6 months to 30 June * % change*

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1 PRESS RELEASE Non-Standard Finance plc ( Non-Standard Finance, NSF, the Company or the Group ) Unaudited Half Year Results to 30 June August 2018 Highlights The Group is now benefiting from the significant investment made in all three divisions over the past 18 months Normalised revenue (before fair value adjustments) up 51% to 78.9m (2017: 52.2m); reported revenue of 75.1m (2017: 46.3m) Reduction in Group impairment to 25.9% of normalised revenue (2017: 28.9%) on a like-for-like basis 1 Normalised operating profit (before fair value adjustments and amortisation of acquired intangibles) up 79% to 15.2m (2017: 8.5m); reported operating profit of 7.0m (2017: loss of 1.2m) Normalised profit before tax (before fair value adjustments and amortisation of acquired intangibles) up 4% to 5.6m (2017: 5.4m); reported loss before tax of 2.6m (2017: reported loss of 4.2m) Net loan book up 37% on a like-for-like basis to reach 267.4m before fair value adjustments ( 275.6m after fair value adjustments); (30 June 2017 under IFRS 9: 194.9m before fair value adjustments) Current trading: the Group is trading slightly ahead of our expectations and we remain confident in the full-year outlook Half year dividend per share up 20% to 0.6p reflecting the outlook for the second half of 2018 (2017: 0.5p per share) Financial summary 6 months to 30 June * % change* '000 '000 Normalised revenue 2 78,895 52, % Reported revenue 75,056 46, % Normalised operating profit 2 15,173 8, % Reported operating profit (loss) 6,994 (1,160) n/a Normalised profit before tax 2 5,620 5,427 +4% Reported (loss) before tax (2,559) (4,219) +39% Normalised earnings per share p 1.35p +7% Reported (loss) per share (0.66)p (1.11)p +41% Half year dividend per share 0.60p 0.50p +20% * Note that following the acquisition of George Banco and the adoption of IFRS 9, the 2017 figures are not strictly comparable and are as previously published (under IAS 39: Financial Instruments: Recognition and Measurement). 1 Calculated on a rolling 12-month basis assuming that IFRS 9 had been adopted for both periods. 2 Normalised figures are before fair value adjustments and the amortisation of acquired intangibles. 3 Normalised earnings per share in 2018 is calculated as normalised profit after tax of 4.551m divided by the weighted average number of shares of 313,388,139. Normalised earnings per share in 2017 is calculated as normalised profit after tax of 4.282m, divided by the weighted average number of shares of 317,049,682. John van Kuffeler, Group Chief Executive, said Our three business divisions are continuing to deliver as planned with strong loan book growth and tight controls on impairment. The investments made over the past 18-months are starting to bear fruit and we are well-placed to continue to deliver substantial earnings and dividend growth. The third quarter has started well, underpinning our confidence in the full year outlook and we are pleased to declare a 20% increase in the half year dividend to 0.6p per share.

2 As we look further ahead, both our performance to-date and strong market position means that the opportunity before us is now even greater than we first thought. We are finalising our plans for 2019 and beyond and will provide a full update to the market at our annual investor day in November The tables below provide an analysis of the normalised results (excluding fair value adjustments and the amortisation of acquired intangibles) for the Group for the six month period to 30 June 2018 and 30 June 2017 respectively. 6 months to 30 Jun 18 Normalised 4 Branchbased lending Guarantor loans Home credit Central costs NSF plc Revenue 35,802 9,897 33,196-78,895 Other operating income Impairments (6,998) (1,416) (11,653) - (20,067) Admin expenses (17,669) (4,593) (19,497) (2,786) (44,545) Operating profit (loss) 12,025 3,888 2,046 (2,786) 15,173 Net finance cost (5,637) (2,583) (1,271) (62) (9,553) Profit (loss) before tax 6,388 1, (2,848) 5,620 6 months to 30 Jun 17 Normalised 4 Branchbased lending Guarantor loans Home credit Central costs NSF plc Revenue 28,204 1,505 22,526-52,235 Other operating income 1, ,197 Impairments (6,376) (247) (8,615) - (15,238) Admin expenses (13,185) (1,149) (13,121) (2,252) (29,707) Operating profit (loss) 9, (2,252) 8,486 Net finance cost (2,482) (183) (357) (37) (3,059) Profit (loss) before tax 7,358 (74) 433 (2,289) 5,427 4 Excludes fair value adjustments and amortisation of acquired intangibles. Context for the results Note that the 2017 half year results are not strictly comparable as (i) George Banco was acquired on 17 August 2017; and (ii) from 1 January 2018 the Group adopted IFRS 9, a new accounting standard covering financial instruments that replaces IAS 39: Financial Instruments: Recognition and Measurement. As permitted by IFRS 9, comparative information for 2017 has not been restated. Refer to notes to the financial statements for transitional impact of IFRS 9. 2

3 Interviews with John van Kuffeler, Group Chief Executive and Nick Teunon, Chief Financial Officer Interviews with John van Kuffeler and Nick Teunon will be available as video and text from 7.00 am on 2 August 2018 on the Group s website: Analyst meeting, webcast and dial-in details There will be an analyst meeting at 9.30 am on 2 August 2018 for invited UK-based analysts at the offices of The Maitland Consultancy, The HKX Building, 3 Pancras Square, London, N1C 4AG. The meeting will be simultaneously broadcast via webcast and conference call. To watch the live webcast, please register for access by visiting the Group s website Details for the dial-in facility are given below. A copy of the webcast and slide presentation given at the meeting will be available on the Group s website later today. Dial-in details to listen to the analyst presentation at 9.30 am, 2 August am Please call +44 (0) Access code am Meeting starts All times are British Summer Time (BST). For more information: Non-Standard Finance plc John van Kuffeler, Group Chief Executive Nick Teunon, Chief Financial Officer Peter Reynolds, Director, IR and Communications +44 (0) The Maitland Consultancy Andy Donald Peter Hamid Finlay Donaldson +44 (0) About Non-Standard Finance Non-Standard Finance plc is listed on the main market of the London Stock Exchange (ticker: NSF) and was established in 2014 to acquire and grow businesses in the UK s non-standard consumer finance sector. Under the direction of its highly experienced main board, the Company has acquired a sustainable group of businesses offering credit to the c million UK adults who are not served by (or choose not to use) mainstream financial institutions. Its three business divisions are: unsecured branch-based lending, guarantor loans and home credit. Each division is fully authorised by the FCA and has benefited from significant investment in branch expansion, recruitment, training and new IT infrastructure and systems. These investments have supported the delivery of improved customer outcomes together with growing financial returns for shareholders. 3

4 Group Chief Executive s statement Introduction We have continued to consolidate our position as a leading player in the UK s non-standard finance market. Strong organic growth in branch-based lending and home credit was complemented by a full period s contribution from George Banco which was acquired in August 2017, positioning the Group as the clear number two in the fast growing guarantor loans segment. Being a leader is a key pillar of our business strategy and each of our three operating divisions has a top three position in its respective segment of the UK s non-standard finance market. In addition, our two largest divisions, branch-based lending and guarantor loans, are continuing to benefit from particularly strong market growth 5. Having funded the acquisition of George Banco with a new six-year debt facility whilst at the same time obtaining further debt funding, the Group s capital structure has changed substantially from a year ago. Despite this change and the impact of the introduction of IFRS 9 from 1 January 2018, we were able to increase normalised profit before tax for the six months to 30 June 2018 and we remain on course to deliver a full year result in-line with our expectations. 5 Executive Insights, Volume XX, Issue 39 - L.E.K. Consulting, July 2018 Results The Group delivered normalised revenue before fair value adjustments of 78.9m (2017: 52.2m) and normalised operating profit of 15.2m (2017: 8.5m). Reported revenue after fair value adjustments was 75.1m (2017: 46.3m); reported operating profit was 7.0m (2017: loss of 1.2m) and reported loss before tax was 2.6m (2017: 4.2m). The combined net loan book across all three divisions as at 30 June 2018 grew to 267.4m before fair value adjustment ( 275.6m after fair value adjustments) implying a year on year increase of 37% on a pro forma basis (assuming George Banco had been acquired on 1 January 2017), and based on the Group s estimated net loan book at 30 June 2017 under IFRS 9 (including George Banco) of 194.9m. Further details regarding the estimated impact of IFRS 9 on the balance sheet as at 30 June 2017 is set out below. Branch-based lending We opened 11 new branches during the first half of 2018 and so had 64 branches open at 30 June 2018, 20 more than a year ago, confirming Everyday Loans position as the UK s largest branch-based provider of unsecured loans in the non-standard finance market. As well as increasing our geographic coverage and access to consumers, we have also benefited from significant operational improvements that are reflected by our key performance indicators (see Divisional Review below). Despite the significant upfront investment in new branches, recruitment, training and associated infrastructure costs, the business delivered a 22% increase in normalised operating profit to 12.0m (2017: 9.8m). Guarantor loans The acquisition of George Banco in August 2017 transformed our position in the exciting and fast growing UK guarantor loans segment. The first half of 2018 saw us deliver a particularly strong performance across a range of KPIs including loan book growth, numbers of customers whilst maintaining a tight control on impairment. In the six months to 30 June 2018 we delivered a more than six-fold increase in revenue and a 36-fold increase in normalised operating profit to 3.9m (2017: 0.1m). While the overall level of demand for guarantor loans is growing strongly, we are continuing to take market share from competitors and are focused on consolidating our position as the clear number two in the UK. Home credit Loans at Home continued to enjoy strong year-on-year loan book growth. As at 30 June 2018, our network comprised 962 self-employed agents (2017: 862) operating out of 69 offices (2017: 52) and serving more than 98,500 active customers (2017: 88,300). The result was that Loans at Home delivered a much improved normalised operating profit of 2.0m (2017: 0.8m) and is now a much larger business. We expect to see a return to more modest loan book growth in the second half of 2018 as compared with the exceptional growth achieved in Business strategy Our long-term vision and strategy for the Group is unchanged. Our addressable market remains large with approximately million adults either unwilling or unable to access credit from more mainstream banks and 4

5 financial institutions, equating to approximately one third of the UK s working adult population. Non-standard customers tend to have low or variable income, be self-employed, have lower credit ratings or be somehow credit impaired. Continued growth in the number of self-employed persons in the UK as well as a 22% increase in County Court Judgments ( CCJs ) issued in England and Wales in 2017 to over 1.1m means that the demand for nonstandard finance remains high. While macroeconomic uncertainties caused by Brexit remain, the UK economy remains reasonably robust with record high levels of employment and historically low levels of unemployment. The proportion of full time jobs that are on low pay (defined as the value that is two-thirds of median hourly earnings source: ONS) is at its lowest point for over a decade 18.4% (versus 22.0% in 2002). Against this backdrop, we remain focused on three sub-segments of the non-standard market: branch-based lending, guarantor loans and home credit. Each has significant potential, high risk-adjusted margins and an ability to deliver attractive, long-term returns. To realise this potential our strategy is to: be a leader in each of our chosen segments; invest in our core assets (networks, people, technology and brands); and act responsibly was a year of significant investment, consolidating our leading positions in all three segments and providing a solid platform for growth. This is now feeding through into our operational and financial performance, a process that we expect will continue through the rest of 2018 and into Funding Given the strong rate of loan book growth across all three divisions, the Group has reached agreement in principle with its existing lenders to provide 70m of additional credit facilities on similar terms as its existing arrangements. Once in place, this increase will take the Group s total committed debt facilities to 330m and will provide longterm funding to deliver the Group s growth plans into Regulation The Group s regulatory environment continues to evolve and while we expect this process to continue, we are looking forward to a period of relative stability following the completion of a number of detailed consultations and interventions: Staff incentives and performance management - The Financial Conduct Authority ( FCA ) published its policy statement and final rules in March 2018 clarifying the controls it expects firms to have in place to manage any risk of non-compliance with their regulatory obligations arising from performance management or incentives. High-cost credit review In May 2018 the FCA published a further consultation following a detailed review into high-cost credit, including some proposed changes to operational procedures for regulated home credit firms (there was no impact on either branch-based lending or guarantor loans). Whilst the wider industry is in the process of responding to the proposals, we do not believe that such measures, if implemented, will have a material impact on the Group s home credit business. Breathing space in June 2018, HM Treasury issued a summary of the responses received to its call for evidence regarding the proposal by government to introduce a breathing space scheme that, inter alia, would give someone in serious problem debt the right to legal protections from their creditors for up to six weeks, in order to receive debt advice and enter into a sustainable debt solution. The government is expected to issue a policy proposal for consultation during the summer of 2018 through which it will aim to design a scheme which is accessible, supportive and easy to administer. Assessing creditworthiness in consumer credit on 30 July 2018 the FCA published a final policy statement on its original consultation paper regarding proposed rules and guidance on how firms assess creditworthiness in consumer credit. Having anticipated carefully how each of these developments might impact the Group s future performance, we do not expect them to have any material effect on our business. However, we are not complacent and continue to monitor all regulatory developments closely and where appropriate, participate fully in any related consultations or debate. We are also ready to implement whatever measures can further improve the delivery of great outcomes for our customers or that may be deemed necessary by the regulator. 5

6 Half year dividend Reflecting the Group s strong underlying performance, the Board is pleased to declare a 20% increase in the half year dividend to 0.6p per share (2017: 0.5p) with a total half year dividend pay-out of approximately 1.9m (2017: 1.6m) or 41% of normalised post-tax profits. The half year dividend of 0.6p per share (2017: 0.5p) will be payable on 17 October 2018 to those shareholders on the register of shareholders on 21 September 2018 (the Record Date ). Current trading and outlook The investments made over the past 18-months are starting to bear fruit and we are well-placed to deliver substantial earnings and dividend growth. Since the end of June 2018, each of our three business divisions has continued to perform strongly, driven by further loan book growth and careful control of impairment. As a result, the Group is trading slightly ahead of our expectations and whilst uncertainties around Brexit continue, the fact that we have high risk adjusted margins in all three of our business divisions means that we are well-placed to weather any macroeconomic headwinds that may appear on the horizon. Given both our performance to-date and strong market position in all three segments it is clear that the opportunity before us is now even greater than we first thought. We are finalising our plans for 2019 and beyond and will provide an update to the market at our annual investor day in November John de Blocq van Kuffeler Group Chief Executive 2 August

7 Financial review The timing and significance of the acquisition of George Banco as well as the adoption of IFRS 9 (see below) from 1 January 2018 means that the results for the Group in the first half of 2018 and the first half of 2017 are not directly comparable. As permitted by IFRS 9, comparative information for 2017 has not been restated. However, the notes to the financial statements provide further details regarding the transitional impact of IFRS 9. Group reported results The reported results for the Group for the six months to 30 June 2018 comprised a full period of all businesses whilst the reported results for the six months to 30 June 2017 do not include any contribution from George Banco that was acquired on 17 August Fair value adjustments and amortisation of acquired intangibles in 2018 include amounts relating to the acquisitions of Loans at Home, Everyday Loans (including TrustTwo) and George Banco. 6 months to 30 June Normalised 6 Fair value adjustments and amortisation of acquired intangibles Reported Reported '000 '000 '000 '000 Revenue 78,895 (3,839) 75,056 46,297 Other operating income ,197 Impairments (20,067) - (20,067) (15,238) Admin expenses (44,545) (4,340) (48,885) (33,416) Operating profit (loss) 15,173 (8,179) 6,994 (1,160) Finance cost (9,553) - (9,553) (3,059) Profit (loss) before tax 5,620 (8,179) (2,559) (4,219) Taxation (1,069) 1, Profit (loss) after tax 4,551 (6,625) (2,074) (3,532) Loss per share 1.45p (0.66)p (1.11)p Dividend per share 0.60p 0.60p 0.50p 6 Reported figures, adjusted to exclude fair value adjustments and amortisation of acquired intangibles Normalised revenue increased by 51% to 78.9m (2017: 52.2m) reflecting strong organic growth in all divisions and a full period of George Banco which was acquired on 17 August As discussed further below, increased administration costs reflected the addition of George Banco and the significant expansion in both branch-based lending and home credit. The net result was that normalised operating profit increased by 79% to 15.2m (2017: 8.5m). Having secured committed, six-year debt funding to finance the acquisition of George Banco and on the back of the significant increase in the size of the Group s loan book, interest costs in the first half increased by 212% to 9.6m (2017: 3.1m). As a result, normalised profit before tax was 5.6m (2017: 5.4m) and the reported loss before tax (after fair value adjustments and amortisation of acquired intangibles of 8.2m), was 2.6m (2017: loss before tax of 4.2m). Normalised earnings per share was 1.45p (2017: 1.35p) while the impact of fair value and other accounting adjustments meant that the Group s reported loss per share was 0.66p (2017: loss per share of 1.11p). A more detailed review of each of the operating businesses is outlined below on both a normalised as well as a reported basis. 7

8 Divisional review Branch-based lending Everyday Loans is our largest business and represents the driving force behind the Group s financial performance. As at 30 June 2018, the net loan book had reached 166.6m, up 28% over the prior year on a like-for-like basis (2017: 129.9m) while active customer numbers had increased by 34% to 55,300 (2017: 41,300), serviced from 64 branches (2017: 44). Founded in 2006, the business has a proven underwriting process and is one of very few providers of unsecured credit whose business model is founded upon building a personal relationship, face-to-face with each of its customers. While most direct competitors rely on an exclusively online customer journey, at Everyday Loans, in addition to conducting all of the remote checks done by pure digital providers, we also then ask to meet almost all of our customers in one of our branches before deciding whether or not to lend to them. Such an approach is unusual in the internet era and while costly to operate, the investment in people, training, premises and associated infrastructure is more than justified through the achievement of lower rates of impairment, higher risk adjusted margins and significant pre-tax profits when compared with pure online operators. Opening branches in the right locations is a key element of our growth strategy. We look for areas of population with at least 70,000 adults matching our desired customer type: minimum of three years resident in the UK, earning average income but that are either credit impaired, have a thin credit file or are self-employed. Historically, new branches act as a drag on earnings in their first year but within three to four years are delivering an attractive return on asset (operating profit before central costs as a percentage of average net loan book) of over 20%. Financial results 6 months to 30 June Normalised 7 Fair value adjustments Reported '000 '000 '000 Revenue 35,802 (1,979) 33,823 Other operating income Impairments (6,998) - (6,998) Admin expenses (17,669) - (17,669) Operating profit 12,025 (1,979) 10,046 Finance cost (5,637) - (5,637) Profit before tax 6,388 (1,979) 4,409 Taxation (1,214) 376 (838) Profit after tax 5,174 (1,603) 3,571 6 months to 30 June Normalised 7 Fair value adjustments Reported '000 '000 '000 Revenue 28,204 (5,938) 22,266 Other operating income 1,197-1,197 Impairments (6,376) - (6,376) Admin expenses (13,185) - (13,185) Operating profit 9,840 (5,938) 3,902 Finance cost (2,482) - (2,482) Profit before tax 7,358 (5,938) 1,420 Taxation (1,536) 1,128 (408) Profit after tax 5,822 (4,810) 1,012 7 Reported figures, adjusted to exclude fair value adjustments and amortisation of acquired intangibles 8

9 IFRS 9 Key Performance Indicators Number of branches Period end customer numbers (000) Period end loan book ( m) Average loan book ( m) Revenue yield % 45.7% Risk adjusted margin % 35.2% Impairments/revenue % 23.0% Operating profit margin % 37.6% Return on asset % 17.2% 8 Key performance indicators have been provided using normalised data only. We have provided twelve month figures on the basis that IFRS 9 had been adopted for both periods. 9 Excluding fair value adjustments. 10 Excluding fair value adjustments based on a twelve month average 11 See glossary for definitions Normalised revenue was 35.8m (2017: 28.2m) driven by a 28% increase in the net loan book and a 0.8 percentage point increase in the average revenue yield on the loan book to 46.5% (2017: 45.7%). Fair value adjustments of 2.0m (2017: 5.9m) reflects part of the final year of the unwinding of the fair value adjustment made to the loan portfolio on acquisition and resulted in reported revenue of 33.8m (2017: 22.3). Other operating income of 0.9m came from the sale of a small portfolio of non-performing loans that was completed in the first half (2017: 1.2m). The adoption of IFRS 9 resulted in impairments as a percentage of revenue on a rolling 12-month basis of 18.8% (2017: 23.0%) This was well within previous guidance and thanks to a much improved collections performance, was below both the prior year reported figure under IAS 39 as well as the IFRS 9 figure for As a result, the total charge in the period was 7.0m (2017: 6.4m). The investment associated with our planned opening of 12 new branches in 2018 meant that administrative expenses increased to 17.7m (2017: 13.2m) and total normalised operating profit increased by 22% to 12.0m (2017: 9.8m). Higher finance costs, driven by the strong loan book growth and higher cost of funds following the refinancing of the Group s debt arrangements in August 2017, meant that normalised pre-tax profits were lower than last year. However, this is expected to reverse in the second half of 2018 as recently opened branches mature and move towards their full profit potential. On a reported basis, the reduced level of fair value adjustments meant that revenue was up 52% to 33.8m (2017: 22.3m), operating profit was up 157% to 10.1m (2017: 3.9m) and profit before tax increased by 210% to 4.4m (2017: 1.4m). As the capacity of our branch network has expanded, we have increased both the volume and quality of leads that we receive, and also improved the rate at which we convert the resultant applications into loans. In the six months to 30 June 2018, we screened a total of 761,400 applications (2017: 460,900) of which 177,700 were new borrowers that were approved in principle (2017: 141,200) and sent through to the branch network for processing ( applications to branch or ATBs ). By deepening our long-standing relationships with financial brokers, as well as by improving the customer journey through other channels, we have been able to increase the conversion rate of ATBs into loans implying a marked improvement in the quality of leads versus a year ago. At the same time, we have delivered a number of operational improvements through sharing of best practice, extensive training and the development of a can-do culture across all staff. The strong financial performance in the first half was also driven by continued investment in our branch network, our broker relationships, our people and by maintaining a key focus on delinquency management. New branch openings We opened 11 out of the 12 new branches planned for 2018 by April and one further branch will open in the second half. As a result, by the end of June 2018, the network had 20 more branches open than a year ago, increasing our network capacity, geographic coverage and customer reach. Reducing the distance that applicants have to travel to come in to a branch is one metric that is helping to improve our conversion of ATBs into loans. Broker relationships we have continued to work closely with a discrete number of financial brokers, helping them to improve the quality of leads they send through to us and also increasing the volume. In the six months to 30 June 2017, approximately 76% of our leads came via financial brokers. In the six months to 30 June 2018, this proportion had increased to 84%. Just as important, is the fact that an increasing proportion of the leads received through this channel are passing through our internal screening process and being converted into new loans with 9

10 approximately 51% of all loans booked now coming via the broker channel (2017: 35%). Of the balance, 25% comes to us direct and 24% comes from existing or former borrowers. Investment in people with more branches we need more staff and also more managers and area managers to run the network effectively. Having identified this as a potential constraint on future growth, we have developed a bespoke recruitment process that is proving to be highly effective at identifying candidates with the right skills, attitude and ambition to become customer account managers. All new joiners are put through an intensive, classroom-based induction programme where they are taught all of the key processes so they can contribute as soon they arrive in-branch. With a network of 64 branches open today, we already have a large pool of internal management talent and have been able to supplement this by recruiting from other retail-based financial services companies. Delinquency management we have continued to maintain a tight control over impairment and rates of delinquency. This reflects the strength of our proven underwriting process but also an increased focus on all aspects of our collections procedures that helped us to deliver a further year-on-year reduction in the proportion of our loan book that was more than five days in arrears this fell to 7.5% of operational receivables (i.e. before provisions) in June 2018 versus 8.2% a year earlier. Plans for the rest of 2018 We are making good progress with our branch opening programme and remain on-track to reach 12 new branches by the end of the year. Whilst always vigilant regarding the potential impact of changes to the macroeconomic outlook, we are continuing to experience strong demand for our product and so have begun to turn our attention to 2019 and the potential to add further capacity. This is not just through more staff and more branches, but also through a continuous effort to deliver operational improvements that can increase conversion and productivity. Having made great strides in increasing both of these metrics over the past 12 months, we plan to continue this evolution through a combination of sharing best practice across the network, developing further our training and management programmes as well as improving the quantity and quality of leads that are passed onto branches. Guarantor loans The Group s Guarantor Loans Division was completely transformed in August 2017 following our acquisition of George Banco to become the clear number two player in the UK s rapidly growing guarantor loans segment. As a result it has become the Group s second largest division with a net loan book of 62.9m at 30 June 2018, a 56% increase from a year earlier, assuming George Banco had been acquired on 1 January 2017, and adjusting for the impact of IFRS 9. Guaranteed loans differ from our other two divisions as the presence of a guarantor changes the risk/reward dynamic and means that we can meet our underwriting criteria without having to meet the borrower face-to-face. In particular, the presence of a suitable guarantor can act as a positive influence on the borrower s propensity to stay on-track and repay the loan as planned. The net result is that, in most circumstances, a borrower with a thin or impaired credit file is able to obtain a loan at a significantly lower interest cost than if they had sought to borrow without a guarantor. Customers apply online or by phone and having passed a preliminary credit check, both borrower and guarantor are then taken through a thorough income and expenditure assessment thereby ensuring that while the borrower is primarily responsible for making the repayments, both the borrower and the guarantor (in the event of default) are capable of repaying the loan. According to L.E.K. Consulting 12, the value of total outstanding receivables in the segment grew at a compound annual growth rate of 43% between 2008 and 2016 to reach approximately 500m. Since then, the market has continued to grow strongly and in 2017 is estimated to have reached over 700m 13 and has proven to be a highly valued market by investors while the Group had an implied market share in 2017 of approximately 7%, Amigo Holdings PLC is the market leader with an estimated 88% market share 12 and a market value today of approximately 1,300m. 12 Executive Insights, Volume XX, Issue 39 - L.E.K. Consulting, July Amigo Holdings PLC prospectus July

11 Financial results As noted above, the uplift in 2018 reflects a full period of George Banco but also strong underlying growth by our TrustTwo brand. The uplift in performance was due to improved management and a number of operational improvements that helped us to attract and process an increased numbers of leads, drive better conversion and increase the productivity of our people. The resulting strong loan book growth fed through into a substantial uplift in normalised revenue to 9.9m (2017: 1.5m) and this increased operating profit to 3.9m (2017: 0.1m). Despite higher finance costs, normalised pre-tax profits also increased strongly to 1.3m (2017: pre-tax loss of 0.1m). 6 months to 30 June Normalised 14 Fair value adjustments Reported Reported '000 '000 '000 '000 Revenue 9,897 (1,860) 8,037 1,505 Impairments (1,416) - (1,416) (247) Admin expenses (4,593) - (4,593) (1,149) Operating profit 3,888 (1,860) 2, Net finance cost (2,583) - (2,583) (183) Profit/(loss) before tax 1,305 (1,860) (555) (74) Taxation (248) Profit/(loss) after tax 1,057 (1,507) (450) (60) 14 Reported figures, adjusted to exclude fair value adjustments and amortisation of acquired intangibles Our lending process involves capturing leads, turning them into applications and ensuring that those applications become loans. On a pro forma basis (i.e. assuming that George Banco had been acquired on 1 January 2017), the number of leads increased by 81% to 1.25m (2017: 690,000). This large increase reflected in part the fact that George Banco had been forced to reduce its lending substantially during May and June 2017 as a result of funding constraints. Following the acquisition by NSF and with the provision of ample funding in August 2017, lending practise resumed at George Banco, leading to a 91% increase in applications on a pro forma basis to almost 372,000 in the first half of 2018 (2017: 195,000). While this large increase resulted in a slightly lower rate of conversion, the number of loans booked still increased by 61% to 8,150 (2017: 5,060) and the value of loans booked in the period increased by 80% to 29.9m (2017: 16.6m). This increase in volume was following a concerted effort and by working closely with the financial broking community to both increase the number of leads we receive, whilst also improving the quality of those leads 30% of all leads passed through our screening process and became applications in H which was a two percentage point increase versus the prior year (2017: 28%). Processing more applications and converting them into loans requires a delicate balance of capacity and productivity. Having added a further 15 staff by the end of June 2018, we expect that volumes will continue to increase not just because of more capacity, but also because as new recruits become more experienced, productivity also increases. IFRS 9 Key Performance Indicators Period end customer numbers (000) Period end loan book ( m) Average loan book ( m) Revenue yield 36.6% 31.0% Risk adjusted margin 30.4% 26.5% Impairment/revenue 17.0% 14.5% Operating profit margin 35.9% 12.6% Return on asset 13.2% 3.9% 15 Key performance indicators have been provided using normalised data only. We have provided twelve month figures on the basis that IFRS 9 had been adopted for both periods. All definitions are as per glossary and above The focus in 2018 has been on continuing to drive financial performance through the following key areas across both the George Banco and TrustTwo brands: 11

12 Maintaining a well-balanced channel mix we source loan volumes through a variety of channels and while the financial broker market remains our most important channel with 53% of the total (2017: 49%), all channels have seen strong year-on-year growth. Our focus on attracting new customers meant that they represented 85% of volume while top-ups for existing or former borrowers fell to 15% of the total (2017: 21%) but still grew by 40% in absolute terms. Developing a common underwriting approach and harmonised collections ensuring consistency across both brands is having a positive impact on the quality of our underwriting as well as maintaining a tight control on impairment. During the first half of 2018 we completed the analytical work required with the credit reference agencies and established a common underwriting approach with all of our underwriters across the division. This will be followed by the introduction of supporting technology and a pricing matrix later in Moving to a single loan management platform we are making excellent progress on this important part of our integration plan and expect that by the end of 2018 all new loans written, irrespective of the brand, will be completed using a single loan management platform. Being obsessed about our customers experience by operating in different segments of the market, our two brands are able to offer applicants a different customer experience, depending upon source of lead, income, quality of guarantor and size and duration of loan. With improved management information we aim to offer a more tailored journey for applicants, improving conversion, productivity and delivering great customer outcomes. Plans for the rest of 2018 The division s strong performance in the first half has provided an excellent platform for growth for the rest of 2018 and into We are focused on completing the remaining elements of our technical integration whilst maintaining good momentum in our operational and financial performance. This will be boosted by increased capacity with the recruitment of more staff and further operational efficiencies from harmonised processes and the continued development of our bespoke management information systems and tools. Home credit After a transformational 16-month period, Loans at Home has seen the shape, size and quality of its business increase significantly. As at 30 June 2018, the division had approximately 98,500 customers (2017: 88,300) served by a network of 962 self-employed agents (2017: 862) operating out of 69 offices (2017: 52) around the country. The net loan book increased to 37.8m at 30 June 2018, a 53% increase versus the prior year on a like-for-like basis. This strong growth was due largely to the major restructuring of our largest competitor which prompted large numbers of self-employed agents and staff to leave and join Loans at Home. As well as driving strong growth across a range of KPIs, the influx of new agents also helped to improve the quality of our loan book and the proportion of quality customers (those that had made 70% of all payments due within the previous 13-week period) increased to 59% of the total at 30 June 2018 (2017: 55%). Operationally, the spans of control that we set in 2017 to manage the large influx of agents and customers are working well, ably supported by our handheld technology that is used by all of our agents. We have also now launched a new, fully mobile management information platform for managers who can now access full data analytics on all agents and associated customer information in real-time. This has reduced the time needed to access and process data, allowing more time to be out with agents and spending time with their customers. While addressing a very different part of the market to branch-based lending, home credit shares the same face-toface interaction with customers, not just for lending but also through the cash collection process. Regular personal contact also provides us as lender with up-to-date information about the customer's circumstances, thereby ensuring we are fully up-to-speed with their situation and can take this into account as part of our lending and collections process. At the heart of the home credit model has always been the strong sense of trust established between customer and agent, one that is founded on the weekly visit and on having established a relationship, sometimes over many months and even years. Customers know that if things change, their agent is able to discuss this with them and find the best solution for their circumstances, which may be through rescheduling one or more repayments, but without any penalty fees or costs to the customer. These and other features of home credit, such as the fact that the total cost of the credit is fixed at the outset and never changes, mean that it is popular among those on low or variable incomes who have to manage to a tight weekly budget. Based on figures provided by the FCA 15, home credit customers have a median income of 15,500, or roughly half the national average. As a result, they can be more exposed to unexpected, or temporary changes to their income or expenditure. Whilst loans of up to 1,500 are available, most customers tend to borrow relatively small amounts 12

13 ( ) two or three times a year for specific items such as back-to-school, Christmas or an annual holiday as well as to help cover unexpected emergencies such as a broken home appliance or car breakdown. Having recently completed its detailed review of a number of segments of the high-cost credit industry, the FCA noted that home credit was a service that was valued by consumers. Specifically, the FCA noted 16 : Generally, consumers are mainly positive about using home collected credit. Many said they would be significantly worse off if this line of credit were unavailable to them. While the FCA considers that the home credit market is providing an important source of credit, it has issued a consultation on two suggested operational changes: that regulated firms (i) provide consumers with a comparison of the relative costs of refinancing an existing loan versus taking out a new loan; and (ii) capture how and when loan requests from consumers are received. The industry is reviewing these proposals carefully and will be responding in due course but welcomes the regulator s decision not to make wholesale changes to a market that it acknowledges is, on the whole, working well for consumers. 16 High-Cost Credit Review: Consultation on rent-to-own, home-collected credit, catalogue credit and store cards, and alternatives to high-cost credit. Discussion on rent-to-own pricing FCA, May 2018 Financial results The larger loan book fed through to a significant uplift in revenue to 33.2m (2017: 22.5m), albeit on a marginally lower revenue yield. The adoption of IFRS 9 caused no surprises and the rate of impairment as a percentage of revenue at 36.6% (2017: 37.7%) was within our previously announced guidance range of 33-37%. As noted above, the larger and much higher quality loan book has resulted in a significant uplift in total collections and a reduction in the proportion of missed payments. Administration costs increased to 19.5m (2017: 13.1m), driven by 17 more offices, 100 more self-employed agents and 106 more staff, both in the field and in oversight roles - the total number of staff at 30 June 2018 was 370 (2017: 264). Breaking down the costs further, agent commissions increased by 59% to 8.1m (2017: 5.1m) while other admin costs, including staff-related costs, also increased, this was by a smaller proportion. As a result, normalised operating profit was up substantially to 2.0m (2017: 0.8m) and while there was a 0.9m increase in finance costs to 1.3m (as a result of the strong loan book growth as well as the increased cost of the new debt facilities outlined above), normalised pre-tax profit doubled to 0.8m (2017: 0.4m). 6 months to 30 June Reported '000 Reported Revenue 33,196 22,526 Impairments (11,653) (8,615) Admin expenses (19,497) (13,121) Operating profit 2, Finance cost (1,271) (357) Profit before tax Taxation (147) (82) Profit after tax '000 IFRS 9 Key Performance Indicators Period end agent numbers Period end number of offices Period end customer numbers (000) Period end loan book ( m) Average loan book ( m) Revenue yield (%) 174.9% 178.1% Risk adjusted margin (%) 110.9% 111.0% Impairments/revenue (%) 36.6% 37.7% Operating profit margin (%) % 4.8% Return on asset (%) % 8.5% 17 We have provided twelve month figures on the basis that IFRS 9 had been adopted for both periods. All definitions are as per glossary and above 18 Before temporary additional commission 13

14 Plans for the rest of 2018 We remain focused on tightly managing our collections and impairment performance as well as supporting the agents recruited over the past year to reach their agreed number of customers as soon as they can. This will help to increase volumes and also reduce our costs as we remove the temporary additional commissions offered to newly recruited agents when they first joined our network. The strong loan book growth and the increase in customer numbers and overall quality of our loan book for the year to-date bodes well for the seasonally important second half of the year. While we are working through the suggested operational changes put forward by the FCA as part of the High-Cost Credit Review, we do not anticipate any meaningful impact on our business should they be introduced in full. Central costs 6 months to 30 June 2018 Normalised Amortisation of acquired intangibles 2018 Reported Revenue Admin expenses (2,786) (4,340) (7,126) Exceptional items Operating loss (2,786) (4,340) (7,126) Net finance (cost)/income (62) - (62) Loss before tax (2,848) (4,340) (7,188) Taxation ,365 Loss after tax (2,308) (3,515) (5,823) 6 months to 30 June 2017 Normalised Amortisation of acquired intangibles 2017 Reported Revenue Admin expenses (2,252) (3,709) (5,961) Exceptional items Operating loss (2,252) (3,709) (5,961) Net finance (cost)/income (37) - (37) Loss before tax (2,289) (3,709) (5,998) Taxation ,163 Loss after tax (1,831) (3,004) (4,835) 19 Adjusted to exclude amortisation of acquired intangibles related to the acquisition of Loans at Home, Everyday Loans and George Banco. Normalised administrative expenses for the period were 2.8m (2017: 2.3m). They include plc-related costs as well as advisory and other related expenses. In addition, the Group incurred 4.3m of amortisation of intangible assets (2017: 3.7m) recognised on the acquisition of Loans at Home, Everyday Loans and George Banco. IFRS 9 The International Accounting Standard Board s introduction of a new accounting standard covering financial instruments became effective for accounting periods beginning on or after 1 January This standard replaces IAS39: Financial Instruments: Recognition and Measurement. The new standard requires that lenders (i) provide for the expected credit loss ( ECL ) from performing assets over the following year as a result of defaults forecast in the year and (ii) provide for the ECL over the life of the asset where that asset has seen a significant deterioration in credit risk. As a result, whilst the underlying cash flows from the asset are unchanged, IFRS9 has the effect of bringing forward provisions into earlier accounting periods. 14

15 This has resulted in a one-off adjustment to receivables and reserves on 1 January 2018 as detailed in the notes to the financial statements. Whilst the adoption of IFRS 9 from 1 January 2018 has meant that the prior year figures, as previously reported, are not directly comparable, the Group estimates that the unaudited combined net loan book as at 30 June 2017, assuming IFRS9 had been adopted for the full accounting period ended 30 June 2017 would have been 165.2m ( 194.9m if George Banco had been acquired on 1 January 2017). A breakdown of the unaudited analysis is as follows: IFRS 9 balance sheet 30 June 2017 IAS 39 m IFRS9 adjustment m IFRS9 m Receivables: 20 - Branch-based lending (0.7) Home credit 31.2 (6.5) Guarantor loans: TrustTwo Total receivables (7.1) Guarantor loans: George Banco Total receivables including George Banco Adjusted to exclude fair value adjustments and the amortisation of acquired intangibles Principal risks There are a number of potential risks and uncertainties which could have a material impact on the Group s performance over the remaining six months of the financial year and could cause reported and normalised results to differ materially from expected and historical results. The principal risks facing the Group, together with the Group s risk management process in relation to these risks, are unchanged from those reported in the Group s Annual Report for the period ended 31 December 2017 (which is available for download at and relate to the following areas: Conduct risk of poor outcomes for our customers or other key stakeholders as a result of the Group s actions that may result in censure or penalty; Regulation risk through changes to regulations or a failure to comply with existing rules and regulations; Credit risk of loss through poor underwriting or a diminution in the credit quality of the Group s customers; Business strategy a failure to execute and integrate acquisitions (including technology), or to execute the Group s strategy as planned, may increase the risk of financial loss, including the possible impairment of goodwill; Operational the Group s operations are complex and have many important processes and procedures that if not followed or executed properly could increase the risk of financial loss; and Cyber risk the Group may suffer data loss or be subject to an unauthorised change that causes a security issue, data or systems abuse, cyber-attack or denial of service to any of the Group s systems. On behalf of the Board of Directors Nick Teunon Chief Financial Officer 2 August