to enter a formal insolvency process.

FCA investigation

Additionally, in June 2020, the Financial Conduct Authority (FCA) launched an investigation into the Group's creditworthiness assessment process, and the governance and oversight of this process. This investigation will cover the period from 1 November 2018 to date. The potential impact of the investigation on the business is extremely difficult to predict and quantify, and hence the potential adverse impact of the investigation has been considered separately and not included in the scenarios laid out above. There are a number of potential outcomes which may result from the FCA investigation, including the imposition of a significant fine and/or the requirement to perform a mandatory back-book remediation exercise.

The Directors consider that should they be required to perform a back-book remediation exercise it could reasonably be expected to exhaust, or at least significantly reduce, the Group's available liquid resources. Additionally, other lesser but still significant adverse outcomes could significantly reduce the Group's available liquidity headroom and thus the Group would need to source additional financing to maintain adequate liquidity to continue to operate.

Conclusion

The Board continues to actively pursue options which represent realistic alternatives to liquidation or the cessation of trade, such as the Scheme of Arrangement considered in the Scheme scenarios. The long-term viability of the Group is reliant on the Group receiving permission from the FCA to recommence lending, either within Amigo Loans Ltd or other entities within the Group, and originations reaching a level that will sustain a loan book of sufficient size to allow the Group to meet its liabilities as they fall due, and is dependent on the Group's ability to raise further capital to support future lending. However, in each of the Scheme scenarios above the financial projections indicate that the Group will have sufficient funds to enable it to operate within its available facilities and settle its liabilities as they fall due for at least the next twelve months. Accordingly, the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.

However, the Board also recognises that at the date of approval of these financial statements significant uncertainty remains. An alternative Scheme requires a second positive creditor vote and a High Court sanction which is outside the control of the Group. Additionally, both the final outcome of the FCA investigation and FCA approval of new lending remain highly uncertain. These matters indicate the existence of a material uncertainty related to events or conditions that may cast significant doubt over the Group and Company's ability to continue as a going concern and, therefore, that the Group and Company may be unable to realise their assets and discharge their liabilities in the normal course of business. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

1.2 Amounts receivable from customers

i) Classification

IFRS 9 requires a classification and measurement approach for financial assets which reflects how the assets are managed and their cash flow characteristics. IFRS 9 includes three classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit and loss (FVTPL). Note, the Group does not hold any financial assets that are equity investments; hence the below considerations of classification and measurement only apply to financial assets that are debt instruments. A financial asset is measured at amortised cost if it meets both of the following conditions (and is not designated as 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.

Business model assessment

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

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

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

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

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

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

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

Assessment of whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, "principal" is defined as the fair value of the financial asset on initial recognition. "Interest" is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time, as well as profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest (SPPI), the Group considers the contractual terms of the instrument.

This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. The Group has deemed that the contractual cash flows are SPPI and hence, loans to customers are measured at amortised cost under IFRS 9.

ii) Impairment

IFRS 9 includes a forward-looking "expected credit loss" (ECL) model in regards to impairment. IFRS 9 requires an impairment provision to be recognised on origination of a financial asset. Under IFRS 9, a provision is made against all stage 1 (defined below) financial assets to reflect the expected credit losses from default events within the next twelve months. The application of lifetime expected credit losses to assets which have experienced a significant increase in credit risk results in an uplift to the impairment provision.

iii) Measurement of ECLs

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

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

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

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

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

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.

When a borrower misses a payment, both parties are kept informed regarding the remediation of the arrears. If a missed payment is not remediated within a certain timeframe, collection efforts are switched to the guarantor and if arrears are cleared the loan is considered performing.

The Covid-19 pandemic presents significant economic uncertainty. The Group assessed that its key sensitivity was in relation to expected credit losses and its run-off on customer loans and receivables.

Given the significant uncertainty around the duration and severity of the impact of the pandemic on the macroeconomy and in particular unemployment, a matrix of nine scenarios consisting of three durations (three, six and twelve months) and three severities (moderate, high and extremely high) has been modelled. Refer to note 2.1.1 for further detail on 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.

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

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

The Group has offered payment holidays to customers in response to Covid-19. These measures were introduced on 31 March 2020, the offering of these payment holidays concluded in March 2021. The granting of a payment holiday, or the extension of a payment holiday at the customer's request, does not automatically trigger a significant increase in credit risk. Customers granted payment holidays are assessed for other indicators of SICR and are classified as stage 2 if other indicators of a SICR are present. This is in line with guidance issued by the International Accounting Standards Board (IASB) and Prudential Regulation Authority (PRA) which noted that the extension of government-endorsed payment holidays to all borrowers in particular classes of financial instruments should not automatically result in all those instruments being considered to have suffered a significant increase in credit risk. At the time a customer requests an extension to a payment holiday, the Group has no additional information available than was present at the original grant date for which to make an alternative assessment over whether there has been a significant increase in credit risk; extensions are granted on request. See note 2.1.2 for further detail on SICR considerations for Covid-19 payment holidays and note 2.4 for judgements and estimates applied by the Group on the calculation of a modification loss resulting from the granting of these payment holidays. As at 31 December 2021, the Group has been able to analyse the initial data relating to customer behaviour and payment patterns now these payment holidays have finished.

v) Derecognition

Historically, the Group offered, to certain borrowers, the option to top up existing loans subject to internal eligibility criteria and customer affordability. The Group pays out the difference between the customer's remaining outstanding balance and the new loan amount at the date of top-up. The Group considers a top-up to be a derecognition event for the purposes of IFRS 9 on the basis that a new contractual agreement is entered into by the customer replacing the legacy agreement. The borrower and guarantor are both fully underwritten at the point of top-up and the borrower may use a different guarantor from the original agreement when topping up.

vi) Modification

Aside from top-ups and Covid-19 payment holidays, no formal modifications are offered to customers. In some instances, forbearance measures are offered to customers. These are not permanent measures; there are no changes to the customer's contract and the measures do not meet derecognition or modification requirements. See policy 1.11.1 in the Group's annual report and accounts 2021 for more details on the Group's accounting policies for modification of financial assets.

vii) Definition of default

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

viii) Forbearance

Where the borrower indicates to the Group that they are unable to bring the account up to date, informal, temporary forbearance measures may be offered. There are no changes to the customer's contract at any stage. Therefore, with the exception of Covid-19 payment holidays, these changes are neither modification nor derecognition events. 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.

Throughout the Covid-19 pandemic, payment holidays have been offered to all customers who indicated to the Group they were experiencing potential payment difficulties and concluded in March 2021. The granting of these payment holidays has been treated as non-substantial modification events. See note 2.4.1 for more details.

2. Critical accounting assumptions and key sources of estimation uncertainty

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

Judgements

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

· IFRS 9 - measurement of ECLs:

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

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

· Multiple economic scenarios - the probability weighting of nine scenarios to the ECL calculation (note 2.1.3).

· IFRS 9 - modification of financial assets:

· Assessment of Covid-19 payment holidays as a non-substantial modification (note 2.4.1).

· Assessment of whether a modification loss is an indicator of a significant increase in credit risk (note 2.4.2).

· Complaints provisions:

· Judgement is involved in determining whether a present constructive obligation exists and in estimating the probability, timing and amount of any outflows (note 2.3.2).

· Following the ruling on 24 May 2021 in which the High Court did not approve the proposed Scheme of Arrangement despite the overwhelmingly positive creditors' vote, the Board continues to consider all options for the Group, including a potential alternative Scheme of Arrangement. Significant judgement is applied in determining if there is sufficient certainty over the potential outcome of the Scheme to estimate the future complaints redress liabilities on the basis of a successful Scheme outcome (note 2.3.1).

· Going concern:

· Judgement is applied in determining if there is a reasonable expectation that the Group adopts the going concern basis in preparing these financial statements (note 1.1).

· IAS 1 requires the preparation of financial statements on a going concern basis unless the Board either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so. At the date of approval of these interim financial statements, the Board continues to consider a number of options, including a potential other Scheme of Arrangement, which represent realistic alternatives to liquidation or the cessation of trade. Hence, it has been deemed there is a reasonable expectation that the Group is a going concern. However, due to significant uncertainty around terms of a potential new Scheme and whether it would be sanctioned by the High Court, there is a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern.

Estimates

Areas which include a degree of estimation uncertainty are:

· IFRS 9 - measurement of ECLs:

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

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

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

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

· IFRS 9 - modification of financial assets:

· Estimating the change in net present value of the projected future cashflows arising from Covid-19 payment holidays on a cohort basis (note 2.4.2).

· Estimating expected Covid-19 payment holiday duration (note 2.4.2).

· Estimating the change in net present value of projected future cash flows arising upon payment holiday extensions (note 2.4.2).

· Complaints provisions:

· Calculation of provisions involves management's best estimate of expected future outflows, the calculation of which evaluates current and historical data, and assumptions and expectations of future outcomes (note 2.3.2).

· Effective interest rate (note 2.2):

· Calculation of the effective interest rate includes estimation of the average behavioural life of the loans and the profile of the loan payments over this period (note 2.2).

· Carrying amount of current and deferred taxation assets and liabilities

The Group's current loss-making position and the current uncertainty over the Group's future profitability means that it is no longer considered probable that future taxable profits will be available against which to recognise deferred tax assets. No tax assets have been recognised in respect of losses in the current period (note 7).

2.1 Credit impairment

2.1.1 Measurement of ECLs

The Group has adopted a collective basis of measurement for calculating ECLs. The loan book is divided into portfolios of assets with shared risk characteristics including whether the loan is new business, repeat lending or part of a lending pilot as well as considering if the customer is a homeowner or not. These portfolios of assets are further divided by contractual term and monthly origination vintages.

The allowance for ECLs is calculated using three components: a probability of default (PD), a loss given default (LGD) and the exposure at default (EAD). The ECL is calculated by multiplying the PD (twelve month or lifetime depending on the staging of the loan), LGD and EAD. The result of the ECL calculation is discounted to reflect the time value of money, the period discounted involves an estimated time taken to default to the reporting date which remains uncertain in nature.

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

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

The Group assesses the impact of forward-looking information on its measurement of ECLs. The Group has analysed the effect of a range of economic factors and identified the most significant macroeconomic factor that is likely to impact credit losses as the rate of unemployment and the rate of inflation.

Given the significant uncertainty around the duration and severity of the Covid-19 pandemic on the macroeconomy a matrix of nine scenarios consisting of three durations (three, six and twelve months) and three severities (moderate, high and extremely high) has been modelled and probability weighted to determine the ECL provision (see note 2.1.3).

2.1.2 Assessment of significant increase in credit risk (SICR)

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

1) The primary indicator of whether a significant increase in credit risk has occurred for an asset is determined by considering the presence of certain payment status flags on a customer's account. This is the Group's primary qualitative criteria considered in the assessment of whether there has been a significant increase in credit risk.

If a relevant operational flag is deemed a trigger indicating the remaining lifetime probability of default has increased significantly, the Group considers the credit risk of an asset to have increased significantly since initial recognition. Examples of this include operational flags for specific circumstances such as short-term payment plans and breathing space granted to customers.

2) As a backstop, the Group considers that a significant increase in credit risk occurs no later than when an asset is two contractual payments past due (equivalent to 30 days), in line with the rebuttable presumption in IFRS 9 that credit risk has significantly increased if contractual payments are more than 30 days past due. This is the primary quantitative information considered by the Group in a 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. Each quarter a flag governance meeting is held, to review operational changes which may impact the use of operational flags in the assessment of a significant increase in credit risk.

The Group has offered payment holidays to customers in response to Covid-19; at this date a payment holiday is granted, the arrears status of the loan is passed for the duration of the payment holiday up to a maximum of six months. In normal circumstances, a customer's request for a payment holiday (i.e. breathing space) would trigger a SICR in line with the Group's payment status flag approach to staging. However, the granting of exceptional payment holidays in response to Covid-19 does not automatically trigger a significant increase in credit risk.

2.1.3 Forward-looking information

The Group has modelled a range of economic shock scenarios to estimate the impact of a spike in unemployment as a result of the Covid-19 pandemic. In doing so, consideration has also been given to the potential impact of deep fiscal and monetary support measures that have been implemented by the government to support the economy during this time. Given the lack of reliable external information the range of scenarios include a variety of both severities and durations which are probability weighted. In response to the significant uncertainty around the duration and severity of the pandemic on the macroeconomy a matrix of nine scenarios has been modelled. The probability weightings allocated to the nine scenarios are included in the table below. These scenarios are weighted according to management's judgement of each scenario's likelihood.

The severity of the economic shock has been estimated with reference to underlying expectations for customer payment behaviour for accounts which are up to date or one contractual payment past due. The moderate, high and extremely high severities represent increases of 25%, 50% and 100% respectively, in the propensity for these accounts to miss payments and fall into arrears for the full duration of the economic shock.

	Moderate (33%)	High (33%)	Extremely high (33%)
Three-month duration	Moderately severe impact of an initial three month spike in the rate of unemployment	High severity of an initial three month spike in the rate of unemployment	Extremely high severity of an initial three month spike in the rate of unemployment
Six-month duration	Moderately severe impact of the increase in unemployment but with an extended duration of six months	High severity of the increase in unemployment but with an extended duration of six months	Extremely high severity of the increase in unemployment but with an extended duration of six months
Twelve-month duration	Moderately severe impact of the increase in unemployment and assuming that the deterioration in unemployment continues to increase for a full year	High severity of the increase in unemployment and assuming that the deterioration in unemployment continues to increase for a full year	Extremely high severity of the increase in unemployment and assuming that the deterioration in unemployment continues to increase for a full year

The following table details the absolute impact on the current ECL provision of £52.1m if each of the nine scenarios are given a probability weighting of 100%.

	Moderate	High	Extremely high
Three month duration	-6.2m	-4.7m	-2.9m
Six month duration	-4.5m	-1.3m	+2.5m
Twelve month duration	-1.1m	+5.3m	+12.9m

The table above demonstrates that in the first scenario with a moderate severity and an impact of an initial three month spike in the unemployment rate, the ECL provision would decrease by £6.2m. In the worst case scenario with the greatest severity assuming this deterioration continues for a duration of twelve months the ECL provision would increase by £12.9m. The scenarios above demonstrate a range of ECL provisions from £45.9m to £65.0m.

In the financial statements for the 9 months ended 31 December 2021 severity weightings used were 33% for moderate, high and extremely high scenarios (Q3 2020: 33%, 33% and 33%).

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 Effective interest rates

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 capitalised and recognised over the expected behavioural life of the loan as part of the effective interest rate method. The key judgement applied in the effective interest rate calculation is the behavioural life of the loan.

The historical settlement profile of loans, which were initially acquired through third-party brokers, is used to estimate the average behavioural life of each monthly cohort of loans. Settlements include early settlements and historically have also included top-ups as they are considered derecognition events (see note 1.2v). The average behavioural life is then used to estimate the effective interest on broker originations and thus the amortisation profile of the deferred costs.

Broker costs are predominantly calculated as a percentage of amounts paid out and not as a fixed fee per loan. Therefore, in determining the settlement profile of historical cohorts, settlement rates are pay-out weighted to accurately match the value of deferred costs with the settlement of loans.

2.3 Complaints provisions

2.3.1 Key judgements - Scheme of Arrangement

On 21 December 2020, the Group announced its intention to agree a Scheme of Arrangement to address customer redress claims with the aim that all customers are treated equitably. The vehicle ALL Scheme Ltd ("SchemeCo") was incorporated on 6 January 2021 and is a wholly owned subsidiary through which the Group intends to review claims and, where appropriate, pay redress to customers that have been affected as a result of historical issues in the UK business. The Group's original proposal for a Scheme of Arrangement was not sanctioned at the High Court hearing held on 19 May 2021, this judgement was received on 24 May 2021, despite receiving overwhelming support from the majority of Scheme creditors who voted.

Subsequently the Board is pursuing an alternative Scheme of Arrangement to the one which was not approved. It is the Board's view, in light of the anticipated alternative - a possible insolvency - that subject to further regulatory discussions, a successful alternative Scheme is achievable. However, the Directors acknowledge that the ultimate success of the Scheme is not wholly within their control not least because at the reporting date the approval of an alternative Scheme of Arrangement remains subject to reaching the key milestones of a second successful creditor vote and a High Court sanction.

IAS 37 - Provisions, Contingent Liabilities and Contingent Assets requires that the measurement of provisions is not adjusted for future events, such as the approval of an alternative Scheme of Arrangement, unless there is sufficient objective evidence that the future event will occur. Each of the aforementioned factors are ultimately outside of the Group's control and represent a significant source of uncertainty with regard to the ultimate success of an alternative Scheme. Hence, in line with IAS 37, it has been determined that the complaints provision will be measured by calculating a total redress liability assuming that there is no scheme in place, as there is not sufficient objective evidence that the future approval of an alternative Scheme of Arrangement will occur.

2.3.2 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 and the assumption that there is no Court approved Scheme of Arrangement (see note 13 for further detail).

Identifying whether a present obligation exists and estimating the probability, timing, nature and quantum of the redress payments that may arise from past events requires 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.

The key assumptions in these calculations which involve significant, complex management judgement and estimation relate primarily to the projected costs of potential future complaints, where it is considered more likely than not that customer redress will be appropriate. These key assumptions are:

· Future estimated volumes - estimates of future volumes of complaints.

· Uphold rate (%) - the expected average uphold rate applied to future estimated volumes where it is considered more likely than not that customer redress will be appropriate.

· Average redress (£) - the estimated compensation, inclusive of balance adjustments and cash payments, for future upheld complaints included in the provision.

These assumptions remain subjective due to the uncertainty associated with future complaint volumes and the magnitude of redress which may be required. Complaint volumes may include complaints under review by the Financial Ombudsman Service, complaints received from claims management companies (CMCs) or complaints received directly from customers.

Following the announcement of the proposed Scheme of Arrangement on 21 December 2020 these assumptions became more challenging to estimate as customer and CMC behaviour was temporarily influenced by the proposed Scheme of Arrangement.

Whilst the proposed Scheme was not sanctioned by the High Court on 19 May 2021, the creditor meeting on 12 May 2021, in which the Group received a total of 78,732 votes, provides some indication of the potential future propensity for past and present customers to raise a complaint. Whilst the vote provides a useful reference point for the potential population of future claims, this estimate remains highly uncertain. If an alternative Scheme is not successfully approved, it is unclear to what extent future complaint volumes would be impacted by increased customer awareness generated by the engagement with customers as part of the creditor vote process and increased publicity connected to the unsuccessful outcome of the first proposed Scheme, as well as any additional publicity relating to any potential future Scheme. Additionally, throughout Amigo's progress towards a Scheme, substantial work has gone into reviewing and enhancing our future claims handling methodologies, aligning with the expectations of our regulator and re-setting expectations of how claims will be assessed moving forward regardless of whether a potential new Scheme is successful.

As at 31 December 2020, the complaints provision was £150.9m; the increase of 130.3% to £347.5m at 31 December 2021 is primarily due to an increase in both the volume of estimated uphold complaints provided for and the estimated uphold rate. Also partially contributing is the increase in FOS invoice costs from £650 to £750 each.

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

	Assumption used	Sensitivity applied	Sensitivity
Future complaint volumes¹	76,984	5%	+58.9m	-58.9m
Average uphold rate per customer²	65%	20 ppts	+94.1m	-94.1m
Average redress per valid complaint³	£4,451	£1,000	+59.9m	-59.9m

1. Future estimated volumes. Sensitivity analysis shows the impact of a 5% change in the number of complaints estimated in the provision.

2. Uphold rate. Sensitivity analysis shows the impact of a 20 percentage point change in the applied uphold rate on both the current and forward-looking elements of the provision.

3. Average redress. Sensitivity analysis shows the impact of a £1,000 change in average redress on the provision.

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

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

The complaints provision has been estimated assuming that there is no Scheme in place, as there is not sufficient objective evidence that the future approval of an alternative Scheme will occur. However, a potential future Scheme remains a plausible outcome. In this scenario, it is likely that the total redress liability would be materially lower than the amount recognised under IAS 37 because cash redress would be capped at a level approved by the Scheme creditors, which is expected to be substantially lower than the total cash liability of £285.8m included in the £347.5m provision. For example, the cash element contribution proposed under the terms of the original Scheme proposal, which was not sanctioned by the High Court, was £15.0m. As part of the Board's pursuit of a new Scheme of Arrangement ("Scheme") to address Amigo's historic lending complaints liability, and after extensive negotiations with the Independent Customer Committee ("ICC"), the Board issued a revised Scheme proposal to the ICC on 12 November 2021. The revised offer incorporated two distinct Schemes; the first, the 'New Business Scheme', which is contingent on new lending restarting and Amigo completing a successful equity raise. The second, a managed wind-down of Amigo Loans Ltd business under a Scheme framework ("Wind-Down Scheme").

The Group has disclosed a contingent liability with respect to the FCA investigation announced on 29 May 2020. The investigation is with regards to the Group's creditworthiness assessment process, the governance and oversight of this, and compliance with regulatory requirements. The FCA investigation is covering lending for the period from 1 November 2018 to date. The Group was informed on 15 March 2021 that the FCA had decided to extend the scope of its current investigation so that it can investigate whether the Group appropriately handled complaints after 20 May 2020 and whether the Group deployed sufficient resource to address complaints in accordance with the Voluntary Requirement (VReq) announced on 27 May 2020 and the subsequent variation announced on 3 July 2020.

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

The Group will continue to co-operate fully with the FCA. There is significant uncertainty around the impact of this investigation on the business, the assumptions underlying the complaints provision and any future regulatory intervention. See note 13 for further details.

2.4 Modification of financial assets

2.4.1 Assessment of Covid-19 payment holidays as a non-substantial modification

From 31 March 2020, Covid-19 relief measures were formally introduced; on request, depending on a customer's individual circumstances, initial payment holidays with durations of up to three months were offered. At the end of the payment holiday the customer's monthly instalments revert to the contractual instalment with the term of the loan effectively extended by the duration of the payment holiday. Following the FCA's announcement of the extension to customer payment holidays for personal loans for up to six months, the Group's payment holiday policy was revised. If a customer applied for a payment holiday extension, the payment holiday automatically renewed on a monthly basis, up to a maximum of six months.

The customer had the option to opt out and end the payment holiday at any time. For the first three months of the payment holiday no interest accruals were applied to customer balances; from four to six months interest began to accrue again on the loan.

As a result of the Group's interest cap, the reintroduction of interest accruals from month four to month six of a payment holiday does not increase the total interest payable by the customer over the life of the loan. Rolling monthly extensions were predominantly granted from 1 July 2020 onwards. The final payment holidays and extensions were granted in March 2021.

No capital or interest is forgiven as part of the payment holiday despite no interest accruing during the first three months of the payment holiday; the customer is still expected to repay the loan in full.

The Group has assessed Covid-19 payment holidays from both a qualitative and quantitative perspective; the Group is not originating new assets with substantially different terms and the original asset's contractual cash flows is deferred, leading to what is deemed a non-substantial estimated reduction in loan carrying amounts.

Hence, the initial granting of Covid-19 payment holidays was accounted for as non-substantial modification of financial assets under IFRS 9. When a customer was offered an extension to their original payment holiday up to a total of six months in length, this was considered a second non-substantial modification event. Assets were not derecognised as the modifications were not substantial; instead, modification losses were recognised in the period to 31 March 2021. The impact of Covid-19 payment holiday modifications is discussed in note 5.

2.4.2 Measurement of modification losses

The Group has estimated modification losses arising from Covid-19 payment holidays on a cohort basis. Future contractual cash flows are forecast collectively in cohorts based on the remaining contractual term. The cash flow forecasts are then further segmented by month of modification (being payment holiday start date or date of extension) and payment holiday duration.

Following the introduction of automatic rolling extension of payment holidays up to a maximum of six months, a key judgement is the expected payment holiday duration. Customers on payment holidays of one and two month initial durations can first extend to a backstop of a three month payment holiday. Where the customer applied for an extension to their original payment holiday beyond the three month backstop, the payment holiday will automatically extend on a monthly basis up to a maximum of six months unless the customer opted out.

Forecast cash flows are lagged by the relevant payment holiday duration and discounted using the original effective interest rate to calculate net present value of each cohort. The difference between the net present value of the revised cash flows and the carrying value of the assets is recognised in the consolidated statement of comprehensive income as a modification loss.

Customers granted Covid-19 payment holidays were assessed for other potential indicators of SICR. This assessment included a historical review of the customer's payment performance and behaviours. Following this review, those customers that were granted a Covid-19 payment holiday and are judged to have otherwise experienced a SICR are transitioned to stage 2 within the Group's impairment model (note 1.2.iii). Where the modification loss related to customers that have been transitioned from stage 1 to stage 2 as a result of this assessment, the modification loss has been recognised as an impairment in the consolidated statement of comprehensive income.

In the current period, there has been no modification loss recognised in respect of Covid-19 payment holidays. In prior periods if the customer was already in arrears, suggesting a significant increase in credit risk event prior to them being granted a payment holiday; a modification loss relating to these customers has also been recognised in impairment. The remainder of the modification loss has been recognised in revenue (see note 5 for further details).

3. Revenue and Segment reporting

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. The Group has two operating segments based on the geographical location of its operations, being the UK and Ireland. 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. The table below presents the Group's performance on a segmental basis for the nine months to 31 December 2021 in line with reporting to the chief operating decision maker:

9 months to 31 December 2021	Period to 31 Dec 21 £m UK	Period to 31 Dec 21 £m Ireland	Period to 31 Dec 21 £m Total
Revenue	74.9	0.8	75.7
Interest payable and funding facility fees	(14.3)	(0.1)	(14.4)
Interest receivable	0.1	-	0.1
Impairment of amounts receivable from customers	(30.6)	0.3	(30.3)
Administrative and other operating expenses	(19.1)	(0.5)	(19.6)
Provision expenses	(9.9)	-	(9.9)
Total operating expenses	(29.0)	(0.5)	(29.5)
Profit before tax	1.1	0.5	1.6
Tax credit on profit¹	0.9	-	0.9
Profit and total comprehensive income attributable to equity shareholders of the Group	2.0	0.5	2.5

	31 Dec 21	31 Dec 21	31 Dec 21
	£m	£m	£m
	UK	Ireland	Total
Gross loan book²	231.0	1.8	232.8
Less impairment provision	(51.7)	(0.4)	(52.1)
Net loan book³	179.3	1.4	180.7

¹The tax credit for the UK primarily relates to the release of a return to provision adjustment for prior years. .

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.

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; hence the split between UK and Ireland has not been presented. The results of each segment have been prepared using accounting policies consistent with those of the Group as a whole.

	Period to	Period to	Period to
	31 Dec 20	31 Dec 20	31 Dec 20
	£m	£m	£m
9 months to 31 December 2020	UK	Ireland	Total
Revenue	135.7	1.8	137.5
Interest payable and funding facility fees	(22.1)	-	(22.1)
Impairment of amounts receivable from customers	(41.1)	(0.4)	(41.5)
Administrative and other operating expenses	(34.4)	(1.0)	(35.4)
Complaints expense	(116.2)	-	(116.2)
Total operating expenses	(150.6)	(1.0)	(151.6)
Strategic review, formal sale process and related financing costs	(3.6)	-	(3.6)
(Loss)/ profit before tax	(81.7)	0.4	(81.3)
Tax (charge)¹	(5.2)	(0.3)	(5.5)
(Loss)/ profit and total comprehensive income attributable to equity shareholders of the Group	(86.9)	0.1	(86.8)

	31 Dec 20	31 Dec 20	31 Dec 20
	£m	£m	£m
	UK	Ireland	Total
Gross loan book²	497.7	4.7	502.4
Less impairment provision	(89.1)	(1.1)	(90.2)
Net loan book³	408.6	3.6	412.2

1 The tax charge for Ireland is primarily reflective of the write-off of a £0.3m corporation tax asset in the period.

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

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

4. Interest payable and funding facility fees

	Period to	Period to	Year to
	31 Dec 21	31 Dec 20	31 Mar 21
	Unaudited	Unaudited	Audited
	£m	£m	£m
Senior secured notes interest payable	13.4	12.6	17.8
Funding facility fees	0.3	0.9	0.4
Securitisation interest payable	0.2	2.4	2.8
Complaints provision discount unwind (note 13)	-	2.0	2.0
Other finance costs	0.5	4.2	4.5
	14.4	22.1	27.5

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 represent non-utilisation fees of £0.5m relating to the securitisation facility.

In the prior year, other finance costs also included written off fees totalling £1.9m following cancellation of the Group's revolving credit facility and substantial modification of the securitisation facility.

5. Modification of financial assets

Covid-19 payment holidays and any subsequent extensions have been assessed as non-substantial financial asset modifications under IFRS 9 (see note 2.4 for further details). The Group stopped granting payment holidays in March 2021; hence no additional modification losses have been recognised in the period. All payment holidays ended by 31 July 2021.

In the period, £nil of modification losses were released in respect of loan agreements that settled or charged off in the 9 months to 31 December 2021. The carrying value of historical modification losses at the period end was £7.6m.

	Period to	Period to	Year to
	31 Dec 21	31 Dec 20	31 Mar 21
	Unaudited	Unaudited	Audited
	£m	£m	£m
Modification (loss) recognised in revenue	-	(26.2)	(27.2)
Modification (loss) recognised in impairment	-	(7.7)	(8.3)
Total modification (loss)	-	(33.9)	(35.5)

6. Strategic review, formal sale process and related financing costs

Strategic review, formal sale process and related financing costs are disclosed separately in the financial statements because the Directors consider it necessary to do so to provide further understanding of the financial performance of the Group. There has been no strategic review, formal sale process and related financing costs as at 31 December 2021. Prior period costs are material items of expense that have been shown separately due to the significance of their nature and amount.

	Period to	Period to	Year to
	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
	Unaudited	Unaudited	Audited
Strategic review and formal sale process costs	-	3.6	3.0
	-	3.6	3.0

The costs above relate to advisor and legal fees in respect of the strategic review and formal sale process announced on 27 January 2020 and its termination was announced on 8 June 2020.

7. Taxation

The applicable corporation tax rate for the period to 31 December 2021 was 19.0% (Q3 2020: 19.0%) and the effective tax rate is positive 56.3% (Q3 2020: negative 6.8%). The effective tax rate is primarily due to the release of a return to provision adjustment for prior years and the recognition of an imminent tax refund.

In the prior year, the Group's loss-making position and the ongoing uncertainty over the Group's future profitability meant that it was no longer considered probable that future taxable profits would be available against which to recognise deferred tax assets. Consequently, no tax assets were recognised in respect of losses in the prior year, which were primarily driven by the recognition of a £344.6m complaints provision as at 31 March 2021. The uncertainty remains in the period to 31 December 2021 as the Group continues to pursue a Scheme of Arrangement.

Whilst the nine months ended 31 December 2021 were profitable, no tax charge has been recognised on profits due to the uncertainty around the profitability for the remainder of the year, whereby revenue will continue to decrease as the loan book declines and the uncertainty surrounding the outcome of the Scheme of Arrangement.

8. Profit/(loss) per share

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

Diluted earnings/(loss) per share calculates the effect on profit/(loss) per share assuming conversion of all dilutive potential ordinary shares. Dilutive potential ordinary shares are calculated as follows:

i) For share awards outstanding under performance-related share incentive plans such as the Share Incentive Plan (SIP) and the Long Term Incentive Plans (LTIPs), the number of dilutive potential ordinary shares is calculated based on the number of shares which would be issuable if the end of the reporting period is assumed to be the end of 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 earnings/(loss) per share.

	31 Dec 21	31 Dec 20	31 Mar 21
	Unaudited	Unaudited	Audited
	Pence	Pence	Pence
Basic earnings/ profit/(loss) per share	0.5	(18.3)	(60.8)
Diluted earnings/ profit/(loss) per share	0.5	(18.2)	(60.8)
Adjusted basic earnings/ profit/(loss) per share (basic and diluted)2	0.2	(16.2)	(58.9)

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

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

	31 Dec 21	31 Dec 20	31 Mar 21
	Unaudited	Unaudited	Audited
	£m	£m	£m
Profit/(loss) for basic EPS	2.5	(86.8)	(289.1)
Strategic review, formal sale process and related financing costs	-	3.6	3.0
Write-off of revolving credit facility (RCF) fees	-	0.7	0.7
Write-off of unamortised securitisation fees	-	1.2	1.2
Tax provision release	(0.8)	(2.5)	(2.5)
Tax refund due	(0.6)	-	-
Tax asset write-off	-	7.8	7.8
Less tax impact	-	(1.0)	(0.9)
Profit/(loss) for adjusted basic EPS1	1.1	(77.0)	(279.8)
Basic weighted average number of shares (m)	475.3	475.3	475.3
Dilutive potential ordinary shares (m)²	0.8	2.7	0.5
Diluted weighted average number of shares (m)	476.1	478.0	475.8

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

2. Although the Group has issued further options under the employee share schemes, upon assessment of the dilutive nature of the options, some options are not considered dilutive as at 31 December 2021 as they would not meet the performance conditions. Those dilutive shares included are in relation to the employee October 2020 SAYE scheme.

9. 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.

	31 Dec 21	31 Dec 20	31 Mar 21
	Unaudited	Unaudited	Audited
	£m	£m	£m
Stage 1	165.5	364.9	311.5
Stage 2	40.1	93.5	61.4
Stage 3	27.2	44.0	50.0
Gross loan book	232.8	502.4	422.9
Deferred broker costs1 - stage 1	3.2	8.7	7.2
Deferred broker costs1 - stage 2	0.8	2.3	1.4
Deferred broker costs1 - stage 3	0.5	1.1	1.1
Loan book inclusive of deferred broker costs	237.3	514.5	432.6
Provision²	(52.1)	(90.2)	(82.0)
Customer loans and receivables	185.2	424.3	350.6

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.

2. Included within the provision is a judgemental management overlay of £nil for 31 December 2021, £6.2m for 31 December 2020 and £6.0m for 31 March 2021.

As at 31 December 2021, £106.2m of loans to customers had their beneficial interest assigned to the Group's special purpose vehicle (SPV) entity, namely AMGO Funding (No. 1) Ltd, as collateral for securitisation transactions (Q3 2020: £211.7m).

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

	31 Dec 21	31 Dec 20	31 Mar 21
	Unaudited	Unaudited	Audited
	£m	£m	£m
Current	165.1	376.2	315.5
1-30 days	29.8	57.7	41.4
31-60 days	10.6	24.5	16.0
>60 days	27.3	44.0	50.0
Gross loan book	232.8	502.4	422.9

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.

	31 Dec 21	31 Dec 20	31 Mar 21
	Unaudited	Unaudited	Audited
Customer loans and receivables	£m	£m	£m
Due within one year	140.6	241.8	218.9
Due in more than one year	40.1	170.4	122.0
Net loan book	180.7	412.2	340.9
Deferred broker costs1
Due within one year	3.2	7.5	6.2
Due in more than one year	1.3	4.6	3.5
Customer loans and receivables	185.2	424.3	350.6

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.

10. Other receivables

	31 Dec 21	31 Dec 20	31 Mar 21
	Unaudited	Unaudited	Audited
	£m	£m	£m
Current
Other receivables	0.6	0.2	0.5
Prepayments and accrued income	0.9	1.0	1.1
	1.5	1.2	1.6

11. Trade and other payables

	31 Dec 21	31 Dec 20	31 Mar 21
	Unaudited	Unaudited	Audited
	£m	£m	£m
Current
Accrued senior secured note interest	8.2	8.1	3.7
Trade payables	0.3	0.4	0.5
Taxation and social security	0.4	0.9	0.8
Other creditors	0.9	2.9	1.8
Accruals and deferred income	5.1	8.1	9.1
	14.9	20.4	15.9

12. Bank and other borrowings

	31 Dec 21	31 Dec 20	31 Mar 21
	Unaudited	Unaudited	Audited
	£m	£m	£m
Current and non-current liabilities
Amounts falling due in less than 2 years
Securitisation facility	-	-	64.4
Amounts falling due 2-3 years
Senior secured notes	232.6	-	232.1
Securitisation facility	-	112.2	-
Amounts falling due 3-4 years
Senior secured notes	-	231.9	-
	232.6	344.1	296.5

The Group's facilities are:

• Senior secured notes in the form of £232.6m high yield bonds with a coupon rate of 7.625% which expire in January 2024 (Q3 2020: £231.9m). The senior secured notes are presented in the financial statements net of unamortised fees. As at 31 December 2021, the gross principal amount outstanding was £234.1m. On 20 January 2017, £275.0m of notes were issued at an interest rate of 7.625%. The high yield bond was tapped for £50.0m in May 2017 and again for £75.0m in September 2017 at a premium of 3.8%. £165.9m of notes have been repurchased in the open market in prior financial years (2020: £85.9m; 2019: £80.0m). After the Balance Sheet date, Amigo served notice of the early redemption, at par, of £184.1m of the outstanding senior secured notes (see note 17).

· The securitisation facility was in place during the period; however, the securitisation facility has been fully repaid. Given the current suspension of all new lending activity at Amigo, the size of the securitisation facility was reduced from £250m to £100m, effective 25 June 2021. On 25 June 2021, the Group extended the securitisation facility's performance trigger waiver period from 25 June 2021 to 24 September 2021. The 24 September 2021 extension period of the facility's performance trigger waiver expired on 24 September 2021. In light of the Group's immediate financing needs and current unrestricted cash balance, the Company does not expect the need to operate the securitisation facility in the near term. The Board intends to keep the securitisation structure in place to provide the Company with more diversity for future funding options. With effect from 24 September 2021, all rights, obligations and liabilities of the Lead Arranger, Facility Agent and Senior Noteholder, as defined in the securitisation Facility Documents, were taken over and assumed by Amigo.

13. Provisions

Provisions are recognised for present obligations arising as the consequence of past events where it is more likely than not that a transfer of economic benefit will be necessary to settle the obligation, which can be reliably estimated.

	31 Dec 21			31 Dec 20			31 Mar 2021
	Complaints	Restructuring	Total	Complaints	Restructuring	Total	Complaints	Restructuring	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance as at 31 March 2021/20	344.6	-	344.6	117.5	-	117.5	117.5	-	117.5
Provisions made during period	9.9	-	9.9	116.2	-	116.2	318.8	1.0	319.8
Discount unwind (note 4)	-	-	-	2.0	-	2.0	2.0	-	2.0
Movement in the provision	(7.0)	-	(7.0)	(84.8)	-	(84.8)	(93.7)	-	(93.7)
Closing provision	347.5	-	347.5	150.9	-	150.9	344.6	1.0	345.6

Non-current	-	-	-	-	-	-	-	-	-
Current	347.5	-	347.5	150.9	-	150.9	344.6	1.0	345.6
	347.5	-	347.5	150.9	-	150.9	344.6	1.0	345.6

Customer complaints redress

As at 31 December 2021, the Group has recognised a complaints provision totalling £347.5m in respect of customer complaints redress and associated costs. Utilisation in the period totalled £7.0m. Our lending practices have been subject to significant shareholder, regulatory and customer attention, which, combined with the pursuit of a Scheme, has resulted in an increase in the number of complaints received.

The current provision reflects the estimate of the cost of redress relating to customer-initiated complaints and complaints raised by CMCs for which it has been concluded that a present constructive obligation exists, based on the latest information available.

The provision has two components, firstly a provision for complaints received at the reporting date, and secondly a provision for the projected costs of potential future complaints where it is considered more likely than not that customer redress will be appropriate.

The engagement with customers and increased publicity of complaints in connection the proposed Scheme and the accompanying creditor vote process, as well as ongoing publicity relating to any potential future Scheme, is expected to result in an acceleration in the timing of claims versus our prior year assumptions. Consequently, in the current period, the complaints provision is classified as a current liability.

There is significant uncertainty around the emergence period for complaints, in particular the impact of customer communications in connection with the unsuccessful Scheme of Arrangement and any potential alternative Scheme of Arrangement and the activities of claims management companies; both of which could significantly affect complaint volumes, uphold rates and redress costs. It is possible that the eventual outcome may differ materially from current estimates which could materially impact the financial statements as a whole, given the Group's only activity is guarantor-backed consumer credit. See note 2.3 for details of the key assumptions that involve significant management judgement and estimation in the provision calculation, and for sensitivity analysis.

The Group continues to monitor its policies and processes to ensure that it responds appropriately to customer complaints.

The Group will continue to assess both the underlying assumptions in the calculation and the adequacy of this provision periodically using actual experience and other relevant evidence to adjust the provisions where appropriate.

Restructuring provision

As at 31 March 2021, the Group recognised a restructuring provision totalling £1.0m in respect of the expected cost of staff redundancies. This provision was fully utilised by 30 June 2021 and outstanding balance at 31 December 2021 is £nil.

Contingent liability

FCA investigation

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

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

Such investigations take an average of two years to conclude from the commencement date. There are a number of different outcomes which may result from this FCA investigation, including the imposition of a significant fine and/or the requirement to perform a back-book remediation exercise in the absence of a successful Scheme of Arrangement. Should the FCA mandate this review it is possible that the cost of such an exercise will exceed the Group's available resources. The potential impact of the investigation on the business is unpredictable and unquantifiable.

14. Immediate and ultimate parent undertaking

The immediate and ultimate parent undertaking is Amigo Holdings PLC, a company incorporated in England and Wales. The consolidated financial statements of the Group as at and for the year ended 31 March 2021 are available upon request from the Company's registered office at Nova Building, 118-128 Commercial Road, Bournemouth, United Kingdom, BH2 5LT.

15. Share-based payments

Share-based payment transactions in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity settled share-based payments. At the grant date, the fair value of the share-based payment is recognised by the Group as an expense, with a corresponding increase in equity, over the period in which the employee becomes unconditionally entitled to the awards. The fair value of the awards granted is measured based on Company specific observable market data, considering the terms and conditions upon which the awards were granted. The Group recognised an expense of £0.7m in the nine months to 31 December 2021.

16. Related party transactions

The Group had no related party transactions during the nine-month period to 31 December 2021 that would materially affect the performance of the Group. Details of the transactions for the year ended 31 March 2021 can be found in note 24 of the Amigo Holdings PLC financial statements.

17. Post balance sheet events

Senior secured notes partial redemption

On 4 January 2022, Amigo served notice of the early redemption, at par, of £184.1m of the £234.1m outstanding 7.625% senior secured notes due in 2024 with a redemption date of 15 January 2022. The remaining £50.0m gross principal amount outstanding is due in January 2024.

Board changes

On 24 January 2022 Amigo announced that the Chief Financial Officer (CFO) Mike Corcoran, would leave the business with immediate effect. Mike formally stepped down as a Director on 19 February 2022. Danny Malone was appointed interim CFO, and joined the business on 7 February 2022.

Scheme of Arrangement and Equity issue update

On 24 January 2022 Amigo announced a Scheme of Arrangement and Equity issue update. For the New Business Scheme Amigo is proposing initial cash contributions totalling 97 million from internally generated resource, alongside a further contribution of £15m, being part of the proceeds of a new equity raise. The equity raise is likely to be undertaken by a rights issue for existing shareholders, with a placing of unsubscribed shares to third party investors. In order to secure the best result for Redress Creditors possible in the circumstances, the New Business Scheme will include a mechanism for an additional payment to Redress Creditors to be made in the event that the existing loan book generates a better return than currently anticipated. The New Business Scheme will also require the Company to issue at least 19 new shares for every existing share in the Company.

Appendix: alternative performance measures (unaudited)

This financial report provides alternative performance measures (APMs) which are not defined or specified under the requirements of International Financial Reporting Standards. The Board believes these APMs provide readers with important additional information on the Group. To support this, details of the APMs used, how they are calculated and why they are used are set out below.

Key performance indicators

Other financial data

	9 months ended		9 months ended	Year to
	31 December		31 December	31 March
Figures in £m, unless otherwise stated		2021	2020	2021
Average gross loan book		327.9	626.2	586.4
Gross loan book		232.8	502.4	422.9
Percentage of book <31 days past due		83.7%	86.4%	84.4%
Net loan book		180.7	412.2	340.9
Net debt		52.9	(179.5)	(118.6)
Net debt/gross loan book		(22.7)%	35.7%	28.0%
Net debt/equity		0.4x	2.2x	(1.0)x
Revenue yield		30.8%	29.3%	29.1%
Risk adjusted revenue		45.4	96.0	110.1
Risk adjusted margin		18.5%	20.4%	18.8%
Net interest margin		14.6%	20.8%	20.3%
Adjusted net interest margin		25.0%	24.6%	24.5%
Cost of funds percentage		5.9%	4.3%	4.3%
Impairment:revenue ratio		40.0%	30.2%	35.5%
Impairment charge as a percentage of loan book		17.4%	11.0%	14.4%
Cost:income ratio		39.0%	110.3%	212.7%
Operating cost:income ratio (ex. complaints)		25.9%	25.7%	26.1%
Adjusted profit/(loss) after tax		1.1	(77.0)	(279.8)
Return on assets		0.6%	(17.3)%	(44.9)%
Adjusted return on average assets		0.3%	(15.3)%	(43.5)%
Return on equity		(2.8)%	(93.3)%	(1257.0)%
Adjusted return on average equity		(1.2)%	(82.7)%	(1216.5)%

1. Average gross loan book

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Opening gross loan book	422.9	749.9	749.9
Closing gross loan book	232.8	502.4	422.9
Average gross loan book¹	327.9	626.2	586.4

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

2. The percentage of balances up to date or less than 31 days overdue is presented as this is useful in reviewing the quality of the loan book.

	31 Dec 21	31 Dec 20	31 Mar 21
Ageing of gross loan book by days overdue:	£m	£m	£m
Current	165.1	376.2	315.5
1-30 days	29.8	57.7	41.4
31-60 days	10.6	24.5	16.0
>61 days	27.3	44.0	50.0
Gross loan book	232.8	502.4	422.9
Percentage of book <31 days past due	83.7%	86.4%	84.4%

3. "Net loan book" is a subset of customer loans and receivables and represents the interest yielding loan book when the IFRS 9 impairment provision is accounted for, comprised of:

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Gross loan book1 (see APM number 2)	232.8	502.4	422.9
Provision2	(52.1)	(90.2)	(82.0)
Net loan book 3	180.7	412.2	340.9

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

² Provision for impairment represents the Group's estimate of the portion of loan accounts that are not in arrears or are up to five payments in arrears for which the Group will not ultimately be able to collect payment. Provision for impairment excludes loans that are six or more payments in arrears, which are charged off of the statement of financial position and are therefore no longer included in the loan book.

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

4. "Net debts" is comprised of:

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Borrowings¹	(232.6)	(344.1)	(296.5)
Cash and cash equivalents	285.5	164.6	177.9
Net debt	52.9	(179.5)	(118.6)

1 Total borrowing is net of unamortised fees.

This is deemed useful to show total debt if unrestricted cash available at the period end was used to repay borrowings.

5. The Group defines loan to value (LTV) as net debt divided by gross loan book. This measure shows if the debt year-on-year movement is in line with loan book growth.

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Net debt (see APM number 4)	52.9	(179.5)	(118.6)
Gross loan book (see APM number 2)	232.8	502.4	422.9
Net debt/gross loan book	(22.7)%	35.7%	28.0%

6. Net borrowings/equity

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Shareholder equity	118.1	80.7	(121.4)
Net debt (see APM number 4)	52.9	(179.5)	(118.6)
Net debt/equity	0.4x	2.2x	(1.0)x

This is one of the Group's metrics to assess gearing.

7. The Group defines "revenue yield" as annualised revenue over the average of the opening and closing gross loan book for the period.

	31 Dec 21	31 Dec20	31 Mar 21
Revenue yield	£m	£m	£m
Revenue	75.7	137.5	170.8
Opening loan book	422.9	749.9	749.9
Closing loan book	232.8	502.4	422.9
Average loan book (see APM number 1)	327.9	626.2	586.4
Revenue yield (annualised)	30.8%	29.3%	29.1%

This is deemed useful in assessing the gross return on the Group's loan book.

8. The Group defines "risk adjusted revenue" as revenue less impairment charge.

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Revenue	75.7	137.5	170.8
Impairment of amounts receivable from customers	(30.3)	(41.5)	(60.7)
Risk adjusted revenue	45.4	96.0	110.1

Risk adjusted revenue is not a measurement of performance under IFRS and is not an alternative to profit/(loss) before tax as a measure of the Group's operating performance, as a measure of the Group's ability to meet its cash needs or as any other measure of performance under IFRS.

9. The Group defines "risk adjusted margin" as risk adjusted revenue divided by the average of gross loan book.

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Risk adjusted revenue (see APM number 8)	45.4	96.0	110.1
Average gross loan book (see APM number 1)	327.9	626.2	586.4
Risk adjusted margin (annualised)	18.5%	20.4%	18.8%

This measure is used internally to review an adjusted return on the Group's loan book.

10. The Group defines "net interest margin" as annualised net interest income divided by average interest-bearing assets (being both gross loan book and cash) at the beginning of the period and end of the period.

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Revenue	75.7	137.5	170.8
Interest payable, receivable and funding facility fees	(14.3)	(22.1)	(27.4)
Net interest income	61.4	115.4	143.4
Opening interest-bearing assets (gross loan book plus unrestricted cash)	600.8	814.2	814.2
Closing interest-bearing assets (gross loan book plus unrestricted cash)	518.3	667.0	600.8
Average interest-bearing assets (customer loans and receivables plus unrestricted cash)	559.6	740.6	707.5
Net interest margin (annualised)	14.6%	20.8%	20.3%

Adjusted net interest margin, being net interest income divided by average gross loan book, is also presented below:

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Net interest income	61.4	115.4	143.4
Average gross loan book (see APM number 1)	327.9	626.2	586.4
Adjusted net interest margin (annualised)	25.0%	24.6%	24.5%

11. The Group defines "cost of funds" as annualised interest payable divided by the average of gross loan book at the beginning and end of the period.

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Cost of funds	14.4	22.1	27.5
Less complaints discount unwind expense (notes 4 and 13)	-	(2.0)	(2.0)
Adjusted cost of funds	14.4	20.1	25.5
Average gross loan book (see APM number 1)	327.9	626.2	586.4
Cost of funds percentage (annualised)	5.9%	4.3%	4.3%

This measure is used by the Group to monitor the cost of funds and impact of diversification of funding. The measure has been amended to reflect on true interest expenses related to borrowings, accounting related adjustments have been removed to provide a better understanding for users.

12. Impairment charge as a percentage of revenue "impairment:revenue ratio" represents the Group's impairment charge for the period divided by revenue for the period.

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Revenue	75.7	137.5	170.8
Impairment of amounts receivable from customers	30.3	41.5	60.7
Impairment charge as a percentage of revenue	40.0%	30.2%	35.5%

This is a key measure for the Group in monitoring risk within the business.

13 . Impairment charge as a percentage of loan book represents the Group's impairment charge for the period divided by closing gross loan book.

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Impairment of amounts receivable from customers	30.3	41.5	60.7
Closing gross loan book (see APM number 1)	232.8	502.4	422.9
Impairment charge as a percentage of loan book (annualised)	17.4%	11.0%	14.4%

This allows review of the impairment charge relative to the size of the Group's gross loan book.

14. The Group defines "cost:income ratio" as operating expenses excluding strategic review, formal sale process and related financing costs divided by revenue.

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Revenue	75.7	137.5	170.8
Total operating expenses	29.5	151.6	363.3
Cost:income ratio	39.0%	110.3%	212.7%

This measure allows review of cost management.

15. Operating cost:income ratio, defined as the cost:income ratio excluding the complaints provision, is:

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Revenue	75.7	137.5	170.8
Administrative and other operating expenses	19.6	35.4	44.5
Operating cost:income ratio	25.9%	25.7%	26.1%

16. The following table sets forth a reconciliation of profit/(loss)after tax to "adjusted profit/(loss) after tax" for the 9 months to 31 December 2021, 2020 and year to 31 March 2021.

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Reported profit/(loss) after tax	2.5	(86.8)	(289.1)
Revolving credit facility (RCF) fees	-	0.7	0.7
Securitisation fees	-	1.2	1.2
Strategic review and formal sale process costs	-	3.6	3.0
Tax provision release	(0.8)	(2.5)	(2.5)
Tax refund due	(0.6)	-	-
Tax asset write-off	-	7.8	7.8
Less tax impact	-	(1.0)	(0.9)
Adjusted profit/(loss) after tax	1.1	(77.0)	(279.8)

The above items were all excluded due to their exceptional nature. The Directors' believe that adjusting for these items is useful in making year-on-year comparisons.

· Senior secured note buybacks are not underlying business-as-usual transactions.

· RCF fees relate to fees written-off following the modification and extension of the revolving credit facility in FY20, and in FY21 relates to fees written-off following cancellation of the facility. Modification, extension and cancellation of the facility were all deemed substantial modifications of the financial instrument leading to the derecognition of previously capitalised fees. The facility was cancelled in May 2020 and hence these amounts have been excluded.

· Following the renegotiation of the securitisation facility on 14 August 2020 a substantial modification of the facility occurred; as such all previous capitalised fees relating to the facility have been written off. This has been adjusted for above as it was a one-off event in the period.

· Due to inherent uncertainty surrounding future profitability, current and deferred tax assets were written off and charged to the consolidated statement of comprehensive income in the year. The tax provision release refers to the release of a tax provision no longer required. These adjustments result in a tax charge for the year despite the large loss making position as at 31 March 2021 and hence have been adjusted for in the calculation.

· Strategic review and formal sale process costs relate to the strategic review and formal sale processes both announced in January 2020. They are one off costs and hence have been adjusted.

· Tax provision release is a prior year adjustment due to the release of the 2017 uncertain tax provision relating to potential thin capitalisation adjustment in Amigo Holdings.

· Tax refund due reflects the release of a historic tax liability.

None are business-as-usual transactions. Hence, removing these items is deemed to give a view of underlying profit/(loss) adjusting for non-business-as-usual items within the financial year.

17. Return on assets (ROA) refers to annualised profit/(loss) over tax as a percentage of average assets.

Adjusted return on assets	31 Dec 21	31 Dec 20	31 Mar 21
Profit/(loss) after tax	2.5	(86.8)	(289.1)
Customer loans and receivables at period and year end	185.2	424.3	350.6
Other receivables and current assets at period and year end	5.7	1.2	8.0
Cash and cash equivalents at period and year end	285.5	164.6	177.9
Total	476.4	590.1	536.5
Average assets	533.3	670.6	643.8
Return on assets (annualised)	0.6%	(17.3)%	(44.9)%

18. Adjusted return on assets refers to annualised adjusted profit/(loss) over tax as a percentage of average assets

Adjusted return on assets	31 Dec 21	31 Dec 20	31 Mar 21
Adjusted profit/(loss) after tax (see APM number 16)	1.1	(77.0)	(279.8)
Customer loans and receivables at period and year end	185.2	424.3	350.6
Other receivables and current assets at period and year end	5.7	1.2	8.0
Cash and cash equivalents at period and year end	285.5	164.6	177.9
Total	476.4	590.1	536.5
Average assets	533.3	670.6	643.8
Adjusted return on assets (annualised)	0.3%	(15.3)%	(43.5)%

19. "Return on equity" (ROE) is calculated as annualised profit/(loss) after tax divided by the average of equity at the beginning of the period and the end of the period.

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Profit/(loss) after tax	2.5	(86.8)	(289.1)

Shareholder equity	(118.1)	80.7	(121.4)
Average equity	(119.8)	124.1	23.0
Return on average equity (annualised)	(2.8)%	(93.3)%	(1257.0)%

20. "Adjusted return on equity" is calculated as annualised adjusted profit/(loss) after tax divided by the average of equity at the beginning of the period and the end of the period.

	31 Dec 21	31 Dec 20	31 Mar 21
	£m	£m	£m
Adjusted profit/(loss) after tax (see APM number 16)	1.1	(77.0)	(279.8)

Shareholder equity	(118.1)	80.7	(121.4)
Average equity	(119.8)	124.1	23.0
Adjusted return on average equity (annualised)	(1.2)%	(82.7)%	(1216.5)%

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