Hello, and welcome to the Amigo Holdings PLC Q1 2023 results. My name is Alex. I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star one on your telephone keypad. If you'd like to withdraw your question, you may press star two. I'll now hand over to your host, Danny Malone, Chief Financial Officer, to begin. Over to you, Danny.
Thank you. Good morning, and thank you for joining us for Amigo Holdings first quarter results for the three months to June 30th, 2022. I am Danny Malone, Amigo's Chief Financial Officer. Gary's away. I will first give a summary of the headlines before we look at the numbers in more detail. I will then give an update on our progress to implement the Scheme of Arrangement, which was sanctioned at the High Court at the end of May, and on a return to new lending with the new lending proposition RewardRate. Following the presentation, we will open the call to questions. Let's turn first to slide five and look at the headlines. We were extremely pleased that our Scheme of Arrangement was sanctioned by the High Court on the May 26th .
This is now contingent on Amigo returning to lending with FCA consent by the February 26th, 2023, and completing a capital raise by May 26th next year. Engagement with the FCA continues to be positive on both our return to lending and on reaching a resolution to the outstanding FCA enforcement investigations, both of which are critical to the successful implementation of the scheme and to the ultimate survival of Amigo. While we cannot commit to a date when this will be completed, we believe we are close to the end of the process. I will go into more detail shortly on what we are doing to prepare to return to lending with our new RewardRate branded products and on the proposed capital raise.
We are working with our advisors to determine the overall structure of the capital raise, mindful both of our existing shareholders and the total funds we need to satisfy the scheme conditions and support future lending. If either of the scheme conditions is not met, then the scheme will revert to the fallback solution, and the business will be wind down. Financially, there has been little change to the year-end position. The portfolio continues to amortize with associated reductions in revenue and customer numbers, and there has been no material change to the scheme provision. The volumes of complaints we have received to date in the scheme process are within expectations. Customers have until November 26th this year to submit their claims.
Collections remain resilient, with increased delinquency levels reflecting normal levels we would expect to see in a runoff rather than any significant impact from the inflationary environment. We continue to offer forbearance measures for those experiencing difficulties, and the rising cost of living will be factored into all affordability assessments when we return to lending. Let's now look at the numbers in more detail, starting with the P&L. With the absence of further scheme provisioning, but also reflecting the decline in the loan book, we have reported a small profit in the quarter of GBP 2.2 million. As you can see, revenue has declined by over 60% to just over GBP 10 million, as lending has remained paused throughout the period and the net loan book amortizes.
Finance costs have reduced significantly year on year due to the redemption of a significant portion of our senior secured notes and the paid down of our securitization facility. The impairment charge was minimal in the period, largely owing to the absence of originations in the quarter and reduction in the loan book, with no IFRS 9 upfront provisioning required and the gross loan book being increasingly provided for under lifetime loss assumptions as it runs off. There has been some increase in operating expenses as we invest in RewardRate development ahead of a return to lending. Slide seven shows the breakdown of our balance sheet. The group had net assets at the end of June 2022 of GBP 50 million. It's important to understand that substantially all of this is committed within the scheme.
It will be utilized over the coming 12 months-18 months as the cost of administering the scheme, the operating costs of collecting the existing loan book as it runs off, credit losses, and the interest on our bonds more than offset the interest generated on the loan book. Any remaining funds that we generate from running off the loan book, excluding a small working capital amount of circa GBP 8 million, will be added to the scheme fund. This is referred to as the cash turnover amount within the scheme. The estimate of this incremental cash turnover amount is highly uncertain and will evolve as the legacy loan book collects up. It is currently estimated to be around GBP 4 million.
The gross loan book has continued to decline due to the ongoing pause in lending, down to GBP 144 million, with the net loan book now GBP 106 million. Funding has reduced significantly year on year, with the securitization being fully paid down in September last year, and GBP 184 million of the senior secured notes being redeemed in January 2022. Business continues to generate cash from collections, and with no originations in the year, unrestricted cash was GBP 102 million. This is a decrease on last year as we used available cash to reduce debt. Slide eight demonstrates the strong cash generation of the business. We continue to conserve cash by controlling operating expenses and as a result of the ongoing pause in lending while collections remain resilient.
The cash balance, including restricted cash at the end of June, was GBP 173 million. Let's move now to look at how we are working to implement the scheme. Turning to Slide 10, you can see the critical path which we must follow to successfully implement the preferred solution of the scheme and for the survival of Amigo. The preferred solution of the scheme is contingent on two conditions being met. These two important conditions precedent must be met in the timescales agreed with the court, or the scheme will revert to a managed wind down of the business. The first condition is that Amigo must return to lending by February 2023. For this, we need FCA agreement.
Dialogue with the FCA continues to be very positive as we work to satisfy the FCA that we meet their threshold conditions and that all processes, policies, and infrastructure is in place. We have built an entirely new internal system to launch our new products with, and we must satisfy the FCA that testing of this new system has been completed successfully before we can issue our first loan. While we cannot commit to a date, we believe we are close to the end of this process. We have committed to limit lending to a net GBP 35 million before we have raised new capital. This GBP 35 million will come from existing resources, including the GBP 50 million of outstanding bonds still in place and not due for repayment until January 2024.
We will conduct a pilot lend period in consultation with the FCA before we build monthly originations further. The second condition is that we raise at least GBP 15 million, being the scheme contribution, via a capital raise. Part of which must be a 19-for-1 equity issue. That is 19 Amigo shares for every 1 in issue. It is expected that shareholder approval will be required. We also need to raise additional funds to support future lending. I will go into both of these conditions in more detail in a minute. The other task on our critical path is to resolve the two outstanding FCA enforcement investigations. It will be important to do this in order to raise the required capital. The FCA has stated that the levying of any fine would be considered in the context of the scheme and its impact on creditors.
Let's move to Slide 11 and look in more detail at what we are doing to prepare to return to lending. This may seem that it's taken a long time, but there is a lot to do, and it's crucial to not only get it right but to bring the FCA with us on this journey. Our new products will be launched under the RewardRate brand and incorporate unique features designed to offer customers the cheapest way for them to borrow and to enhance their financial mobility. This is really important and addresses a need for mid-cost credit in a large underserved market. We want to help our customers by putting them on a pathway to nearer prime credit with products that best suit their needs. We intend to offer both guarantor loans and non-guarantor personal loans.
The personal loan will start at 49.9% APR, and the guarantor loan with its added security from the presence of the guarantor will start at 39.9%. Both will have the rate dropper feature, which means that our customers will be able to lower the amount they repay simply by making their payments on time. They will also be able to take a payment holiday each year with no penalties, providing extra flexibility when they need it. For example, at times such as Christmas or summer holidays. We are extremely proud of our new lending proposition, which seeks to support financial mobility, helping customers with limited options to be able to borrow. All new lending is designed to meet the FCA's proposed Consumer Duty outcomes, and we have updated all of our policies and procedures.
This includes an improved underwriting process with enhanced affordability checks for all customers. For example, when we return to lending, Open Banking or an equivalent will be used in all affordability assessments. Finally, we will be deploying a new cloud-based technology environment. This has been built around market-leading solutions with best in class third parties such as Salesforce, Mambu, and MuleSoft. It will be scalable and easily configured to grow with us and adapt to changing needs along the way. This is world-class, and we are very excited about it. Turning to Slide 12, let's look at the capital raise in more detail. Firstly, we continue to work with our advisors on the right structure for the capital raise. This is a complex process, and it is important to get it right for the long-term future of the business.
As well as the minimum GBP 15 million scheme contribution, Amigo needs to raise additional funds to support future lending. As our advisors help us to assess the most appropriate structure for the capital raise, one of the key elements that we have focused on is facilitating the participation of our existing shareholders in the raise. In other words, getting the size of the raise right. We are cognizant that a smaller equity raise might enable this. As I have said, at this point, no final decision has been made. What we need to balance this with is the need to ensure the success of the capital raise and the timeline imposed on us by the court within a scheme agreement. That is by the twenty-sixth of May of next year. These are two important considerations.
We must also ensure we can attract investors who will underwrite the issue in case our existing shareholders are unable or unwilling to participate. Part of the final capital raise structure will be establishing the right debt to equity split for the business. We are currently planning to raise additional debt to fulfill our total funding requirements. We expect to be able to provide more information in due course. Before I close, I'd like to update you on the progress we're making with ESG. Amigo is a fundamentally different business from the one of the past, and one with a strong social purpose. In May, we established our Responsible Business Council. This is a group of eight employees who report into the board advising on key ESG matters.
Priority areas include setting Amigo's ESG vision, goals, and targets, driving diversity, equity, and inclusion, climate change related matters, and our strategy for charity and community engagement. They are already having an impact. The council has assisted in our selection of our four priority UN Sustainable Development Goals and has been working to identify and set targets and metrics against each goal. One of our elected goals is reduce inequalities. This is a key driver as we build our new business proposition, enabling financial mobility for our customers, and building an inclusive and equitable environment for our employees. The council is also working with our risk function to assess how Amigo stacks up across key areas such as leadership, governance, and ethics.
This will help drive the values, behaviors, and attitudes the council wants to embed in the business, which will support the business's future growth as well as its impact on customers, employees, and the wider community. We are a small company, but we have big ambitions to make a really positive impact. Let me finish now with the summary and outlook on Slide 14. The sanctioning of our preferred Scheme of Arrangement signals a turning point for the business. We now need to meet the conditions set out in the scheme, that is return to lending and complete a capital raise, and resolve the outstanding FCA investigations. This is critical to the survival of Amigo. We have made significant progress. We are working very well with the FCA, both to secure their agreement to return to lending and conclude the investigations.
We're pleased to have appointed and be working with our new advisors, Peel Hunt and Ashcombe Advisers, as we relaunch and recapitalize the business. We have been talking with both for some time and work is well underway on determining the structure of the capital raise. Our current cash position remains strong at over GBP 115 million. Amigo is a very different business to that of the past. We have a new culture based on high standards of conduct, focused on delivering positive outcomes for all stakeholders as we pursue our purpose of providing those with few options to borrow the opportunity to achieve financial mobility. Thank you for listening. With that, I will now open the call to questions. We'll first take questions from the phone line and then move to addressing questions from the webcast. Thank you.
Thank you. As a reminder, if you'd like to ask a question, that's star one on your telephone keypad. If you'd like to withdraw your question, you can press star two. Please ensure you're unmuted locally when asking your question. As a reminder, that's star one on your telephone keypad. Okay, we currently have no questions via the telephone line, so I'll hand back to Kate Patrick for any questions via the webcast.
Thank you, Alex. We have no questions on the webcast either. Oh, I beg your pardon. We've had one come in. One from Daryl. Bear with me one second. Danny, you mentioned several times the question from Daryl Longware about being inclusive. Why is this not the case for existing shareholders that have supported the business during the hard times?
We are trying to be inclusive for existing shareholders as well. The scheme conditions, you know, the business as it was before the scheme came into effect was insolvent. It had, you know, negative net assets, and, you know, the value, the true value of the shareholding was nil in effect. By getting the scheme approved and establishing some value for existing shareholders, that has helped as much as we can at that stage. When we do the capital raise by enabling existing shareholders to participate in that, we hope that they can share in the future of the business as we build it in the future as well.
Thank you. I have another question on the webcast from David Smith. Has the testing of the new lending been completed with us awaiting a decision from the FCA?
Not quite. We are close to finalizing the actual build of the system, so we expect that imminently. The testing will be shortly after that. We do not yet have a date from the FCA, but at the moment, they have not held us up, and we hope that they won't.
Great. Thank you. A couple more questions have come in. I have one from Seshen Minchanda. Good morning. What is the timeline for repayment of the remaining GBP 50 million of the senior secured notes?
Those are due in January 2024.
Thank you. One from Robert Sage. With respect to your two new loan products, do you expect that sales will be, in the first instance, focused on the non-guarantor personal loans product or the guarantor product?
We have designed both products to have a similar return on assets. Yeah, as a company, we can be relatively agnostic in terms of which ones come through the door. When we launch, we are basically testing the market. You know, there won't be huge volumes in the first few months, but testing the market to see where the demand is, and what we are able to complete. It's hard to say which one we expect to have more success. I could find arguments for both and against both. You know, we will have to see what actually comes through the door. Financially, it shouldn't really matter which ones arrive. It should give a very similar return.
Thank you. That is all of the questions on the webcast.
Well, thank you. As a reminder, if you'd like to ask a question on the phone lines, please press star one on your telephone keypad. We have a question from Aengus McMahon from Sarria Credit. Aengus, the line is now open.
Thank you. Thanks for the presentation. I just wondered if you could give us some sort of idea as to where you see the size of the loan book getting to and what kind of the break-even level for the new start for the new Amigo will be.
That's probably information I can't really give out, because it would be market sensitive. Yeah. Amigo in the past has got to a substantial scale with a single product. While we do not expect to get to that size with the guarantor loan product by going either two products, there is every possibility that we could get, you know, to a similar size with both. That is, you know, several years in the future and a lot of challenges in between.
Thank you.
Thank you. We have no further questions. I'll hand back to the speaker team for any final remarks.
There's no final remarks from here, so thank you all for listening, and thank you for your contributions.