FINANCIAL RESULTS FOR THE NINE MONTHS TO 31 DECEMBER 2017 - - PowerPoint PPT Presentation

financial results for the nine months to 31 december 2017
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FINANCIAL RESULTS FOR THE NINE MONTHS TO 31 DECEMBER 2017 - - PowerPoint PPT Presentation

FINANCIAL RESULTS FOR THE NINE MONTHS TO 31 DECEMBER 2017 Disclaimer This presentation has been prepared by Amigo Loans Group Ltd (the Company) solely for informational purposes. For the purposes of this disclaimer, the presentation shall


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FINANCIAL RESULTS FOR THE NINE MONTHS TO 31 DECEMBER 2017

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Disclaimer

This presentation has been prepared by Amigo Loans Group Ltd (the “Company”) solely for informational purposes. For the purposes of this disclaimer, the presentation shall mean and include the slides that follow, the oral presentation of the slides by the Company or any person on their behalf, any question-and-answer session that follows the oral presentation, hard copies of this document and any materials distributed in connection with the presentation. By attending the meeting at which the presentation is made, dialing into the teleconference during which the presentation is made or reading the presentation, you will be deemed to have agreed to all of the restrictions that apply with regard to the presentation and acknowledged that you understand the legal and regulatory sanctions attached to the misuse, disclosure or improper circulation of the presentation. The Company has included non-GAAP financial measures in this presentation. These measurements may not be comparable to those of other companies. Reference to these non-GAAP financial measures should be considered in addition to GAAP financial measures, but should not be considered a substitute for results that are presented in accordance with GAAP. The information contained in this presentation has not been subject to any independent audit or review. Certain of the information contained in this document is based on estimates or expectations of the Company, and there can be no assurance that these estimates or expectations are or will prove to be accurate. The Company has not verified the accuracy of such information, data or predictions contained in this report. In addition, past performance of the Company is not indicative of future performance. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of this presentation or the opinions contained herein. The future performance of the Company will depend on numerous factors which are subject to uncertainty. Certain statements contained in this document are forward-looking statements, including, without limitation, any statements preceded by, followed by or including the words “targets,” “believes,” “expects,” “aims,” “intends,” “may,” “anticipates,” “would,” “could” or similar expressions or the negative thereof, notwithstanding that such statements are not specifically identified. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict and outside of the control of the management of the Company. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The Company has based these assumptions on information currently available, if any one or more of these assumptions turn

  • ut to be incorrect, actual market results may differ from those predicted. While the Company does not know what impact any such differences may have on its business, if there are such

differences, the Company’s future results of operations and financial condition, and the market price of the notes, could be materially adversely affected. You should not place undue reliance on these forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements referenced above. Forward-looking statements speak only as of the date on which such statements are made. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any of the information in this presentation to reflect events or circumstances after the date on which this presentation was made, or to reflect the occurrence of unanticipated events. The presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue, or the solicitation of an offer to purchase, subscribe to or acquire the Company or the Company’s securities, or an inducement to enter into investment activity in any jurisdiction in which such offer, solicitation, inducement or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of such jurisdiction. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation is not for publication, release or distribution in any jurisdiction where to do so would constitute a violation

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

Because consolidated financial information for the Company is not available prior to the year ended March 31, 2016, unless otherwise indicated, financial information presented in this presentation for periods prior to March 31, 2016 is that of Amigo Loans Ltd. Amigo Loans Ltd is the Company’s primary operating subsidiary and represented 99.9% of the Company’s consolidated revenue and 99.9% of the Company’s consolidated retained earnings as of and for the twelve months ended December 31, 2017, and therefore differences between the consolidated financial information for the Company and financial information of Amigo Loans Ltd for periods prior to March 31, 2016 would be negligible.

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Today’s presenters

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

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Agenda

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

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Key Highlights

1 Live Accounts represent customer accounts with a balance greater than zero as at the date indicated. ² Net Loan Originations represent total loan originations for the period. For loans made to existing borrowers where they are increasing the loan only the incremental amount is included. 3 Net Loan Book represents total outstanding loan value less provision for impairment. 4 Adjusted EBITDA means operating profit before interest and funding facility fees, amortisation, depreciation, provisions and write downs other than for impairment of Loan Book 5 Impairment Charge as a Percentage of Loan Book represents the impairment charge for the last 12 months divided by the average month end value of our Loan Book from the start of the period to the end of the period.

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Net Loan Originations continue to drive loan book growth 1 Net Loan Book at £607m supported by strong growth in live accounts1 totaling 169,000 as of 31 December 2017, up by 44% y-o-y 2 Sustained Adjusted EBITDA growth benefiting from strong top line growth and operating leverage 3 Increase in impairment charge levelling out in line with expectations & offset by lower acquisition costs and improving

  • perating leverage

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Net loan originations2 (£m)

196 362 9m Dec 16 9m Dec 17

Net Loan Book3 (£m)

364 607 As at Dec 16 As at Dec 17

Adjusted EBITDA4 (£m)

60 85 9m Dec 16 9m Dec 17

Impairments as a % of loan book5

3.3% 7.3% LTM Dec 2016 LTM Dec 2017

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Agenda

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

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Financial Review Significant increases in revenue and Adjusted EBITDA reflects increased interest income driven by a 67% growth in the Net Loan Book in the LTM to 31 December 2017. On an LTM basis adjusted EBIDTA is greater than £100m for the first time

1 For the twelve months ended 31 March 2017 revenue and Adjusted EBITDA include £2m of revenue related to the sale of some charged off loans that had previously been written off in Amigo Loans Group

Ltd’s statement of financial position. Although we plan to continue to sell charged off loans from time to time in the future, this was the first such sale. The last twelve months ended 31 December 2017 includes a further £0.5m from our second such sale. For the twelve month periods to 31 March 2017 and 2016, and the nine month periods to 31 December 2017 and 2016, revenue is presented net of the commission paid to broker which are amortised over the life of the loan. For the preceding periods this adjustment has not been made to be consistent with the published financials for Amigo Loans.

2 Adjusted EBITDA means operating profit before interest and funding facility fees, amortisation, depreciation, provisions and write downs other than for impairment of Loan Book.

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REVENUE1: 56% increase in LTM to December 2017 driven by current year origination growth (£m) Adjusted EBITDA1,2: 44% increase reflecting increased loan book and operating leverage (£m)

80.7 95.1 102.1 130.6 119.9 186.6 2014 2015 2016 2017 LTM Dec 2016 LTM Dec 2017 45.2 51.4 60.8 82.0 74.3 106.9 2014 2015 2016 2017 LTM Dec 2016 LTM Dec 2017

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Financial Review

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ORIGINATION: Significant growth across all 3 origination channels (£m)

129.9 126.5 142.5 276.8 195.9 362.4 65.8 64.1 61.8 104.0 74.0 104.8 27.1 23.9 35.4 70.3 48.8 91.1 37.0 38.6 45.4 102.5 73.1 166.5 2014 2015 2016 2017 9m Dec 2016 9m Dec 2017 Direct Third party introducers Repeat

ORIGINATION: Up 65% on prior year Q3 with managed increase in underlying risk (£m)

68.7 75.4 128.5 80.9 109.7 124.2 21.3 21.5 22.4 26.1 27.9 26.5 19.3 17.6 17.9 22.2 22.4 20.1 15.5 16.1 17.9 21.7 24.6 33.5 8.0 8.6 8.7 12.6 14.1 18.7 4.6 11.5 13.9 27.1 39.5 25.4 Q2 FY 16/17 Q3 FY 16/17 Q4 FY 16/17 Q1 FY 17/18 Q2 FY 17/18 Q3 FY 17/18 New origination Homeowner Repeat homeowner New origination with non-homeowner guarantor Repeat Non-homeowner Lending pilots

Commentary

  • Managed originations in Q3 as

pilot lending growth levers are adjusted to reduce impairment increase

  • Strong and continued loan book

growth at this level of

  • rigination
  • Approximately £15m of
  • rigination per month required

to maintain loan book compared to average actual

  • rigination of £41m in Q3
  • Performance on loans is in line

with expectations meaning that we are seeing a controlled increase in impairment charges from the historically very low levels

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Financial Review Impairment spike begins to flatten out as we optimise loan book growth

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Impairment charge as % of revenue Commentary

0% 5% 10% 15% 20% 25% 30% 35% 40% Amigo Non Standard Finance Provident New Day

  • Rate of growth in impairment

flattens as we control origination mix

  • Management have adjusted credit

scorecards and eligibility criteria on lending pilots, cutting cohorts with higher impairments

  • Further levers are available to

implement

  • The burden of impairment is front

loaded based on the age of the loan, i.e. loans are more likely to go into arrears in the first 12 months.

  • As lending pilots mature we have

actively mined their data to enhance credit quality

  • Implementation of learnings from

pilot lending to actively manage impairment levels

1 Amigo information is for the 9 months ended 31 December 2017, Non Standard Finance and Provident is for the 6 months ended 30 June 2017, and New Day is for the 12 months ended 31 December 2016.

0% 5% 10% 15% 20% 25% 30% 35% 40% 10 20 30 40 50 60 Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/18 Q2 17/18 Q3 17/18 £m

Impairment (LHS) Impairment /Revenue (RHS) Revenue (LHS)

Impairment charge as % of revenue for Amigo vs. comparable companies 1

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Financial Review Operational leverage and reduced cost of acquisition largely offsets increase in impairment

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  • Direct cost efficiency has

improved due to growth in loan

  • rigination, channel mix and

leveraging of advertising expenditure

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

  • Excluding impairment there is a

clear downward trend in the cost income ratio - key drivers being operational leverage and reduced cost of acquisition based on volume and type of loans originated

  • With the inclusion of

impairment the ratio has flattened as management restrict lending pilot criteria on loans with higher expected impairments

  • Additional lending is profitable,

captures further analytical data

Commentary

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Q1 15/16 Q2 15/16 Q3 15/16 Q4 15/16 Q1 16/17 Q2 16/17 Q3 16/17 Q4 16/17 Q1 17/18 Q2 17/18 Q3 17/18 Exc Impairment Inc Impairment 12.4% 13.2% 15.8% 11.7% 11.9% 9.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 2014 2015 2016 2017 9m Dec 2016 9m Dec 2017

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Financial Review

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Free cash flow excluding loan originations1: 52% increase in underlying cash flow prior to new loan originations (£m)

1 Free cash flow is calculated as collections less non acquisition costs

171 198 247 174 268 2015 2016 2017 9m Dec 2016 9m Dec 2017

  • Monthly cash collected increased by 52% in 9 months to 31 December 2017 compared to prior period
  • High cash flows reduce gearing even with strong loan book growth
  • Additional £30m added to SSRCF by introduction of 3rd bank in December 2017
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Agenda

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

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Recent areas of focus by regulators / government

Regulatory product focus Other key FCA focus areas

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

  • Amigo’s product helps to improve

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

  • Amigo does not pay individual

underwriters or collections staff a bonus based on sales or collections made

  • Amigo works with both borrowers

and guarantors to find a solution if a loan goes into arrears

  • Credit cards (FCA Credit Card Market Review)
  • Motor finance (FCA Annual Business Plan)
  • Home collected credit (FCA High Cost Credit Review)
  • Rent-to-own (FCA High Cost Credit Review)
  • Catalogue credit (FCA High Cost Credit Review)
  • Logbook lending (Government Goods Mortgages Bill)

Government Consultation

  • HM Treasury consultation on statutory breathing

space has closed. Focus area Amigo approach

  • FCA proposals for enhanced

creditworthiness and affordability assessments are broadly in line with Amigo’s current process 13

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Agenda

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

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Outlook

Increasing loan book providing ever greater embedded profit and cash flow

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1 2 5

Continued focus on conversion through key stages of the application process including ongoing reduction in time to payout while maintaining our rigorous and disciplined application and underwriting process Strong cash flows reducing gearing in the quarter Applied for lending licence in Ireland to test guarantor model in controlled way with minimal investment required. Continuing to explore potential IPO with advisers

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Implementation of learnings from pilot lending to actively manage impairment levels

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Q&A

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Agenda

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

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Covenant Position

Source: Company

1 Excludes unamortised fees.

² Net SSRCF is SSRCF less cash available.

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Bonds 400.0 SSRCF (facility of £109.75m) 47.5 Less: Cash available (17.3) Less: Unamortised bond/SSRCF fees (9.4) Net Debt 420.8 Gross loan book 626.9 LTM Adjusted EBITDA 106.9 Covenant Net debt / loan book (1) 68.6% 80.0% Net SSRCF / loan book (2) 4.8% 17.5% Fixed charge cover ratio 3.4x 2.5x LTM Impairment / ave gross loan book 7.3% 12.5%

As of 31 December 2017 (£m)

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Key Contacts

Simon Dighton – Chief Finance Officer Email: simon.dighton@amigo.me Telephone: 07791 221499 Harriet Shaw – Executive PA Email: harriet.shaw@amigo.me Telephone: 07734 778862

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