REG - Distribution Finance - Final Results
02/04/2025 07:04
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RNS Number : 2426D Distribution Finance Cap. Hldgs PLC 02 April 2025
This announcement contains inside information as stipulated under the UK
version of the Market Abuse Regulation (EU no. 596/2014) as it forms part of
UK law by virtue of the European Union (Withdrawal) Act 2018 (as amended from
time to time) ("MAR").
2 April 2025
Distribution Finance Capital Holdings plc
("DF Capital" or the "Company" together with its subsidiaries the "Group")
Audited Results for the year ended 31 December 2024
Strong performance ahead of initial expectations
Distribution Finance Capital Holdings plc, the specialist bank providing
working capital solutions to dealers and manufacturers across the UK, today
announces its audited results for the year ended 31 December 2024.
Highlights
2024 2023 Change
Performance
Loan Book (£m) 666 581 15%
New loans advanced to customers (£m) 1,440 1,200 20%
No of dealer customers 1,334 1,182 13%
Financial
Gross Revenue (£m) 76.8 60.4 27%
Net Income (£m) 45.6 38.0 20%
Cost of Risk (bps) (4) 228 (102%)
Profit before tax (£m) 19.1 4.6 317%
Net Assets (£m) 115.4 100.4 15%
Basic earnings per share (pence) 7.8 1.8 338%
Tangible net asset value per share (pence) 63.8 55.6 15%
· Strong financial performance, delivering profit before tax of £19.1m,
including a £4.7m write back of a provision made in 2023, more than four
times 2023 outturn
· Strong growth in new loan origination of £1.44bn, up almost £250m on the
prior year supporting a record year-end loan book of £666m, up 15% on 2023
· Net Interest Margin ("NIM") increased by 30bps to 7.9%, well ahead of target
· Strong credit risk performance with continued low number of arrears cases: 33
dealers (2023: 30), with arrears one day past due and in legal recovery,
representing less than 3% of the Group's entire dealer customer base
· Retail deposits increased during the year by £75m to £650m with over 15,600
savings accounts
· Tangible net asset value per share increased by 8.2p to 63.8p, up 15% on 2023.
· Continued progress in diversifying the Group's product set and end markets,
ensuring further avenues for long-term growth without the need for a dilutive
capital raise
Carl D'Ammassa, Chief Executive, commented: "2024 was another year of
significant progress for the Group, marking our third consecutive year of
profit growth since our authorisation in 2020. This year, we have continued to
scale the bank in our core inventory finance lending space, whilst also making
investments in new products and services, bringing to life our ambitions to
become a multi-product lender. I am incredibly proud of the team and the
products we are bringing to life for our customers. We have an exciting
journey ahead of us."
An overview video of the results, by CEO Carl D'Ammassa, is available to watch
here: https://bit.ly/DFCH_FY2024_overview
(https://bit.ly/DFCH_FY2024_overview) and on the Company's website:
https://www.dfcapital-investors.com/ (https://www.dfcapital-investors.com/)
Analyst presentation
The Company will host an analyst webinar at 9am today relating to the results.
Analysts wishing to join can register by emailing dfcapital@almastrategic.com
(mailto:dfcapital@almastrategic.com) .
Investor presentation
The Company will also provide a presentation to existing and potential
shareholders via the Investor Meet Company platform at 2:30pm. Investors can
register for the webinar here:
https://www.investormeetcompany.com/distribution-finance-capital-holdings-plc/register-investor
(https://www.investormeetcompany.com/distribution-finance-capital-holdings-plc/register-investor)
A recording of the presentation will be made available on the Company's
website following the conclusion of the investor presentation.
Annual General Meeting
The Company will hold its Annual General Meeting on 4 June 2025 at the
Company's registered office in Manchester. The Notice of AGM and Form of
Proxy will be posted to shareholders in due course and a copy will be
available at www.dfcapital-investors.com (http://www.dfcapital-investors.com/)
.
The Group's full Annual Report and Financial Statements have today been
published and are available on its investor website
at www.dfcapital-investors.com (http://www.dfcapital-investors.com/) .
The person responsible for arranging the release of this announcement on
behalf of the Company is Karen D'Souza (Company Secretary).
For further information contact:
Distribution Finance Capital Holdings plc
Carl D'Ammassa - Chief Executive Officer +44 (0) 161 413 3391
Kam Bansil - Head of Investor Relations +44 (0) 7779 229508
http://www.dfcapital-investors.com (http://www.dfcapital-investors.com/)
Panmure Liberum Limited (Nomad and Broker) +44 (0) 203 100 2000
Chris Clarke
William King
Alma Strategic Communications +44 (0) 203 405 0235
Josh Royston
Hilary Buchanan
Hannah Campbell
Sarah Peters
About DF Capital
DF Capital is a specialist independent bank providing award-winning commercial
finance solutions and savings products to consumers and small businesses.
Founded in 2016, the Group is headquartered in Manchester with over 130
people. DF Capital's commercial lending supports, distributors and
manufacturers across sectors including Automotive, Leisure and Luxury. In
2020, the Group became a fully authorised bank and started offering a range of
consumer savings products.
The Group is listed on AIM on the London Stock Exchange under the ticker DFCH.
For more information, please visit www.dfcapital.bank
(http://www.dfcapital.bank)
Chair's Statement
It is with immense pride that I present my statement for the last financial
year. 2025 marks my sixth year with the Company, having assumed the role of
Chair in 2021. During this time, it has been truly rewarding to see how the
firm has grown and developed, having achieved the status of a bank only four
years ago. This year, we are pleased to report significant year-on-year
increases in profit, continued loan book growth and the imminent launch of new
products and services. Such accomplishments are remarkable, especially
considering the early-stage nature of our bank. As a Board, we believe that DF
Capital's journey since authorisation has been exceptional, marked by
outstanding delivery and achievement of key milestones.
This year, in addition to our strong financial performance, we have made great
progress towards our ambitions to be a multi-product lender, supporting our
dealer and manufacturer customers in a bigger way though lending product
adjacencies. Our singular focus on reaching profitability quickly after
authorisation has paid off. We have a strong financial base and accretive
capital position that allows us to grow at meaningful levels year-on-year. We
are now in a virtuous circle of scale, generating increasing levels of
annualised earnings, which in turn creates capital unlocking further scale in
our lending capacity.
Our updated medium-term guidance, which does not require additional Tier 1
capital, sets the firm apart from many early-stage banks. We are now
delivering double digit returns on equity that is firmly "baked in" to our
financial performance and we are on track to achieving mid-to-high teens
returns in the medium term.
Whilst delivering on our financial objectives is undoubtedly critical, what I
believe further sets DF Capital apart is the equal focus given to having a
strong positive culture, where employees can thrive and demonstrate their
passion to deliver the very best levels of customer service. As a Board, we do
not put the financial successes down to good fortune. We believe it is the
careful orchestration of a strong strategic focus, great culture, fabulous
people and exceptional leadership that bring this level of performance to
life.
The team at DF Capital is passionate about its purpose, doing the right thing
and giving back to the communities in which it operates. Throughout our
workforce, the ambition and enthusiasm for what they do is palpable. My fellow
Board members and I enjoy spending time with the DF Capital team, lending our
support and providing constructive challenge to the management team to drive
greater success.
The Board believes DF Capital is an exciting growth story with a strong
investment case. It's undoubted that we have many opportunities ahead of us to
further scale the bank at attractive risk adjusted returns in specialised
lending niches. The management team's focus on delivering exceptional service
to our borrowers and retail depositors, through scalable and cost-efficient
technology solutions sets it apart, demonstrated by the significant
year-over-year growth in lending and strength of customer sentiment and the
industry recognition and awards received.
We believe the launch of our share buyback programme in January 2025 sends a
clear message about the confidence we have in the Group's intrinsic earnings
potential and runway for further growth. As a Board, we continue to believe
the Group's share price undervalues its current and future prospects and given
this material disparity we felt compelled to launch the programme.
It is also undoubted that we have a high-quality team at DF Capital, but this
level of performance is not possible without supportive shareholders,
customers and wider stakeholders, to whom I extend my gratitude.
Whilst the global macro-economic uncertainty and some negative business
sentiments in the UK remain, I'm optimistic about DF Capital's future
prospects. We are at a point of transformation for the firm as we accelerate
our multi-product lending ambitions and drive further scale across the bank,
unconstrained by legacy issues or remediation activities felt by others in the
sector.
Mark Stephens
Independent Non-executive Chair
Chief Executive Officer's Report
2024 has seen us continue to scale the bank in line with our growth plans. In
particular, we are proud to have delivered our third consecutive year of
profit, only four years since being authorised as a bank in 2020. During that
time, we have seen more than a sevenfold increase in our loan book, supported
by our retail savings proposition, and it is this scaling of lending that
underpins our franchise and overall profit generation.
The Group has delivered pre-tax profit of £19.1m being more than a four-fold
increase on the prior year (2023: £4.6m), including a significant write-back
of the provision we made last year relating to RoyaleLife and associated
companies. The Group's adjusted pre-tax profit is £14.4m being a 55% year on
year increase (2023: £9.3m). Tangible net asset value per share increased
significantly during the period to 63.8p (2023: 55.6p).
I believe the Group's performance in the year clearly demonstrates the
successful delivery against our strategic objective to become a multi-product
lender. I'm extremely proud of the business we continue to build and the
products and services we are bringing to life for our customers.
Disciplined approach to growth drives strength of financial return
The Group continues to operate in attractive niche lending markets, providing
working capital solutions to dealers and manufacturers. Despite significant
macro-economic headwinds, we have continued to grow our new loan origination
both in the core inventory finance product and new product adjacencies. New
loan origination reached £1.44bn up almost £250m on the prior year (2023;
£1.2bn). The Group's loan book increased by almost 15% to £666m (2023:
£581m).
Whilst we remain focused on delivering double digit rates of loan book growth,
we have not compromised on credit quality and have also maintained a
disciplined approach to pricing, given the value and opportunity our lending
products unlock for our customers.
We have selectively increased our lending customers to 1,334 (2023: 1,182) and
now support 88 (2023: 89) manufacturer partners, who meet our current credit
standards and represent scalable ongoing relationships. Total credit lines
pledged to customers were £1,142m (2023: £1,030m). The number of dealers in
arrears held strong at 33 (2023: 30), with arrears classified as a payment of
at least one day past due, representing less than 3% of the Group's entire
dealer customer base. The Group's total arrears closed the year at £4.3m
(2023: £14.0m), equal to 0.64% (2023: 2.4%) of total lending.
Net Interest Margin (NIM) increased marginally through the year to 7.9% (2023:
7.6%), a significant driver of our year-over-year profit improvement.
Our operating platform is significantly scalable and, whilst costs have
increased overall given new hires, investments in technology and product
capabilities, as well as general inflationary pressures, our cost-to-income
ratio broadly held at 59% (2023: 58%). We expect this cost income ratio to
continue to fall over the medium term as the Group scales its loan book, and
expect this ratio to be less than 50% by 2028.
The Group's adjusted return on equity, excluding the RoyaleLife write back, is
on the cusp of exceeding 10% at 9.8% (2023: 6.7%).
Continued momentum in core lending product builds market share
In our core inventory finance product, the range of end-user markets we
support remains stable and our portfolio continues to be well diversified
across multiple sectors. Undoubtedly, it has been another unpredictable year
from a macro-economic perspective, impacted further by the change in
Government during the second half of the year.
During the year we have grown our market share, demonstrated through the
increase in new loan origination, which reached £1.44bn. It is clear in some
sectors that the measures from the UK Government's budget caused a number of
dealers to be more cautious in ordering and holding inventory over the festive
period and winter months, traditionally a period where dealers would build up
stock in readiness for the spring and the period where end-user sales
ordinarily increase. This reticence has continued through the start of 2025,
whilst some dealers consider the wider impact on their business of anticipated
business rates increases, alongside an increase in employers' national
insurance contributions and an expectation of interest rates continuing to be
elevated.
Average stock days, which measures the average age of loans outstanding, was
145 days for the year remaining consistent with the prior year (2023: 145
days). We saw a modest reduction during Q4 2024 to 140 days (Q4 2023: 148
days).
Overall, we are pleased with where our loan book closed the year at £666m, up
15% on 2023. We continue to make significant strides forward in the motorhomes
and caravans, marine, motorcycles and automotive sectors, where we have grown
our market share materially during the year despite some of the market
challenges.
Motorhome and caravan end-user demand has been particularly high during the
second half of the year given the better weather conditions, encouraging
people to seek out domestic holidays. This increase in demand and a rebalance
of production by manufacturers has allowed dealers to adjust their stock
levels to better align to anticipated demand. Elevated end-user demand for
motorhomes and pre-orders saw an unprecedented number of sales during the
first half of the year, reaching more normalised levels after the summer
months.
In the caravan tourer market, much of the year has been characterised by stock
overhang from prior years, with manufacturers adjusting production to better
match dealer orders meaning that fewer new units have been manufactured during
the year. End-user demand was slower in the first half having been adversely
impacted by poor weather conditions.
The holiday home and lodge sector has continued to work through more
challenging times, caused by severe weather conditions and the aftermath of
the failure of RoyaleLife. That being said, having now adjusted production
levels, sales are increasing as park operators fill stock gaps and rebalance
their existing stock towards larger units in line with demand. The market has
seen some shift to short-term holiday rental bookings versus sales of units;
the Group's flexible lending products ably help unlock this opportunity for
the park operators. Additionally, there continues to be a healthy level of
activity among those with sizeable pension pots looking to make investments in
prefabricated holiday homes to enjoy during retirement.
Like other sectors, marine manufacturers have also adjusted their production
levels to align better with end-user demand, particularly at the leisure craft
/ smaller boat end of the market. Larger boats continue to see strong demand.
Generally, end-users in these leisure focused markets are resilient to the
impact of elevated interest rates and cost of living pressures, leaving
dealers buoyant about prospects in 2025 and beyond.
Whilst growing from a low base, the automotive sector has seen consistent
levels of demand across higher value cars, with more challenging times
relating to conventional and electric vehicles in particular. This more
challenging landscape has been mirrored in the transport sector, particularly
the light commercial vehicles space where some market participants have ran
significant discount campaigns, adding pressure to our distributor partners
who operate in this market. Government policy on electric vehicles has also
materially impacted demand for new EVs more generally.
The industrial sectors, which is predominantly plant and machinery, correlates
closely with government plans of major infrastructure projects. Constraints to
the HS2 programme and project delays due to change in government impacted much
of the year, although as we closed out 2024, we started to see green shoots of
optimism.
The agricultural sector has seen investment tightening, firstly driven by the
poor weather that impacted crop harvesting, but more recently aligned to
government policy which has created uncertainty amongst farming community.
Groundscare and forestry have remained buoyant throughout, although are small
sectors for us.
Our diversification across these sectors, whilst maintaining intimacy in our
relationships, whether dealers or manufacturers, allows us to successfully
navigate market challenges and support lending opportunities. We have
demonstrated our commitment to providing funding solutions that help our
customers through more unpredictable times whilst also allowing them to
capitalise on opportunities presented to them and support their growth.
Looking forward, we believe adding new manufacturer partners and entering new
sectors will provide further downside protection should markets deteriorate.
Our recent entry into the renewables asset class, specifically solar panels
and batteries, is a great example of how we continue to innovate and develop
our proposition around a common capability and financial product offering.
Structuring finance solutions that deepen relationships
Through the year we have been presented with more opportunities to support
existing customers, partners or known industry participants with structured or
bespoke lending solutions. Drawing on the extensive experience and expertise
we have across the bank, we have been able to provide an array of ancillary
lending products to our customers, which includes short-term working capital,
wholesale funding (i.e. lending to non-bank lenders), business related
bridging, receivables financing or business to business hire purchase loans.
These opportunities are tailored to an individual customer or partner's need
and offer us attractive risk-adjusted returns.
Following the launch of these bespoke lending solutions in Q1 2023, we have
successfully grown lending in this area to almost £75m in 2024 (2023: £18m).
Whilst always expected to be relatively small, and not representing more than
10-15% of our entire lending balance, having this lending capability is
important and allows us to deepen our relationships with existing customers
and play an active role in supporting opportunities and sector participants
right across the spectrum of markets in which we operate.
We are particularly excited about the recently announced relationship with
Satago Financial Solutions Limited ("Satago"), a leading provider of Lending
as a Service software solutions and invoice financing, which will unlock
invoice discounting capabilities for our existing customers sitting alongside
an inventory finance facility. This arrangement will also enable us to
selectively tap into Satago's partnerships, where they have their lending
capability integrated to accounting platforms and alike.
Over and above this, we have also continued to leverage our Euro-zone lending
capabilities, to support selective dealers in Republic of Ireland and
Netherlands. At the end of the year, we had lent approximately €5m across
this customer cohort. Whilst we do not have immediate plans to expand into
Europe in any meaningful way, having this capability and being able to
selectively support our existing dealer and manufacturer relationships is
helpful. Equally, this capability allows us to build knowledge and experience
operating on a multi-currency basis, providing optionality for the future as
we continue to scale.
Asset Finance unlocks significant future growth and our multi-product lending
ambitions
Having ruled out the pursuit of inorganic product development opportunities
through M&A, we started the self-build of an asset finance capability in
early 2024. We believe this is the natural extension to our existing
manufacturer and dealer relationships by unlocking the opportunity to finance
assets "beyond the forecourt", supporting the retail sales of our dealer
customers and thereby deepening our relationships with those dealers even
further. Hire purchase and leasing, commonly known as asset finance, are
typical lending products required by end-users in order to purchase dealers'
products and is viewed as a welcomed addition to our proposition.
Having identified the leisure market, specifically motorhomes and caravans, as
the best entry point for us, we are now well progressed in both the product
build and onboarding of dealers. In February 2025, as previously announced, we
were granted the relevant regulatory permissions in order to provide asset
finance to consumer borrowers. Distributed through existing dealer customers,
these markets are significant in size, many times larger than those in which
we operate today. Importantly, this lending is also much longer tenor (three
to five years) than our traditional core inventory finance product which
averaged c145 days during 2024. This will provide the basis of a 'stickier'
loan book and fuel an acceleration of our medium term loan book growth.
There has been much publicity around the challenges facing the motor finance
sector following both the FCA's motor finance review and the Court of Appeal's
ruling in relation to commission disclosure. This has proven highly beneficial
to us in the build of our own capability. Having completed our application to
the FCA, responded to their questions and ensured our own capabilities address
all elements of the motor finance sector challenges, we enter the consumer
asset finance market with no legacy issues, a proposition and offering that
aligns to the most stringent standards, whilst being a platform for further
growth at a time when other lenders could find themselves distracted by
remediation activities.
Strength of deposit raising supports our lending ambitions
We have demonstrated over the four years or so since we were fully authorised
as a bank, that having great savings rates coupled with exceptional customer
service resonates with depositors. We continue to iterate our savings service
proposition, making it even easier for customers to transact with us, whilst
always knowing that they can quickly, efficiently and effectively speak to one
of our Manchester-based savings team when they need to.
Nothing has changed about how we do business in this regard. Our savings
products are available using "Best Buy Tables" as a route to attract savers,
with a super-fast application journey that allows customers to open an account
in minutes, being issued with a dedicated sort-code and account number
immediately on successful application.
We received feefo's Platinum Trusted Service Award in 2024 and again in 2025,
building on their Exceptional Award from 2023. We consistently achieve 4.8
feefo stars from our depositor customers for the service we offer.
We closed the year with £650m of deposits (2023: £575m) with over 15,600
accounts (2023: c.15,200 accounts) up 3% on the prior year. Having
diversification to our saving product maturity profile remains a significant
focus for us, and we raised over £430m of new deposit or reinvestments
through the year in the easy access, notice and fixed rate markets. The
average rate for new deposits was 5.1%.
Fostering a positive culture
Achieving consistent world class levels of employee engagement is at the heart
of what we do. We have long believed that having employees that are highly
invested in our strategic ambitions, understand what we are looking to achieve
and do the right thing for our customers, communities, the environment and
their colleagues define the quality of shareholder return.
DF Capital has been ranked amongst the best places to work in the UK by Best
Companies. We are recognised as offering world class levels of employee
engagement as a 3-star organisation and ranked:
- #5 Top Companies to Work For in the Financial Services Sector
- #21 Top Mid-Sized Companies to Work For in the UK
- #36 Top Companies to Work For in the North West
We believe giving back to our local communities is core to being a great place
to work. We punch above our weight in this regard and were recognised by Best
Companies as the Top Mid-Sized Company for community initiatives. Our "Mega
Give Back" day is now firmly engrained in our operating rhythm, alongside many
hours of voluntary work the DF Capital team consistently offer to community
initiatives.
In creating an environment where our employees feel they can thrive, fulfil
their careers ambitions and seek out opportunities to grow and develop, I
believe we've nailed a key ingredient to having a highly sustainable business
model. Accordingly, the extent of financial return is no surprise to me.
I am proud of the culture at DF Capital and what the team has achieved since
being authorised as a bank in September 2020.
Outlook
We are at an exciting point in the Group's strategic journey. 2025 will see us
truly become a multi-product lender, with significant opportunity to grow our
lending and further scale the bank. With scale comes increasing returns and,
being on the cusp of double digit returns in 2024 already, we believe we are
well on our way to achieve the high-teens ROE we have talked about for some
time.
The Group is not short of opportunities to grow, and our plans touch three key
areas:-
Core inventory finance
- Grow market share in current sectors with existing and new relationships
- Enter new sectors and specifically leverage new technology to allow lending
against other types of serialised assets
Asset Finance
- Unlock lending in existing sectors that support dealer sales
Structured finance
- Providing bespoke lending solutions to existing customers and market
participants
- Working capital / invoice discounting for existing and new customers through
Satago relationship
As we look beyond 2025, we will continue to diligently and ruthlessly ensure
our capital is put to work where we can achieve the best risk adjusted
returns.
We are now generating meaningful levels of annualised profit, organically
delivering capital that unlocks further growth. With scale we become even more
cost efficient, underpinning our medium-term guidance. We do not require
additional dilutive Tier 1 capital to be raised from shareholders to support
our medium-term growth plans and can develop our loan book and scale at a
healthy level year-on-year.
The opportunities ahead of us are immense, I'm excited about our future plans,
whilst always cautious and vigilant about the uncertainties presented by the
global macro-economic environment.
Carl D'Ammassa
Chief Executive Officer
Chief Financial Officer's Report
We are delighted to report another year of strong and increasing profitability
with continued momentum, delivering pre-tax profit of £19.1m for the year,
including a £4.7m recovery on a previously impaired loan, up 317% on the
prior year (2023: £4.6m). As we scale the business, we continue to increase
returns with an adjusted return on equity for the year of 9.8% (2023: 6.7%)
and adjusted basic earnings per share for the year of 5.9p (2023: 3.7p).
Significant revenue growth whilst maintaining a strong Net Interest Margin
Gross revenues, which are predominantly comprised of interest and similar
income, increased by 27% to £76.8m (2023: £60.4m). The increase is a result
of the 15% year-on-year loan book growth combined with a 10% increase in gross
yield for the year at 12.2% (2023: 11.1%). This increase in gross yield
reflects our ability to pass on the base rate rises that occurred through 2023
into newly originated loans.
Net Interest Margin (NIM), which is gross yield less interest expense,
increased by 4% during the period to 7.9% (2023: 7.6%).
The average cost of retail deposits increased during the year to 5.16% (2023:
4.27%) driven by base rate increases over the life of the deposit book. As the
Group's deposit book is predominantly an array of fixed rate tenors, it takes
time for increasing deposit rates to fully flow through to the deposit book as
a whole, only impacting as older maturing deposits are replaced by newer
deposits at higher rates. Accordingly, during a period of rising base rates
the loan book has repriced more quickly than the deposit book given its
shorter average tenor with this effect seen during 2023 and H1 2024.
Additionally, since base rates started increasing from late 2021, the
underlying increase in the cost of new and retention of maturing existing
deposits has not increased to the same extent as the base rate increase
leading to an additional increase in the underlying NIM over this period of
base rate increase.
Summarised Statement of Comprehensive Income 2024 2023
£'000
£'000
Gross revenues 76,805 60,350
Interest expense (31,208) (22,336)
Net income 45,597 38,014
Operating expenses (26,714) (21,843)
Impairment charges 241 (11,598)
Provisions for commitments and other liabilities (50)
Profit before taxation 19,074 4,573
Taxation (5,053) (1,418)
Profit after taxation 14,021 3,155
Other comprehensive income 75 183
Total comprehensive profit 14,095 3,338
Net income, which is gross revenues less interest expense, increased by 20% to
£45.6m (2023: £38.0m) given the movement in these underlying components set
out above.
Investing in future growth
During the year we commenced the organic build of our asset finance lending
capability. This has included, in late 2024, onboarding some senior hires to
support these new products. Following FCA approval received in February 2025,
we expect the launch of the new consumer lending products during H1 2025.
Recruitment of personnel to support this asset finance lending is currently
underway and we expect, given the early development of this product that it
will have a c£2m drag on the Group's overall pre-tax profit in 2025,
targeting breakeven of asset finance lending in 2026.
Since the firm's inception we have focussed on, and have delivered, a highly
digitised platform. However, to service our proposition as a competitive
differentiator, we continue to recognise the importance of further automation
and leveraging technology to provide continuous enhancements. During the year,
these investments in robotic process automation and character-recognition
technologies, as well as deploying new market leading technology solutions
have enabled us to provide new products to our customers. Additionally, as a
maturing bank, we continue to enhance our underlying controls, with further
investment in cyber security and in our risk management technology during the
year.
The Group's headcount reached 137 employees at the year end (31 December 2023:
133 employees) with an average headcount during the year of 136 employees
(2023: 126 employees). This headcount reflects that the people resource
required over the near term to scale our existing lending and retail deposit
propositions (excluding the new asset finance proposition) are already
substantively embedded in the business, allowing us to unlock further
operational leverage on the existing loan book as we continue to grow our
lending.
Total operating expenses for the year were £26.7m (2023: £21.8m) comprising
£16.0m of staff costs (2023: £13.4m) and £10.7m of other operating expenses
(2023: 8.4m).
Strong credit risk performance
Despite the challenging macro-economic and higher interest rate environment
the Group's overdue accounts have continued to perform exceptionally well.
This reflects the quality of our customer base, underpinned by the strength of
our credit risk and portfolio management. The number of customers with arrears
one day past due at 31 December 2024 was 33 (31 December 2023: 30) comprising
less than 3% of the Group's entire customer base, which includes 19 cases in
legal recovery. The Group's total arrears closed the year at £4.3m (31
December 2023: £14.0m), equal to just 0.6% of total lending.
As at 31 December 2023 an almost full provision of c£10m had been made in
respect of RoyaleLife and associated companies ("RoyaleLife") being equivalent
to the customers entire outstanding unrecoverable balance at that time. During
2024 we have diligently and proactively looked to make the fullest recovery
possible. Due to this we have recovered assets and cash of £1.7m and
completed the successful negotiation of a £3m settlement against property
that is currently pending sale and is subject to a new counterparty loan. This
has resulted in the write back of £4.7m of the provision, reducing impairment
losses in the year accordingly.
31-Dec-24 31-Dec-23 31-Dec-22 31-Dec-21
Arrears - principal repayment, fees and interest
1-30 days past due 271 696 136 105
31-60 days past due 1,146 265 1,084 834
61-90 days past due 199 946 25 0
91 days + past due 2,646 12,102 5,885 164
4,262 14,009 7,130 1,103
% Loan book 0.6% 2.4% 1.6% 0.4%
Associated principal balance
1-30 days past due 1,305 1,253 2,016 951
31-60 days past due 2,623 717 1,512 834
61-90 days past due 449 1900 214 0
91 days + past due 3,912 12,821 16,317 184
8,289 16,691 20,058 1,970
% Loan book 1.2% 2.9% 4.6% 0.8%
Cost of risk for the year was a gain in 2024 of 0.04% (2023: cost 2.28%),
however excluding this RoyaleLife impact, the adjusted cost of risk for the
year would have been 0.75% (2023: 1.36%). We are very pleased with this
underlying cost of risk which reflects our proactive credit risk management
supported by the ability to remediate dealer defaults by product
redistribution through our customer network or sale of our secured assets to
other parties.
Portfolio ageing
We use average outstanding loan tenor as the most appropriate stock days
measure to determine how our portfolio is ageing compared to our historical
experience and our sector tolerance levels used for portfolio oversight. Our
historical data, which covers 2018 to 2023, is significantly impacted by both
pandemic and post-pandemic market dynamics. During 2024, for the first time
since 2020, we have seen normalised seasonality returning to the leisure
sectors with high levels of repayments over the spring/summer "selling" season
and reduced repayments during the autumn/winter "stocking" season.
Overall, there has been a modest reduction in stock days at year end to 140
days (December 2023: 148 days). This reduction is a factor of both underlying
sector movements and portfolio sector mix change.
The diversity of the portfolio sector characteristics means stock days have
increased across some sectors and decreased in others. Motorhome and caravan
stock days has increased to 125 days (December 2023: 98 days), with strong
ongoing demand through the year but with manufacturers rebalancing production
to align with demand. The lodges sector has seen an increase in stock days to
278 days (December 2023: 239 days) driven by dealers earlier in the year not
acquiring new stock whilst they reduced stock levels, although manufacturer
orders increased in the second half with the stock days reducing towards the
year end accordingly. In the transport sector dealers have been better
managing their inventory levels to match muted demand with a reduction in
stock days to 93 days (December 2023: 122 days). Marine stock days has reduced
to 119 days (December 2023: 147 days) as manufacturers better align their
production to customer demand.
The main mix change driving a decrease in overall portfolio stock days has
been the below portfolio average stock turning motorhome and caravan sector
seeing significant growth to 35% of the inventory finance portfolio at
December 2024 (December 2023: 23%), whilst the above portfolio average stock
days in the lodge sector has reduced to 15% of the inventory finance portfolio
at December 2024 (December 2023: 26%).
Overall, all sectors of the portfolio operate well within our tolerances.
Strong underlying security position
In our core inventory finance lending product, we take legal title against
individual assets to provide working capital to fund dealers' inventory or
stock. The Group's lending relative to its security position continues to
remain strong with a Loan to Wholesale Value ('LTV') of 84% (31 December 2023:
85%). We do not advance funds measured against retail prices, which typically
represent a mark-up of approximately 20% on the wholesale invoice price.
Accordingly, for the Group to incur losses on recovery of an asset in the
event of default there would need to be an average reduction of approximately
30% in retail prices across the sectors and products we lend against.
We have manufacturer repurchase or redistribution agreements in place across
c60% of our inventory finance loan book (2023: c.60%) which further mitigate
credit losses. Also, we often hold additional security in the form of personal
and/or cross company guarantees.
Growth ambitions underpinned by a well-capitalised balance sheet
As at 31 December 2024 the Group's equity stood at £115.4m (31 December 2023:
£100.4m). Regulatory capital which is the Common Equity Tier 1 (CET1) capital
together with Tier 2 capital increased to £109.0m (31 December 2023 £89.5m).
This includes £10m drawn in 2023 under the £20m Tier 2 capital facility with
British Business Investments.
During the year the ENABLE Guarantee with the British Business Bank, which was
entered in 2023, was upsized from £250m to £350m. The strong retained
earnings and increased utilisation of the ENABLE Guarantee has meant that
despite an increase in the loan book of 15%, the CET1 ratio only reduced by a
small amount ending the year at 21.6% (31 December 2023: 22.8%). This CET1
ratio is well above our regulatory minimum.
Given the combination of an existing well capitalised balance sheet, the
sizeable retained earnings expected to be generated going forwards, increasing
utilisation of the ENABLE Guarantee and full utilisation of the Tier 2
facility, the business expects to be able to meet its medium term financial
targets without the need to raise any additional Tier 1 capital.
Gavin Morris
Chief Financial Officer
Recent trend vs expected norms Actual Actual
New Loans Repayments Historical Annual Average Tolerance Level 31-Dec-24 31-Dec-23
Agriculture In line In line 119 240 153 141
Automotive In line In line 73 200 84 83
Industrial In line In line 120 250 179 167
Lodges Lower Slower 154 300 278 239
Marine Higher Faster 132 250 119 147
Motorcycle Higher Faster 107 200 107 113
Motorhome & Caravan Higher In line 105 200 125 98
Transport Lower Faster 86 200 93 122
Loan book average 128 240 150 148
Report of the Directors
The Directors present their Annual Report on the affairs of the Group,
together with the consolidated financial statements, company financial
statements and auditor's report, for the year ended 31 December 2024.
Details of significant subsequent events are contained in note 45 to these
consolidated financial statements. An indication of likely future developments
in the business of the Group are included in the Strategic Report section.
Information about the use of financial instruments by the Group is detailed
within note 39 to the consolidated financial statements.
Principal activity
The principal activity of the Group is as a specialist savings and commercial
lending bank group. The Group provides niche working capital funding solutions
to dealers and manufacturers across the UK, enabled by competitively priced
customer savings products.
Results and dividends
The total comprehensive profit for the year, after taxation, amounted to
£14,096,000 (2023: £3,338,000). The Directors do not recommend the payment
of a dividend (2023: £nil).
Directors'
The Directors who held office during the year and up to the date of the
Directors' report were as follows:
Mark Stephens
Sheryl
Lawrence
Nicole
Coll
Thomas Grathwohl
Haakon Stenrød
Carl D'Ammassa
Gavin Morris
Directors' shareholdings
As at 31 December 2024, the Directors held the following ordinary shares in
the Company:
Director Position No. of ordinary shares Voting rights (%)
Mark Stephens Independent Board Chair 62,500 0.03%
Thomas Grathwohl Independent Non-Executive Director 533,312 0.30%
Carl D'Ammassa Chief Executive Officer 638,666 0.36%
Gavin Morris Chief Financial Officer 470,816 0.26%
Significant shareholders
As at 31 December 2024, the following parties held greater than 3% of issued
share capital in the Company in accordance with the requirements of Rule 5 of
the Disclosure Guidance and Transparency Rules:
No. of ordinary shares Voting rights (%)
Watrium AS 16.07%
28,827,593
Davidson Kempner Capital Management 13.32%
23,899,990
Lombard Odier Investment Managers 9.96%
17,856,408
Janus Henderson Investors 17,299,501 9.64%
River Global Investors 9.44%
16,925,000
Premier Miton Investors 7.11%
12,745,000
Crucible Clarity Fund 4.54%
8,149,922
BlackRock 4.12%
7,388,910
Allianz Global Investors 3.49%
6,266,736
Political and charitable donations
The Group made charitable donations of £23,335 (2023: £11,703) and no
political donations during the year ended 31 December 2024 (2023: £nil).
Annual General Meeting
The Company anticipates holding its Annual General Meeting in June 2025. The
Notice of AGM and Form of Proxy will be posted to shareholders in due course
and a copy will be available at www.dfcapital-investors.com. The AGM will be
held at the Company's registered office in Manchester.
Directors' insurance and indemnities
The Group has maintained Directors and Officers liability insurance for the
benefit of the Group, the Directors, and its officers. The Directors consider
the level of cover appropriate for the business and will remain in place for
the foreseeable future.
Statement of Going Concern
The Directors have completed a formal assessment of the Group's financial
resources. In making this assessment the Directors have considered the Group's
current available capital and liquidity resources, the business financial
projections and the outcome of stress testing. Based on this review, the
Directors believe that the Group is well placed to manage its business risks
successfully within the expected economic outlook. See note 1.6 for further
details.
Accordingly, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for a period of at
least 12 months from the date of approval of the financial statements.
Accordingly, they continue to adopt the going concern basis in preparing the
Annual Report and Financial Statements.
Corporate Governance
The Corporate Governance Report on pages 63 to 99 contains information about
the Group's corporate governance arrangements.
Subsequent events
Details relating to significant events occurring between 31 December 2024 and
the date of approval of the financial statements are detailed further within
Note 45 of the consolidated financial statements.
Disclosure of information to the auditor
Each of the persons who is a Director at the date of approval of this annual
report confirms that:
● so far as the Director is aware, there is no relevant audit information of
which the Company's auditors are unaware; and
● the Director has taken all the steps that they ought to have taken as a
Director in order to make themself aware of any relevant audit information and
to establish that the Company's auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the
provisions of s418 of the Companies Act 2006.
Reappointment of auditor
Deloitte LLP have expressed their willingness to continue in office as
auditors and a resolution to reappoint them will be proposed at the
forthcoming Annual General Meeting.
Approved by the Board on 01 April 2025 and signed on its behalf by:
………………………………………..
Carl D'Ammassa
Director
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the Group
and parent Company financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Group and parent Company
financial statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with United
Kingdom adopted International Accounting Standards. The financial statements
also comply with International Financial Reporting Standards (IFRSs) as issued
by the International Accounting Standards Board (IASB). The Directors have
chosen to prepare the parent Company financial statements on the same basis.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and parent Company and of their profit or loss of the
Group for the year.
In preparing these consolidated financial statements and Company financial
statements, the Directors are required to:
● properly select and apply accounting policies;
● present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information;
● provide additional disclosures when compliance with the specific requirements
of the financial reporting framework are insufficient to enable users to
understand the impact of particular transactions, other events and conditions
on the entity's financial position and financial performance; and
● make an assessment of the company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the financial position of the Group and enable
them to ensure that the financial statements comply with the Companies Act
2006. They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, and Corporate Governance
Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial
report
Each of the persons who is a Director at the date of approval of this report
confirms, to the best of their knowledge, that:
● the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole;
● the Strategic Report/Directors' Report includes a fair review of the
development and performance of the business and the position of the Company
and the undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face;
and
● the annual report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
Consolidated Statement of Comprehensive Income
2024 2023
Note £'000 £'000
Interest and similar income 4 76,820 59,970
Interest and similar expenses 6 (31,208) (22,336)
Net interest income 45,612 37,634
Fee income 7 1,237 1,393
Fee expenses 8 (1,626) (719)
Net gains/(losses) from derivatives and other financial instruments at fair 22 372 (303)
value through profit or loss
Other income 2 9
Total operating income 45,597 38,014
Staff costs 9 (16,044) (13,431)
Other operating expenses 11 (10,670) (8,412)
Net impairment gain/(loss) on financial assets 14 241 (11,598)
Other provisions 13 (50) -
Total operating profit 19,074 4,573
Profit before taxation 19,074 4,573
Taxation 16 (5,053) (1,418)
Profit after taxation 14,021 3,155
Other comprehensive income/(loss):
Items that may subsequently be transferred to the income statement:
FVOCI investment securities:
Amounts transferred to the income statement 75 -
Fair value movements - 183
Total other comprehensive income for the year, net of tax 75 183
Total comprehensive income for the year 14,096 3,338
Earnings per share: pence pence
Basic EPS 40 7.8 1.8
Diluted EPS 40 7.4 1.7
The notes on pages 120 to 184 are an integral part of these financial
statements.
The financial results for all periods are derived entirely from continuing
operations.
Consolidated Statement of Financial Position
2024 2023
Note £'000 £'000
Assets
Cash and balances at central banks 110,030 89,552
Loans and advances to banks 28 3,771 3,475
Investment securities 21 769 14,839
Derivatives held for risk management (asset) 22 295
537
Loans and advances to customers 20 660,772 568,044
Trade and other receivables 24 4,678 5,335
Current taxation asset 25 -
55
Deferred taxation asset 27 3,980 7,111
Property, plant and equipment 17 1,093 1,145
Right-of-use assets 18 202 1,227
Intangible assets 19 950
618
Total assets 786,540 691,938
Liabilities
Customer deposits 35 649,665 574,622
Amounts due to banks 22 180 -
Derivatives held for risk management (liability) 22 6
565
Fair value adjustments on hedged liabilities 23 136
424
Financial liabilities 36 90 1,255
Trade and other payables 38 9,335 4,297
Provisions 13 285
67
Current taxation liability 26 1,259
73
Subordinated liabilities 37 10,230 10,221
Total liabilities 671,186 591,524
Equity
Issued share capital 31 1,793 1,793
Share premium 31 -
-
Merger relief 31 94,911 94,911
Merger reserve 33 (20,609) (20,609)
Own shares 32 (440)
(401)
Retained earnings 39,699 24,720
Total equity 115,354 100,414
Total equity and liabilities 786,540 691,938
The notes on pages 120 to 184 are an integral part of these consolidated
financial statements.
These financial statements were approved by the Board of Directors and
authorised for issue on 01 April 2025. They were signed on its behalf by:
……………………………
Carl D'Ammassa
Director
01 April 2025
Registered number: 11911574
Consolidated Statement of Changes in Equity
Issued share capital Share premium(3) Merger relief Merger reserve Own shares(2) Retained earnings/(loss) Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2023 1,793 39,273 94,911 (20,609) (364) (18,765) 96,239
Profit after taxation - - - - - 3,155 3,155
Other comprehensive income - - - - - 183 183
Total comprehensive income - - - - - 3,338 3,338
Share-based payments(1) - - - - - 905 905
Employee Benefit Trust(2) - - - - (37) (31) (68)
Share premium account cancellation(3) - (39,273) - - - 39,273 -
Balance at 31 December 2023 1,793 - 94,911 (20,609) (401) 24,720 100,414
Profit after taxation - - - - - 14,021 14,021
Other comprehensive income - - - - - 75 75
Total comprehensive income - - - - - 14,096 14,096
Share-based payments(1) - - - - - 985 985
Employee Benefit Trust(2) - - - - (39) (102) (141)
Balance at 31 December 2024 1,793 - 94,911 (20,609) (440) 39,699 115,354
(1) Refer to note 10 for details on share-based payments during the year.
(2) The Group has adopted look-through accounting (see note 1.3) and
recognised the Employee Benefit Trust as Own Shares. Refer to note 32 for
further details of the movements in the year.
(3)In the year ended 31 December 2023, the Company cancelled its share premium
account - refer to note 31 of the consolidated financial statements for
details
The notes on pages 120 to 184 are an integral part of these consolidated
financial statements.
Consolidated Cash Flow Statement
2024 2023
Note £'000 £'000
Cash flows from operating activities:
Profit before taxation 19,074 4,573
Adjustments for non-cash items and other adjustments Included in the income 29 3,822 13,000
statement
Increase in operating assets 29 (92,390) (149,456)
Increase in operating liabilities 29 79,376 94,171
Taxation paid 25,26 (681) -
Net cash generated from/(used in) operating activities 9,201 (37,712)
Cash flows from investing activities:
Purchase of investment securities 21 (9,918) (14,554)
Proceeds from sale and maturity of investment securities 21 25,000 23,000
Dividend income on money market funds 21 25 -
Interest income on investment securities 21 75 383
Purchase of property, plant and equipment 17 (397) (418)
Purchase of intangible assets 19 (623) (117)
Net cash generated from investing activities 14,162 8,294
Cash flows from financing activities:
Repayment of lease liabilities 34 (252) (227)
Issuance of subordinated liabilities 37 - 10,000
Acquisition of subordinated liabilities 29 - (51)
Coupon paid on subordinated liabilities 29 (1,273) -
Purchase of own shares 32 (142) (67)
Net cash (used in)/generated from financing activities (1,667) 9,655
Net increase/(decrease) in cash and cash equivalents 21,696 (19,763)
Cash and cash equivalents at start of the period 29 90,867 110,630
Cash and cash equivalents at end of the period 29 112,563 90,867
Notes to the Financial Statements
1. Basis of preparation
1.1 General information
The consolidated financial statements of Distribution Finance Capital Holdings
plc (the "Company" or "DFCH plc") include the assets, liabilities, and results
of its wholly owned subsidiaries, DF Capital Bank Limited (the "Bank"), DF
Capital Financial Solutions Limited and DF Capital Retail Finance Limited,
which together form the "Group".
DFCH plc is registered and incorporated in England and Wales whose company
registration number is 11911574. The registered office is St James' Building,
61-95 Oxford Street, Manchester, England, M1 6EJ. The Company's ordinary
shares are listed on the Alternative Investment Market ("AIM") of the London
Stock Exchange.
The principal activity of the Company is that of an investment holding
company. The principal activity of the Group is as a specialist savings and
commercial lending banking group. The Group provides niche working capital
funding solutions to dealers and manufacturers, enabled by competitively
priced savings products.
These financial statements are presented in pounds sterling, which is the
currency of the primary economic environment in which the Group operates, and
are rounded to the nearest thousand pounds, unless stated otherwise.
1.2 Basis of preparation
The Group consolidated financial statements and the Company financial
statements have been prepared and approved by the Directors in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by the United
Kingdom (UK) and interpretations issued by the IFRS Interpretations Committee
(IFRS IC).
The consolidated and Company financial statements are prepared on a going
concern basis and under the historical cost convention except for the
treatment of certain financial instruments, including the revaluation of
investment securities held at fair value through other comprehensive income
(FVTOCI), and derivative contracts and other financial assets or liabilities
held at fair value through profit or loss (FVTPL).
By including the Company financial statements, here together with the Group
consolidated financial statements, the Company is taking advantage of the
exemption in Section 408 of the Companies Act 2006 not to present its
individual income statement and related notes that form a part of these
approved financial statements.
For the year ended 31 December 2024, subsidiary undertakings DF Capital
Financial Solutions Limited (Company number: 14891201) and DF Capital Retail
Finance Limited (Company number: 15788832) were exempt from the requirements
of the Companies Act 2006 relating to the audit of individual accounts by
virtue of section 479A of the Companies Act 2006. The Company, as the ultimate
parent company, is providing a guarantee for DF Capital Financial Solutions
Limited and DF Capital Retail Finance Limited in accordance with section 479C
of the Companies Act 2006 as at 31 December 2024.
1.3 Basis of consolidation
The Group financial statements include the results of the Company and its
subsidiary undertakings. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group and are deconsolidated from the date
that control ceases. Accounting policies of the Company and its subsidiaries
are consistent. The Group 'controls' an entity if it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
Upon consolidation, all intra-group transactions, balances, income, and
expenses are eliminated within the consolidated financial statements within
this Annual Report and Financial Statements. The consolidated financial
statements contained in this Annual Report consolidate the statements of total
comprehensive income, statements of financial position, cash flow statements,
statements of changes in equity and related notes for Distribution Finance
Capital Holdings plc, DF Capital Bank Limited, DF Capital Financial Solutions
Limited and DF Capital Retail Finance Limited, which together form the
"Group", which have been prepared in accordance with applicable IFRS
accounting standards. Accounting policies have been applied consistently
throughout the Group and its subsidiaries.
The Group's Employee Benefit Trust (EBT) is controlled and recognised by the
Company using the look-through approach, i.e. as if the EBT is included within
the accounts of the Company.
1.4 Adoption of new and revised standards and interpretations
International financial reporting standards issued and adopted for the first
time in the year ended 31 December 2024
In the preparation of these financial statements no accounting standards are
being applied for the first time.
International financial reporting standards issued but not yet effective which
are applicable to the Group
In April 2024 the IASB issued IFRS18 - "Presentation and Disclosure in
Financial Statements". This is expected to impact the way in which
information is disclosed in financial statements without impacting materially
on the underlying accounting.
IFRS18 is expected to apply to the Group with effect from the financial year
ending 31 December 2027, if the standard is endorsed for use in the UK. A
detailed exercise to determine the impact of the new standard on the Group's
annual reporting will be carried out before the implementation date.
Other than IFRS18 there are no new reporting standards and interpretations in
issue but not effective which address matter relevant to the Group's
accounting and reporting.
1.5 Principal accounting policies
The principal accounting policies adopted in the preparation of this financial
information are set out below. These policies have been applied consistently
to all the financial periods presented.
1.6 Reclassification
During the year ended 31 December 2024, the Group invested into a low
volatility money market fund. This is a type of investment security which
required presentation under a new financial statement caption. In addition to
this fund, the Group also hold debt securities in the form of UK treasury
bills (and previously government gilts) which represent a subcategory of
investment securities. These balances which were previously presented as 'debt
securities' within the statement of financial position will now be presented
under 'investment securities' in addition to the balance invested into the
money market fund.
For the year ended 31 December 2024, the Group has reclassified £nil from
'debt securities' to 'investment securities' (31 December 2023: £14,839,000).
Both debt and investment securities operate under the same accounting policy,
IFRS 9 - financial instruments, with the policy remaining unchanged.
1.7 Going concern
The financial statements are prepared on a going concern basis as the
Directors are satisfied that the Group has adequate resources to continue
operating for a period of at least 12 months from the date of approval of the
financial statements. In making this assessment the Directors have
considered:
· The Group's financial projections;
· The Group's current available capital and liquidity resources and
surplus over regulatory and risk appetite requirements;
· The stress testing and capital and liquidity planning performed as a part
of the ICAAP and ILAAP
indicate adequate capital and liquidity buffers and the
ability to effectively manage stresses and
resources. A number of severe and plausible scenarios were considered as part
of the stress testing process with a combination of severe
idiosyncratic and macroeconomic scenarios. The scenarios included a global
supply chain disruption impacting the amount of assets our dealers are able to
source from manufacturers, combined with rising inflation and unemployment
reducing consumer disposable income;
· Banking sector failures in recent years and any implications for the Group.
This included consideration of our deposit base, which is made up
predominantly of retail customers, of which 92% are fully covered by the
Financial Services Compensation Scheme ('FSCS'). The liquid assets of the
Group being predominantly either cash held at the Bank of England or in UK
treasury bills. The Group's asset and liability maturity profile;
· In respect of climate change, the Board recognises the long-term risks and
these are considered as part of the annual ICAAP.
Based on this review, the Directors believe that the Group is well placed to
manage its business risks successfully within the expected economic outlook.
Accordingly, the Directors have adopted the going concern basis in preparing
the financial statements.
Information on the Group's business strategy, performance and outlook are
detailed in the Chair's Statement, Chief Executive Officer's review and Chief
Financial Officer's review. The Risk Overview sections further detail the key
risks faced by the Group and mitigants and provides an overview of the Group's
Risk Management Framework.
1.8 Critical accounting estimates and judgements
In accordance with IFRS, the Directors of the Group are required to make
judgements, estimates and assumptions in certain subjective areas whilst
preparing these financial statements. The application of these accounting
policies may impact the reported amounts of assets, liabilities, income and
expenses and actual results may differ from these estimates.
Any estimates and underlying assumptions used within the statutory financial
statements are reviewed on an ongoing basis, with revisions recognised in the
period in which they are adjusted, and any future periods affected.
Further details can be found in note 3 on the critical accounting estimates
and judgements used within these financial statements.
1.9 Foreign currency translation
The financial statements are expressed in Pound Sterling, which is the
functional and presentational currency of the Group.
Transactions in foreign currencies are translated to the Group's functional
currency at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the
reporting date are retranslated to the functional currency at the foreign
exchange rate ruling at that date. Non-monetary assets and liabilities that
are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction. Foreign exchange
differences arising on translation are recognised in the statement of income.
2. Summary of material accounting policies
2.1 Revenue recognition
Net interest income
Interest income and expense for all financial instruments except for those
classified as held for trading or measured or designated as at fair value
through profit and loss ("FVTPL") are recognised in "Net interest income" as
"Interest income" and "Interest expenses" in the income statement using the
effective interest method.
The effective interest rate ("EIR") is the rate that exactly discounts
estimated future cash flows of the financial instrument through the expected
life of the financial instrument or, where appropriate, a shorter period, to
the net carrying amount of the financial asset or financial liability. The
future cash flows are estimated taking into account all the contractual terms
of the instrument.
The calculation of the EIR includes all fees and points paid or received
between parties to the contract that are incremental and directly attributable
to the specific lending arrangement, transaction costs, and all other premiums
or discounts.
In calculating the EIR, management have taken into consideration the
behavioural characteristics of the underlying loans in the lending portfolio
which includes evaluating the expected duration of loans and any additional
behavioural fees.
The EIR is adjusted where there is a movement in the reference interest rate
(SONIA, or base rate) affecting portfolios with a variable interest rate which
will impact future cash flows.
The interest income/expense is calculated by applying the EIR to the gross
carrying amount of non-credit impaired financial assets (that is, to the
amortised cost of the financial asset before adjusting for any expected credit
loss allowance), or to the amortised cost of financial liabilities.
For credit-impaired financial assets, as defined in the financial instruments
accounting policy, the interest income is calculated by applying the EIR to
the amortised cost of the credit-impaired financial assets (that is, to the
gross carrying amount less the allowance for expected credit losses ("ECLs").
Interest income on investment securities is included in interest and similar
income. Interest on derivatives is included in interest and similar income or
interest and similar expenses charges following the underlying instrument it
is hedging.
Fee income
All fee income relates to fees charged directly to customers based on their
credit facility. These fees do not meet the criteria for inclusion within
interest income. The Group satisfies its performance obligations as the
services are rendered. These fees are billed in arrears of the period they
relate to.
Fee income is recognised in accordance with IFRS 15 which sets out the
principles to follow for revenue recognition which takes into consideration
the nature, amount, timing and uncertainty of revenue and cash flows resulting
from a contract with a customer. The accounting standard presents a five-step
approach to income recognition to enable the Group to recognise the correct
amount of income in the corresponding period(s):
· the contract has been approved by the parties to the contract;
· each party's rights in relation to the goods or services to be transferred can
be identified;
· the payment terms for the goods or services to be transferred can be
identified;
· the contract has commercial substance; and
· it is probable that the consideration to which the entity is entitled to in
exchange for the goods or services will be collected.
All other income is currently recognised under IFRS 9 under the effective
interest rate methodology, however, when new fees are implemented, they will
be assessed as to whether they fall under IFRS 9 (EIR) or IFRS 15. IFRS 9 and
IFRS 15 have been applied consistently to all the financial periods presented.
Fee expense
Fee and commission expense predominantly consists of non-incremental fees in
relation to financial guarantee schemes, undrawn facility commitment facility
fees, introducer commissions, and other non-incremental direct costs. Where
these fees and commissions are incremental costs that are directly
attributable to the issue of a financial instrument, they are included in
interest income as part of the EIR calculation. Where they are not incremental
costs that are directly attributable, they are recognised within fee and
commission expense as the services are received.
Net gains / (losses) from derivatives and other financial instruments at fair
value through profit or loss
Net gains/(losses) from derivatives and other financial instruments at fair
value through profit or loss relate to non-trading derivatives held for risk
management purposes. It includes all realised and unrealised fair value
movements, interest and foreign exchange differences.
Other income from financial instruments
Investment securities are measured at fair value through other comprehensive
income. The securities are measured at their closing bid prices at the
reporting date with any unrealised gain or loss recognised through other
comprehensive income. Once the assets have been disposed, the corresponding
realised gain or loss is transferred from other comprehensive income into the
income statement.
Other operating income
Other operating income predominantly consists of payroll subsidies,
specifically in relation to Statutory Maternity/Paternity Pay (SMP/SPP) as
levied by HM Revenue & Customs.
2.2 Property, plant and equipment
All property, plant and equipment is stated at historical cost (or deemed
historical cost) less accumulated depreciation, and less any identified
impairment. Cost includes the original purchase price of the asset and the
costs attributable to bringing the asset to its working condition for its
intended use.
Depreciation is provided on all property, plant and equipment at rates
calculated to write each asset down to its estimated residual value on a
straight-line basis at the following annual rates:
Fixtures & fittings
3 years
Computer
equipment
3 years
Telephony &
communications 3 years
Leasehold
improvements
1 - 10 years
Motor
vehicles
3 years
Right-of-use assets are depreciated over the shorter period of the lease term
and the useful life of the underlying asset. All current lease agreements have
a maximum lease term of 7 years. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset reflects that the Group
expects to exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset.
Useful economic lives and estimated residual values are reviewed annually and
adjusted as appropriate.
The gain or loss arising on the disposal of an asset is determined as the
difference between the sales proceeds less any costs of disposal and the
carrying amount of the asset, which is recognised in the Income Statement.
2.3 Intangible assets
Computer software
Computer software which has been purchased by the Group from third party
vendors is measured at initial cost less accumulated amortisation and less any
accumulated impairments.
Computer software is estimated to have a useful life of 3 years with no
residual value after the period. These assets are amortised on a straight-line
basis with the useful economic lives and estimated residual values being
reviewed annually and adjusted as appropriate.
Internally generated intangible assets
Internally generated intangible assets are only recognised by the Group when
the recognition criteria have been met in accordance with IAS 38: Intangible
Assets as follows:
· expenditure can be reliably measured;
· the product or process is technically and commercially feasible;
· future economic benefits are likely to be received;
· intention and ability to complete the development; and
· view to either use or sell the asset in the future.
The Group will only recognise an internally generated asset should it meet all
the above criteria. In the event of a development not meeting the criteria it
will be recognised within the consolidated income statement in the period
incurred.
Capitalised costs include all directly attributable costs to the development
of the asset. Internally generated assets are measured at capitalised cost
less accumulated amortisation less accumulated impairment losses.
The internally generated asset is amortised at the point the asset is
available for use or sale. The asset is amortised on a straight-line basis
over the useful economic life with the remaining useful economic life and
residual value being assessed annually. The estimated useful economic life of
internally generated assets is 3-5 years with no expected residual balance.
Any subsequent expenditure on the internally generated asset is only
capitalised if the cost increases the future economic benefits of the related
asset. Otherwise, all additional expenditure should be recognised through the
income statement in the period it occurs.
2.4 Financial instruments
Initial recognition
Financial assets and financial liabilities are recognised in the statement of
financial position when the Group becomes a party to the contractual
provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition
or issue of the financial assets and financial liabilities (other than
financial assets and financial liabilities at FVTPL) are respectively added to
or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs that
are not directly attributable to the acquisition of financial assets and
financial liabilities at FVTPL are recognised immediately in the consolidated
income statement.
Classification
The Group classifies financial instruments based on the business model and the
contractual cash flow characteristics of the financial instruments. Under IFRS
9, the Group classifies financial assets into one of three measurement
categories:
● Amortised cost - assets in a business model whose objective is to hold
financial assets to collect contractual cash flows, where the contractual
terms of the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest (SPPI) on the principal amount
outstanding. The Group classifies non-derivative financial liabilities as
measured at amortised cost.
● Fair value through other comprehensive income (FVOCI) - assets held in a
business model whose objective is to collect contractual cash flows and sell
financial assets where the contractual terms of the financial assets give rise
on specified dates to cash flows that are SPPI on the principal amount
outstanding. The Group measures investment securities under this category.
● Fair value through profit or loss (FVTPL) - assets not measured at amortised
cost or FVOCI. The Group measures derivatives under this category.
The Group has no non-derivative financial assets or liabilities classified as
held for trading.
The Group reassesses its business models each reporting period.
The Group classifies certain financial instruments as equity where they meet
the following conditions:
● the financial instrument includes no contractual obligation to deliver cash or
another financial asset on potentially unfavourable conditions;
● the financial instrument is a non-derivative that includes no contractual
obligation for the issuer to deliver a variable number of its own equity
instruments; or
● the financial instrument is a derivative that will be settled only by the
issuer exchanging a fixed amount of cash or another financial asset for a
fixed number of its own equity instruments.
Financial assets - measurement
I. Financial assets measured at amortised cost
These are initially measured at fair value plus transaction costs that are
directly attributable to the financial asset. Subsequently, these are measured
at amortised cost using the EIR method. The amortised cost is the amount
advanced less principal repayments, plus or minus the cumulative amortisation
using the EIR method of any difference between the amount advanced and the
maturity amount, less impairment provisions for expected losses. The losses
arising from impairment are recognised in the income statement and disclosed
with any other similar losses within the line item "Net impairment loss on
financial assets".
Financial assets measured at amortised cost mainly comprise loans and advances
to customers, loans and advances to banks, and other receivables.
II. Fair value through other comprehensive income
(FVTOCI)
These are initially measured at fair value plus transaction costs that are
directly attributable to the financial asset.
Subsequently, they are measured at fair value based on current, quoted bid
prices in active markets for identical assets that the Group can access at the
reporting date. Where there is no active market, or the investment securities
are unlisted, the fair values are based on valuation techniques including
discounted cash flow analysis, with reference to relevant market rates and
other commonly used valuation techniques. Interest income is recognised in the
income statement using the EIR method. Impairment provisions for expected
losses are recognised in the income statement which does not reduce the
carrying amount of the investment security but is transferred from the FVOCI
reserve in equity. Other fair value movements are recognised in other
comprehensive income and presented in the FVOCI reserve in equity. On
disposal, the gain or loss accumulated in equity is reclassified to the income
statement.
FVTOCI financial assets includes investment securities in the form of UK
Treasury Bills and UK Gilts. These assets are not classified as: loans and
receivables; held-to-maturity investments; or financial assets at fair value
through profit or loss.
Regular purchases and sales of investment securities are recognised on the
trade date at which the Group commits to purchase or sell the asset.
III. Financial assets at fair value through profit or loss
(FVTPL)
These are measured both initially and subsequently at fair value with
movements in fair value recorded in the income statement. Any costs that are
directly attributable to their acquisition are recognised in profit or loss
when incurred. The Group only measures derivative financial assets under this
classification.
Financial assets - impairment
The Group recognises loss allowances for expected credit losses ("ECLs") on
the following financial instruments that are not measured at FVTPL:
· Financial assets measured at amortised cost;
· Investment securities measured at fair value through other comprehensive
income; and
· Loan commitments
IFRS 9 permits entities to apply a 'simplified approach' for trade
receivables, contract assets and lease receivables. The simplified approach
permits entities to recognise lifetime expected losses on all these assets
without the need to identify significant increases in credit risk. The Group
has adopted this simplified approach for assessing trade and other receivables
balances. The Group confirms these trade and other receivable balances do not
contain a significant financing component.
With the exception of purchased or originated credit impaired ("POCI")
financial assets (which are considered separately below), ECLs are measured
through loss allowances calculated on the following bases.
ECLs are a probability-weighted estimate of the present value of credit
losses. The Group measures ECL on an individual basis, or on a collective
basis for portfolios of loans that share similar economic risk
characteristics. The loss allowance is measured as the difference between the
contractual cash flows and the present value of the asset's expected cash
flows using the asset's original EIR, regardless of whether it is measured on
an individual basis or a collective basis.
A financial asset that gives rise to credit risk, is referred to (and analysed
in the notes to this financial information) as being in "Stage 1" provided
that since initial recognition (or since the previous reporting date) there
has not been a significant increase in credit risk, nor has it has become
credit impaired.
For a Stage 1 asset, the loss allowance is the "12-month ECL", that is, the
ECL that results from those default events on the financial instrument that
are possible within 12 months from the reporting date.
A financial asset that gives rise to credit risk is referred to (and analysed
in the notes to this financial information) as being in "Stage 2" if since
initial recognition there has been a significant increase in credit risk
(SICR) but it is not credit impaired.
For a Stage 2 asset, the loss allowance is the "lifetime ECL", that is, the
ECL that results from all possible default events over the life of the
financial instrument.
A financial asset that gives rise to credit risk is referred to (and analysed
in the notes to this financial information) as being in "Stage 3" if since
initial recognition it has become credit impaired.
For a Stage 3 asset, the loss allowance is the difference between the asset's
projected exposure at default (EAD) and the present value of estimated future
cash flows discounted at an applicable EIR. Further, the recognition of
interest income is constrained relative to the amounts that are recognised on
Stage 1 and Stage 2 assets, as described in the revenue recognition policy set
out above.
If circumstances change sufficiently at subsequent reporting dates, an asset
is referred to by its newly appropriate Stage and is re-analysed in the notes
to the financial information.
Where an asset is expected to mature in 12 months or less, the "12-month ECL"
and the "lifetime ECL" have the same effective meaning and accordingly for
such assets the calculated loss allowance will be the same whether such an
asset is at Stage 1 or Stage 2. In order to determine the loss allowance for
assets with a maturity of 12 months or more, and disclose significant
increases in credit risk, the Group nonetheless determines which of its
financial assets are in Stages 1 and 2 at each reporting date.
Significant increase in credit risk - policies and procedures for identifying
Stage 2 assets
Whenever any contractual payment is past due, the Group compares the risk of a
default occurring on the financial instrument as at the reporting date with
the risk of a default occurring on the financial instrument as at the date of
initial recognition in order to determine whether credit risk has increased
significantly.
See note 39 for further details about how the Group assesses increases in
significant credit risk.
Definition of a default
Critical to the determination of significant increases in credit risk (and to
the determination of ECLs) is the definition of default. Default is a
component of the probability of default (PD), changes in which lead to the
identification of a significant increase in credit risk, and PD is then a
factor in the measurement of ECLs.
The Group's definition of default for this purpose is:
· A counterparty defaults on a payment due under a loan agreement and that
payment is more than 90 days overdue;
· The collateral that secures, all or in part, the loan agreement has been sold
or is otherwise not available for sale and the proceeds have not been paid to
the Group; or
· A counterparty commits an event of default under the terms and conditions of
the loan agreement which leads the lending company to believe that the
borrower's ability to meet its credit obligations to the Group is in doubt.
The definition of default is similarly critical in the determination of
whether an asset is credit-impaired (as explained below).
Credit-impaired financial assets - policies and procedures for identifying
Stage 3 assets
A financial asset is credit-impaired when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset
have occurred. IFRS 9 states that evidence of credit-impairment includes
observable data about the following events:
· A counterparty is 90 days past due for one or more of its loan receivables;
· Significant financial difficulty of the borrower or issuer;
· A breach of contract such as a default (as defined above) or past due event,
or
· The Group, for economic or contractual reasons relating to the borrower's
financial difficulty, having granted to the borrower a concession that the
Group would not otherwise consider.
The Group assesses whether debt instruments that are financial assets measured
at amortised cost or at FVTOCI are credit-impaired at each reporting date.
When assessing whether there is evidence of credit-impairment, the Group takes
into account both qualitative and quantitative indicators relating to both the
borrower and to the asset. The information assessed depends on the borrower
and the type of the asset. It may not be possible to identify a single
discrete event - instead, the combined effect of several events may have
caused financial assets to become credit-impaired.
See note 39 for further details about how the Group identifies credit impaired
assets.
Purchased or originated credit-impaired ("POCI") financial assets
POCI financial assets are treated differently because they are in Stage 3 from
the point of original recognition. It is not in the nature of the Group's
business to purchase financial assets originated by other lenders, nor has the
Group to date originated any loans or advances to borrowers that it would
define as credit impaired.
Movements back to stages 1 and 2
Exposures will move out of stage 3 to stage 2 when they no longer meet the
criteria for inclusion and have completed a minimum 3-month probation period
as set according to the type of lending and default event circumstances.
Movement into stage 1 will only occur when the SICR criteria are no longer
met.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for ECL are presented in the statement of financial position
as follows:
· For financial assets measured at amortised cost: as a deduction from the gross
carrying amount of the assets; and
· For loan commitments: as a provision.
Revisions to estimated cash flows
Where cash flows are significantly different from the original expectations
used to determine EIR, but where this difference does not arise from a
modification of the terms of the financial instrument, the Group revises its
estimates of receipts and adjusts the gross carrying amount of the financial
asset to reflect actual and revised estimated contractual cash flows. The
Group recalculates the gross carrying amount of the financial asset as the
present value of the estimated future contractual cash flows discounted at the
financial instrument's original EIR.
The adjustment is recognised in the consolidated income statement as income or
expense.
Modification of financial assets
A modification of a financial asset occurs when the contractual terms
governing a financial asset are renegotiated without the original contract
being replaced and derecognised. A modification is accounted for in the same
way as a revision to estimated cash flows, and in addition;
· Any fees charged are added to the asset and amortised over the new expected
life of the asset, and
· The asset is individually assessed to determine whether there has been a
significant increase in credit risk.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to
the cash flows from the asset expire, or when it transfers the financial asset
and substantially all the risks and rewards of ownership of the asset to
another entity. If the Group neither transfers nor retains substantially all
the risks and rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and an
associated liability for amounts it may have to pay. If the Group retains
substantially all the risks and rewards of ownership of a transferred
financial asset, the Group continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between
the asset's carrying amount and the sum of the consideration received and
receivable and the cumulative gain or loss that had been recognised in other
comprehensive income and accumulated in equity is recognised in the income
statement.
On derecognition of a financial asset other than in its entirety (e.g. when
the Group retains an option to repurchase part of a transferred asset), the
Group allocates the previous carrying amount of the financial asset between
the part it continues to recognise under continuing involvement, and the part
it no longer recognises on the basis of the relative fair values of those
parts on the date of the transfer. The difference between the carrying amount
allocated to the part that is no longer recognised and the sum of the
consideration received for the part no longer recognised and any cumulative
gain or loss allocated to it that had been recognised in other comprehensive
income is recognised in the consolidated statement of comprehensive income. A
cumulative gain or loss that had been recognised in other comprehensive income
is allocated between the part that continues to be recognised and the part
that is no longer recognised on the basis of the relative fair values of those
parts.
Write-offs
Loans and advances are written off when the Group has no reasonable
expectation of recovering the financial asset; either in its entirety or a
portion of it. This is the case when the Group determines that the borrower
does not have assets or sources of income that could generate sufficient cash
flows to repay the amounts subject to the write-off. A write-off constitutes a
derecognition event. The Group may apply enforcement activities to financial
assets written off. Recoveries resulting from enforcement activities will
result in impairment gains.
Financial guarantees, letters of credit and undrawn loan commitments
Undrawn loan commitments and letters of credit are commitments under which,
over the duration of the commitment, the Bank is required to provide a loan
with pre-specified terms to the customer. These contracts are in the scope of
the ECL requirements. The nominal contractual value of financial guarantees,
letters of credit and undrawn loan commitments, where the loan agreed to be
provided is on market terms, are not recorded in the statement of financial
position. The nominal values of these instruments together with the
corresponding ECLs are disclosed in note 39.
Forward-looking macroeconomic scenarios
ECLs and SICR take into account forecasts of future economic conditions in
addition to current conditions. The Group has developed a macroeconomic model
which adjusts the ECLs calculated by the credit models to provide probability
weighted numbers based on a number of forward-looking macroeconomic scenarios.
Due to the assumptions and estimates within these forward-looking
macroeconomic scenarios, refer to note 3 for further details of the Group's
approach.
Financial liabilities
A financial liability is a contractual obligation to deliver cash or another
financial asset or to exchange financial assets or financial liabilities with
another entity under conditions that are potentially unfavourable to the Group
or a contract that will or may be settled in the Group's own equity
instruments, or a derivative contract over own equity that will or may be
settled other than by the exchange of a fixed amount of cash (or another
financial asset) for a fixed number of the Group's own equity instruments.
Gains or losses on financial liabilities are recognised in the consolidated
statement of comprehensive income.
Subordinated liabilities
Subordinated notes issued by the Group are assessed as to whether they should
be treated as equity or financial liabilities. Where there is a contractual
obligation to deliver cash or other financial assets, they are treated as a
financial liability and measured at amortised cost using the EIR method after
taking account of any discount or premium on the issue and directly
attributable costs that are an integral part of the EIR. The amount of any
discount or premium is amortised over the period to the expected call date of
the instrument.
All subordinated notes issued by the Group are classified as financial
liabilities.
Financial liabilities and equity
Debt and equity instruments that are issued are classified as either financial
liabilities or as equity in accordance with the substance of the contractual
arrangement.
Equity instruments
The Group classifies capital instruments as financial liabilities or equity
instruments in accordance with the substance of the contractual terms of the
instruments. Where an instrument contains no obligation on the Group to
deliver cash or other financial assets, or to exchange financial assets or
financial liabilities with another party under conditions that are potentially
unfavourable to the Group, or where the instrument will or may be settled in
the Group's own equity instruments but includes no obligation to deliver a
variable number of the Group's own equity instruments, then it is treated as
an equity instrument. Accordingly, the Group's share capital are presented as
components of equity and any dividends, interest or other distributions on
capital instruments are also recognised in equity. Any related tax is
accounted for in accordance with IAS 12.
Financial liabilities - measurement
Financial liabilities are classified as either financial liabilities measured
at amortised cost or financial liabilities at FVTPL.
I. Financial liabilities measured at amortised cost
Financial liabilities at amortised cost are recognised initially at fair value
net of transaction costs incurred. They are subsequently measured at amortised
cost. Any difference between the fair value and the redemption value is
recognised in the income statement over the period of the borrowings using the
EIR method.
Interest bearing loans and borrowings are measured at amortised cost using the
effective interest rate method. Gains and losses are recognised in the income
statement when the liabilities are derecognised as well as through the
effective interest rate method (EIR) amortisation process. Amortised cost is
calculated by taking into account any discount or premium on acquisition and
fees or costs that are an integral part of the EIR. The EIR amortisation is
included in "Interest and similar expenses" in the Income Statement.
II. Financial liabilities at fair value through profit
or loss
Financial liabilities at fair value through profit or loss may include
financial liabilities held for trading. Financial liabilities are classified
as held for trading if they are acquired for the purpose of selling in the
near term.
During the periods presented the Group has held no financial liabilities for
trading, nor designated any financial liabilities upon initial recognition as
at fair value through profit or loss.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's
obligations are discharged, cancelled or they expire.
Impairment of non-financial assets
The carrying amounts of the Group's non-financial assets, other than deferred
tax assets, are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists, then the asset's
recoverable amount is estimated. The recoverable amount of an asset or
cash-generating unit is the greater of its value in use and its fair value
less costs to sell. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset. For the purposes of impairment testing, assets that
cannot be tested individually are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets ('the
cash-generating unit').
An impairment loss is recognised if the carrying amount of an asset or its
cash-generating unit ("CGU") exceeds its estimated recoverable amount.
Impairment losses are recognised in the income statement. Impairment losses
recognised in respect of CGUs are allocated to reduce the carrying amounts of
assets in the unit (or group of units) on a pro rata basis.
An impairment loss is reversed if and only if the reasons for the impairment
have ceased to apply.
Impairment losses recognised in prior periods are assessed at each reporting
date for any indication that the loss has decreased or no longer exists. An
impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been
recognised.
2.5 Derivative financial instruments
The Group uses derivative financial instruments (interest rate swaps) to
manage its exposure to interest rate risk. In accordance with the Group
Treasury Policy, the Group does not hold or issue derivative financial
instruments for proprietary trading.
Derivative financial instruments are recognised at their fair value with
changes in their fair value taken to profit or loss. Fair values are
calculated by discounting cash flows at the prevailing interest rates. All
derivatives are classified as assets when their fair value is positive and as
liabilities when their fair value is negative. If a derivative is cancelled,
it is derecognised from the Consolidated Statement of Financial Position. A
derivative is presented as a non-current asset or a non-current liability if
the remaining maturity of the instrument is more than 12 months and it is not
due to be realised or settled within 12 months. Other derivatives are
presented as current assets or current liabilities.
2.6 Hedge accounting
Due to the simplistic nature of the Group's hedging activities, the Group has
adopted to apply IFRS 9 for portfolio assets and liabilities being hedged by
applying fair value hedge accounting.
The Group designates certain derivatives held for risk management as hedging
instruments in qualifying hedging relationships. On initial designation of the
hedge, the Group formally documents the relationship between the hedging
instruments and hedged items, including the risk management objective, the
strategy in undertaking the hedge and the method that will be used to assess
the effectiveness of the hedging relationship.
The Group makes an assessment, both at the inception of the hedge
relationship, as well as on an ongoing basis, as to whether the hedging
instruments are expected to be highly effective in offsetting the movements in
the fair value of the respective hedged items during the period for which the
hedge is designated.
The Group considers the following as key sources of hedge ineffectiveness:
· the mismatch in maturity date of the swap and hedged item, as swaps with a
given maturity date cover a portfolio of hedged items which may mature
throughout the month;
· the actual behaviour of the hedged item differing from expectations, such as
early repayments or withdrawals and arrears; and
· minimal movements in the yield curve leading to ineffectiveness where hedge
relationships are sensitive to small value changes.
Where there is an effective hedge relationship for fair value hedges, the
Group recognises the change in fair value of each hedged item in profit or
loss with the cumulative movement in their value being shown separately in the
Consolidated Statement of Financial Position as fair value adjustments on
hedged assets and liabilities. The fair value changes of both the derivative
and the hedge substantially offset each other to reduce profit volatility.
The Group discontinues hedge accounting when the derivative ceases through
expiry, when the derivative is cancelled or the underlying hedged item
matures, is sold or is repaid.
If a derivative no longer meets the criteria for hedge accounting or is
cancelled whilst still effective, the fair value adjustment relating to the
hedged assets or liabilities within the hedge relationship prior to the
derivative becoming ineffective or being cancelled remains on the Consolidated
Statement of Financial Position and is amortised over the remaining life of
the hedged assets or liabilities. The rate of amortisation over the remaining
life is in line with expected income or cost generated from the hedged assets
or liabilities. Each reporting period, the expectation is compared to actual
with an accelerated run-off applied where the two diverge by more than set
parameters.
Fair value hedge accounting for portfolio hedges of interest rate risk
The Group applies fair value hedge accounting for portfolio hedges of interest
rate risk. As part of its risk management process, the Group identifies
portfolios whose interest rate risk it wishes to hedge. The portfolios
comprise of only liabilities. The Group analyses each portfolio into repricing
time periods based on expected repricing dates, by scheduling cash flows into
the periods in which they are expected to occur. Using this analysis, the
Group designates as the hedged item an amount of the liabilities from each
portfolio that it wishes to hedge.
The amount to hedge is determined based on a movement in the present value of
the Group's balance sheet under a 200-basis point shift in the yield curve
being used to value the instruments to ensure the mismatches in expected
repricing buckets are within the limits set by the Board on the sensitivity
analysis approach using a hypothetical shift in interest rates.
The Group measures monthly the movements in fair value of the portfolio
relating to the interest rate risk that is being hedged. Provided that the
hedge has been highly effective, the Group recognises the change in fair value
of each hedged item in the income statement with the cumulative movement in
their value being shown on the statement of financial position as a separate
item, 'Fair value adjustment for portfolio hedged risk', either within assets
or liabilities as appropriate.
The Group measures the fair value of each hedging instrument monthly. The
value is included in derivatives held for risk management in either assets or
liabilities as appropriate, with the change in value recorded in net gains
from derivatives and other financial instruments at fair value through profit
or loss in the income statement. Any hedge ineffectiveness is recognised in
net gains/(losses) from derivatives and other financial instruments at fair
value through profit or loss in the income statement as the difference between
the change in fair value of the hedged item and the change in fair value of
the hedging instrument.
2.7 Current and deferred income tax
Income tax on the result for the period comprises current and deferred income
tax. Income tax is recognised in the statement of comprehensive income except
to the extent that it relates to items recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income
for the period, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous
periods.
Deferred tax is provided using the balance sheet liability method, providing
for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation
purposes. The amount of deferred tax provided is based on the expected manner
of realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets are recognised to the extent it is probable that taxable
profits will be available against which the deductible temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered. Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
Deferred tax liabilities are recognised for all taxable temporary differences.
The Company and its UK subsidiaries are in the same VAT group.
2.8 Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents
comprise cash and non-mandatory deposits held with central banks, mandatory
deposits held with central banks in demand accounts and amounts due from banks
with an original maturity of less than three months that are available to
finance the Group's day-to-day operations.
2.9 Employee benefits - pension costs
A defined contribution plan is a post-employment benefit plan under which the
Group pays fixed contributions into a separate entity and will have a legal or
constructive obligation to pay further amounts. Contributions to defined
contribution schemes are charged to the statement of comprehensive income as
they become payable in accordance with the rules of the scheme. Differences
between contributions payable in the year and contributions actually paid are
shown as either accruals or prepayments in the statement of financial
position.
2.10 Share-based payments
The Group has a number of long-term incentive share schemes for all employees,
including some Directors, whereby they have been granted equity-settled
share-based payments in the Group. The share schemes all have vesting
conditions with some schemes for senior management being subject to specific
performance conditions. All share schemes are equity settled share-based
payments.
The fair value of equity settled share-based payment awards are calculated at
grant date and recognised over the period in which the employees become
unconditionally entitled to the awards (the vesting period). Fair value is
measured by use of the Black-Scholes option pricing model. The variables used
in the model are adjusted, based on management's best estimate, for the
effects of non-transferability, exercise restrictions and behavioural
considerations.
The share-based payments are recognised as staff costs in the income statement
and expensed on a straight-line basis over the vesting period, based on
estimates of the number of shares which may eventually vest. The amount
recognised as an expense is adjusted to reflect differences between expected
and actual outcomes, such that the amount ultimately recognised as an expense
is based on the number of awards that meet the related service and specific
performance conditions at the vesting date. The change in estimations, if any,
is recognised in the income statement at the time of the change with a
corresponding adjustment in equity through the retained earnings account.
It is assumed where the Company grants awards to employees of the Company and
its subsidiaries, the employee offers services to the respective employing
entity only. Where the Company satisfies awards granted to an employee of its
subsidiary, there is no obligation for the subsidiary to reimburse the
Company. Consequently, all share-based payments are considered equity-settled
with any awards to an employee of its subsidiary being deemed a capital
contribution with a corresponding debit to investment in subsidiaries. As the
Company is settling these awards through its own equity instruments, there is
a corresponding credit to the retained earnings account. The Company
recognises the expense of share-based payments in the respective entity of the
employee.
See note 10 for further details on the share schemes.
2.11 Leasing
The Group presently is only a lessee with lease agreements with third-party
suppliers. It does not hold any lessor contracts with customers.
IFRS 16 distinguishes leases and service contracts on the basis of whether an
identified asset is controlled by a customer for which these are deemed as
right-of-use assets. The lessee is required to recognise a right-of-use asset
representing the Group right of use and control over the leased asset.
Furthermore, the Group is required to recognise a lease liability representing
its obligation to make lease payments over the relevant term of the lease. The
Group will recognise both interest expense and depreciation charges, which
equate to the finance costs of the leases.
Furthermore, the classification of cash flows will also be affected because
operating lease payments under IAS 17 are presented as operating cash flows;
whereas under the IFRS 16 model, the lease payments will be split into a
principal and an interest portion which will be presented as financing and
operating cash flows respectively.
Lease liability
The lease liability is initially measured at the present value of the lease
payments that are not paid at that date. The Group assesses on a
lease-by-lease payments the contractual terms of the lease and likelihood of
the Group enacting on available extension and break clauses within the lease
in order to determine the expected applicable term of the lease. Once
determined, the Group analyses the expected future payments of the lease over
this applicable term, which are discounted. The interest rate used to discount
the cashflows is the interest rate implicit to the lease agreement. Where this
is not available, the Group has applied their incremental borrowing rate. The
incremental borrowing rate is the rate of interest that the Group would have
to pay to borrow, over a similar term and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use asset in a
similar economic environment.
Subsequently, the lease liability is adjusted for interest and lease payments,
as well as the impact of lease modifications, amongst other variables. The
interest expense of the lease liability is calculated under the effective
interest rate where the interest expense equates to the lease payments over
the remaining term.
Right-of-use asset
The right-of-use asset is initially measured at cost and subsequently measured
at cost (subject to certain exceptions) less accumulated depreciation and
impairment losses, adjusted for any remeasurement of the lease liability.
The cost at initial recognition is calculated as the initial lease liability
plus initial direct costs, expected restoration costs and remaining prepayment
balances at the commencement date.
The right-of-use asset is subsequently measured at cost, less accumulated
depreciation, and any accumulated impairment losses. Any remeasurement of the
lease liability results in a corresponding adjustment to the right-of-use
asset.
The Company calculates depreciation of the right-of-use asset in accordance
with IAS 16 'Property, Plant and Equipment' and is consistent with the
depreciation methodology applied to other similar assets. All leases are
depreciated on a straight-line basis over the shorter of the lease term and
the useful life of the right-of-use asset.
Restoration costs will be estimated at initial application and added to the
right-of-use asset and a corresponding provision raised in accordance with IAS
37 'Provisions, contingent liabilities, and contingent assets. Any subsequent
change in the measurement of the restoration provision, due to a revised
estimation of expected restoration costs, is accounted for as an adjustment of
the right-of-use asset.
Short-term leases and leases of low value assets
The Group leases some smaller asset classes, such as computer hardware, which
either has a value under £5,000 per annum or has a lease period of 12 months
or shorter. For such leases, the Group has elected under IFRS 16 rules to
treat these as operating leases and hold off-balance sheet. These leases are
charged to the income statement on a straight-line basis over the lease term.
2.12 Provisions for commitments and other liabilities
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the reporting date, taking into
account the risks and uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash flows
(discounted at the Company's weighted average cost of capital when the effect
of the time value of money is material).
When some or all of the economic benefits required to settle a provision are
expected to be recovered from a third party, a receivable is recognised as an
asset only if it is virtually certain that reimbursement will be received, and
the amount of the receivable can be measured reliably.
2.13 Operating segments
IFRS 8 Operating segments requires particular classes of entities (essentially
those with publicly traded securities) to disclose information about their
operating segments, products and services, the geographical areas in which
they operate, and their major customers. Information is based on the Group's
internal management reports, both in the identification of operating segments
and measurement of disclosed segment information.
The Group's products and the markets to which they are offered are so similar
in nature that they are reported as one class of business. As a result, the
chief operating decision maker uses only one segment to control resources and
assess the performance of the entity, while deciding the strategic direction
of the Group.
2.14 Earnings per share
In accordance with IAS 33, the Group will present on the face of the statement
of comprehensive income basic and diluted EPS for:
- Profit or loss from continuing operations attributable to the ordinary equity
holders of the Company; and
- Profit or loss attributable to the ordinary equity holders of the Company for
the period for each class of ordinary shares that has a different right to
share in profit for the period.
Basic EPS is calculated by dividing profit or loss attributable to ordinary
equity holders of the Company by the weighted average number of ordinary
shares outstanding during the period.
Diluted EPS is calculated by adjusting the earnings and number of shares for
the effects of dilutive options and other dilutive potential ordinary shares.
2.15 Merger relief
Merger relief is relief granted under the Companies Act 2006 section 612 which
removes the requirement for the Company to recognise the premium on issued
shares to acquire another company within the share premium account. Merger
relief is recognised where all the following criteria are satisfied:
§ The Company secures at least a 90% equity holding of all share classes in
another company as part of the arrangement; and
§ The Company provides either of the following as consideration for the
allotment of shares in the acquired company:
o Issue or transfer of equity shares in the Company in exchange for equity
shares in the acquired company; or
o The cancellation of any such shares in the acquired company that the
Company does not already hold.
2.16 Merger accounting
Business combination and merger accounting
IFRS 3 Business Combinations prescribes the accounting treatment for business
combinations, however, the change in control and ownership of a company under
common control is outside the scope of IFRS 3 Business Combinations. In the
absence of appropriate IFRS, the Directors sought other applicable accounting
standards, and elected to apply FRS 102 in the form of Merger Accounting which
provides accounting guidance for transactions of this nature.
The principles of merger accounting are as follows:
§ Assets and liabilities of the acquired entity are stated at predecessor
carrying values. Fair value measurement is not required;
§ No new goodwill arises in merger accounting; and
§ Any difference between the consideration given and the aggregate book value of
the assets and liabilities of the acquired entity at the date of transaction
is included in equity in retained earnings or in a separate "Merger Reserve"
account.
By way of using the merger accounting methodology for preparing these
consolidated financial statements, comparative information will be prepared as
if the Group had existed and been formed in prior periods. The Directors agree
this will enable informative comparatives to users given the underlying
activities and management structure of the Group remain largely unchanged
following the formation of the Group.
Merger reserve
Where merger accounting has been applied this prescribes that any difference
between the consideration given and the aggregate book value of the assets and
liabilities of the acquired entity at the date of transaction is included in
equity in retained earnings or in a separate reserve account. Therefore, on
consolidation of the Group financial statements, the difference between the
consideration paid and the book value of the acquired entity is recognised as
a Merger Reserve, in accordance with relevant accounting standards relating to
businesses under common control.
2.17 Own Shares
Own equity instruments of the Group which are acquired by it or by any of its
subsidiaries (treasury shares) are deducted from equity. Consideration paid or
received on the purchase, sale, issue, or cancellation of the Group's own
equity instruments is recognised directly in equity. No gain or loss is
recognised in profit or loss on the purchase, sale, issue, or cancellation of
own equity instruments.
Own shares represents shares of the Company that are held by the Employee
Benefit Trust.
3. Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in accordance with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets and
liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
Judgements
The Group has made the following key judgements in applying the accounting
policies:
3.1. Expected credit losses loan impairment
Significant increase in credit risk for classification in stage 2
Counterparties are classified into stage 2 where the risk profile of the
borrower profile has significantly increased from inception of the exposure.
This increase in credit risk is signified by either increases in internal or
external credit ratings, the counterparty becoming over 30 days past due, or
forbearance measures being applied.
The Group has aligned its assessment of significant increases in credit risk
to its internal threshold criteria for prompting customer pricing reviews for
consistency.
Due to the short-term behavioural term of the majority of the current lending
portfolio, the Group has not applied a probationary ("cooling off") period to
exposures which are no longer triggering the stage 2 threshold criteria so
these will move back to stage 1 once the classification criteria is no longer
met.
Definition of default
The Group aligns its definition of default to the regulatory definition for
default in all periods presented. The Group applies the regulatory guideline
of 90+ days in arrears and also uses internal and external information, along
with financial and non-financial information, available to the Group to
determine whether a default event has either occurred or is perceived to have
occurred.
Should a default event occur the Group applies a probationary ("cooling off")
period to Stage 3 counterparties before being transferred back to either stage
1 or 2. The probationary period is typically 3 months but is extended up to 12
months for more severe scenarios. During the probationary period the
counterparty must no longer meet the criteria for Stage 3 inclusion for the
entire applicable period.
Estimates
The Group has made the following estimates in the application of the
accounting policies that have a significant risk of material adjustment to the
carrying amount of assets and liabilities within the next financial year:
3.2. Expected credit losses loan impairment
Probability of default ("PD")
In the absence of sufficient internal historical default data, the Group uses
an external credit rating agency to provide credit ratings and corresponding
probability of defaults ("PDs") for the vast majority of the Group's
counterparties. These are "Through-the-Cycle" PDs which represents a long-run
average probability of default, opposed to Point-in-Time PDs which are shorter
term and partially reflect the current economic outlook. Further, the primary
data points which impact credit ratings and PDs are derived from past events,
therefore, PDs are inherently a lagging indicator of expected default activity
over the following 12 month period and longer.
Consequently, the Group utilises external macro-economic forecast data sourced
from an external economics research company to adjust PDs from
Through-the-Cycle to Point-in-Time, and further consider how default activity
may evolve in the future. Following this exercise, as at 31 December 2024 the
Group has applied a c.34% scalar increase to its PDs consistent to the c.34%
scalar increase as at 31 December 2023.
A 100% deterioration in PDs from average PD of 2.62% to 5.25% (excluding stage
3 exposures, which are already in default), would result in an additional
impairment charge of £1,445,000 at 31 December 2024 (31 December 2023:
£1,901,000).
Loss given default ("LGD")
The Group reviewed its LGD modelling assumptions as at 31 December 2024 by
comparing observed loss given default rates against modelled LGD. The Group
analyses historical default events by different sectors, products, and
counterparty activity to validate whether its current LGD methodology is
reasonable. The Group may apply managerial overlays to its LGD assumptions to
accommodate for deviations in expected LGD rates over the following 12 month
period and longer from historical observed LGD rates.
Although the Group has observed strong performance in default recoveries
within the year ended 31 December 2024, the Group has elected to review its
LGD modelling assumptions to reflect an uncertain economic outlook,
specifically within industries identified as having higher potential loss
rates. Collateral haircuts have been reviewed at industry-level, along with an
adjustment of "sold-out-trust" (SOTs) probabilities, which weaken the Group's
recovery position due to becoming uncollateralised.
A 10% reduction in the expected discounted cashflows from the collateral held
by the Group would result in an additional impairment charge of £1,355,000 at
31 December 2024 (31 December 2023: £967,000).
Forward looking macroeconomic scenarios
The Group considers four economic stress scenarios within its impairment
modelling whereby the Group stresses PD and LGD inputs in accordance with
expected macro-economic outlooks. This provides an ECL impairment allowance
for each scenario which is multiplied by the likelihood of occurrence over the
next 12-month period from the balance sheet date to give a probability
weighted ECL.
The following forward-looking macroeconomic scenarios, together with their
probability weighting and key economic variables, were used in calculating the
ECLs used for determining impairment provisions:
Scenario Probability Weighting ECL Impairment ECL Coverage(1)
(%)
(£'000)
(%)
31 December 2024
Upside 20% 4,618 0.68%
Base 50% 5,621 0.83%
Downside 20% 7,384 1.08%
Severe downside 10% 13,656 2.01%
Weighted Total 100% 6,577 0.97%
31 December 2023
Upside 20% 13,181 2.22%
Base 50% 13,816 2.33%
Downside 20% 15,243 2.57%
Severe downside 10% 20,036 3.38%
Weighted Total 100% 14,596 2.46%
(1) ECL Coverage is calculated by dividing the ECL impairment by the Exposure
at Default (EAD). EAD is typically higher than the gross loan receivable
balance.
The following table details the additional impairment allowance
charge/(credit) should one of the macroeconomic scenarios be assigned a 100%
probability weighting:
2024 2023
Scenario £'000 £'000
Upside (1,959) (1,415)
Base (956) (780)
Downside 807 647
Severe downside 7,079 5,441
4. Interest and similar income
2024 2023
£'000 £'000
At amortised cost (using effective interest rate method):
On loans and advances to customers 71,619 55,203
On loans and advances to banks 4,930 4,246
On money market fund 28 -
76,577 59,449
At FVOCI:
On investment securities 243 521
Total interest and similar income 76,820 59,970
5. Operating segments
It is the Director's view that the Group's products and the markets to which
they are offered are so similar in nature that they are reported as one class
of business. As a result, it is considered that the chief operating decision
maker uses only one segment to control resources and assess the performance of
the entity, while deciding the strategic direction of the Group. For this
purpose, the chief operating decision maker of the Group is the Board of
Directors.
6. Interest and similar expenses
The Group is solely funded by customer deposits and Group reserves. See note
35 and 36 for further detail of the movements in customer deposits and
financial liabilities during the year.
2024 2023
£'000 £'000
At amortised cost (using effective interest rate method):
On customer deposits 29,482 21,799
On subordinated liabilities 1,272 269
30,754 22,068
At FVTPL:
Net interest expense on financial instruments hedging liabilities 454 268
Total interest and similar expense 31,208 22,336
7. Fee income
2024 2023
£'000 £'000
Facility-related fees 1,237 1,393
Total fee income 1,237 1,393
8. Fee expense
2024 2023
£'000 £'000
Enable guarantee charges 988 648
Financial guarantee charges 576 19
Undrawn commitment facility fees 20 8
Non-incremental direct costs 23 44
Broker Fees 19 -
Total fee expense 1,626 719
9. Staff costs
Analysis of staff costs:
2024 2023
£'000 £'000
Wages and salaries 12,367 10,437
Share-based payments 985 905
Contractor costs 59 22
Social security costs 1,784 1,314
Pension costs arising on defined contribution schemes 849 753
Total staff costs 16,044 13,431
Contractor costs are recognised within personnel costs where the work
performed would otherwise have been performed by employees. Contractor costs
arising from the performance of other services is included within other
operating expenses.
Average number of persons employed by the Group (including Directors):
2024 2023
No. No.
Management 13 13
Finance 10 8
Credit & Risk 30 26
Sales & Marketing 36 35
Operations 31 28
Technology 16 16
Total average headcount 136 126
Directors' emoluments:
Fees/basic salary Bonuses Employer pension contributions Benefits in kind 2024 total 2023 total
£'000 £'000 £'000 £'000 £'000 £'000
Executive Directors:
Carl D'Ammassa 529 477 53 9 1,068 808
Gavin Morris 299 120 30 10 459 427
828 597 83 19 1,527 1,235
Non-executive Directors:
Mark Stephens 150 - - - 150 150
Thomas Grathwohl 75 - - - 75 75
Nicole Coll 85 - - - 85 85
Sheryl Lawrence 95 - - - 95 95
Haakon Stenrød(1) - - - - - -
405 - - - 405 405
Total Director remuneration 1,233 597 83 19 1,932 1,640
( )
(1) Haakon Stenrød holds his position as Non-Executive Director by virtue of
major shareholding by Watrium AS exercising their right to appoint a Director
under their Relationship Agreement. He is compensated by Watrium AS.
(2) Taxable gain on share awards exercised during the year.
The pension for the year ended 31 December 2024 to Carl D'Ammassa and Gavin
Morris of £53,000 (2023: £44,000) and £30,000 (2023: £29,000) respectively
is the sum of payments made to these individuals in lieu of Group pension
contributions.
Carl D'Ammassa and Gavin Morris have received share options as part of
long-term incentive schemes - further details of these share option schemes
can be found in note 10.
Carl D'Ammassa is the highest paid Director with total remuneration of
£1,068,000 (2023: £808,000) in the year ended 31 December 2024. Carl
D'Ammassa has been awarded share options of which none have been exercised yet
as at 31 December 2024 (2023: nil). Refer to note 10 for further details of
these awards.
10. Share-based payments
The share-based payment expense during the year comprised the following:
2024 2023
£'000 £'000
Performance Share Plan (PSP) 958 860
Sharesave Scheme (SAYE) 27 45
Total share-based payments expense 985 905
The Group has the following share options scheme for employees which have been
granted and remain outstanding at 31 December 2024:
Plan No. of options outstanding Options outstanding value Grant dates Vesting dates Exercise price Performance conditions attached Settlement method Charge for year ended 31 December 2024
31 December 2024
31 December 2024
£'000
£'000
General Award 2020 105,000 39 Jun-20 Jun-23 Nil No Equity (2)
General Award 2021 106,150 65 Jun-21 Jun-24 Nil No Equity 15
General Award 2022 304,836 97 May-22 May-25 Nil No Equity 36
General Award 2023 285,739 54 Apr-23 Apr-26 Nil No Equity 32
General Award 2024 841,881 38 Apr-24 Apr-27 Nil No Equity 38
Manager CSOP Award 384,298 31 Aug-20 Jun-21 40.5p No Equity -
Aug-20
Jun-22
Aug-20
Jun-23
Manager PSP Award 301,904 122 Aug-20 Aug-20 Nil No Equity -
Aug-20
Jun-21
Aug-20
Jun-22
CEO Recruitment Award 900,000 338 Jun-20 Jun-23 Nil Yes Equity -
Senior Manager Award 2020 430,720 156 Jun-20 Jun-23 Nil Yes Equity -
Senior Manager Award 2021 113,394 68 Jun-21 Sep-22 Nil No Equity 7
Jun-21
Jun-24
Nov-21
Nov-24
Senior Manager Award 2022 1,314,170 406 May-22 May-25 Nil Yes Equity 151
Sep-22
Sep-25
Senior Manager Award 2023 4,689,317 921 Apr-23 Apr-26 Nil Yes Equity 493
Aug-23
Aug-26
Oct-23
Aug-26
Senior Manager Award 2024 2,250,000 104 Jan-24 Jan-27 Nil No Equity 105
Apr-24
Apr-27
Jul-24
Jul-27
Nov-24
Nov-27
Leader & High Performer Award 2022 179,133 57 May-22 May-25 Nil No Equity 21
Feb-23
May-25
Leader & High Performer Award 2023 524,644 103 Apr-23 Apr-26 Nil No Equity 61
Sharesave Scheme 2,312,987 83 Nov-21 Jan-25 46.3p No Equity 28
Jun-22
Aug-25
30p
May-23
Aug-26
30.72p
May-24
May-27
18p
TOTAL 15,044,173 2,682 985
All awards are equity-settled, and the shares awarded for all schemes are
Distribution Finance Capital Holdings plc ordinary shares of £0.01 each of
the current share capital of the Company which are listed on the Alternative
Investment Market (AIM). The awards were granted to employees and Directors
within the Group with the majority of the employees being employed by DF
Capital Bank Limited.
During the year ended 31 December 2024, the movements in share options
granted, forfeited, and exercised were as follows:
Options outstanding at start of year Options granted during the year Options forfeited during the year Options exercised during the year Options outstanding at end of the year Options exercisable at end of the year
Plan No. No. No. No. No. No.
Year ended 31 December 2024
General Award 2020 143,350 - (4,233) (34,117) 105,000 105,000
General Award 2021 134,130 - 2,329 (30,309) 106,150 106,150
General Award 2022 337,422 - (32,586) - 304,836 -
General Award 2023 325,739 - (40,000) - 285,739 -
General Award 2024 - 920,000 (78,119) - 841,881 -
Manager CSOP Award 384,298 - - - 384,298 384,298
Manager PSP Award 821,668 - - (519,764) 301,904 301,904
CEO Recruitment Award 900,000 - - - 900,000 900,000
Senior Manager Award 2020 581,080 - - (150,360) 430,720 430,720
Senior Manager Award 2021 113,394 - - - 113,394 113,394
Senior Manager Award 2022 1,314,170 - - - 1,314,170 -
Senior Manager Award 2023 5,592,609 - (903,292) - 4,689,317 -
Senior Manager Award 2024 - 2,350,000 (100,000) - 2,250,000 -
Leader & High Performer Award 2022 200,876 - (21,743) - 179,133 -
Leader & High Performer Award 2023 586,820 - (62,176) - 524,644 -
Sharesave Scheme 1,418,952 1,977,620 (1,083,585) - 2,312,987 -
Total 12,854,508 5,247,620 (2,323,405) (734,550) 15,044,173 2,341,466
Year ended 31 December 2023
General Award 2020 222,500 - (26,151) (52,999) 143,350 143,350
General Award 2021 160,248 - (26,118) - 134,130 -
General Award 2022 385,511 - (48,089) - 337,422 -
General Award 2023 - 365,000 (39,261) - 325,739 -
Manager CSOP Award 384,298 - - - 384,298 384,298
Manager PSP Award 853,334 - - (31,666) 821,668 821,668
CEO Recruitment Award 900,000 - - - 900,000 900,000
Senior Manager Award 2020 885,000 - (173,200) (130,720) 581,080 581,080
Senior Manager Award 2021 144,370 - (11,291) (19,685) 113,394 19,685
Senior Manager Award 2022 1,765,000 - (450,830) - 1,314,170 -
Senior Manager Award 2023 - 5,673,292 (80,683) - 5,592,609 -
Leader & High Performer Award 2022 201,022 5,000 (5,146) - 200,876 -
Leader & High Performer Award 2023 - 615,000 (28,180) - 586,820 -
Sharesave Scheme 1,068,212 717,166 (366,426) - 1,418,952 -
Total 6,969,495 7,375,458 (1,255,375) (235,070) 12,854,508 2,850,081
The fair value at grant date is calculated by taking into consideration any
restrictive vesting criteria, including any market and/or non-market
performance conditions. The below table summarises the share schemes including
the weighted average remaining contractual years and the weighted average fair
value at grant date:
2024 2023
Plan Options outstanding at end of the year Weighted average remaining contractual life (years) Weighted average fair value at grant date Options outstanding at end of the year Weighted average remaining contractual life (years) Weighted average fair value at grant date
(No.)
(pence)
(No.)
(pence)
General Award 2020 105,000 - 37.50 143,350 - 37.50
General Award 2021 106,150 - 61.00 134,130 0.4 61.00
General Award 2022 304,836 0.4 37.00 337,422 1.4 37.00
General Award 2023 285,739 1.3 38.50 325,739 2.3 38.50
General Award 2024 841,881 2.3 23.50 - - -
Manager CSOP Award 384,298 - 8.00 384,298 - 8.00
Manager PSP Award 301,904 - 40.50 821,668 - 40.50
CEO Recruitment Award 900,000 - 37.50 900,000 - 37.50
Senior Manager Award 2020 430,720 - 37.50 581,080 - 37.50
Senior Manager Award 2021 113,394 - 60.27 113,394 0.5 60.27
Senior Manager Award 2022 1,314,170 0.4 34.85 1,314,170 1.4 34.85
Senior Manager Award 2023 4,689,317 1.4 36.75 5,592,609 2.4 36.75
Senior Manager Award 2024 2,250,000 2.6 31.71 - - -
Leader & High Performer Award 2022 179,133 0.4 37.03 200,876 1.4 37.03
Leader & High Performer Award 2023 524,644 1.3 38.50 586,820 2.3 38.50
Sharesave Scheme 2,312,987 2.1 13.96 1,418,952 2.0 13.98
15,044,173 12,854,508
Where a share award scheme has an exercise price that is equal to £nil,
valuation models such as the Black Scholes valuation model cannot be used to
determine the fair value of the award at the grant date, therefore, it is
assumed the market price of the share is assumed to be the fair value. For
schemes which have an exercise price greater than £nil, the Group has used
the following variables for the respective schemes:
Manager CSOP Award Sharesave Scheme Sharesave Scheme Sharesave Scheme Sharesave Scheme
Grant date Aug-20 Nov-21 Jun-22 May-23 May-24
Contractual life (years) 3 3 3 3 3
Share price at issue (pence) 40.50 57.50 37.50 38.40 29.00
Exercise price (pence) 40.50 46.30 30.00 30.72 18.00
Expected volatility (%) 30.00% 30.00% 30.00% 30.00% 30.00%
Risk-free rate (%) 0.20% 0.55% 2.08% 3.91% 4.30%
Dividend yield (%) 0.00% 0.00% 0.00% 0.00% 0.00%
The terms of the individual schemes are as follows:
General Award
In the year ended 31 December 2024, nil cost options over ordinary shares
of £0.01 each of the current share capital of the Company were granted to
all employees (excluding Directors). These options vest over a 3-year period
and are not subject to specific performance conditions.
Manager PSP and CSOP Award
As part of a Group reorganisation of its existing share capital and employee
loan agreements in the year ended 31 December 2020, managers and former
managers were awarded share options so that they were not disadvantaged by
this exercise. PSP scheme nil cost options and Company Share Option Scheme
shares ("CSOP") were issued over ordinary shares of £0.01 each of the share
capital of the Company. The CSOP Options have an exercise price per share of
40.5p equal to the market value of Ordinary Shares as at the time of grant and
the PSP Options are nil cost options. The PSP and CSOP Options became
exercisable on the same timeline, and in the same proportions, that the
corresponding original Ordinary Shares would have become freely transferable
on the terms on which they were held. The Options are not subject to the
satisfaction of performance conditions.
The fair value of the CSOP was measured at the grant date using the
Black-Scholes model - see table above for further details of the inputs into
this valuation model.
No further awards under this scheme were granted in the years ended 31
December 2024 and 31 December 2023.
Senior Manager Award
Nil cost options over ordinary shares of £0.01 each of the current share
capital of the Company were granted to certain senior managers. All of these
share awards have been granted in line with our PSP rules and have performance
conditions aligned to financial performance, risk management and cultural
objectives.
In the year ended 31 December 2024, Senior Managers were granted additional
awards based on either promotion, recruitment incentives, or performance. No
performance conditions are included for all of the 2,350,000 awards granted in
the year ended 31 December 2024, and all awards vest over a 3-year period
subject to service conditions being met.
Sharesave Scheme
The Group has operated a 'Save As You Earn' scheme ('SAYE' or 'Sharesave
Scheme') for several years which is available to all UK-based employees. This
is a HMRC-approved share scheme, whereby the scheme allows employees to
purchase options by saving a fixed amount of between £10 and £500 per month
over a period of three years at the end of which the options, subject to
leaver provisions, are usually exercisable. If not exercised, the amount saved
is returned to the employee. During the year ended 31 December 2024, the Group
has offered a scheme with a grant date of May 2024 and a vesting date of July
2027. The option price is calculated using the closing bid-market price of a
Distribution Finance Capital Holdings plc ordinary share over the five dealing
days prior to the Invitation Date and applying a discount of 20%.
The fair value at grant date for the schemes is calculated by using the
Black-Scholes Model - see table above for further details of the inputs into
this valuation model.
Director share awards:
The below table summarises share options which have been awarded to Directors
as part of long-term incentive schemes:
Options outstanding at start of year Options granted during the year Options forfeited during the year Options exercised during the year Options outstanding at end of the year Options exercisable at end of the year
Plan No. No. No. No. No. No.
Year ended 31 December 2024
Carl D'Ammassa:
General Award 2020 5,000 - - - 5,000 5,000
CEO Recruitment Award 900,000 - - - 900,000 900,000
Senior Manager Award 2022 400,000 - - - 400,000 -
Senior Manager Award 2023 1,168,000 - - - 1,168,000 -
Senior Manager Award 2024 - 1,000,000 - - 1,000,000 -
Sharesave Scheme 60,000 - (60,000) - - -
2,533,000 1,000,000 (60,000) - 3,473,000 905,000
Gavin Morris:
General Award 2020 5,000 - - - 5,000 5,000
Manager CSOP Award 74,074 - - - 74,074 74,074
Manager PSP Award 19,733 - - - 19,733 19,733
Senior Manager Award 2020 130,720 - - - 130,720 130,720
Senior Manager Award 2022 200,000 - - - 200,000 -
Senior Manager Award 2023 753,000 - - - 753,000 -
Senior Manager Award 2024 - 200,000 - - 200,000 -
Sharesave Scheme 60,000 - - - 60,000 -
1,242,527 200,000 - - 1,442,527 229,527
Total Director Awards 3,775,527 1,200,000 (60,000) - 4,915,527 1,134,527
Year ended 31 December 2023
Carl D'Ammassa:
General Award 2020 5,000 - - - 5,000 5,000
CEO Recruitment Award 900,000 - - - 900,000 900,000
Senior Manager Award 2022 400,000 - - - 400,000 -
Senior Manager Award 2023 - 1,168,000 - - 1,168,000 -
Sharesave Scheme 60,000 - - - 60,000 -
1,365,000 1,168,000 - - 2,533,000 905,000
Gavin Morris
General Award 2020 5,000 - - - 5,000 5,000
Manager CSOP Award 74,074 - - - 74,074 74,074
Manager PSP Award 19,733 - - - 19,733 19,733
Senior Manager Award 2020 200,000 - (69,280) - 130,720 130,720
Senior Manager Award 2022 200,000 - - - 200,000 -
Senior Manager Award 2023 - 753,000 - - 753,000 -
Sharesave Scheme 60,000 - - - 60,000 -
558,807 753,000 (69,280) - 1,242,527 229,527
Total Director Awards 1,923,807 1,921,000 (69,280) - 3,775,527 1,134,527
See above section within this note for further details of the schemes,
including the fair value (market price) at grant date. No performance
conditions are attached to the Senior Manager Award 2024 for both Carl
D'Ammassa and Gavin Morris. All awards are subject to service conditions being
met over the vesting period.
11. Other operating expenses
2024 2023
Note £'000 £'000
Finance costs 12 103 76
Depreciation 17,18 641 498
Amortisation of intangible assets 19 285 376
Loss on disposal of fixed assets 17 5 -
Loss on disposal of intangible assets 19 6 -
Professional services expenses 2,998 2,189
Audit and accountancy fees 15 480 418
IT-related expenses 3,502 2,506
Other operating expenses 2,546 2,349
Foreign currency loss 104 -
Total other operating expenses 10,670 8,412
12. Finance costs
2024 2023
£'000 £'000
Interest on lease liabilities 103 76
Total finance costs 103 76
13. Provisions
Analysis for movements in provisions:
Leasehold dilapidations Other provisions Total
£'000 £'000 £'000
Year ended 31 December 2024
At start of period 67 - 67
Additions - 50 50
Utilisation of provision - - -
Unused amounts reversed - - -
Unwinding of discount 6 - 6
Lease modification 162 - 162
At end of year 235 50 285
Year ended 31 December 2023
At start of period 77 - 77
Additions 25 - 25
Utilisation of provision - - -
Unused amounts reversed (10) - (10)
Unwinding of discount 5 - 5
Lease modification (30) - (30)
At end of year 67 - 67
As detailed in note 18, the Group currently leases office premises at its
Manchester headquarters. During the year, the Group agreed to enact the
contractual break clause which will terminate the lease in August 2025. This
resulted in a lease modification which increased the estimated total
restoration costs. These amounts have been discounted to present value by
using an applicable discount factor.
14. Net impairment (gain)/loss on financial assets
2024 2023
£'000 £'000
Movement in impairment allowance in the year (8,062) 11,034
Write-offs 7,821 564
Total net impairment (gains)/losses on financial assets (241) 11,598
During the year ended 31 December 2024, the Group released the entire expected
credit loss provision in respect of RoyaleLife. As at 31 December 2023 this
balance was c.£9.8m. The related write off was c.£4.9m following a recovery
of c.£4.7m. See notes 20 and 24 for further analysis of the movement in
impairment allowances on loans and advances to customers and trade receivables
respectively.
Analysis of write-offs:
2024 2023
Note £'000 £'000
Realised losses on loan receivables 20 7,286 355
Realised losses on trade receivables 24 223 8
Realised losses on other receivables - -
Recovery transaction costs 351 251
Bad debt VAT relief (39) (50)
Total write-offs 7,821 564
15. Profit before taxation
Profit before taxation is stated after charging:
2024 2023
£'000 £'000
Depreciation of property, plant and equipment 444 318
Depreciation of right-of-use assets 197 180
Amortisation of intangible assets 285 376
Loss on disposal of property, plant and equipment (5) -
Loss on disposal of intangible assets (6) -
Allowance for credit impaired assets (8,062) 11,034
Staff costs 16,044 13,431
Auditor's remuneration 480 418
9,377 25,757
Analysis of auditor's remuneration:
2024 2023
£'000 £'000
Audit services:
Fees payable to the Company's auditor for the audit of the Company's annual 85 72
accounts
Fees payable to the Company's auditor for the audit of its subsidiaries 255 215
Fees paid to the Company's auditors relating to prior periods 40 39
Total audit services fees 380 326
Assurance services:
Interim review 78 69
Net profit verification 22 23
Total assurance services fees 100 92
Total auditor's remuneration 480 418
16. Taxation
Analysis of tax charge recognised in the period:
2024 2023
£'000 £'000
Current taxation charge:
UK corporation tax on profit for the current period 1,925 73
Adjustments in respect of prior years (3) -
Total taxation charge 1,922 73
Deferred taxation charge:
Current period 3,135 1,345
Adjustments in respect of prior years (4) -
Total deferred taxation charge 3,131 1,345
Total taxation charge 5,053 1,418
Reconciliation of profit before taxation to total tax charge recognised:
2024 2023
£'000 £'000
Profit on ordinary activities before taxation 19,074 4,573
Taxation on Profit on ordinary activities at standard corporation tax rate of 4,769 1,076
25% (2023: 23.5%)
Effects of:
Fixed asset differences 14 3
Disallowable expenses 322 275
Other permanent differences (45) (18)
Other short-term timing differences for which no deferred tax asset has been - -
recognised
Current year losses for which no deferred tax asset has been recognised - 3
Adjustments in respect of prior years (3) -
Remeasurement of deferred tax for changes in tax rates (4) 79
Total tax charge 5,053 1,418
Current tax on profits reflects UK corporation tax levied at a rate of 25% for
the year ended 31 December 2024 (31 December 2023: 23.5%). The Company is not
subject to the banking surcharge levied at a rate of 3% (31 December 2023: 3%)
on the profits of banking companies chargeable to corporation tax after an
allowance of £100 million (31 December 2023: £100m) per annum.
Expenses that are not deductible in determining taxable profits/losses include
impairment losses, amortisation of intangible assets, depreciation of fixed
assets, client and staff entertainment costs, and professional fees which are
capital in nature.
A deferred tax asset is only recognised to the extent the Group finds it
probable that the prior taxable losses can be utilised against future taxable
profits. As at 31 December 2024, the Group has an estimated unrecognised
deferred tax asset of £nil (31 December 2023: £0.7m) from prior taxable
losses.
In the year ended 31 December 2024, the Group has recognised a deferred tax
asset in respect of future taxable profits. Further detail on the deferred
taxation asset is provided in note 27.
17. Property, plant and equipment
Leasehold Improvements Furniture, Fixtures & Fittings Computer Hardware Telephony & Communications Motor Vehicles Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost:
As at 1 January 2023 10 24 159 - 954 1,147
Additions 13 129 121 - 155 418
Disposals and write offs - (1) (16) - - (17)
As at 31 December 2023 23 152 264 - 1,109 1,548
Additions 166 13 111 4 103 397
Disposals and write offs - - (8) - - (8)
As at 31 December 2024 189 165 367 4 1,212 1,937
Accumulated depreciation:
As at 1 January 2023 5 12 69 - 16 102
Charge for the year 4 32 65 - 217 318
Disposals and write offs - (1) (16) - - (17)
As at 31 December 2023 9 43 118 - 233 403
Charge for the year 47 55 105 2 235 444
Disposals and write offs - - (3) - - (3)
As at 31 December 2024 56 98 220 2 468 844
Carrying amount:
At 31 December 2023 14 109 146 - 876 1,145
At 31 December 2024 133 67 147 2 744 1,093
In the year ended 31 December 2024, the Group wrote off fully depreciated
assets of £nil (2023: £17,000).
18. Right-of-use assets
Buildings
£'000
Cost:
As at 1 January 2023 1,153
Additions 407
Disposals and write offs -
Lease modifications 567
As at 31 December 2023 2,127
Additions 8
Disposals and write offs -
Lease modifications (836)
As at 31 December 2024 1,299
Accumulated depreciation:
As at 1 January 2023 720
Charge for the year 180
Disposals and write offs -
As at 31 December 2023 900
Charge for the year 197
Disposals and write offs -
As at 31 December 2024 1,097
Carrying amount:
At 31 December 2023 1,227
At 31 December 2024 202
During the year, the Group agreed to enact the contractual break clause which
will terminate the lease in August 2025. This resulted in a lease modification
which reduced the right-of-use asset by £836,000, predominantly due to a
significant reduction in future lease payments.
The maturity analysis of lease liabilities is presented in note 34.
Amounts recognised in the income statement:
2024 2023
£'000 £'000
Depreciation expense on right-of-use assets 197 180
Interest expense on lease liabilities 103 76
Expense relating to short-term leases - 3
Expense relating to leases of low value assets 13 9
Expenses relating to variable lease payments not included in measurement of 126 112
lease liability
Total amounts recognised in the income statement 439 380
Some of the property leases in which the Group is the lessee contain variable
lease payment terms relating to service charges and insurance costs which are
included within the contractual terms of the lease agreement. The breakdown of
the lease payments for these property leases are as follows:
2024 2023
£'000 £'000
Buildings:
Fixed payments 109 227
Variable payments 126 118
Total lease payments 235 345
19. Intangible assets
Computer software
£'000
Cost
At 1 January 2023 1,941
Additions from internal development 117
Additions from separate acquisitions -
Disposals and write offs (538)
At 31 December 2023 1,520
Additions from internal development 623
Additions from separate acquisitions -
Disposals and write offs (53)
As at 31 December 2024 2,090
Accumulated amortisation
At 1 January 2023 1,064
Charge for the year 376
Disposals and write offs (538)
At 31 December 2023 902
Charge for the year 285
Disposals and write offs (47)
As at 31 December 2024 1,140
Carrying amount
At 31 December 2023 618
At 31 December 2024 950
In the year ended 31 December 2024, the Group capitalised £623,000 (2023:
£117,000) of consultancy costs in relation to the development of software
platforms to provide an asset finance capability, improving the commercial
lending processes, enhancing the customer journey for commercial clients and
development of the customer deposits platform. The amortisation period for
these software costs is within a range of 3-5 years following an individual
assessment of the asset's expected life. The Group performed an impairment
review at 31 December 2024 and concluded an impairment of £nil (2023: £nil).
In the year ended 31 December 2024, the Group wrote off fully depreciated
intangible assets of £nil (2023: £538,000).
20. Loans and advances to customers
2024 2023
£'000 £'000
Loan book principal 665,709 580,525
Accrued interest and fees 4,067 3,602
Gross carrying amount 669,776 584,127
less: impairment allowance (6,577) (14,596)
less: effective interest rate adjustment (2,427) (1,487)
Total loans and advances to customers 660,772 568,044
During the year ended 31 December 2024, the Group released the entire expected
credit loss provision in respect of RoyaleLife. As at 31 December 2023 this
balance was c.£9.8m.
Refer to note 39 for details on the expected maturity analysis of the gross
loans receivable balance.
Refer to note 14 and 39 for further details on the impairment losses
recognised in the periods.
Ageing analysis of gross loan receivables:
2024 2023
£'000 £'000
Not in default:
Not yet past due 661,391 566,503
Past due: 1 - 30 days 435 467
Past due: 31 - 60 days 168 35
Past due: 61 - 90 days 5 -
Past due: 90+ days - -
661,999 567,005
Defaulted:
Not yet past due and past due 1 - 90 days 6,143 5,020
Past due 90+ days 1,634 12,102
7,777 17,122
Total gross carrying amount 669,776 584,127
Analysis of gross loans and advances to customers:
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2024 545,952 21,052 17,123 584,127
Transfer to Stage 1 38,281 (38,204) (77) -
Transfer to Stage 2 (82,317) 82,416 (99) -
Transfer to Stage 3 (10,714) (7,327) 18,041 -
Net lending/(repayment) 152,311 (39,433) (19,943) 92,935
Write-offs - (20) (7,266) (7,286)
Total movement in gross loan receivables 97,561 (2,568) (9,344) 85,649
As at 31 December 2024 643,513 18,484 7,779 669,776
Loss allowance coverage at 31 December 2024 0.57% 0.90% 34.95% 0.98%
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2023 410,756 13,323 17,205 441,284
Transfer to Stage 1 42,913 (42,913) - -
Transfer to Stage 2 (88,983) 89,328 (345) -
Transfer to Stage 3 (2,617) (3,728) 6,345 -
Net lending/(repayment) 183,883 (34,958) (5,727) 143,198
Write-offs - - (355) (355)
Total movement in gross loan receivables 135,196 7,729 (82) 142,843
As at 31 December 2023 545,952 21,052 17,123 584,127
Loss allowance coverage at 31 December 2023 0.46% 0.76% 69.58% 2.50%
Analysis of impairment losses on loans and advances to customers:
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2024 2,522 160 11,914 14,596
Transfer to Stage 1 277 (275) (2) -
Transfer to Stage 2 (425) 479 (54) -
Transfer to Stage 3 (69) (173) 242 -
Remeasurement of impairment allowance (1,274) 560 3,191 2,477
Net lending/(repayment) 2,661 (582) (3,837) (1,758)
Write-offs - (3) (8,735) (8,738)
Total movement in loss allowance 1,170 6 (9,195) (8,019)
As at 31 December 2024 3,692 166 2,719 6,577
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2023 1,943 84 1,693 3,720
Transfer to Stage 1 365 (365) - -
Transfer to Stage 2 (464) 606 (142) -
Transfer to Stage 3 (16) (174) 190 -
Remeasurement of impairment allowance (1,668) 266 10,870 9,468
Net lending/(repayment) 2,362 (257) (342) 1,763
Write-offs - - (355) (355)
Total movement in loss allowance 579 76 10,221 10,876
As at 31 December 2023 2,522 160 11,914 14,596
21. Investment Securities
2024 2023
£'000 £'000
Investments not measured at fair value:
Money market fund 769 -
Investment securities measured at FVOCI
UK government gilts - 14,839
769 14,839
Analysis of movements during the period:
At 1 January 2024 14,839 22,964
Purchased investment securities 10,659 14,554
Proceeds from sold or maturing securities (25,000) (23,000)
Coupons received (75) (383)
Interest income 271 521
Unrealised gains - 183
Amounts transferred to the income statement 75 -
At 31 December 2024 769 14,839
Maturity profile of investment securities:
Within 12 months 769 14,839
Over 12 months - -
In May 2024 the Group entered into a cross-currency swap to support lending
denominated in non-GBP currencies. Surplus funds from the swap were invested
into a low volatility money market fund to earn a return whilst retaining same
day liquidity. The fund invests in a range of cash holding and short dated
securities which are held to maturity. This materially removes exposure to
market movements, meaning the fund consistently trades at par value
The fund is a type of investment security which required presentation under a
new financial statement caption. In addition to this fund, the Group also held
investment securities in the form of UK government gilts which matured during
the year that represent a sub-category of investment securities.
In the year ended 31 December 2024, the Group purchased treasury bills which
matured before year end. The impact of the purchase and maturity has been
reflected within the analysis of movements during the period table above.
In accordance with IFRS 9, all investment securities were assessed for
impairment and treated as Stage 1 assets in both reporting periods.
22. Derivatives
The table below reconciles the gross amount of derivative contracts to the
carrying balance shown in the consolidated statement of financial position:
Gross amount of recognised financial assets/(liabilities) Net amount of financial assets/(liabilities) presented in the Statement of Cash collateral paid/(received) not offset in the Statement of Financial Net amount
Financial Position Position
£'000 £'000 £'000 £'000
31 December 2024
Derivative assets:
Interest rate risk hedging 154 154 180 334
Foreign currency risk hedging 141 141 - 141
Derivative liabilities:
Interest rate risk hedging (6) (6) - (6)
31 December 2023
Derivative assets:
Interest rate risk hedging 537 537 (372) 165
Foreign currency risk hedging - - - -
Derivative liabilities:
Interest rate risk hedging (565) (565) 222 (343)
All interest rate derivative instruments which have been entered into are
transacted against SONIA. All foreign currency risk derivative instruments
which have been entered into are transacted against the Euro.
Margin call collateral is either paid or received with the swap counterparties
on all active swap contracts - this has been included in the above table. As
at 31 December 2024, the Group has a variation margin payable of £180,000
(2023: £150,000 receivable) with swap counterparties. Further, the Group
holds £2,000,000 (2023: £2,000,000) of independent collateral with banks for
the swap facility, which is not included within the above table. See note 28
for the balance of cash collateral held with banks.
The table below profiles the maturity of nominal amounts for interest rate
risk hedging derivatives based on contractual maturity:
Total nominal amount Less than 3 months 3 - 12 months 1 - 5 years More than 5 years
£'000 £'000 £'000 £'000 £'000
31 December 2024
Derivative assets
Interest rate risk hedging 10,000 - - 10,000 -
Foreign currency risk hedging 4,283 - 4,283 - -
Derivative liabilities
Interest rate risk hedging 5,000 - 5,000 - -
19,283 - 9,283 10,000 -
31 December 2023
Derivative assets
Interest rate risk hedging 45,000 - 30,000 15,000 -
Foreign currency risk hedging - - - - -
Derivative liabilities
Interest rate risk hedging 100,000 45,000 55,000 - -
145,000 45,000 85,000 15,000 -
The Group has 3 (2023: 10) interest rate swap contracts with an average fixed
rate of 4.50% (2023: 4.65%).
The Group has 1 FX swap and 1 cross currency swap contract which make up the
foreign currency risk hedging balance.
23. Hedge Accounting
2024 2023
£'000 £'000
Hedged liabilities:
Current hedge relationships 167 407
Swap inception adjustment (31) 17
Fair value adjustments on hedged liabilities 136 424
As at the year ended 31 December 2024, the Group only hedges liabilities in
the form of its customer deposits and subordinated liabilities. The Group does
not hedge its loans and advances to customers given these assets are expected
to reprice within a short time frame.
Refer to note 39 for further details on the Group's interest rate risk
management.
The swap inception adjustment relates to hedge accounting adjustments arising
when hedge accounting commences, primarily on derivative instruments
previously taken out against new hedged liabilities.
At present, the Group expects its hedging relationships to be highly effective
as the Group hedges only fixed term deposit accounts and subordinated
liabilities for which the fair value movements between the hedged item and
hedging instrument are expected to be highly correlated. Further, the Group
does not anticipate having to rebalance the relationship once entered into due
to the contractual terms of these financial liabilities. In the year ended 31
December 2024, there has been no cancelled or de-designated hedge
relationships due to failed hedge accounting relationships.
The tables below analyse the Group's portfolio hedge accounting for fixed rate
amounts owed to retail depositors:
2024 2023
Hedged item Hedging instrument Hedged item Hedging instrument
£'000 £'000 £'000 £'000
Customer deposits:
Carrying amount of hedged item/nominal value of hedging instrument 15,167 15,000 150,639 145,000
Cumulative fair value adjustments of hedged item/fair value of hedging (136) 148 (424) (28)
instrument
Changes in the fair value adjustment of hedged item/hedging instrument used (251) (56) (542) 133
for recognising the hedge ineffectiveness for the period
In the Consolidated Statement of Financial Position, £295,000 (2023:
£537,000) of hedging instruments were recognised within derivative assets;
and £6,000 (2023: £565,000) within derivative liabilities.
24. Trade and other receivables
2024 2023
£'000 £'000
Trade receivables 3,316 3,965
Impairment allowance (216) (259)
3,100 3,706
Other debtors 528 452
Accrued income - -
Prepayments 1,050 1,177
1,578 1,629
Total trade and other receivables 4,678 5,335
All trade receivables are due within one year, refer to note 39 for the
expected maturity profile.
The trade receivable balances are assessed for expected credit losses (ECL)
under the 'simplified approach', which requires the Group to assess all
balances for lifetime ECLs and is not required to assess significant increases
in credit risk.
Ageing analysis of trade receivables:
2024 2023
£'000 £'000
Not in default:
Not yet past due 3,125 3,513
Past due: 1 - 30 days 45 21
Past due: 31 - 60 days 5 176
Past due: 61 - 90 days 8 12
Past due: 90+ days - 1
3,183 3,723
Defaulted:
Not yet past due and past due 1 - 90 days 94 65
Past due 90+ days 39 177
133 242
Total trade receivables 3,316 3,965
Analysis of movement of impairment losses on trade receivables:
2024 2023
£'000 £'000
At 1 January 259 101
Amounts written off (223) (8)
Amounts recovered - -
Change in loss allowance due to new trade and other receivables originated net 180 166
of those derecognised due to settlement
At 31 December 216 259
25. Current taxation asset
2024 2023
£'000 £'000
At 1 January 55 55
Repayments (55) -
At 31 December - 55
26. Current taxation liability
2024 2023
£'000 £'000
At 1 January (73) -
Charge to profit and loss account (1,925) (73)
Payments 736 -
Adjustments in respect of prior years 3
At 31 December (1,259) (73)
Refer to note 27 for further details of the deferred taxation asset.
27. Deferred taxation asset
Deferred tax assets and liabilities are recognised on temporary differences
between the carrying amounts of assets and liabilities in the balance sheet
and the amounts attributed to such assets and liabilities for tax purposes.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent it is
probable that future taxable profits will be available against which
deductible temporary differences can be utilised. Deferred tax is determined
using tax rates and legislation in force at the balance sheet date and is
expected to apply when the deferred tax asset is realised, or the deferred tax
liability is settled.
The table below shows the movement in net deferred tax assets:
2024 2023
£'000 £'000
At 1 January 7,111 8,457
Charge to profit and loss account (3,135) (1,346)
Adjustments in respect of prior years 4 -
At 31 December 3,980 7,111
See below for an analysis of the deferred taxation asset balance:
2024 2023
£'000 £'000
Losses 4,232 7,402
Short term timing differences 8 8
Fixed assets (260) (299)
Deferred taxation asset 3,980 7,111
The Group has recognised a deferred tax asset in relation to tax losses
carried forward of £17m, short term timing difference of £30,000, and a
deferred tax liability in relation to tangible fixed assets differences of
£1m.
The Group has an unrecognised deferred tax asset value of £0.7m (2023:
£0.7m).
28. Loans and advances to banks
2024 2023
£'000 £'000
Unencumbered:
Included in cash and cash equivalents: balances with less than three months to 1,764 1,315
maturity at inception
Encumbered:
Cash collateral on derivatives placed with banks 2,007 2,160
Total loans and advances to banks 3,771 3,475
29. Notes to the cash flow statement
See below for reconciliation of balances classified as cash and cash
equivalents, which are recognised within the consolidated cash flow statement:
2024 2023
£'000 £'000
Cash and balances at central banks 110,030 89,552
Loans and advances to banks 1,764 1,315
Euro liquidity fund 769 -
Total cash and cash equivalents 112,563 90,867
Adjustments for non-cash items and other adjustments included in the income
statement:
2024 2023
Note £'000 £'000
Depreciation of property, plant and equipment 17 444 318
Depreciation of right-of-use assets 18 197 180
Loss on disposal of property, plant and equipment 17 5 -
Amortisation of intangible assets 19 285 376
Loss on disposal of intangible assets 19 6 -
Loss on lease modification 30 -
Share based payments 10 985 905
Impairment allowances on receivables 14 (241) 11,598
Movement in other provisions 13 50 (15)
Dividend income on money market funds 21 (28) -
Interest income on investment securities 21 (243) (521)
Finance costs 12 103 76
Unwind of discount 13 6 5
Interest on subordinated liabilities 6 1,272 269
Amortisation of subordinated liabilities acquisition costs 29 10 3
Movement in effective interest rate adjustment 20 941 (194)
Total non-cash items and other adjustments 3,822 13,000
Net change in operating assets:
2024 2023
£'000 £'000
Increase in loans and advances to customers (93,048) (141,648)
Derivative financial instruments 241 (480)
Decrease in other assets 417 (7,328)
Increase in operating assets (92,390) (149,456)
Net change in operating liabilities:
2024 2023
£'000 £'000
Increase in customer deposits 75,043 94,886
Derivative financial instruments (559) 522
Fair value adjustments for portfolio hedged risk (288) 508
Increase in other liabilities 5,180 (1,745)
Increase in operating liabilities 79,376 94,171
Changes in liabilities arising from financing activities:
The table below details changes in the Group's liabilities arising from
financing activities, including both cash and non-cash changes. Liabilities
arising from financing activities are those for which cash flows were, or
future cash flows will be, classified in the Group's consolidated cash flow
statement as cash flows from financing activities.
2024 2023
Lease liabilities Subordinated Liabilities Own Shares Lease liabilities Subordinated Liabilities Own Shares
(see note 34) (see note 37) (See note 32) Total (see note 34) (see note 37) (See note 32) Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 1,205 10,221 (401) 11,025 395 - (364) 31
Financing cash flows:
Recognition of subordinated liabilities - - - - - 10,000 - 10,000
Subordinated liabilities acquisition costs - - - - - (51) - (51)
Interest payments (252) (1,273) - (1,525) (227) - - (227)
Purchase of own shares - - (142) (142) - - (67) (67)
Non-cash movements:
Interest expense on subordinated liabilities - 1,272 - 1,272 - 269 - 269
Amortisation of subordinated liabilities acquisition costs - 10 - 10 - 3 - 3
Recognition of lease liabilities - - - - 365 - - 365
Interest expense on lease liabilities 103 - - 103 76 - - 76
Lease modification (966) - - (966) 596 - - 596
Settlement of employee share awards - - 103 103 - - 30 30
At 31 December 90 10,230 (440) 9,880 1,205 10,221 (401) 11,025
30. Investment in subsidiaries
Subsidiary Principal activity Shareholding % Class of shareholding Country of incorporation Registered address
DF Capital Bank Limited Financial Services 100% Ordinary UK St James' Building, 61-95 Oxford St, Manchester, M1 6EJ
DF Capital Financial Solutions Limited Financial Services 100% Ordinary UK St James' Building, 61-95 Oxford St, Manchester, M1 6EJ
DF Capital Retail Finance Limited Financial Services 100% Ordinary UK St James' Building, 61-95 Oxford St, Manchester, M1 6EJ
31. Equity
2024 2023 2024 2023
No. No. £'000 £'000
Authorised:
Ordinary shares of 1p each 179,369,199 179,369,199 1,793 1,793
Allotted, issued and fully paid: Ordinary shares of 1p each 179,369,199 179,369,199 1,793 1,793
Analysis of the movements in equity:
The below table details equity movements within the share capital, share
premium and merger relief accounts during the years ended 31 December 2024 and
31 December 2023:
Date No. of shares Issue Price Share Capital Share Premium Merger Relief Total
# £ £'000 £'000 £'000 £'000
Balance at 1 January 2023 179,369,199 1,793 39,273 94,911 135,977
Share premium account cancellation 29-Jun-23 - - - (39,273) - (39,273)
Balance at 31 December 2023 179,369,199 - 1,793 - 94,911 96,704
No movements in the year - - - - - -
Balance at 31 December 2024 179,369,199 1,793 - 94,911 96,704
32. Own shares
At 31 December 2024 the Group's Employee Benefit Trust held 2,677,998 (2023:
2,926,617) ordinary shares in Distribution Finance Capital Holdings plc to
meet obligations under the Company's share and share option plans. The shares
are stated at cost and their market value at 31 December 2024 was £990,859
(2023: £658,489).
2024 2023
£'000 £'000
At 1 January (401) (364)
Acquisition of shares (142) (67)
Settlement of employee share awards 103 30
At 31 December (440) (401)
33. Merger reserve
There were no movements relating to the merger reserve account during years
ended 31 December 2024 and 31 December 2023.
34. Lease liabilities
2024 2023
£'000 £'000
At 1 January 1,205 395
Initial recognition - 365
Interest expense 103 76
Lease payments (252) (227)
Lease modification (966) 596
At 31 December 90 1,205
During the year, the Group agreed to enact the contractual break clause which
will terminate the lease in August 2025. This resulted in a lease modification
which reduced the lease liability by £966,000, predominantly due to a
significant reduction in future lease payments
The Group does not face a significant liquidity risk with regard to its lease
liabilities. Lease liabilities are monitored within the Group's treasury
function.
All lease obligations are denominated in currency units.
The maturity analysis of lease liabilities is as follows:
2024 2023
£'000 £'000
Analysed as:
Current 90 148
Non-Current - 1,057
Total lease liabilities 90 1,205
Maturity analysis of expected lease payments:
Year 1 109 253
Year 2 - 252
Year 3 - 252
Year 4 - 253
Year 5 - 252
Onwards - 360
Total expected lease payments 109 1,622
Less: unearned interest (19) (417)
Total lease liabilities 90 1,205
35. Customer deposits
2024 2023
£'000 £'000
Customer deposits 649,665 574,622
Total customer deposits 649,665 574,622
Amounts repayable within one year 513,226 512,168
Amounts repayable after one year 136,439 62,454
649,665 574,622
Refer to note 39 for the maturity profile of the customer deposit balances.
36. Financial liabilities
2024 2023
£'000 £'000
Lease liabilities 90 1,205
Preference Shares - 50
Total financial liabilities 90 1,255
Lease liabilities:
See note 34 for further details on the lease liabilities of the Group.
Preference shares:
In April 2019, a sole member decision was granted the allocation of 50,000
non-voting paid up redeemable preference shares of £1.00 each. The preference
shares had no attached interest rate, dividends or return on capital. These
preference shares were deemed as paid in full with the Director undertaking to
pay the consideration of the preference shares by 1 April 2024. The preference
shares were redeemed in full in March 2024.
The maturity profile of the financial liabilities are as follows:
2024 2023
£'000 £'000
Current liabilities 90 148
Non-current liabilities - 1,107
Total financial liabilities 90 1,255
Refer to note 39 for changes in financial liabilities balances during the
year, including both cash and non-cash changes, as classified within the
Group's consolidated cash flow statement under cash flows from financing
activities.
37. Subordinated liabilities
2024 2023
£'000 £'000
Tier 2 notes 10,000 10,000
Accrued interest 268 269
Deferred acquisition costs (38) (48)
Total subordinated liabilities 10,230 10,221
Refer to note 39 for the maturity profile of the subordinated liabilities.
38. Trade and other payables
2024 2023
£'000 £'000
Current liabilities
Trade payables 524 528
Social security and other taxes 62 132
Other creditors 4,165 875
Pension contributions 77 71
Accruals 4,427 2,621
Total current liabilities 9,255 4,227
Non-current liabilities
Social security and other taxes 80 70
Total non-current liabilities 80 70
Total trade and other payables 9,335 4,297
Refer to note 39 for the maturity profile of the trade payables.
39. Financial instruments
The Directors have performed an assessment of the risks affecting the Group
through its use of financial instruments and believe the principal risks to
be: Treasury (covering capital management, liquidity and interest rate risk);
and Credit risk.
This note describes the Group's objectives, policies and processes for
managing the material risks and the methods used to measure them. The
significant accounting policies regarding financial instruments are disclosed
in note 2.
Capital management
The Group manages its capital to ensure that it will be able to continue as a
going concern while providing an adequate return to shareholders.
The capital structure of the Group consists of equity (comprising issued
capital, merger relief, reserves, own shares and retained earnings - see notes
31 to 33) and subordinated liabilities (see note 37).
As a regulated banking Group, the Group is required by the Prudential
Regulation Authority (PRA) to hold sufficient regulatory capital. The Group is
required by the PRA to conduct an Internal Capital Adequacy Assessment Process
("ICAAP") to assess the appropriate amount of regulatory capital to be held by
the Group as a measure of its risk weighted assets ("RWAs"), in accordance
with the Group's risk management framework. The ICAAP identifies all key risks
to the Bank and how the Group manages these risks. The document outlines the
capital resources of the Group, its perceived capital requirements, and
capital adequacy over a 3-year period. Within this process the Group conducts
a stress testing process to identify key risks, the potential capital
requirements and whether the Group has sufficient capital buffers to sustain
such events. The Group uses the Standardised Approach (SA) for calculating the
capital requirements for credit risk, and Counterparty Credit Risk (SA-CCR)
and the Basic Indicator Approach (BIA) for operational risk. The ICAAP is
approved by the Group Board at least annually.
The regulatory capital resources of the Group were as follows (unaudited):
2024 2023
£'000 £'000
CET1 capital: instruments and reserves
Called up share capital 1,793 1,793
Share premium accounts - -
Retained earnings account 39,624 24,537
Accumulated other comprehensive income & other reserves 73,937 74,084
CET1 capital before regulatory adjustments 115,354 100,414
CET1 capital: regulatory adjustments
Intangible assets (950) (618)
Investment in own shares (1,549) (2,120)
Prudent valuation adjustment - (15)
Deferred tax asset (3,980) (7,111)
Exposure amount qualifying for a RW of 1250% (10,095) (11,281)
CET1 capital 98,780 79,269
Tier 1 capital 98,780 79,269
Tier 2 capital 10,230 10,269
Total regulatory capital 109,010 89,538
This table is not subject to audit.
The return on assets of the Group (calculated as profit after taxation divided
by average total assets) was 1.96% (2023: 0.49%).
Information disclosure under Pillar 3 of the Capital Requirements Directive is
published on the Group's website at www.dfcapital-investors.com
(http://www.dfcapital-investors.com)
Principal financial instruments
The principal financial instruments to which the Group is party, and from
which financial instrument risk arises, are as follows:
· Cash and balances at central banks, which are considered risk
free;
· Loans and advances to banks, which can be a source of credit risk
but are primarily liquid assets available to further business objectives or to
settle liabilities as necessary;
· Loans and advances to customers, primarily credit risk, interest
rate risk, and liquidity risk;
· Investment securities, source of interest rate risk;
· Derivative instruments, credit and liquidity risk;
· Customer deposits, primarily interest rate risk and liquidity
risk;
· Subordinated liabilities, primarily interest rate risk and
liquidity risk;
· Trade receivables, primarily credit risk and liquidity risk;
· Trade and other payables, primarily credit risk and liquidity
risk;
Summary of financial assets and liabilities:
Below is a summary of the financial assets and liabilities held on the Group's
statement of financial position at the reporting dates. These values are
reflected at their carrying amounts at the respective reporting date:
Amortised cost Fair value through other comprehensive income Fair value through profit or loss Total
31 December 2024 £'000 £'000 £'000 £'000
Financial assets:
Cash and balances at central banks 110,030 - - 110,030
Loans and advances to banks 3,771 - - 3,771
Investment securities 769 - - 769
Derivative assets - - 295 295
Loans and advances to customers 660,772 - - 660,772
Trade receivables 3,100 - - 3,100
Other receivables 528 - - 528
Total financial assets 778,970 - 295 779,265
31 December 2024
Financial liabilities:
Customer deposits 649,665 - - 649,665
Derivative liabilities - - 6 6
Other financial liabilities 90 - - 90
Subordinated liabilities 10,230 - - 10,230
Trade payables 524 - - 524
Other payables 4,384 - - 4,384
Preference shares - - - -
Total financial liabilities 664,893 - 6 664,899
Amortised cost Fair value through other comprehensive income Fair value through profit or loss Total
31 December 2023 £'000 £'000 £'000 £'000
Financial assets:
Cash and balances at central banks 89,552 - - 89,552
Loans and advances to banks 3,475 - - 3,475
Investment securities - 14,839 - 14,839
Derivative assets - - 537 537
Loans and advances to customers 568,044 - - 568,044
Trade receivables 3,706 - - 3,706
Other receivables 452 - - 452
Total financial assets 665,229 14,839 537 680,605
31 December 2023
Financial liabilities:
Customer deposits 574,622 - - 574,622
Derivative liabilities - - 565 565
Other financial liabilities 1,205 - - 1,205
Subordinated liabilities 10,221 - - 10,221
Trade payables 528 - - 528
Other payables 1,148 - - 1,148
Preference shares 50 - - 50
Total financial liabilities 587,774 - 565 588,339
Analysis of financial instruments by valuation model
The Group measures fair values using the following hierarchy of methods:
· Level 1 - Quoted market price in an active market for an
identical instrument
· Level 2 - Valuation techniques based on observable inputs. This
category includes instruments valued using quoted market prices in active
markets for similar instruments, quoted prices for similar instruments that
are considered less than active, or other valuation techniques where all
significant inputs are directly or indirectly observable from market data
· Level 3 - Inputs for the assets or liabilities that are not based
on observable market data (unobservable inputs).
Financial assets and liabilities that are not measured at fair value:
Carrying amount Fair value Level 1 Level 2 Level 3
31 December 2024 £'000 £'000 £'000 £'000 £'000
Financial assets not measured at fair value:
Cash and balances at central banks 110,030 110,030 110,030 - -
Loans and advances to banks 3,771 3,771 3,771 - -
Investment securities 769 769 769 - -
Loans and advances to customers 660,772 660,772 - - 660,772
Trade receivables 3,100 3,100 - - 3,100
Other receivables 528 528 - - 528
778,970 778,970 114,570 - 664,400
Financial liabilities not measured at fair value:
Customer deposits 649,665 650,736 - - 650,736
Other financial liabilities 90 90 - - 90
Subordinated liabilities 10,230 10,567 - 10,567 -
Trade payables 524 524 - - 524
Other payables 4,384 4,384 - - 4,384
664,893 666,301 - 10,567 655,734
Carrying amount Fair value Level 1 Level 2 Level 3
31 December 2023 £'000 £'000 £'000 £'000 £'000
Financial assets not
measured at fair value:
Cash and balances at central banks 89,552 89,552 89,552 - -
Loans and advances to banks 3,475 3,475 3,475 - -
Loans and advances to customers 568,044 568,044 - - 568,044
Trade receivables 3,706 3,706 - - 3,706
Other receivables 452 452 - - 452
665,229 665,229 93,027 - 572,202
Financial liabilities not
measured at fair value:
Customer deposits 574,622 574,177 - - 574,177
Other financial liabilities 1,205 1,205 - - 1,205
Subordinated liabilities 10,221 10,742 - 10,742 -
Trade payables 528 528 - - 528
Other payables 1,148 1,148 - - 1,148
Preference shares 50 50 - - 50
587,774 587,850 - 10,742 577,108
Where assets and liabilities are not measured at fair value, the Group has
calculated their fair values at the reporting date as follows:
Cash and balances at central banks
This represents cash held at central banks where fair value is considered to
be equal to carrying value.
Loans and advances to banks
This mainly represents the Group's working capital current accounts with other
banks with an original maturity of less than three months. Fair value is not
considered to be materially different to carrying value.
Investment securities
The investment securities carried at amortised cost represent the Groups
investment in a money market fund. Due to the short-term nature of the
underlying investments which are held to maturity, the fund has never deviated
from par value. The carrying value is therefore considered to be approximately
equal to the fair value.
Loans and advances to customers
Due to the short-term nature of loans and advances to customers, their
carrying value is considered to be approximately equal to their fair value.
These items are short term in nature such that the impact of the choice of
discount rate would not make a material difference to the calculations.
Customer deposits
The fair value of fixed rate customer deposits has been estimated by
discounting future cash flows at current market rates of interest. Customer
deposits at variable rates and deposits payable on demand are considered to be
at current market rates and as such fair value is estimated to be equal to
carrying value.
Subordinated liabilities
The fair value of the subordinated liabilities is estimated by discounting the
expected cashflows using an interest rate for similar liabilities with the
same remaining maturity rate and credit profile.
Trade and other receivables, other borrowings and other liabilities
These represent short-term receivables and payables and as such their carrying
value is considered to be equal to their fair value.
Financial assets and liabilities included in the statement of financial
position that are measured at fair value:
Carrying amount Principal amount Level 1 Level 2 Level 3
31 December 2024 £'000 £'000 £'000 £'000 £'000
Financial assets measured at fair value:
Investment securities - - - - -
Derivative assets 295 10,000 - 295 -
295 10,000 - 295 -
Financial liabilities measured at fair value:
Derivative liabilities 6 5,000 - 6 -
6 5,000 - 6 -
Carrying amount Principal amount Level 1 Level 2 Level 3
31 December 2023 £'000 £'000 £'000 £'000 £'000
Financial assets
measured at fair value:
Investment securities 14,839 15,000 14,839 - -
Derivative assets 537 45,000 - 537 -
15,376 60,000 14,839 537 -
Financial liabilities
measured at fair value:
Derivative liabilities 565 100,000 - 565 -
565 100,000 - 565 -
Investment securities
The investment securities carried at fair value by the Company are treasury
bills and government gilts. Treasury bills and government gilts are traded in
active markets and fair values are based on quoted market prices.
There were no transfers between levels during the periods, all investment
securities have been measured at level 1 from acquisition.
Derivatives
Derivative instruments fair values are provided by a third party and are based
on the market values of similar financial instruments. The fair value of
investment securities held at FVTPL is measured using a discounted cash flow
model.
Financial risk management
The Group's activities and the existence of the above financial instruments
expose it to a variety of financial risks.
The Board has overall responsibility for the determination of the Group's risk
management objectives and policies. The overall objective of the Board is to
set policies that seek to reduce ongoing risk as far as possible without
unduly affecting the Group's competitiveness and flexibility.
The Group is exposed to the following financial risks:
· Credit risk
· Liquidity risk
· Interest rate risk
Further details regarding these policies are set out below.
Credit risk
Credit risk is the risk that a customer or counterparty will default on its
contractual obligations resulting in financial loss to the Group. One of the
Group's main income generating activities is lending to customers and
therefore credit risk is a principal risk. Credit risk mainly arises from
loans and advances to customers. The Group considers all elements of credit
risk exposure such as counterparty default risk, geographical risk and sector
risk for risk management purposes.
Credit risk management
The Group has a dedicated credit risk function, which is responsible for
individual credit assessment, portfolio management, asset monitoring,
collections and recoveries. Furthermore, it manages the Group's credit risk
by:
· Ensuring that the Group has appropriate credit risk practices,
including an effective system of internal control;
· Identifying, assessing and measuring credit risks across the
Group from an individual instrument to a portfolio level;
· Creating relevant policies to protect the Group against the
identified risks including the requirements to obtain collateral from
borrowers, to perform robust ongoing credit assessment of borrowers and to
continually monitor exposures against internal risk limits;
· Limiting concentrations of exposure by type of asset,
counterparty, industry, credit rating, geographic location;
· Establishing a robust control framework regarding the
authorisation structure for the approval and renewal of credit facilities;
· Established practises to identify and manage risks within the
portfolio;
· Developing and maintaining the Group's risk grading to categorise
exposures according to the degree of risk default. Risk grades are subject to
regular reviews; and
· Developing and maintaining the Group's processes for measuring
Expected Credit Loss (ECL) including monitoring of credit risk, incorporation
of forward-looking information and the method used to measure ECL.
Significant increase in credit risk
The Group continuously monitors all assets subject to Expected Credit Loss as
to whether there has been a significant increase in credit risk since initial
recognition, either through a significant increase in Probability of Default
("PD") or in Loss Given Default ("LGD").
The following is based on the procedures adopted by the Group for the year
ended 31 December 2023:
Granting of credit
The commercial team prepare a Credit Application which sets out the rationale
and the pricing for the proposed loan facility, and confirms that it meets the
Group's product, manufacturer programme and pricing policies. The Application
will include the proposed counterparty's latest financial information and any
other relevant information but as a minimum:
· Details of the limit requirement e.g. product, amount, tenor,
repayment plan etc;
· Facility purpose or reason for increase;
· Counterparty details, background, management, financials and
ratios (actuals and forecast);
· Key risks and mitigants for the application;
· Conditions, covenants & information (and monitoring
proposals) and security (including comments on valuation);
· Pricing;
· Confirmation that the proposed exposure falls within risk
appetite;
· Clear indication where the application falls outside of risk
appetite.
Other information which can be considered includes (where necessary and
available):
· Existing counterparty which has met all obligations in time and
in accordance with loan agreements;
· Counterparty known to credit personnel who can confirm positive
experience;
· Additional security, either tangible or personal guarantees where
there is verifiable evidence of personal net worth;
· A commercial rationale for approving the application, although
this mitigant will generally be in addition to at least one of the other
mitigants.
The credit risk function will analyse the financial information, obtain
reports from a credit reference agency, allocate a risk rating, and make a
decision on the application. The process may require further dialogue with the
Business Development Team to ascertain additional information or
clarification.
Each mandate holder is authorised to approve loans up to agreed financial
limits and provided that the risk rating of the counterparty is within agreed
parameters. If the financial limit requested is higher than the credit
authority of the first reviewer of the loan facility request, the application
is sent to the next credit authority level with a recommendation.
Transactional Credit Committee considers all applications that are outside the
credit approval mandate of the Director - Credit due to the financial limit
requested. There is an agreed further escalation to the Board Risk Committee
for the largest transactions which fall outside of the Transactional Credit
Committee.
Identifying significant increases in credit risk
The short tenor of the current loan facilities reduces the possible adverse
effect of changes in economic conditions and/or the credit risk profile of the
counterparty.
The Group nonetheless measures a change in a counterparty's credit risk mainly
on payment performance and end of contract repayment behaviour. The regular
collateral audit process and interim reviews may highlight other changes in a
counterparty's risk profile, such as the security asset no longer being under
the control of the borrower. The Group views a significant increase in
credit risk as:
· A two-notch reduction in the Company's counterparty's risk
rating, as notified through the credit rating agency alert system;
· a presumption that an account which is more than 30 days past due
has suffered a significant increase in credit risk. IFRS 9 allows this
presumption to be rebutted, but the Group believes that more than 30 days past
due to be an appropriate back stop measure and therefore has not rebutted the
presumption;
· A counterparty defaults on a payment due under a loan agreement;
· Late contractual payments which although cured, re-occur on a
regular basis;
· Counterparty confirmation that it has sold Group financed assets
but delays in processing payments;
· Evidence of a reduction in a counterparty's working capital
facilities which has had an adverse effect on its liquidity;
· Evidence of actual or attempted sales out of trust or of double
financing, of assets funded by the Group.
An increase in significant credit risk is identified when any of the above
events happen after the date of initial recognition.
Identifying loans and advances in default and credit impaired
The Group's definition of default for this purpose is:
· A counterparty defaults on a payment due under a loan agreement
and that payment is more than 90 days overdue;
· A counterparty commits an event of default under the terms and
conditions of the loan agreement which leads the lending company to believe
that the borrower's ability to meet its credit obligations to the lending
company is in doubt; or
· The Group is made aware of a severe deterioration of the credit
profile of the customer which is likely to impede the customers' ability to
satisfy future payment obligations.
In the normal course of economic cyclicality, the short tenor of the loans
extended by the Group means that significant economic events are unlikely to
influence counterparties' ability to meet their obligations to the Group.
Exposure at default (EAD)
Exposure at default ("EAD") is the expected loan balance at the point of
default. Where a receivable is not classified as being in default at the
reporting date, the Group have included reasonable assumptions to add
unaccrued interest and fees up to the receivable becoming 91 days past due,
which is considered to be the point of default.
Expected credit losses (ECL)
The ECL on an individual loan is based on the credit losses expected to arise
over the life of the loan, being defined as the difference between all the
contractual cash flows that are due to the Group and the cash flows that it
expects to receive. This difference is then discounted at the original
effective interest rate on the loan to reflect the disposal period of such
assets underlying the original contract.
Regardless of the loan status stage, the aggregated ECL is the value that the
Group expects to lose on its current loan book having assessed each loan
individually.
To calculate the ECL on a loan, the Group considers:
1. Counterparty PD; and
2. LGD on the asset
whereby: ECL = EAD x PD x LGD
Forward looking information
In its ECL models, the Group applies sensitivity analysis of forward-looking
economic inputs. When formulating the economic scenarios, the Group considers
both macro-economic factors and other specific drivers which may trigger a
certain stress scenario. The impact of movements in these macro-economic
factors are assessed on a 12-month basis from the reporting date (31
December).
Maximum exposure to credit risk:
2024 2023
£'000 £'000
Loans and advances to banks 3,771 3,475
Derivative assets 295 537
Loans and advances to customers 660,772 568,044
Trade and other receivables 3,627 4,158
668,465 576,214
Collateral held as security:
2024 2023
£'000 £'000
Fully collateralised:
Loan-to-value* ratio:
Less than 50% 15,539 14,261
51% to 70% 75,391 56,482
71% to 80% 120,027 93,582
81% to 90% 104,174 108,833
91% to 100% 305,906 291,266
Total collateralised lending 621,037 564,424
Partially collateralised lending - -
Unsecured lending 48,739 19,703
* Calculated using wholesale collateral values. Wholesale collateral values
represent the invoice total (including applicable VAT) from the invoice
received from the supplier of the product. The wholesale amount is less than
the recommended retail price (RRP) of the product.
The Group's lending activities are asset based so it expects that the majority
of its exposure is secured by the collateral value of the asset that has been
funded under the loan agreement. The Group has title to the collateral which
is funded under loan agreements. The collateral includes boats, motorcycles,
recreational vehicles, caravans, light commercial vehicles, industrial and
agricultural equipment. The collateral has low depreciation and is not subject
to rapid technological changes or redundancy. There has been no change in the
Group's assessment of collateral and its underlying value in the reporting
period.
The assets are generally in the counterparty's possession, but this is
controlled and managed by the asset audit process. The audit process checks
on a periodic basis that the asset is in the counterparty's possession and has
not been sold out of trust or is otherwise not in the counterparty's
control. The frequency of the audits is initially determined by the risk
rating assessed at the time that the borrowing facility is first approved and
is assessed on an ongoing basis.
Additional security may also be taken to further secure the counterparty's
obligations and further mitigate risk. Further to this, in many cases, the
Group is often granted, by the counterparty, an option to sell-back the
underlying collateral.
Based on the Group's current principal products, the counterparty repays its
obligation under a loan agreement with the Group at or before the point that
it sells the asset. If the asset is not sold and the loan agreement reaches
maturity, the counterparty is required to pay the amount due under the loan
agreement plus any other amounts due. In the event that the counterparty does
not pay on the due date, the Group's customer management process will maintain
frequent contact with the counterparty to establish the reason for the delay
and agree a timescale for payment. Senior Management will review actions on a
regular basis to ensure that the Group's position is not being prejudiced by
delays.
In the event the Group determines that payment will not be made voluntarily,
it will enforce the terms of its loan agreement and recover the asset,
initiating legal proceedings for delivery, if necessary. If there is a
shortfall between the net sales proceeds from the sale of the asset and the
counterparty's obligations under the loan agreement, the shortfall is payable
by the counterparty on demand.
As at 31 December 2024, 92.7% of the loan portfolio was fully collateralised
(2023: 96.6%).
Concentration of credit risk
The Group maintains policies and procedures to manage concentrations of credit
at the counterparty level and industry level to achieve a diversified loan
portfolio.
The below table analyses gross carrying amount and impairment allowance by
counterparty industry sector:
31 December 2024 31 December 2023
£'000 Portfolio % £'000 Portfolio %
Gross carrying amount:
Leisure:
Lodges and holiday homes 91,473 13.7% 148,441 25.4%
Motorhomes and caravans 207,948 31.0% 131,478 22.5%
Marine 72,120 10.8% 55,981 9.6%
Motorsport 35,264 5.3% 27,458 4.7%
Automotive 31,562 4.7% 8,366 1.4%
438,367 65.4% 371,724 63.6%
Commercial:
Transport 93,314 13.9% 130,982 22.4%
Industrial equipment 33,128 4.9% 35,926 6.2%
Agricultural equipment 24,720 3.7% 26,995 4.6%
151,162 22.6% 193,903 33.2%
Wholesale and receivables funding 80,247 12.0% 18,500 3.2%
Total gross carrying amount 669,776 100% 584,127 100%
£'000 ECL coverage % £'000 ECL coverage %
Impairment allowance:
Leisure:
Lodges and holiday homes (944) 1.0% (11,428) 7.7%
Motorhomes and caravans (1,439) 0.7% (454) 0.3%
Marine (342) 0.5% (773) 1.4%
Motorsport (387) 1.1% (312) 1.1%
Automotive (912) 2.9% (40) 0.5%
(4,024) 0.9% (13,007) 3.5%
Commercial:
Transport (330) 0.4% (563) 0.4%
Industrial equipment (126) 0.4% (87) 0.2%
Agricultural equipment (830) 3.4% (688) 2.5%
(1,286) 0.9% (1,338) 0.7%
Wholesale and receivables funding (1,267) 1.6% (251) 1.4%
Total impairment allowance (6,577) 1.0% (14,596) 2.5%
Credit quality
The Risk Rating is an internal rating system of counterparty credit risk
whereby the Group will allocate a rating from 1 to 9, 1 being the highest
level of credit quality and 9 being the lowest level of credit quality. The
Group uses Experian Delphi scores to set Risk Ratings which in turn determine
the probability of default for each Counterparty. In the majority of cases,
the Experian Delphi score will be used without management override
adjustments. However, where the Delphi score differs from the Group's
assessment of credit risk and/or where a Delphi score cannot be derived such
as in the case of sole traders or unincorporated partnerships, either a Delphi
score uplift or a Delphi score equivalent is utilised to calculate DFC's
internal risk rating. The Risk Rating for each counterparty is reviewed on an
ongoing basis and recorded as at the reporting date.
An analysis of the Group's credit risk exposure for loan and advances to
customers, internal rating and "stage" is provided in the following tables.
A description of the meanings of Stages 1, 2 and 3 was given in the
accounting policies set out above. See below table of gross loan receivables
by Risk Rating and IFRS 9 stage allocation:
Stage 1 Stage 2 Stage 3 Total
31 December 2024
£'000 Portfolio % £'000 Portfolio % £'000 Portfolio % £'000 Portfolio %
Gross carrying amount:
Above average (Risk rating 1-2) 459,277 68.6% 13,996 2.1% 4,075 0.6% 477,348 71.3%
Average (Risk rating 3-5) 173,037 25.8% 2,092 0.3% 1,157 0.2% 176,286 26.3%
Below average (Risk rating 6+) 11,199 1.7% 2,396 0.4% 2,547 0.4% 16,142 2.4%
Total gross carrying amount 643,513 96.1% 18,484 2.8% 7,779 1.2% 669,776 100.0%
£'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage %
Impairment allowance:
Above average (Risk rating 1-2) (1,686) 0.4% (89) 0.6% (1,700) 41.7% (3,475) 0.7%
Average (Risk rating 3-5) (1,839) 1.1% (11) 0.5% (430) 37.1% (2,280) 1.3%
Below average (Risk rating 6+) (167) 1.5% (66) 2.8% (589) 23.1% (822) 5.1%
Total impairment allowance (3,692) 0.6% (166) 0.9% (2,719) 35.0% (6,577) 1.0%
Stage 1 Stage 2 Stage 3 Total
31 December 2023
£'000 Portfolio % £'000 Portfolio % £'000 Portfolio % £'000 Portfolio %
Gross carrying amount:
Above average (Risk rating 1-2) 432,493 74.0% - 0.0% 763 0.1% 433,256 74.2%
Average (Risk rating 3-5) 93,568 16.0% 17,729 3.0% 1,850 0.3% 113,147 19.4%
Below average (Risk rating 6+) 19,891 3.4% 3,323 0.6% 14,510 2.5% 37,724 6.5%
Total gross carrying amount 545,952 93.5% 21,052 3.6% 17,123 2.9% 584,127 100.0%
£'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage %
Impairment allowance:
Above average (Risk rating 1-2) (1,483) 0.3% - 0.0% (526) 68.9% (2,009) 0.5%
Average (Risk rating 3-5) (860) 0.9% (150) 0.8% (315) 17.0% (1,325) 1.2%
Below average (Risk rating 6+) (179) 0.9% (10) 0.3% (11,073) 76.3% (11,262) 29.9%
Total impairment allowance (2,522) 0.5% (160) 0.8% (11,914) 69.6% (14,596) 2.5%
See note 20 for analysis of the movements in gross loan receivables and
impairment allowances in terms of IFRS 9 staging.
Analysis of credit quality of trade receivables:
2024 2023
£'000 £'000
Status at balance sheet date:
Not past due, nor defaulted 3,125 3,513
Past due but not in default 58 210
Defaulted 133 242
Total gross carrying amount 3,316 3,965
Impairment allowance (216) (259)
Carrying amount 3,100 3,706
See note 24 for analysis of the movements in gross trade receivables and
impairment allowances in terms of IFRS 9 staging.
Financial guarantee schemes
In the year ended 31 December 2023, the Group entered into financial guarantee
schemes which allow the Group to reduce its regulatory capital requirements.
In January 2023 the Group entered into the ENABLE guarantee scheme with the
British Business Bank for an initial facility of £175m, in August 2023 the
facility size was increased to £250m, and in July 2024 the facility size was
increased to its maximum of £350m. The Group has considered the impact of
the ENABLE guarantee scheme on its expected credit losses which has been
deemed to have an immaterial net impact on the Group's impairment allowances
given the recourse criteria thresholds on the scheme. The ENABLE guarantee is
a mitigant against significant systemic, portfolio-level loss events but is
very unlikely to be drawn upon in the natural course of business.
In December 2023, the Group entered into a trade credit insurance policy
covering a portion of the Group's loan book exposure in the case of default.
Given the scheme size at the year-end it is deemed to have an immaterial net
impact on the Group's impairment allowances.
Amounts written off
The contractual amount outstanding on financial assets that were written off
during the reporting period and are still subject to enforcement activity is
£nil at 31 December 2024 (31 December 2023: £208,000).
Liquidity risk
Liquidity risk is the risk that the Group does not have sufficient financial
resources to meet its obligations as they fall due or will have to do so at an
excessive cost. This risk arises from mismatches in the timing of cash flows
which is inherent in all finance operations and can be affected by a range of
Group-specific and market-wide events.
Liquidity risk management
The Group has in place a policy and control framework for managing liquidity
risk. The Group's Asset and Liability Management Committee (ALCO) is
responsible for managing the liquidity risk via a combination of policy
formation, review and governance, analysis, stress testing, limit setting and
monitoring. The ALCO meets on a monthly basis to review the liquidity position
and risks.
The Bank has a comprehensive suite of liquidity management processes in place,
which allow the Bank to monitor liquidity risk on a daily basis. Daily
liquidity reporting is supplemented by Early Warning Indicators and a
Liquidity Contingency Plan.
Liquidity stress testing
Stress Testing is a key risk management tool for the Bank and is used to
inform the setting of risk appetite limits and required buffers.
A range of liquidity stress scenarios has been conducted (as detailed in the
Internal Liquidity Adequacy Assessment Process "ILAAP" document), which
demonstrates that the Group's liquidity profile is sufficient to withstand a
severe stress.
Maturity analysis for financial assets:
The following maturity analysis is based on expected gross cash flows:
Carrying amount Gross nominal inflow Less than 1 month 1 - 3 months 3 months to 1 year 1 - 5 years >5 years
31 December 2024 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cash and balances at central banks 110,030 110,030 110,030 - - - -
Loans and advances to banks 3,771 3,771 1,951 - - 1,820
Investment securities 769 769 769 - - - -
Derivative assets 295 295 - - 141 154 -
Loans and advances to customers 660,772 666,484 120,052 169,333 293,082 83,417 600
Trade receivables 3,100 3,316 3,251 26 39 - -
Other receivables 528 528 188 22 217 1 100
779,265 785,193 236,241 169,381 293,479 85,392 700
Carrying amount Gross nominal inflow Less than 1 month 1 - 3 months 3 months to 1 year 1 - 5 years >5 years
31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cash and balances at central banks 89,552 89,552 89,552 - - - -
Loans and advances to banks 3,475 3,475 1,325 (49) (173) 2,372
Investment securities 14,839 15,075 - - 15,075 - -
Derivative assets 537 537 - - 7 530 -
Loans and advances to customers 568,044 573,485 77,060 174,366 280,617 41,442 -
Trade receivables 3,706 3,965 3,965 - - - -
Other receivables 452 452 145 1 51 4 251
680,605 686,541 172,047 174,318 295,577 44,348 251
Maturity analysis for financial liabilities:
The following maturity analysis is based on contractual gross cash flows:
Carrying amount Gross nominal outflow Less than 1 month 1 - 3 months 3 months to 1 year 1 - 5 years >5 years
31 December 2024 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Customer deposits 649,665 667,834 115,854 52,120 352,490 147,370 -
Derivative liabilities 6 6 - - 6 - -
Other financial liabilities 90 109 - 63 46 -
Subordinated liabilities 10,230 15,080 - 318 953 13,809 -
Trade payables 524 524 524 - - - -
Other payables 4,384 4,702 4,197 (72) 101 476 -
Preference shares - - - - - - -
664,899 688,255 120,575 52,429 353,596 161,655 -
Loan commitments - 5,972 5,972 - - - -
Carrying amount Gross nominal outflow Less than 1 month 1 - 3 months 3 months to 1 year 1 - 5 years >5 years
31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Customer deposits 574,622 588,866 82,022 83,486 355,709 67,649 -
Derivative liabilities 565 565 - 220 345 - -
Other financial liabilities 1,205 1,622 - 64 189 1,008 361
Subordinated liabilities 10,221 16,350 - 318 953 15,079 -
Trade payables 528 528 528 - - - -
Other payables 1,148 1,337 1,045 27 7 258 -
Preference shares 50 50 - - 50 - -
588,339 609,318 83,595 84,115 357,253 83,994 361
Loan commitments - 7,833 7,833 - - - -
Market risk
Market risk is the risk that movements in market factors, such as foreign
exchange rates, interest rates, credit spreads, equity prices and commodity
prices will reduce the Group's income or the value of its assets.
The principal market risk to which the Group is exposed is interest rate risk.
Interest rate risk management
The Group is exposed to the risk of loss from fluctuations in the future cash
flows or fair values of financial instruments because of the change in market
interest rates.
The Group's borrowings are either fixed rate, or administered, (being products
where the rate is set at the DFC's discretion). The Group has no exposure to
LIBOR. These borrowings fund loans and advances to customers at fixed
rate.
The limited average duration of the loan and deposit book provide a natural
mitigant against interest rate risk. The Bank aims to naturally hedge interest
rate risk through raising funding of a similar profile of the loans being
funded. Where this is not possible, interest rate swaps are used to manage
repricing mismatches.
The Bank evaluates changes in the economic value of equity calculated under
the following six supervisory shock scenarios referred to in Rule 9.7 of the
ICAA Part of the PRA Rulebook as issued by the Prudential Regulation Authority
(PRA).
The impact of changes in interest rates has been assessed in terms of economic
value of equity (EVE) and profit or loss. Economic value of equity (EVE) is
a cash flow calculation that takes the present value of all asset cash flows
and subtracts the present value of all liability cash flows. This is a
long-term economic measure used to assess the degree of interest rate risk
exposure.
The estimate that a 200bps upward and downward movement in interest rates
would have impacted the economic value of equity (EVE) is as follows:
2024 2023
£'000 £'000
Change in interest rate (basis points):
Sensitivity of EVE +200bps (186) (268)
Sensitivity of EVE -200bps 156 273
The estimate of the effect on the next 12 months net interest income using a
200bps upward and 200bps downward movement in interest rates is as follows:
2024 2023
£'000 £'000
Change in interest rate (basis points):
Sensitivity of profit +200bps 1,040 911
Sensitivity of profit -200bps (2,233) (1,755)
In preparing the sensitivity analyses above, the Group makes certain
assumptions consistent with the expected and contractual re-pricing behaviour
as well as behavioural repayment profiles under the two interest rate
scenarios.
40. Earnings per share
2024 2023
Earnings attributable to ordinary shareholders £'000 £'000
Profit after tax attributable to the shareholders 14,021 3,155
Weighted average number of shares, thousands
Basic 179,369 179,369
Dilutive impact of share-based payment schemes 9,669 8,125
Diluted 189,038 187,494
Earnings per share, pence per share
Basic 7.8 1.8
Diluted 7.4 1.7
41. Controlling party
As at 31 December 2024 there was no controlling party of the ultimate parent
company of the Group, Distribution Finance Capital Holdings plc.
42. Country by country reporting (CBCR)
CBCR was introduced through Article 89 of CRD IV, aimed at the banking and
capital markets industry. The name, nature of activities and geographic
location of the Group's companies are presented below:
Jurisdiction Country Name Activities
UK England Distribution Finance Capital Holdings plc Holding company
DF Capital Bank Limited Commercial lending and specialist personal savings
DF Capital Financial Solutions Limited Commercial lending
DF Capital Retail Finance Limited Retail lending
Other disclosures required by the CBCR directive are provided below:
UK totals 2024 2023
Average number of employees 136 126
Turnover, £'000 76,805 60,350
Profit before taxation, £'000 19,074 4,573
Taxation charge/(credit), £'000 5,053 1,418
The table below reconciles tax charged and tax paid during the year.
2024 2023
UK totals £'000 £'000
Taxation charge/(credit) 5,053 1,418
Effects of:
Deferred taxation asset recognition (1,345)
-
Deferred taxation asset utilisation (3,178) (73)
Movement in current tax liability (1,192) -
Other timing differences -
-
Taxation paid 683 -
All activities relating to the Group are conducted within the United Kingdom
and the Group is not subject to non-domestic taxation.
43. Related party disclosures
In the year ended 31 December 2024, Directors were awarded share-based
payments, refer to note 10 for further details.
Directors' emoluments are disclosed in note 9 of these consolidated financial
statements.
In the year ended 31 December 2024, there were no other related party
transactions.
44. Transactions with key management personnel
All related party transactions were made on terms equivalent to those that
prevail in arm's length transactions. During the year, there were no related
party transactions between the key management personnel and the Group other
than as described below.
The Directors and Senior Leadership team are considered to be key management
personnel. Directors' remuneration is disclosed in note 9 and in the
Directors' Remuneration Report on pages 82-85. The Senior Leadership team are
all employees of the Group. The aggregate remuneration of the key management
personnel (including Directors) is shown in the table below:
2024 2023
£'000 £'000
Short-term employment benefits 5,072 3,808
Share-based payments - 54
Total key management personnel remuneration 5,072 3,862
Key management personnel held deposits with the Group of £256,000 (2023:
£117,000).
45. Subsequent events
In January 2025 the Group announced the commencement of a share buyback
programme to purchase ordinary shares of £0.01 each in the capital of the
Company up to a maximum aggregate consideration of the lower of either £5
million or 17.5 million Ordinary Shares.
In February 2025, the Group's subsidiary, DF Capital Retail Finance Limited,
was granted the relevant regulatory permissions by the Financial Conduct
Authority in order to provide asset finance to consumer borrowers.
The Company Statement of Financial Position
2024 2023
Note £'000 £'000
Assets
Loans and advances to banks 5 132 81
Trade and other receivables 7 106 157
Amounts receivable from Group Undertakings 443 86
Investment in subsidiaries 8 136,225 135,604
Total assets 136,906 135,928
Liabilities
Trade and other payables 10 1,027 836
Financial liabilities 11 - 50
Amounts payable to Group Undertakings 9 8,270 6,742
Total liabilities 9,297 7,628
Equity
Issued share capital 12 1,793 1,793
Share premium 12 - -
Merger relief 12 94,911 94,911
Retained earnings 31,345 31,997
Own shares 13 (440) (401)
Total equity 127,609 128,300
Total equity and liabilities 136,906 135,928
The notes on pages 188 to 194 are an integral part of these financial
statements.
Distribution Finance Capital Holdings plc recorded loss after taxation for the
year ended 31 December 2024 of £1,535,000 (2023: loss of £779,000). These
financial results are derived entirely from continuing operations.
These financial statements were approved by the Board of Directors and
authorised for issue on 01 April 2025. They were signed on its behalf by:
……………………………
Carl D'Ammassa
Director
01 April 2025
Registered number: 11911574
The Company Cash Flow Statement
2024 2023
Note £'000 £'000
Cash flows from operating activities:
Loss before taxation (1,892) (865)
Adjustments for non-cash items and other adjustments included in the income 6 (1,175) (1,970)
statement
Decrease in operating assets 1 (2)
Increase in operating liabilities 192 137
Taxation paid - -
Net cash used in operating activities (2,874) (2,700)
Cash flows from investing activities:
Net cash used in investing activities - -
Cash flows from financing activities:
Proceeds from intercompany loan 3,067 2,702
Purchase of own shares 13 (142) (67)
Net cash generated from financing activities 2,925 2,635
Net decrease in cash and cash equivalents 51 (65)
Cash and cash equivalents at start of the year 5 81 146
Cash and cash equivalents at end of the year 5 132 81
The Company Statement of Changes in Equity
Issued share capital Share premium(3) Merger relief Own shares(2) Retained earnings/(loss) Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2023 1,793 39,273 94,911 (364) (7,371) 128,242
(Loss) after taxation - - - - (779) (779)
Share-based payments(1) - - - - 905 905
Employee Benefit Trust(2) - - - (37) (31) (68)
Share premium account cancellation(3) - (39,273) - - 39,273 -
Balance at 31 December 2023 1,793 - 94,911 (401) 31,997 128,300
(Loss) after taxation - - - - (1,535) (1,535)
Share based payments(1) - - - - 985 985
Employee Benefit Trust(2) - - - (39) (102) (141)
Share premium account cancellation - - - - - -
Balance at 31 December 2024 1,793 - 94,911 (440) 31,345 127,609
(1)Refer to note 10 of the consolidated financial statements for further
details of movements in the year.
(2)The Company has adopted look-through accounting (see note 1.3 to the
Group's consolidated financial statements) and recognised the Employee Benefit
Trusts within the Company. Refer to note 13 for further details on movements
in the year.
(3)In the year ended 31 December 2023, the Company cancelled its share premium
account - refer to note 31 of the consolidated financial statements for
details.
Noes to the Company Financial Statements
1. Basis of preparation
1.1 Accounting basis
These standalone financial statements for Distribution Finance Capital
Holdings plc (the "Company") have been prepared and approved by the Directors
in accordance with International Financial Reporting Standards ("IFRSs") as
adopted by the United Kingdom (UK) and interpretations issued by the IFRS
Interpretations Committee (IFRS IC).
1.2 Going concern
As detailed in note 1 to the consolidated financial statements, the Directors
have performed an assessment of the appropriateness of the going concern
basis. The Directors consider that it is appropriate to continue to adopt the
going concern basis in preparing the financial statements.
1.3 Income statement
Under Section 408 of the Companies Act 2006 the Company is exempt from the
requirement to present its own income statement.
2. Summary of material accounting policies
These financial statements have been prepared using the material accounting
policies as set out in note 2 to the consolidated financial statements. Any
further accounting policies provided below are solely applicable to the
Company financial statements.
2.1 Investment in subsidiaries
In accordance with IAS 27 Separate Financial Statements the Company has
elected to account for an investment in subsidiary at cost. The Company
performs an impairment assessment on the investment in subsidiary at each
reporting date to assess whether the cost basis reflects an accurate value of
the investment at the reporting date.
3. Critical accounting judgements and key sources of estimation uncertainty
In the financial statements for the year ended 31 December 2024, the Company
has not made any critical accounting judgements and key sources of estimation
which are considered to be material in value or significance to the
performance of the Company.
4. Net loss attributable to equity shareholders of the Company
2024 2023
£'000 £'000
Net loss attributable to equity shareholder of the Company (1,535) (779)
5. Loans and advances to banks
2024 2023
£'000 £'000
Included in cash and cash equivalents: balances with 132 81
less than three months to maturity at inception
Total loans and advances to banks 132 81
6. Notes to the cash flow statement
See below for reconciliation of balances classified as cash and cash
equivalents, which are recognised within the cash flow statement:
2024 2023
£'000 £'000
Loans and advances to banks 132 81
Total cash and cash equivalents 132 81
Adjustments for non-cash items and other adjustments included in the income
statement:
2024 2023
£'000 £'000
Management fee recharge (1,540) (2,287)
Share-based payments 365 317
Total non-cash items and other adjustments (1,175) (1,970)
Changes in liabilities arising from financing activities:
Please see note 9 for changes in the Company's liabilities arising from
financing activities, including both cash and non-cash changes, for the years
ended 31 December 2024 and 31 December 2023.
7. Trade and other receivables
2024 2023
£'000 £'000
Other debtors - 50
Indirect taxes 55 11
Prepayments 51 96
Total trade and other receivables 106 157
8. Investment in subsidiaries
£'000
Balance at 1 January 2023 134,213
Capital contribution - parent equity-settled share-based payments 1,391
Balance at 31 December 2023 135,604
Capital contribution - parent equity-settled share-based payments 621
Balance at 31 December 2024 136,225
For the year ended 31 December 2024, the Company conducted an impairment
assessment of the investment in subsidiaries and concluded that there is no
impairment required (2023: £nil).
9. Amounts payable to Group undertakings
2024 2023
£'000 £'000
Amounts payable to DF Capital Bank Limited 8,270 6,742
Total amounts payable to Group undertakings 8,270 6,742
All amounts drawn and outstanding under the intercompany loan facility,
including all accrued interest and costs, are payable on demand by the lender
DF Capital Bank Limited. Interest on the loan shall accrue daily and is
charged at 4% over the Sterling Overnight Indexed Average (SONIA) rate at the
end of each calendar month. This contractual agreement has an expiry date of
31 December 2024.
10. Trade and other payables
2024 2023
£'000 £'000
Trade payables 194 187
Accruals 678 593
Social security taxes 155 56
Total trade and other payables 1,027 836
11. Financial liabilities
2024 2023
£'000 £'000
Preference shares - 50
Total financial liabilities - 50
Reconciliation of movements in financial liabilities:
Preference Shares
£'000
Balance at 1 January 2023 50
No transactions in the year
-
Balance at 31 December 2023 50
Preference shares redemption
(50)
Balance at 31 December 2024 -
12. Share capital
2024 2023 2024 2023
No. No. £'000 £'000
Authorised:
Ordinary shares of 1p each 179,369,199 179,369,199 1,793 1,793
Allotted, issued and fully paid: Ordinary shares of 1p each 179,369,199 179,369,199 1,793 1,793
Date No. of shares Issue Price Share Capital Share Premium Merger Relief Total
# £ £'000 £'000 £'000 £'000
At 1 January 2023 179,369,199 1,793 39,273 94,911 135,977
Share premium account cancellation 29-Jun-23 - - - (39,273) - (39,273)
At 31 December 2023 179,369,199 1,793 - 94,911 96,704
No transactions in the year - - - - - -
At 31 December 2024 179,369,199 1,793 - 94,911 96,704
13. Own shares
£'000
Balance at 1 January 2023 (364)
Acquisition of shares (67)
Settlement of employee share awards 30
Balance at 31 December 2023 (401)
Acquisition of shares (142)
Settlement of employee share awards 103
Balance at 31 December 2024 (440)
14. Financial instruments
The Group monitors and manages risk management at a group-level and,
therefore, the Risk Management Framework stipulated in note 39 of the
consolidated financial statements encompasses the Company risk management
environment.
The Company and Directors believe the principal risks of the Company to be
credit risk, liquidity risk and capital risk. The Directors have evaluated the
following risks to either not be relevant to the Company or of immaterial
significance: market risk, interest rate risk and exchange rate risk.
The regulatory capital requirements in respect of capital risk are assessed at
both a consolidated group level and for DF Capital Bank Limited at an entity
level.
See note 39 of the consolidated financial statements for further details on
how the Company defines and manages credit risk, liquidity risk and capital
risk.
Financial assets and financial liabilities included in the statement of
financial position that are not measured at fair value:
Carrying amount Fair value Level 1 Level 2 Level 3
31 December 2024 £'000 £'000 £'000 £'000 £'000
Financial assets not
measured at fair value
Loans and advances to banks 132 132 132 - -
Other receivables 55 55 - - 55
Amounts receivable from Group Undertakings 144 144 - - 144
331 331 132 - 199
31 December 2024
Financial liabilities not
measured at fair value
Trade payables 194 194 - - 194
Other payables 155 155 - - 155
Preference shares - - - - -
Amounts payable to Group Undertakings 8,270 8,270 - - 8,270
8,619 8,619 - - 8,619
Fair value Level 1 Level 2 Level 3
Carrying amount
31 December 2023 £'000 £'000 £'000 £'000 £'000
Financial assets not
measured at fair value:
Loans and advances to banks 81 81 81 - -
Other receivables 61 61 - - 61
Amounts receivable from Group Undertakings 86 86 - - 86
228 228 81 - 147
31 December 2023
Financial liabilities not
measured at fair value:
Trade payables 187 187 - - 187
Other payables 56 56 - - 56
Preference shares 50 50 - - 50
Amounts payable to Group Undertakings 6,742 6,742 - - 6,742
7,035 7,035 - - 7,035
Maximum exposure to credit risk:
2024 2023
£'000 £'000
Loans and advances to banks 132 81
Trade and other receivables 55 61
Amounts receivable from Group Undertakings 144 86
331 228
Maturity analysis for financial assets
The following maturity analysis is based on expected gross cash flows:
Carrying amount Gross nominal inflow Less than 1 months 1 - 3 months 3 months to 1 year 1 - 5 years >5 years
31 December 2024 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Loans and advances to banks 132 132 132 - - - -
Other receivables 55 55 55 - - - -
Amounts receivable from Group Undertakings 144 144 - - 144 - -
331 331 187 - 144 - -
Carrying amount Gross nominal inflow Less than 1 months 1 - 3 months 3 months to 1 year 1 - 5 years >5 years
31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Loans and advances to banks 81 81 81 - - - -
Other receivables 61 61 11 - 50 - -
Amounts receivable from Group Undertakings 86 86 - - 86 - -
228 228 92 - 136 - -
Maturity analysis for financial liabilities
The following maturity analysis is based on contractual gross cash flows:
Carrying amount Gross nominal outflow Less than 1 months 1 - 3 months 3 months to 1 year 1 - 5 years >5 years
31 December 2024 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Trade payables 194 194 194 - - - -
Other payables 155 265 59 - 33 173 -
Preference shares - - - - - - -
Amounts payable to Group Undertakings 8,270 8,270 - - 8,270 - -
8,619 8,729 253 - 8,303 173 -
Carrying amount Gross nominal outflow Less than 1 months 1 - 3 months 3 months to 1 year 1 - 5 years >5 years
31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Trade payables 187 187 187 - - - -
Other payables 56 111 33 - - 78 -
Preference shares 50 50 - - 50 - -
Amounts payable to Group Undertakings 6,742 6,742 - - 6,742 - -
7,035 7,090 220 - 6,792 78 -
15. Subsequent events
In January 2025 the Company announced the commencement of a share buyback
programme to purchase ordinary shares of £0.01 each in the capital of the
Company up to a maximum aggregate consideration of the lower of either £5
million or 17.5 million Ordinary Shares.
Appendix - Alternative Performance Measures
Certain financial measures disclosed in this Annual Report do not have a
standardised meaning prescribed by International Financial Reporting Standards
(IFRS) and may therefore not be comparable to similar measures presented by
other issuers. These measures (defined below) are deemed to be alternative
performance measures ("APMs").
APMs may be considered in addition to, but not as a substitute for, the
reported IFRS results. The Group believes that these APMs, when considered
together with reported IFRS results, provide stakeholders with additional
information to better understand the Group's financial performance.
Gross revenues (£m)
2024 2023
Interest and similar income 76.8 60.0
Fee income 1.2 1.4
Fee expenses (1.6) (0.7)
Net gains/(losses) on derivatives at fair value through profit or loss and 0.4 (0.3)
other operating income
Total gross revenues 76.8 60.4
Sum of interest and similar income, fee income less fee expenses, net gains/
(losses) on disposal of financial assets at fair value through other
comprehensive income, net losses from derivatives measured at fair value
through profit or loss and other operating income.
Gross yield (%)
2024 2023
Interest and similar income on loans and advances to customers (£m) 71.6 55.2
Fee income (£m) 1.2 1.4
72.9 56.6
Average gross receivables (£m) 595.0 508.8
Gross yield (%) 12.2% 11.1%
The effective interest rate we charge our customers including fees.
Net interest margin (%)
2024 2023
Total operating income (£m) 45.6 38.0
Add back: Fee expenses (£m) 1.6 0.7
Adjusted total operating income (£m) 47.2 38.7
Average gross receivables (£m) 595.0 508.8
Net interest margin (%) 7.9% 7.6%
Total operating income adding back fee expense, as a % of gross receivables at
the year end.
Cost of risk (%)
2024 2023
Impairment charges (£m) 0.2 (11.6)
Average gross receivables (£m) 595.0 508.8
Cost of risk (%) 0.04% (2.28%)
Impairments charges in the year as a % of average gross receivables
Cost to income ratio (%)
2024 2023
Staff costs (£m) 16.0 13.4
Other operating expenses (£m) 10.7 8.4
Total operating expenses (£m) 26.7 21.8
Total operating income (£m) 45.6 38.0
Cost to income ratio (%) 59% 58%
Total operating expenses as a % of total operating income
Tangible net asset value per share
2024 2023
Total assets (£m) 786.5 691.9
Total liabilities (£m) (671.2) (591.5)
Net assets (£m) 115.4 100.4
Less: Intangible assets (£m) (1.0) (0.6)
Net assets less intangible assets 114.4 98.8
Weighted average number of shares in issue ('000) 179,369 179,369
Tangible net asset value per share (p) 63.8p 55.6p
Net assets less intangible assets divided by the weighted average number of
shares in issue during the year.
Impairment loss coverage on loans to customers (%)
2024 2023
Impairment allowance on loans and advances to customers (£m) 6.6 14.6
Gross carrying amount of loans and advances to customers (£m) 669.8 584.1
Impairment loss coverage on loans to customers (%) 0.98% 2.50%
Impairment allowance as a % of gross carrying amount of loans and advances to
customers at the year end.
Adjusted profit before tax (£m)
2024 2023
Profit before tax 19.1 4.6
Reallocation of RoyaleLife write back from 2024 to 2023 (4.7) 4.7
Adjusted profit before tax 14.4 9.3
This adjusted profit before tax figure reallocates the 2024 write back on
RoyaleLife to 2023 to match the timing of when the original provision was
recognised.
Adjusted cost of risk (%)
2024 2023
Impairment charges (£m) 0.2 (11.6)
Reallocation of RoyaleLife write back from 2024 to 2023 (4.7) 4.7
Adjusted impairment charges (£m) (4.5) (6.9)
Average gross receivables (£m) 595.0 508.8
Adjusted cost of risk (%) 0.75% 1.36%
Impairments charges in the year as a % of average gross receivables
reallocating the 2024 write back on RoyaleLife to 2023 to match the timing of
when the original provision was recognised.
Adjusted return on customer assets (%)
2024 2023
Profit after tax (£m) 14.0 3.2
Post tax reallocation of RoyaleLife write back from 2024 to 2023 (3.5) 3.5
Adjusted profit after tax (£m) 10.5 6.7
Average gross receivables (£m) 595.0 508.8
Adjusted return on customer assets (%) 1.8% 1.3%
Profit after tax adjusted to reallocate the post-tax 2024 write back on
RoyaleLife to 2023 to match the timing of when the original provision was
recognised. This is then divided by average gross receivables during the
year.
Adjusted return on equity (%)
2024 2023
Profit after tax (£m) 14.0 3.2
Post tax reallocation of RoyaleLife write back from 2024 to 2023 (3.5) 3.5
Adjusted profit after tax (£m) 10.5 6.7
Average equity (£m) 107.4 100.3
Adjusted return on customer assets (%) 9.8% 6.7%
Profit after tax adjusted to reallocate the post-tax 2024 write back on
RoyaleLife to 2023 to match the timing of when the original provision was
recognised. This is then divided by average equity during the year.
Adjusted basic earnings per share
2024 2023
Profit after tax (£m) 14.0 3.2
Post tax reallocation of RoyaleLife write back from 2024 to 2023 (3.5) 3.5
Adjusted profit after tax (£m) 10.5 6.7
Weighted average number of ordinary shares outstanding ('000) 179,369 179,369
Adjusted basic earnings per share (pence) 5.9p 3.7p
Adjusted basic EPS is calculated by dividing profit attributable to ordinary
equity holders of the Company, after adjusting to reallocate the post-tax 2024
write back on RoyaleLife to 2023 to match the timing of when the original
provision was recognised, by the weighted average number of ordinary shares
outstanding during the period.
Regulatory capital (£m)
2024 2023
Common Equity Tier 1 capital 98.8 79.3
Tier 2 capital 10.2 10.3
Regulatory capital 109.0 89.5
Regulatory capital is the Common Equity Tier 1 capital together with Tier 2
capital.
Number of dealers
Number of borrower relationships.
Number of manufacturer partners
Number of vendors and manufacturers with whom we have programs that support
our lending.
Total credit available to dealers
Amount of credit available to our customers to draw (uncommitted) including
existing drawings.
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