Amigo Resources PLC (AMGO) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to today's Q1 2021 financial results presentation for Amigo Holdings PLC. My name is Jordan, and I'll be coordinating your call today. [Operator Instructions] I'm now going to hand over to Nayan Kisnadwala to begin. Nayan, please go ahead.

Thanks, Jordan. Good morning, and thank you for joining us for Amigo Holdings' financial results for the first 3 months to June 30, 2020. I am Nayan Kisnadwala, Amigo's Chief Financial Officer, and with me here is our Chief Regulatory and Public Affairs Officer, Nick Beal. Before we move on to the results, I would like to make a few opening comments. As announced previously, we have made a number of key appointments post the period end, signaling our intent to build a sustainable business for the long term. Jonathan Roe and Gary Jennison have both joined the Board as non-executive directors. Jonathan will take up his role of Chair of the Board on receipt of the FCA authorization. We are not expecting this to occur until after the end of September at the earliest. As of August 1, Glen Crawford also rejoined Amigo, and we are very pleased to have him back with the team. Once Glen receives his authorization from the FCA, again, not before the end of September at the earliest, he will take up his role of Chief Executive and Executive Director. Until then, he is unable to participate in events such as this earnings call. So today, in a moment, I will take you through the numbers, and Nick will then give a brief update on the regulatory environment, before I close the presentation, and we open the call for questions. Please note that we will not be answering questions today on recent social media posts by Richmond Group. Let's turn now to the results for the first quarter of our 2021 financial year. It is pleasing to see a return to profit in the quarter despite the challenges COVID-19 has presented. Collections have remained robust at 87% of pre-COVID expectations in Q1. And we have adequate liquidity, funding and capital to support our business and customers during this time. We are preparing to restart originations in a prudent manner by the end of 2020. Operationally, we have turned a corner in terms of how we manage complaints, and we are confident of meeting the October deadlines agreed with FCA for the VReq on complaint. I will talk more about the complaints challenge in a moment. We are also working with the FCA to aid their ongoing investigation into our credit worthiness assessment. As I've said, post the period end, we have made significant appointments to our Board, which demonstrate our intention to build a sustainable business for the long term. Now let's look at the financial headlines on Slide 6. As expected, with the pause in lending having been initiated just prior to the start of this financial quarter and continuing throughout, we have seen a marked reduction in revenue. This also reflects the impact of the delay in payments to us as a result of the COVID-19-related payment holidays we have provided to help our customers. I will go into more detail on the accounting treatment of this in a moment. The reduction in revenue has a knock-on effect on the impairment and cost-to-income ratios. Complaints provision is broadly flat at GBP 116.4 million. As I've said, it is pleasing to see a return to profit for the quarter, with a reported statutory profit of GBP 3 million. We had cash of GBP 145.2 million at quarter end, and our gearing remains low. Looking at the key financials on the next slide. The reduction in lending, which spanned the whole quarter and the payment holidays provided to help our customers impacted by the COVID-19 pandemic contributed to a fall in revenue of 31.7% and a 24.1% decline in the net loan book. Excluding the impact of COVID, impairment was at 15% of revenue. Incremental charges of GBP 3.1 million and GBP 8.1 million were added to reflect the impact of payment holidays and worsening economic assumptions in our IFRS 9 model, respectively. The ratio of operating expense to revenue remains low at 23%, excluding complaints. This increase on the prior year reflects the lower reported revenue because of COVID-19. The complaints provision in the balance sheet has remained broadly flat at GBP 116.4 million, with the costs reflected in the income statement of GBP 6.8 million. Initiatives to optimize the group's capital structure, including the open market repurchase of high-yield senior secured notes in the prior year, have allowed us to reduce underlying finance costs. We have made no further repurchases of the senior secured notes over the first quarter. But over the period, we canceled RCF, and post quarter end, reduced our securitization facility from GBP 300 million to GBP 250 million. Net borrowings to adjusted tangible equity has been maintained at 1.8x and improved from 2.4x at the fiscal year-end. On the next slide, we have -- we can see the impact of COVID-19-related payment holidays on revenue and the accounting treatment required by IFRS 9. COVID-19-related payment holidays have been granted to approximately 47,000 customers in the quarter. Payment holidays offered both a payment and interest holiday of up to 3 months. The loan term has been extended with no increase in monthly payments. No interest or principal is waived. Deferring contractual repayments without charging interest or increasing the value of future monthly installments reduces the present value of the future cash flows and results in a modification loss under IFRS 9 accounting requirement. The total modification loss in the quarter was GBP 16 million, with GBP 12.9 million recognized in revenue and GBP 3.1 million recognized in impairment. Revenue will fall substantially as a result of GBP 12.9 million modification loss, but is broadly in line with historical levels if revenues normalize to exclude the loss. Since the quarter end, extensions to COVID-19 payment holidays for a further period of up to 3 months have been offered to customers in line with revised regulatory requirements. The timing impact of these changes will be reflected in Q2 results. Moving to the next slide. The chart on this page shows impairment as a percentage of revenue. The COVID-19 assumptions in the provision have been revised to reflect the deteriorating macroeconomic outlook in light of the most recent external forecast. The outlook remains highly uncertain, and assumptions will continue to be monitored. A modification loss has been applied, increasing impairment by GBP 3.1 million in the quarter. This is the estimated impact to impairment arising from the deferring of future customer payments under COVID-19-related payment holidays. Excluding the impact of COVID-19, the impairment to revenue ratio would have been 15%. On the left-hand side of Slide 10, we have the impairment provision with the staging component on the right-hand side with the loan book aging bucket. At the full year, following this analysis performed by COVID-19 on an individual account basis, a Stage 1 to Stage 2 uplift overlay was applied to our IFRS 9 model. We have an impairment provision balance of GBP 98.1 million at the year -- at the quarter end, which is over 2.5x the balance of receivables, which are 60 days past due or more, being GBP 34.8 million, an increase from GBP 33 million on Q1 of last year. The decline in the impairment provision is defined by the decline in the loan book as originations remain suppressed. This is partially offset by the worsening macroeconomic assumptions, which increased ECS due to the anticipated increase in unemployment as a result of COVID-19 pandemic. The macroeconomic assumptions have been revised to reflect equal likelihood of an impact of moderate, high or extremely high severity, amended from a probability of 75%, 20% and 5% for each, respectively, at the full year. The duration weighting is unchanged. The loan aging reflects similar trends. Our proportion of receivables which are current or less than 31 days past due declined to 92.6% compared to 94.1% last year. Moving to Slide 11. We have said -- as we have said, encouragingly, collections have remained robust despite the impact of COVID-19 at 87% of pre-COVID-19 forecast projections as of the end of the quarter. At end of July, this has reduced modestly but remains robust at 86%. High cash collections have been driven in part by operational redeployment to the collections team, whilst originations are temporarily paused, and also by an increase in early settlements. Turning to Slide 12. We can see the complaints provision is broadly unchanged from the full year. We have retained a similar level of provision to full year given the high volatility of the volume of complaints received over recent weeks. The provision includes a combination of estimated redress for known cases and an allowance for future claims. GBP 8.5 million was utilized in the quarter, representing redress of which around half was settled with cash and the remaining half in balance adjustments. An incremental cost of GBP 6.8 million has been recognized in the income statement. The remaining provision on the balance sheet is GBP 116.4 million, broadly flat with year-end. Complaints team has been further resourced and upskilled. And we are on track to meet the deadline agreed with FCA to reach a position by the end of October this year, where all complaints are dealt with appropriately in 8 weeks. We continue to report all breaches of regulation by CMCs to the FCA and intend to report in the future to fraud prevention agencies. Amigo, supported by external advisers, has not to date identified any recurring systemic issue across any past cohort of lending, but we continue to explore root causes in line with regulatory expectations. Excluding complaints, you'll see on the next slide the ratio of operating expense to revenue at 23% reflects the continued efficiency of the model. The moderate increase from the prior year reflects the lower reported revenue due to COVID-19. Adjusting for COVID impact, the operating cost-to-income ratio would have been largely unchanged. Slide 14 shows the continued cash generation of our business, with significant positive cash flow of GBP 80.9 million in the quarter. High cash collections were driven in part by operational redeployment to the collections team, whilst originations are temporarily paused, and also by an increase in early settlements. Gearing remains low, with net borrowings to adjusted tangible equity improved to 1.8x from 2.4x at the full year and flat compared to the same period last year. Cash at the quarter end was GBP 145.2 million, GBP 139.4 million of this was unencumbered. Slide 15 shows our funding structure as at 30 June 2020. We optimized our funding structure over the last 12 months and have improved our cost of funds to 4.2% from 5.2% at the same time last year. Over the quarter, we announced the cancellation of our RCF facility, which was considered no longer necessary. Cancellation of the RCF will save Amigo and annualize nonutilization fee of GBP 1.3 million. Also, during the quarter, we negotiated the temporary suspension of performance triggers related to the securitization facility due to the potential impact of COVID-19 on asset performance. On 17th August, the waiver was further extended to the 18th of December 2020, allowing both Amigo and our lenders the opportunity to fully understand the impact of COVID-19 whilst maintaining the facility. At the same time, we reduced the size of the facility from GBP 300 million to GBP 250 million, reflecting Amigo's current lower funding requirements while lending is paused. The waiver period includes a pause in further drawings from the facility. And during the period, all cash generation arising from customer loans held in the facility will be used to further reduce the outstanding balance. The senior secured notes become callable from Jan 20 at a call premium of 3.8%. No repurchases were made over the quarter, but we retained the option to make opportunistic open market repurchases of our outstanding higher senior secured notes. Combined with the strong cash flows, we have adequate liquidity to support the business and our customers. We have enough cash to enable us to restart lending when the Board considers it appropriate to do so. At the same time, to facilitate a later expansion of that lending, we continue to evaluate optimization of our funding structure, including discussions with other existing lenders and our current lenders. With that, I will hand over to Nick to give you an update on the regulatory environment.

Thanks, Nayan. As we've discussed before, the financial conduct [indiscernible] from the FCA had several sector-wide reviews ongoing on the nonstandard financial sector. This includes a look at affordability, a review of repeat lending and guidance on the treatment of fundable customers. Specific to the guarantor sector, the FCA has also reviewed affordability and forbearance, guarantor presence and guarantor understanding. In July 2020, we received feedback from the FCA's review into affordability and forbearance. Many of the recommendations in affordability were already implemented or were in the process of being implemented before we paused lending. We've increased the level of verification we require during the income and expenditure checks in relation to both borrowers and guarantors. While we have assessed the customers at higher risk, we investigate the relevant individuals' income and expenditure further. We also extended our use of open banking in our affordability assessment. The remaining recommendations by the FCA will be implemented before we return to meaningful levels of lending. We've also introduced the FCA's suggestions around guarantor understanding. As already announced, the FCA has begun an investigation to Amigo's creditworthiness assessment process and the governance and oversight of this process. The investigation will cover the period from the 1st of November 2018 to date. We're at the beginning of the process, but we're working with the FCA to ensure not only that we're compliant with the evolving regulatory requirements, but also to promote a thorough understanding of our products and the real need for financial inclusion within society. In August, the FCA published their review into relending within the nonstandard financial sector, with the expectation that firms will review their relending operations in the light of the findings and make necessary changes to improve customer outcomes. Overall, the findings of the PwC report commissioned by the FCA were more positive for guarantor products than other high cost of credit products. Amigo has made changes to its eligibility criteria for top-up around this time last year, significantly reducing the levels of relending as a proportion of our total origination. We continue to review credit policies to ensure the best outcome for all our customers. The FCA has also published this delayed consultation on guidance on vulnerability. The consultation period will close at the end of September, and final guidance is expected to be issued early in 2021. The FCA research found that just under half of U.K. adopts this to save some form of vulnerability. This was based on research carried out pre-COVID-19. Post the pandemic, the FCA expects that this proportion will significantly increase. At Amigo, our teams are trained to recognize when a customer might consider a potential -- a particular vulnerability. And specialist teams provide targeted support. We're also helping customers with specific COVID-19-related relief and have transitioned back to making full payments where appropriate. The fair and appropriate treatment of all our customers is a priority. In conclusion, particularly in the face of an evolving regulatory landscape, it's important that we continue to engage regularly and productively with the FCA. This will enable us both to understand and comply with evolving regulations, but also to promote a better understanding of our products and our goal of financial inclusion for all. With that, I'll now hand you back to Nayan.

Thanks, Nick. In summary, we are totally focused on addressing our legacy issues. The recent appointments made to the Board with a wealth of experience they bring demonstrate our intent to build a sustainable business for the long term. We are making preparations to restart lending on a prudent basis by the end of 2020. Collections in the quarter were robust at 87% of pre-COVID expectations. And we have adequate liquidity, funding and capital to support our business and our customers during this time. While material uncertainties remain, the long-term drivers of our business are unchanged. Amigo serves an important purpose in providing financial inclusion to those who are unable to access finance through mainstream lenders. This is likely to become even more relevant as the country recovers from the economic impact of COVID-19. We have strong teams in place and a clear focus on the challenges and opportunities we face. With that, I would like to say once again thank you for joining us this morning. We will now open the lines to questions. But please be mindful that this is a quarterly financial update and we will not answer questions on recent social media posts by Mr. Benamor of Richmond Group. I will now hand back to the operator to take your question. Thank you.

[Operator Instructions] Our first question comes from Colin Jackson of Goodbody.

Two for me. The first one, on payment holidays, and the second, on complaints. The first one is on payment holidays. I know 21% of customers were on deferment of plan at the end of June. Can you give us some color on how this has evolved since June? And what proportion of cost has there any initial payment holidays? And then if you could have caveat, that was how have requests for new payment holidays, the original same ones, trended over the past couple of months? Are you still seeing new requests coming in? And then just secondly on complaints. Can I just ask how the profile of complaints received changed since the last update? Are they becoming more [ vested of some E&P ]? And then just a point of detail on complaints as well. Half of complaints redressed were settled in cash. In Q1, do you expect this proportionality to be unchanged going forward? Or would you expect it to be more split towards cash or by balance reduction? So any color you can provide on those will be very helpful.

So let me start with complaints. So basically, we cannot predict future inflows. And we have made a provision which we believe is appropriate based on the latest information we have given the recent volatility of complaints. When we say volatility, it's just up and down every week, and hence, future prediction becomes difficult. That's first part of your question on complaints. Second part, about cash. We've said previously at the year-end, about 60%. But for this quarter, it was about 50%. So we believe that it will remain between 50% and 60% over a longer period of time. In terms of payment holidays, I think, Nick, you want to take that on?

Thanks, Nayan. I mean we -- clearly, the COVID pandemic is still evolving, and we are still seeing individuals who are individually being impacted upon that. So I think part of your question was whether we had seen customers still applying for COVID specific relief, and the answer is yes because people are impacted at different times as a result of the pandemic. We are working with the -- with our customers to help them to get back in time to being able to make their full payments where that's appropriate, and we'll continue to do so. So we have a full communication program with customers, I think, as we made clear the first 3 months of an individual going on to a COVID-specific payment plan was interest-free. Interest is chargeable after that period.

Our next question comes from John Cronin of Goodbody.

A follow-up on complaints actually. Look to stepping back and GBP 6.8 million charge in the quarter. Looking back to the previous financial year and considering the level of utilization of provisions taken today, it's pretty low. So clearly, you've a substantive stock of provisions here to account for potential future issues. In terms of your experience, like can you just give us a broader sense around, that's building off. I mean, are you paying out on a timely basis at the moment, despite the fact that this review is going on? Are there a load of complaints sitting in the ether where you have yet to make the call one way or the other depending on the outcome with the FCA? Because stock price is 15p or whatever and it's taking in a huge amount of downside with respect to complaints clearly and far and above what you've experienced. So just trying to get a sense as when do you expect after this -- when do you -- should we expect that to start inflating quite significantly in the current quarter? Or is it very contingent on the outcome of the discussions with the FCA? And again, to reiterate, is there a big buildup of potential payout cases that you have yet to make a call on?

Yes. So let me start by saying that, operationally, we believe we have turned the corner in how we are managing or handling our complaints. And we have staffed up to the quarter end of nearly 150 people. And so with appropriate 3 levels of controls and oversight from the expo and the Board. So we believe that we have put most of our operational issues behind us. And that's why we can say that we are confident of meeting the VReq requirements. In terms of -- I think I want to restate what I said. We decided to keep the provision almost broadly flat to year-end because of the volatility of complaints we have seen in the most recent past. And there's no way we can predict future inflows. And so we believe it was appropriate for us to maintain our provision balance.

No. But -- can you just tell us on that? Because it is very, very light in the last quarter. I mean it's below GBP 7 million, and you have provision stock going on. And I mean you must be expecting some -- are you telling me you think you're very conservatively provided? Or do you think that the outcome of the FCA review could open up further problems? Because the run rate doesn't suggest that you utilize all your provisions. And as you say, you've been staffing up in terms of the complaint staffing and...

So I won't repeat what I just said that we cannot predict future inflows. What we have seen is a little bit of volatility week over week since we last published the earnings, and that's the reason we have maintained a provision at about the same level.

Okay, okay. And just one final follow-up on that. So is it fair to say then that there's a vast bulk of the provision that you account for future complaints? I forget if you've already pointed to that out during the...

Yes. Our provision includes provision for all complaints we had in-house and provision for future complaints. Not all future complaints, future complaints, yes.

Can you give us a sense of the split between what percent for existing and what component of the provision relates to future unknown [ content of ] complaints?

No. We have not given that split, John, but there are notes where you can read into it.

We now have a question from Ian Parkinson of Polygon.

You guys have around GBP 150 million of cash and your debt is indicated in the market around GBP 57 million. The debt is very liquid, but it seems any other company in your situation, you'd have expected him to announce a tender this morning, spending up to 1/3 of that cash because they -- even at a higher price than the indications you see, the returns on buying back your debt exceed the returns you can get from lending to your customers. Why are you running such high cash balance? Why are we not seeing you capture that discount?

So Ian, again, a good question, good suggestion, which are absolutely in the forefront of our minds. And we have said that we will opportunistically look back -- look at buying back bonds in the open market. And so we have been in the close period, and hence, we have not done it. But we will revisit that now that we're in the open period and make the correct decision, keeping in mind all our stakeholders.

I guess my point is, and we discussed this before, I think that opportunistic purchases are going to be difficult to use some material amounts of your cash. And you'll make far much -- you'll generate some more value for all of your stakeholders if you can deploy a larger amount of money at a slightly higher price rather than do a tiny number of trades in the open market.

Yes, yes. Comments received. Thank you.

We now have a question from -- apologies. Go ahead.

You can confirm, is there any legal or other restriction that would limit how much of your cash you could use to that kind of debt reduction?

No, we have no legal reduction -- or legal restrictions at all.

We now have a question from Alex Field of Oakhill Advisors.

Just a follow-up on that. Do you think that your securitization lenders would have any issue with the bond buybacks at this stage and if there's no legal restriction on it? That's my first question.

So we have -- as I mentioned in my script, have a pause in everything, in all our financial covenants, et cetera. And there's nothing in our agreement with RBC to prevent us from buying back bonds. So that's your first question. Second?

So just on complaints. I had -- you mentioned there's a lot of volatility. And I'm guessing you're not going to give much information on what that means. But how about success rates with the FOS? Are you seeing any sort of change in that? Obviously, there was a step-up to sort of over 90% upheld rates late last year. What are you seeing now on that? And the second part of that question is just, you're clearly reporting the CMCs more. Are you seeing any impact on better behavior from reporting them more for their actions?

Good questions, Alex. So Nick, do you want to answer the FOS?

Yes. And in terms of the FOS, the FOS actually published their quarterly statistics this week on their website. Now these were product based rather than firm based, and therefore, guarantor lending is one of the products they've covered. You will see that the data for guarantor lending shows that the total uphold rate across the entirety of guarantor lending sector is 85% with the Financial Ombudsman Service. And I think given that we are the largest of the guarantor lenders, that would be very much in line with the -- what we are currently seeing with Financial Ombudsman Service. In terms of reporting CMCs, we continue to report egregious behavior by CMCs where that becomes evident. Clearly, because we're reporting that to the regulator, the regulator then takes the action that the regulator decides to take. We're not seeing that immediately, but we do believe in due course, we will see the benefits of having done that.

[Operator Instructions] We now have a question from Karen Miles of Crédit Suisse.

I just had a quick one. So you guys disclosed that you have 47,000 customers on holiday. I think that's about 1/4 of your active base. You disclose -- or can you disclose what percentage of your receivables, of your book that represents? That's just my first one.

It's about -- so I'm trying to remember, about 29%, if I remember, at the quarter end.

Okay. And then I guess related to that. So I saw that you took the GBP 16 million loss, which is the estimated change to the NPV. So what assumptions or provisions are you taking for those people as they come off of holiday? Clearly, there's some uncertainty as to how they'll perform. But is there extra provisions that you've taken assuming they go delinquent? That's it for me.

So we followed IFRS 9. And if you look at the notes, basically, in my script, we've said we've increased the provision by GBP 3.1 million because of the modification and GBP 8.1 million because of a change in economic assumptions. And that's the reason the impairment revenue ratio has gone up.

Right. But if -- and forgive, this is sort of -- to simplify it. But if you're saying you have 30% -- 29% of your receivables in this payment holiday, so on a book of, whatever, mid-600s, right? That's 200 -- nearly GBP 200 million, but we're only taking -- assuming GBP 8 million of that kind of goes bad?

Our provision balance is almost GBP 100 million, right? So provision balance.

Right. But then that -- some of that would have been related to the underlying business on a normal course of business, right? Fair enough. I'm just trying to understand sort of how -- yes, how well cushioned you are for receivables coming off of holiday.

Yes. We believe we are very prudent in our provision at about 15% of receivables.

We now have a question from Alex Fyfe of Apollo.

I got 3 questions. The first one is on complaints again. So you said that in the recent weeks there had been volatility in the number of complaints. Should we read that to mean that the run rate of complaints over the past month has actually increased versus what it was on the last earnings call when you commented that it would have stabilized? The second question is just on the ABS negotiations. I mean I guess that seemed to have failed because you no longer seem to -- or you no longer will receive cash from that facility. Why was the process on that deferred again until December? Is the idea that if performance improves, then maybe you can turn that facility back on? Or is the idea that December is the same date that you intend to lend again? I just want to understand what went on there and what's the outlook. And the third question is, if you can comment on the quality of your assets in the ABS pool versus the quality of your assets that are not in the ABS pool in terms of delinquencies or something else.

Good questions, though I cannot answer the third question. But the first question, it's because of the volatility, which is up and down. And since the period of volatility was quite small post the year-end results, you cannot statistically really come up with trends. And that's why we said it's more appropriate for us to maintain our provision balance at the year-end. Number two, from an ABS perspective, I think we want to retain the optionality basically so that if our trends improve and COVID-19 -- and we recover -- or the economy recovers from the COVID-19, then we can basically renegotiate the opening up of the facility again, right? And so just improves -- it just gives us optionality, basically, okay?

So you would need to see an improvement in the performance of your book before you could start that facility again?

Yes. Absolutely.

And then on -- okay. So the December date is just -- there's nothing to read, the December is just...

No.

Enough time for you to figure out if the book is going to improve again?

Exactly.

And presumably, if the book doesn't improve, then that will just continue to amortize?

Exactly, exactly.

Okay. And then you said on my third question, you weren't going to answer. I mean I would, I guess, push back on that because it's quite an important question for your stakeholders. I mean you have certain assets which are in the collateral pool of the high-yield bonds and certain assets which are in the collateral pool of the ABS. And if you won't tell us what the difference is in terms of the quality of assets, it's very difficult for people to make an assessment of your business. So I'd ask for any kind of color you can give us on the quality of the assets in the ABS versus the quality of the assets that are not in the ABS.

I understand where you're coming from. But when assets were selected within the waterfall, it was randomly selected, right, within the -- within those limits. And we have not disclosed any differences between the 2. So it's a good question. I understand where you're coming from, but we just don't want -- don't have the answer.

But so if you -- if they came from the same pool, are you saying they would be similar asset quality today then? Roughly similar?

Theoretically, yes.

We now have a follow-up question from Alex Field of Oakhill Advisors.

Just you mentioned early settlements as a factor in your collections. I was just wondering if you could kind of quantify how much you think sort of the relative increase in early settlements affected your collections in Q1. That's one question. And then just on the modification impairment, does that take into account also what you're expecting in Q2? Or should we expect another modification investment in Q2 as well?

Thank you, Alex. So we have not disclosed the proportion of early settlements. But from memory, I can say that our early settlements were about -- running about 10% higher than what we would normally expect, which we take it as a positive indicator. In terms of impairments, yes, you're right, the modification loss we have taken, according to accounting rules, is for the payment holidays which were done in Q1. So in Q2, we will look at it again at the end of Q2 and we'll have to take another modification for it.

But those -- that modification impairment, does it effectively -- for Q2, will it just be the incremental?

Yes.

Holidays you've given? Or will that be...

Yes. So it will be netting. So any offset from the Q1 modification loss will be updated, and the new of Q2, so which could be offsetting. So yes, that's the right way of looking at it, Alex.

Okay, okay. And just on early settlements, you said you're running about 10% higher. But how much is that amount typically?

We have not disclosed that.

We now have a question from Nicola Mezzadri of Barclays.

Going back on the securitization question. I understand that you will not comment on the relative quality of the assets and such. But can you just comment or confirm whether the, I would say, the receivable pool in the securitization static? Or are there receivables going in and out from the securitization structure at the moment?

It will be declining now, right?

No, no. Apart from being repaid, right? But are receivables being substituted from staff agents into the securitization and staff that is outside of it?

So it's not receivable substitution, but it just declines, and the cash. It will be -- it will pay down the facility.

Okay. So there is no instance in which our receivable becomes, call it, disqualified, gets taken out from the securitization structure, and then kind of the receivable is put in to substitute.

Correct. No, no. That's not substitution right now.

And another question is, I think you mentioned during the call that you're in discussion with the new and existing lender in anticipation of coming back to higher level of lending. Is that correct? And can you expand on that?

No, not really. It's a bit early, right, to tell us. Right now, we have enough cash flow from operations and enough funding to restart originations when we -- when the Board decides to. This is preparing when we want to further expand our originations that we are planning ahead. And it's a bit early stages for me to give any more details right now.

We now have a follow-up from Ian Parkinson of Polygon.

On the securitization, I had 2 questions. One has been answered in terms of whether the pool was static. The second question is, if a loan inside the securitization perimeter goes to FOS and the FOS decides that compensation needs to be paid, how does that work? Do you take cash from the main balance sheet? Do you take cash from the securitization vehicle and presuming that the loan inside the securitization which gets written down?

So at the point when the complaint is redressed, it comes out of the pool.

What does that mean? So...

It comes back on our balance sheet basically, and it follows the normal process. The whole complaint redress process follows normally for all accounts, whether in the pool or not. And then at a time, if a complaint is redressed, and that comes out of the pool.

Okay. So when it comes out of the pool, it gets -- okay, say we have a loan of a GBP 1,000 balance sheet value inside the pool.

It gets GBP 1,000 out the pool is the right way to say it there.

So the pool just shrinks and there's no compensating payment?

Correct.

Okay. And if, let's say, it comes out at GBP 1,000 and you have to pay on top of that GBP 500 of cash compensation, where does -- where would that cash compensation come from?

That comes from our -- from the company cash.

Not from the securitization [ perimeter ]?

Yes.

I'll now hand back to Amigo for some questions via the webcast.

Sure.

Thank you. And we just wanted to take some questions from private investors through the webcast. The first one is, if you haven't identified a systemic problem in the high number of upheld complaints, how can investors have confidence in Amigo's lending and business model going forward?

So going forward, we are in process of updating all our credit policies, processes, scorecards, leveraging new technology, for example, open banking platforms, et cetera, which will -- and we have -- we are in process of updating our risk appetite, which will allow us to restart originations in a prudent manner going forward, which will lower our risk substantially of impairments and hopefully remove the risk of complaints.

And a second question, why do you think we've not seen any holding update? Do you know who's been buying Richmond Group stocks?

I'm looking for that answer myself. However, we believe that -- and regulation requires that disclosure of any holding greater than 3% by individuals or associates. We have seen no such disclosure except from the -- I don't know if you received when Glen bought the stock, Glen Crawford. So we have not seen any block buildups at all. And we do expect investors to comply with obligations under the disclosure and transparency rules, but we have not seen any yet.

And a final question from the webcast. What head count is there in Amigo for processing claims? And could you just talk about the processes to ensure that any claims being approved are checked periodically by senior members to ensure that staffs are on the right track?

Absolutely. So we have -- at the quarter end, we had about 150 people in our complaints handling -- or customer management department. We are -- we have quality control processes. Plus, we have Complaints Committee, comprised of ExCo members and ExCo oversight and Board oversight of the way we upheld complaints. So we have enough quality control in place already. Any more questions or no? That's it. Thank you, everyone, for your questions. We wish you all good health and look forward to speaking to you again over our half year results in November. I will now hand back to Jordan to conclude the call. Jordan?

Thank you. Ladies and gentlemen, thank you for joining today's call. You may now disconnect your lines.