Amigo Resources PLC (AMGO) Earnings Call Transcript & Summary

Good afternoon. Thank you for joining us for Amigo Holdings PLC's interim results announcement for the 6 months ended 30th of September 2023. I am Danny Malone, Amigo's Chief Executive Officer. And with me today is Kerry Penfold, our Chief Financial Officer; and our Chair, Jonathan Roe. As Amigo continues its orderly wind down, I will give you an update on the next steps in this process. Firstly, I'll provide a summary of the key headlines for the first 6 months of the financial year before Kerry take you through our financial position. We will then open the call to questions. Let's look first at the business headlines on Slide 5 of the presentation. As I'm sure all of you in this call are painfully aware, the Board took the difficult decision in March to enter the fallback solution under the court-approved scheme of arrangement. I don't intend to revisit the decisions for this on today's call, which we have covered elsewhere. But this is the end of a long road for Amigo, having first announced its intention to enter into a scheme in 2020. I reiterate how disappointed we all were that we could not Amigo forward and provide our shareholders, our staff, our creditors and those customers we're able to serve for the better outcome. With the cessation of lending in March of this year, after a period of consultation with colleagues, Amigo enacted its planned redundancy program. I must pay tribute to all Amigos past and present, who have remained dedicated and professional throughout this difficult process. In line with reduced staff numbers, in June of this year, we moved our operational center and registered office to smaller premises on more flexible terms. This has gone hand-in-hand with a careful and planned decommissioning of suppliers to reduce our overheads in the first half whilst maintaining those services necessary to continue supporting our customers. We have continued to process claims received under our scheme of arrangement. Virtually all the claims have now been decisioned with 60% of claimants having now received their outcome. Over the next few months, we will continue to calculate the remaining [ re-address ] I'm expect to make the first payments due in early-2024. And for the scheme pence in the pound to be not less than 17p. We anticipate concluding the operational wind-down of the business, including sales of any remaining live loans, shortly thereafter. We have agreed the sale of the reward rate portfolio, which is expected to conclude in January 2024. Sales of Amigo loans charged-off portfolios have commenced and are ongoing. We expect to conclude the sale of the remaining live portfolio around the end of the financial year. In October, we announced that we had entered exclusivity with Craven House Capital and others to explore a possible transaction, that could offer future value to shareholders, which resulted in temporary suspension of the shares. This unfortunately did not crystallize because the investors concluded that they could not build the sustainable revenue model that they had hoped to create in the time frame originally envisaged. As announced on the 16th of November, this agreement has now terminated and the suspension has been lifted. Whilst all existing assets of the business are pledged to creditors in this scheme, we remain open to other potential transactions. Turning to the financial headlines. At the 30th of September, Amigo held GBP 122 million of unrestricted cash, all of which will go to scheme creditors after operating expenses. We expect to retain ample liquidity through our execution of the wind-down plan. As anticipated, the net loan book has reduced by 70% compared to a year ago with a corresponding 82% reduction in revenue. We have increased our scheme provision to GBP 208 million largely as a result of an increase in our estimation of cash available to scheme creditors and report a loss before tax for the first 6 months of GBP 6.7 million. I will now hand over to Kerry to take you through the numbers in more detail.

Thank you, Danny. Now turning our attention to the P&L. With revenue continuing to decline as the loan books runoff and an increase in the complaints charge, Amigo has reported a loss after tax for the first half of GBP 6.8 million. We show a positive impairment charge this period as collections are increasingly derived from recoveries on previously charged-off loans, including a successful debt sale in the period, plus we have IFRS 9 release on the reducing loan portfolio. Operating expenses are down 43% compared to prior year, reflecting reduced activity and the impact of the wind-down plan. The complaints charge for the first 6 months was GBP 14.8 million and this has largely been driven by an increase of GBP 9 million and our estimate of the amount available to pay in dividend to scheme creditors, which now totals an estimated GBP 106 million. Turning to the balance sheet. We report net assets of GBP 5.8 million at 30th of September, a reduction of 83.5% year-on-year. We expect to see net assets continuing to decline as the wind-down proceeds and ongoing operational costs are incurred with any remaining value committed to scheme creditors. With that, thank you. I will now hand back to Danny.

Thanks, Kerry. I want to spend a bit of time now explaining the next steps in the process of the orderly wind-down operations with a particular focus on what this means for you, our shareholders. Since December 2020, the group has saved of insolvency with the scheme of arrangement. In the last 3 years, we have thought to build an alternative future for the business that would offer a better outcome both for those creditors and for our shareholders. Let me say again, on behalf of the whole board, how deeply sorry we are that we are unable to raise the funds needed for Amigo to continue and the impact that this has had on our shareholders. But as we said in March, this is a difficult time to raise new capital, in particular, for our sector. This is not just an Amigo story, other lenders in our space had a similar fate over recent months. You will have seen the approach received from Craven House Capital and others in relation to a possible transaction. This would effectively have seen the PLC shell we used to take other businesses unaffected by the malaise impacting specialist consumer finance lenders to the public markets. Although ultimately unsuccessful for reasons unconnected with Amigo, we are open to other similar opportunities that could provide some value for you and the shareholders in future. At this stage, nothing has solidified into a fair proposal and any transaction would, of course, require shareholder approval, and you will be provided with full information before you would be asked about. However, as we made clear in our AGM statement, the window of opportunity is closing. Whilst there is nothing inherent in this scheme that requires a group as a whole to wind on, it is a legal requirement that Amigo loans ceases lending and [ address ] liquidation. With no other sources of income and in the absence of new investment, there are simply no money available to fund an ongoing operation. This will lead to the insolvency of plc. As we plan to finally pay out the scheme to creditors and complete the operational wind-down early next year, we expect this will be the tipping point. Finally, and as we have previously announced, I will be stepping down as CEO on the 31st of December as the business gets smaller and narrower. Kerry Penfold will be enabled successor and I [ wish her well ] on that role. She will not be succeeded as CFO as we reduced the number of executives in the business as part of the wind-down. With that, thank you. I will now open the call to questions.

[Operator Instructions]. No questions, so far. We'll give it another minute. Okay. If there are no more questions, I will now close the call. Thank you for listening.