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Amigo Holdings PLC (AMGO)

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Friday 07 June, 2019

Amigo Holdings PLC

Annual Financial Report

RNS Number : 4559B
Amigo Holdings PLC
07 June 2019


7 June 2019

Amigo Holdings PLC

("Amigo" or the "Company")


Posting of Annual Report


The Company's Annual Report and Accounts for the year ended 31 March 2019 (the "2019 Annual Report") have been published on the Company's website at The 2019 Annual Report and the notice of annual general meeting, to be held on Friday 12 July 2019 at 11.30 a.m. at Hilton Hotel, Terrace Road, Bournemouth BH2 5EL, will be posted to shareholders on 12 June 2019. The notice contains instructions on how to vote in person, electronically or by proxy.


In accordance with Listing Rule 9.6.1.R of the UK Financial Conduct Authority, the 2019 Annual Report has been submitted to the National Storage Mechanism and will be available for inspection shortly at


The information contained in the Appendix to this announcement, which is extracted from the 2019 Annual Report, is included for the purposes of complying with DTR 6.3.5R(2)(b) and is reproduced below in unedited full text form. The information should be read in conjunction with the results for the financial year ended 31 March 2019 (the "Full Year Results Announcement") announced on Tuesday 28 May 2019. This announcement and the Full Year Results Announcement together constitute the material required by DTR 6.3.5R to be communicated to the media in unedited full text. This material is not a substitute for reading the full 2019 Annual Report.


Defined terms used in the Appendix refer to terms as defined in the 2019 Annual Report, unless the context otherwise requires, and page and note references in the Appendix below refer to page and note references in the 2019 Annual Report.


This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014


The person responsible for making this announcement is Roger Bennett, Head of Company Secretariat.



Additional Information

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to this announcement or otherwise.

This announcement constitutes notice by Amigo Luxembourg S.A. (the "Issuer") to the holders of the Issuer's 7.625% Senior Secured Notes due 2024 (for the notes issued pursuant to Rule 144A of the United States Securities Act of 1933, ISIN: XS1533928468 and Common Code: 153392846; for the notes issued pursuant to Regulation S of the United States Securities Act of 1933, ISIN: XS1533928625 and Common Code: 153392862) (the "Notes") issued pursuant to pursuant to Section 4.03(a)(3) of an indenture dated January 20, 2017 among, inter alia, the Issuer, the guarantors named therein and U.S. Bank Trustees Limited, as trustee and security agent.  Amigo Holdings PLC is the indirect parent company of the Issuer. This announcement shall constitute a "Report" to holders of the Notes.






Hawthorn Advisors                                    [email protected]

Lorna Cobbett                                              Tel: 020 3745 4960

Victoria Ainsworth


RBC Capital Markets

Markus Jackson                                                                Tel: +44 (0) 20 7029 0508

Oliver Hearsey                                                  Tel: +44 (0) 20 7653 4525


Notes to Editors:


About Amigo Loans

Amigo Holdings PLC ("Amigo" or the "Company") is listed on the main market of the London Stock Exchange (ticker: AMGO). Amigo is the leading provider of guarantor loans in the UK and offers 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 has grown 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 is a mid-cost credit provider with one simple and transparent product - a guarantor loan at an APR of 49.9%, with no fees, early redemption penalties or any other charges.


Amigo Loans Ltd and Amigo Management Services Ltd are authorised and regulated in the UK by the Financial Conduct Authority (FCA).




Principal risks and uncertainties



Amigo has always seen good risk management - particularly around customer and conduct risk and credit risk - as a key driver of our success. But in the past year, with Amigo's growth, listing as a public company and entry to the FTSE 250, we have also broadened and formalised our risk governance. This includes enhancing the "three lines of defence" model, as set out below:


·    Business Line Management - Take risks as an inherent part of the operation of the business and responsible for doing so in a well-controlled manner, within Amigo's risk appetite;

·    Risk Management - Provide independent monitoring and challenge to the first line, ensuring that risks are identified, controlled and managed properly; and

·    Internal Audit - Provide assurance that the first and second lines are doing what they should, and the relationship between them is functioning well.

Management, the Risk Committee, and the Board regularly review our risk profile. We consider the risks currently faced by the business as well as scanning the horizon for emerging risks. The summary below covers the principal risks and uncertainties that we think could have a significant impact on the business, but it should not be taken as a complete list of potential issues.

Overall statement of risk appetite

Amigo recognises that taking risk is necessary, but we seek at all times to ensure that the risk we take is well informed and deliberate, and that controls are in place to mitigate its impact. We apply this principle to ourselves and support our customers in doing the same.


Principal risks and uncertainties

Credit risk

The risk that a counterparty will not repay a debt in full and on time. This includes idiosyncratic lending risk, macroeconomic risk and new lending pilot risk.



Risk appetite


Change in past year


Amigo is a mid-cost lender and we take a degree of credit risk that is consistent with our pricing. Core lending, the bulk of our business, is to customer segments we understand well. We also engage on a controlled basis in pilot lending, testing new segments that we think are appropriate for our product. Amigo does not have an appetite for material wholesale credit risk or other credit risk outside its lending business.

The guarantor nature of our product significantly mitigates the credit risk of our lending, and our Decision Science (analytics) team uses available data to identify lending that is within our risk appetite. We explore new lending segments on a controlled basis through our pilot lending programme. Our Collections team works with customers who fall behind on payments to assist them in coming back up to date on their obligations.

Origination through the year has focused on well understood segments, with older lending pilots either being promoted to core lending or terminated and fewer new pilots pursued. Performance has generally been better than initially forecast. At the same time, higher risk lending from earlier lending pilots has led to slightly increased arrears as the debts have matured, and the persistent uncertainty in the macroeconomic environment, including due to Brexit, has been a drag on performance. The overall result has been broadly stable.


Customer and conduct risk

The risk that Amigo's actions will lead to poor outcomes for our customers. This includes affordability risk, the risk of customer misunderstanding and the risk of persistent debt.



Risk appetite


Change in past year


Amigo recognises that borrowing or acting as a guarantor is a big decision for our customers and we take every reasonable step to ensure that those decisions are fully informed and appropriate.


Amigo believes that the most effective mitigation of customer and conduct risk is based in corporate culture. To that end, we seek to instil a customer-oriented mindset in all employees. Performance metrics and remuneration at all levels are designed with good customer outcomes in mind. Any customer complaints or other evidence of adverse customer outcomes are thoroughly investigated to understand the root cause, and changes are made to business practices when appropriate. Affordability is assessed for both borrower and guarantor on all loans, and we speak with all guarantors to ensure they fully understand their obligations. Measures are in place to identify and work carefully with vulnerable customers. As a second line of defence, a robust system of compliance monitoring covers all customer touchpoints.

Amigo's culture remains strongly customer focused and our product offering remains simple and transparent. We have enhanced processes, such as instituting further income and expense verification for customers at higher risk of affordability issues, and revised performance metrics to better align to customer outcomes.  Our customer and conduct risk management continues to develop in line with evolving regulation and industry best practice.



Regulatory and political risk

The risk that the regulatory or political environment will change in a way adverse to our business. This may be explicit changes in regulation or legislation or changes in interpretation. It includes regulation or legislation specific to our product, applying to financial services more generally, or not specific to our business at all. For example HM Treasury have consulted on the introduction of a statutory breathing space for debtors in financial difficulty. Until the detail is published we cannot be sure of the impact on our business.


Risk appetite


Change in past year

Amigo is in a sector (financial services) and a sub-sector (alternative finance) that are inherently subject to significant regulatory and political risk, but we take all reasonable steps to reduce that risk as it applies to us.

Amigo proactively engages with regulators and politicians to ensure they understand our business model and the value of the service we provide to our customers. We support sensible regulation and legislation that enhances the functioning of the consumer finance market. We actively scan the horizon for any potential changes that may impact our business so that we can be ready for them well before they are implemented.

In the latter part of the year, the FCA stated that it would look specifically at the guarantor loan providers. While we are confident that we can address the specific concerns they have raised, the risk remains elevated.



Reputation risk

The risk of negative stories impacting the way customers, employees, investors, media, politicians, regulators or other stakeholders view Amigo and our brand and affecting their business relationship with us, whether linked to us specifically or not, and whether fair or unfair. This includes both event-driven and non-event-driven risks.


Risk appetite


Change in past year


Amigo works to maintain a positive reputation. We do not act in a way that would give cause for negative stories and we actively counter mistaken or misleading public discussion.

Reputation risk is largely a secondary risk, meaning it results from other failures creating the basis for negative stories. Our primary mitigation therefore is sound risk management, preventing such incidents in the first place. We proactively engage with journalists, politicians and regulators to prevent mistaken or misleading public statements, and we monitor traditional and social media to counter mistaken or misleading stories. A specific policy and employee training address appropriate use of social media and the risks involved.

The latter part of the year saw a steep rise in criticism of guarantor loans from politicians and the FCA. This was not tied to any specific acts or failures by Amigo but referred to general trends and non-specific anecdotal evidence. While we are actively working to counter certain concerns and evolve our practices to address others as appropriate, the risk remains elevated.


Operational risk

The risk of a loss or negative impact due to inadequate or failed internal policies, processes or systems or from external events. This includes data security and cyber risk, system availability, senior managers and certification regime (SMCR) implementation and legal risk.



Risk appetite


Change in past year


Amigo takes a proportionate approach to operational risks, balancing the need to provide consistent and reliable operational performance with the need to remain nimble, refining our operations in a continually changing environment.

IT infrastructure and systems are designed with security, redundancy and spare capacity and are regularly tested. Disaster recovery and incident response plans are in place. The Change Management function provides second line review over all changes in process or systems. First and second line functions monitor process execution and feed back to process owners to continually drive improvement.

The business has a history of rapid operational change and the past year has been no exception. Both efficiency and the control environment are improving but the net effect on risk is broadly stable for now. Our cyber security and IT resilience are constantly evolving, but the threats are as well, resulting in a stable risk position.


People risk

The risk that Amigo will not have the number and quality of people necessary to deliver on its strategy.


Risk appetite


Change in past year


Amigo aims to have the quantity and quality of people necessary to meet its objectives at all times and to maintain its performance in case of unexpected loss of key personnel.

Amigo has succession plans in place for all key people. Robust knowledge management ensures that business operations would not be disrupted by the unexpected loss of key individuals. General staffing requirements are planned well in advance. Amigo positions itself as a highly desirable employer with its combination of culture, work environment and compensation.

Amigo has significantly improved the breadth and depth of its senior management, adding "bench strength" and improving succession planning. Overall staffing levels remain adequate but a number of initiatives have been put in place to improve retention across the business. As a listed company, we now have additional tools available to help with recruiting and retention.


Strategic and competitive risk

The risk that Amigo fails to achieve its objectives, either due to actively poor decisions or a passive failure to adapt to changes in the competitive environment. This includes the risk of new competitors and the risks in entering a new geography.



Risk appetite


Change in past year


Amigo maintains a simple strategy, focusing on maintaining its dominant position and leading execution in the guarantor loans space while exploring adjacent niches which can be developed using our specialised capabilities if they prove promising.

Amigo keeps our strategic focus on our guarantor loan product, doing one thing and doing it extremely well. We do not extend ourselves into barely related product areas. We closely monitor developing competition and counter it with our strong brand and operational excellence.

Amigo launched our first international business this year in Ireland. While this is being done on a controlled and phased basis, it is a significant step for us. A number of new competitors have entered the guarantor loan space and are growing, though from a very small base. Our position remains dominant across many dimensions - brand, product share and operational efficiency - though we have to work to maintain that.


Treasury risk

The risk arising from the core actions of the Treasury function. This is principally liquidity risk.



Risk appetite


Change in past year


Amigo operates its Treasury function to support the growth of its lending business. Treasury is not a profit centre and avoids or hedges any material risk.


Amigo maintains diversity of funding sources and term length. We keep substantial headroom to covenant levels on funding agreements such that there is no material chance of breaching them. Our current strategy creates no material interest rate risk or market risk, but if that changes, it will be hedged.

Amigo has improved its funding diversification over the past year through its private securitisation. While operations have started in Ireland, foreign exchange risk remains immaterial.

















Risk of Shareholders with significant influence

The Company has a majority shareholder which possesses sufficient voting power to have a significant influence over certain matters requiring Shareholder approval, including the election of directors, dividend policy, remuneration policy and approval of significant corporate transactions. The position of the majority shareholder may not always be aligned with the opinion and interests of management, the Company or the Company's minority Shareholders. For more information on the majority shareholders of the Company please see page 79 in the Annual Report.


Risk appetite


Change in past year

The Company seeks to foster

effective engagement with, and

encourage participation from, its Shareholders and its majority shareholder in particular. It seeks to engender a culture where the Company is responsive to views of its Shareholders.


In addition to formal meetings with the majority Shareholder, the Chair seeks regular engagement with the majority Shareholder to understand its views on governance and performance against strategy. The Chairs of each of the Board Committees also seek engagement with Shareholders on significant matters related to their areas of responsibility and the Chair ensures that the Board as a whole has a clear understanding of the views of its Shareholders, including its majority Shareholder.


The Company has entered into a relationship agreement with its majority shareholder, which contains contractual obligations on the majority Shareholder to ensure that the Company operates independently. Please see page 79 for more details.


The majority Shareholder may be more likely to use its shareholding to exercise control and influence the direction of the Company due to the withdrawal of its representative on the Board




Directors' responsibility statement  


Each of the current directors, whose name and function are listed in the 2019 Annual Report, confirms that to the best of their knowledge:

·      the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·      the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. 

Each of the current directors considers the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy. 




This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit

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