REG - Distribution Finance - Half-year Report
29/09/2023 07:00
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RNS Number : 0797O Distribution Finance Cap. Hldgs PLC 29 September 2023
29 September 2023
Distribution Finance Capital Holdings plc
("DF Capital" or the "Company" together with its subsidiaries the "Group")
Results for the six months ended 30 June 2023 and Trading Update
Scaling the bank to deliver strong growth in profitability
Distribution Finance Capital Holdings plc, the specialist bank providing
working capital solutions to dealers and manufacturers across the UK, today
announces its results for the six months ended 30 June 2023 together with a
trading update.
• Delivered £3.2m profit before tax; more than entire FY 2022 (H1:
2022: breakeven).
• 8 consecutive quarters of loan book growth; loan book up 69% to new
record of £519m (H1 2022: £308m) including £15m of new lending products.
• Record new lending up 38% to £607m (H1 2022: £439m); supported by
£926m of facilities (30 June 2022: £724m) and 1,152 dealers (30 June 2022:
908).
• Retail deposits total £498m (H1 2022: £304m) from over 13,600
accounts.
• Net interest margin (NIM) increased to 7.5% (H1 2022: 6.1%), ahead
of 6% target.
30 June 2023 30 June 2022 31 December 2022
6-month 6-month 12-month
Financial Highlights
Gross revenues (£m) (1) 27.4 10.5 26.8
Profit before taxation (£m) 3.2 0.0 1.3
Profit after taxation (£m) 2.3 0.0 9.8
Loan book principal (£m) (2) 519 308 439
Net assets (£m) (3) 98.8 86.1 96.2
Customer deposits (£m) 498.4 304.4 479.7
Regulatory capital (£m) (4) 77.1 82.8 83.3
Common Equity Tier 1 capital ratio 22% 31% 22%
Gross yield(5) 10.6% 7.4% 8.2%
Net interest margin(6) 7.5% 6.1% 6.5%
Average cost of retail deposits(7) 3.7% 1.3% 1.9%
Cost of risk(8) 1.55% 0.50% 0.74%
Impairment loss coverage on loans to customers(9) 1.38% 0.69% 0.84%
Cost income ratio(10) 61% 92% 82%
Key Performance Indicators
Loans advanced to customers (£m) 607 439 1,001
Number of dealer customers(11) 1,152 908 998
Number of manufacturer partners(12) 86 85 90
Total credit available to dealers (£m) (13) 926 724 817
Post period end highlights and outlook
• Loan book growth continued ahead of seasonal expectations over summer;
closed August 2023 at more than £518m.
• Launched maiden easy access saving account: £44m of deposits raised
from 1,150 applications in c.36 hours.
• British Business Bank ENABLE Guarantee extended to £250m.
• Obtained £20m non-dilutive Tier 2 capital facility from British
Business Investments; first £5m drawn in September 2023.
• Potential aggregate capital capacity provides optionality to deliver
attractive loan book growth to in excess of £800m, without the requirement
for additional dilutive Tier 1 equity raise.
• FY 2023 loan book expected to be in the range of £550-600m and profit
before tax expected to be in line with Board expectations.
Carl D'Ammassa, Chief Executive, commented: "It is pleasing to report the
continued strong momentum within the bank. Reporting eight consecutive
quarters of loan book growth and profitability during the period under review
that outpaces the whole of 2022, truly demonstrates that our products and
services resonate with our dealer and manufacturer customers.
Having the aggregate capital firepower to provide loans in excess of £800m,
provides the ability to support an attractive growth plan without the need for
additional dilutive Tier 1 equity. Notwithstanding the macro-economic outlook,
we remain optimistic about our full year performance."
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/)
Investec Bank plc (Nomad and Broker) +44 (0) 207 597 5970
David Anderson
Bruce Garrow
Harry Hargreaves
Maria Gomez de Olea
Liberum Capital Limited (Joint Broker) +44 (0) 203 100 2000
Chris Clarke
Lauren Kettle
Chief Executive's Statement
Strong growth in profitability; on-track to hit full year expectations
The Group is pleased to report on the progress made during the first half of
2023, delivering eight consecutive quarters of loan book growth and profit for
the period in line with the Board's expectations. The Group has built on the
momentum reported in 2022. Despite a macroeconomic environment that has proven
increasingly challenging, with rising interest rates and a tightening of
consumer demand across a number of sectors in which our customers operate, our
products and services continue to resonate with our manufacturer and dealer
customers, playing an important role in supporting their working capital
needs.
During the period, we increased lending ahead of seasonal expectations and hit
record loan balances of £519m as at 30 June 2023, whilst delivering net
interest margin well above our 6% target. In addition, by gaining access to
the British Business Bank ENABLE Guarantee, we have unlocked capacity to
drive further organic growth without the need for additional Tier 1 capital
which would have otherwise required us to raise further equity. These factors,
alongside effective cost control and strong portfolio management have
delivered a profit before tax in the first six months of 2023 of £3.2m,
materially outpacing what was achieved through the entire twelve months of
2022 (FY22: £1.3m).
These results underpin the Board's belief that the strategy is effective as we
can profitably scale the bank and move forward at pace on our journey to
deliver a mid-to-high teens return on capital over the medium term.
Record loan origination; supporting more customers than ever before
The Group originated new loans of £607m during the six-month period to 30
June 2023, up 38% on the equivalent period in 2022 (H1 2022: £439m),
increasing its reach across our chosen markets and now supporting 1,152
dealers (30 June 2022: 908 and 31 December 2022: 998). Aggregate dealer loan
facilities at the end of the period totalled £926m, up 28% on the prior year
(30 June 2022: £724m) and up 13% on the end of FY22 (31 December 2022:
£817m).
The Group's loan book ended the period at £519m, up 69% on the equivalent
period in the prior year (30 June 2022: £308m) and up 18% on the end of FY22
(31 December 2022: £439m). At this critical time for dealers and
manufacturers, it is clear that our products and services continue to
resonate. Our digitised approach to lending, coupled with the depth of
relationship management are the foundation of our growth story.
The impact of high inflation and rising interest rates has been felt across a
number of sectors, where discretionary spend has tightened, adversely
impacting dealer sales. This dynamic has a positive impact on our loan book
balance, as slowing sales means that dealers hold more stock on their
forecourts, and for longer.
Overall, stock turn (i.e. the weighted average duration of repaid loans in the
period) has slowed to 133 days (6 months to 30 June 2022: 110 days), extending
by 13 days over FY22 (12 months to 31 December 2022: 120 days). Whilst this
was expected, it is still below our historical annualised average of 150 days
and our seasonally adjusted expectations, leaving additional capacity for loan
book growth should sales slow further.
The average age of outstanding loans has extended quarter on quarter to 145
days in Q2 2023, from 128 days in Q1 2023 and 109 days in Q4 2022, with a
further extension seen so far in this quarter at 158 days.
In the transportation sector, as an example, we have seen lower relative
demand from end users for electric vehicles versus combustion engines, whereas
by comparison demand has remained relatively high particularly in the
motorhome and caravan sectors. In these markets new loan origination and
therefore stock flowing to dealers has remained robust, despite this dynamic.
Portfolio By Sector
The following table analyses the portfolio at the reporting date by principal
outstanding:
30 June 2023 30 June 2022 31 December 2022
£million % £million % £million %
Leisure
Lodges and holiday homes 157.1 30.3% 94.2 30.6% 117.3 26.7%
Motorhomes and caravans 97.1 18.7% 58.0 18.8% 83.1 18.9%
Marine 48.1 9.3% 36.6 11.9% 47.5 10.8%
Motorsport 28.8 5.5% 15.7 5.1% 20.6 4.7%
Specialist and prestige cars 4.1 0.8% 1.8 0.6% 2.9 0.7%
335.2 64.5% 206.3 67.1% 271.4 61.8%
Commercial
Transport 112.1 21.6% 54.4 17.7% 113.4 25.8%
Industrial equipment 31.5 6.1% 27.5 8.9% 30.0 6.8%
Agricultural equipment 25.6 4.9% 19.4 6.3% 24.4 5.6%
169.2 32.6% 101.3 32.9% 167.8 38.2%
Wholesale and receivables funding 14.9 2.9% - 0.0% - 0.0%
Total loan book principal(1) 519.3 100% 307.6 100% 439.2 100%
(1) Principal balance outstanding at the reporting date for loans and advances
to customers.
During the period, we originated c.£21m of new lending across adjacent
receivables financing (better known as invoice discounting) and wholesale
funding products. Whilst these lending opportunities remain small in the
context of our entire loan book at £15m (c3%) at the end of June 2023, they
present attractive risk-adjusted returns for the Group and diversification
within the loan book, as well as offering routes to deepen relationships with
our customers, providing them with alternative lending products that support
their businesses' needs.
Becoming a multi-product lender remains a strategic imperative for the Group
over the medium term. We have continued to explore inorganic opportunities, be
that through business combination or partnership with others, but are yet to
identify an opportunity that demonstrates acceptable financial characteristics
which would be additive to the Group's longer-term ambitions. As we continue
to scale the bank, building diversification in both lending product and
obligor mix are important for the Group to effectively manage its risk
weighted assets, control concentration risk and remain capital efficient.
Financial performance
Summarised Statement of Comprehensive Income
30 June 2023 30 June 2022 31 December 2022
6-month 6-month 12-month
£'000 £'000 £'000
Gross revenues(1) 27,439 10,511 26,842
Interest expense (9,126) (1,865) (6,411)
Net income(2) 18,313 8,646 20,431
Fee expenses (180) - -
Other operating expenses (11,148) (7,926) (16,831)
Impairment charges (3,786) (704) (2,296)
Profit before taxation 3,199 16 1,304
Taxation (938) - 8,457
Profit after taxation 2,261 16 9,761
Other comprehensive loss (53) (172) (79)
Total comprehensive income/(loss) for the period 2,208 (156) 9,682
( )
( )
(1) Sum of interest and similar income, fee income, net gains/(losses) on
disposal of financial assets, and net losses from derivatives measured at fair
value through profit or loss
(2) Gross revenues less interest and similar expenses
Summarised Statement of Financial Position
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Cash and balances at central banks 46,642 47,586 107,353
Loans and advances to banks 5,067 20,898 3,848
Debt securities 24,528 31,997 22,964
Loans and advances to customers 513,787 305,629 435,883
Taxation asset 7,574 59 8,512
Other assets 5,639 3,448 3,936
Total assets 603,237 409,617 582,496
Customer deposits 498,357 304,377 479,736
Financial liabilities 1,317 499 445
Other liabilities 4,723 18,648 6,076
Total liabilities 504,397 323,524 486,257
Total equity 98,840 86,093 96,239
Net Interest Margin ahead of 6% target
Net Interest Margin (NIM), which is gross yield less interest expense,
increased during the period to 7.5% (H1 2022: 6.1%), being well ahead of our
NIM target of 6%, largely influenced by movements in UK base rates.
Gross yield increased by 43% to 10.6% (H1 2022: 7.4%), as base rate rises were
passed on through newly originated loans. This coupled with a higher average
loan book through the period saw gross revenues, which predominantly comprise
interest and similar income of £26.5m and fee income of £0.8m, increased by
161% to £27.4m (H1 2022: £10.5m).
As expected, and given the rising base rate, the average cost of retail
deposits increased during the period to 3.7% (H1 2022: 1.3%). 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, the loan book has repriced more quickly than the deposit book
given its shorter average tenor, which has driven much of the favourable NIM
expansion. This positive mis-match has been more pronounced in 2023 given the
speed of base rate increases and whilst we expect some favourability in the
near-term it is less likely to be as significant over the medium term;
unwinding over time as the base rate reduces. Our target NIM remains unchanged
at 6%.
Unlocking our operational leverage
During 2022, the Group bolstered and upgraded its commercial and relationship
management team. Accordingly, most of the people resources we require to scale
the bank over the near term are embedded in the business already, allowing us
to unlock operational leverage as we grow our lending. Our platform is highly
digitised and we continue to make investments in robotic process automation
and character-recognition technologies to provide us with further operational
capacity.
As a Group, we are not immune to the general and wage inflationary pressures.
We have carefully managed these inflationary pressures whilst being mindful of
the cost-of-living pressures faced by a number of our employees and our need
to attract and retain high quality colleagues to support our growth ambitions.
As such, we expect any increase in cost relating to the core lending product,
to be predominantly driven by increased relationship management and client
facing employees and any on-going inflationary pressures. During the period
under review operating expenses were £11.1m, an increase of 41% on the
comparative period (H1 2022: £7.9m).
Whilst our overall operating expenses increased during the period, this
increase was considerably lower than the relative increase in net income and
our cost to income ratio reduced significantly to 61% (H1 2022: 92%). We
expect our cost to income ratio to reduce further as we continue to scale the
bank.
Strong portfolio and credit risk management
We are operating in a more challenging macro-economic environment, where a
number of businesses will find it increasingly difficult to navigate rising
interest rates, high inflation and potentially contraction in demand.
Accordingly, we have held a highly cautious and vigilant approach to credit
risk management.
We have continued to invest in technology and analytics to provide us with
greater early warning of issues amongst our customers, as well as adding
further capacity to visit dealers to ensure our security remains in place.
Dealers selling assets and not repaying us directly (sale out of trust) is our
single biggest credit risk.
We have made adjustments to our credit criteria for new dealer relationships
to ensure we maintain a high-quality portfolio of relationships. Through this
period of uncertainty and as we bring on new dealers, our focus is on the
quality of dealer relationship rather than quantity of new dealers onboarded.
Scalability and credit quality of our manufacturer partners has been in focus
for us through the period, making tough decisions to reposition relationships
that do not meet our revised expectations. Whilst the Group added 16 new
manufacturers in the period, the total number reduced to 86 key manufacturers
and distributors who meet the Group's revised criteria (FY22: 90). The 20
manufacturers where relationships were terminated represented approximately
£3.5m of the new loan origination to end of August, c0.4% of total new
lending; management believe these relationships do not present scalable
opportunities for the bank.
Arrears
The following table analyses the arrears balances of lending portfolio at the
respective reporting dates. This table includes the arrears balance
(principal, fees, and interest) by past due days, and a following table which
summarises the maximum arrears days past due by total principal outstanding on
the respective loan receivable:
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Arrears - principal repayment, fees and interest
1 - 30 days past due 475 541 136
31 - 60 days past due 1,226 145 1,084
61 - 90 days past due 219 12 25
91 + days past due 11,155 56 5,885
13,075 754 7,130
Total % of loan book 2.5% 0.2% 1.6%
Associated principal balance
1 - 30 days past due 1,400 13,033 2,016
31 - 60 days past due 1,385 1,866 1,512
61 - 90 days past due - - 214
91 + days past due 13,006 138 16,317
15,791 15,037 20,058
Total % of loan book 3.0% 4.9% 4.6%
Despite the economic uncertainty, the actions we have taken to manage our
portfolio have delivered a continued low number of arrears cases during the
period, with just 29 dealers out of c1,150 in arrears at 30 June 2023. Total
value of arrears has increased from the end of FY22 at 2.5% of the loan book
(30 June 2022: 0.2% and 31 December 2022: 1.6%). The Group's arrears balance
includes £10.4m outstanding in respect of a previously communicated large
single obligor, which excluding this balance would have been 0.5% (31 December
2022: 0.6%).
This large single obligor, who has been a customer of the Group since June
2018, has been undergoing a major refinance and restructure. As a result, its
facility is not currently operating in the normal course, and we are aware of
a number of assets that have been sold out of trust or are missing from
confirmed locations. While we had expected the restructuring and refinancing
process to complete during Summer 2023, given the complexity of the situation
and unique characteristics of our customer's position, progress has been
slower than expected. We have been in regular direct communication with the
firm's principal, its largest existing secured lenders, new shareholders and
new lender throughout, despite the Group not being a direct counterparty to
the refinance. Whilst the successful conclusion of this refinancing and
restructure is not without risk, we are both confident and reassured by the
extent of our dialogue with stakeholders. The Group continues to have cross
company and personal guarantees relating to the facility in force. The Group
will make further announcements as soon as it is able.
Cost of risk, which includes provisions for credit losses and write-offs, for
the six months ended 30 June 2023 was 1.55% (H1 2022: 0.50%). Our approach to
credit loss provisioning is principally a function of expected probability of
default and loss given default, with additional consideration given for aged
arrears cases. Where there are instances of more complex cases or obligor
default, which remain in progress, the Group undertakes analysis of a range of
scenarios, associating a likely outcome probability against each. These
scenarios, which determine the size of any provision, are based on the
specific circumstances of an individual case, known factors and the Group's
relative security position. Following the principles of IFRS9 and given the
probability-based approach to calculations, any individual case specific
provision is unlikely to represent the anticipated financial impact in either
the most positive or least favourable outcome. Additionally, the Group's
credit loss provision for the period incorporates an IFRS9 overlay increase
for the general uncertain macro-economic environment and outlook. The Group
has aggregate credit loss provisions for the whole portfolio and all arrears
cases of £7.2m at 30 June 2023 (31 December 2022: £3.7m) with impairment
charges of £3.8m for the period (H1 2022: £0.7m). The Group expects its full
year cost of risk to trend back towards its through the cycle estimate of 1%
of average gross receivable.
The Group's lending relative to its security position remains strong with a
Loan to Wholesale Value ('LTV') of 88% (30 June 2022: 90% and 31 December
2022: 91%). This reduction in LTV is due to a slowdown in stock turn with an
increase in the associated monthly capital repayments.
Our Security Position
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Loan to wholesale value(1) 88% 90% 91%
( )
(1) Wholesale price is the invoice value paid by the dealer to the
manufacturer
On balance and given the current macro-economic environment, we are pleased
with the underlying high quality and financial strength of our dealer obligors
as a whole.
Effective deposit raising capability
We continue to operate an effective and well-diversified deposit raising
capability, entering the best buy tables as necessary. Over £168m of deposits
were raised or retained on maturity during the period (H1 2022: £84m), at an
average interest rate of 4.4%. We continue to focus on existing customer
retention, with c.70% of maturing deposits retained through loyalty products
and a seamless online product change process. As at 30 June 2023, we had
retail deposits totalling £498m (30 June 2022: £304m; 31 December 2022:
£480m) from over 13,600 accounts. We continue to offer exceptional service
to our deposit customers receiving over 1,800 feefo customer reviews with an
average score of 4.7 over the past 12 months.
Well capitalised balance sheet to support near-term growth ambitions
The Group is well-capitalised. At 30 June 2023 the Group's equity stood at
£98.8m (30 June 2022: £86.1m; 31 December 2022: £96.2m).
Supporting our growth ambitions, in January 2023, the British Business
Bank agreed an initial £175m ENABLE Guarantee, which could be increased in
the future to £350m. This Guarantee commitment provides the Group with
incremental capacity to scale its loan book without the need for additional
Tier 1 equity capital by up to £75m on the basis of the
initial £175m facility and up to £150m if the facility is increased to
£350m. In August 2023, this Guarantee was upsized to £250m, unlocking an
additional c£105m of loan capacity without the need for any further Tier 1
capital.
Earlier this month, we announced that the Group secured a new £20m Tier 2
capital facility from British Business Investments, a wholly-owned commercial
subsidiary of the British Business Bank. The facility, which has a term of 10
years, can be drawn in quarterly tranches of up to £5m.
Utilising the Group's existing equity, the entire £350m ENABLE Guarantee and
the £20m Tier 2 facility, the firm has aggregate capacity to grow its loan
book to over £800m.
Our CET1 ratio as at 30 June 2023 was 22% (30 June 2022: 31%; 31 December
2022:22%) which reflects the benefit of the reduction in Risk Weighted Assets
provided by the British Business Bank Enable Guarantee and is well above our
regulatory capital minimum limits.
Current trading and outlook
Notwithstanding the slower repayment of our single large arrears case, the
Board is pleased with the Group's operational and financial performance
year-to-date. Over the summer months, the loan book has continued to perform
ahead of our seasonally adjusted expectations closing August 2023 at more than
£518m. New loan origination has remained strong, stock turn has extended
further and with continued elevated NIM, we have generated additional profits.
Given current trading, our expectation of further loan book growth and the
rebalancing of the cost of risk through the balance of the year, we expect
full year results for 2023 remain in line with the Board's expectations.
I am very proud of what the entire DF Capital team has achieved since the
Group obtained its banking licence in September 2020, not least eight
consecutive quarters of loan book growth. The progress we have made this year
is a testament to the quality of business we are building, the dedication of
our colleagues and the breadth and depth of relationships we have with our
manufacturer and dealer customers.
Carl D'Ammassa
Chief Executive Officer
( )
Financial Highlights and Key Performance Indicators
( )
30 June 2023 30 June 2022 31 December 2022
6-month 6-month 12-month
Financial Highlights
Gross revenues (£m) (1) 27.4 10.5 26.8
Profit before taxation (£m) 3.2 0.0 1.3
Profit after taxation (£m) 2.3 0.0 9.8
Loan book principal (£m) (2) 519 308 439
Net assets (£m) (3) 98.8 86.1 96.2
Customer deposits (£m) 498.4 304.4 479.7
Regulatory capital (£m) (4) 77.1 82.8 83.3
Common Equity Tier 1 capital ratio 22% 31% 22%
Gross yield(5) 10.6% 7.4% 8.2%
Net interest margin(6) 7.5% 6.1% 6.5%
Average cost of retail deposits(7) 3.7% 1.3% 1.9%
Cost of risk(8) 1.55% 0.50% 0.74%
Impairment loss coverage on loans to customers(9) 1.38% 0.69% 0.84%
Cost income ratio(10) 61% 92% 82%
Key Performance Indicators
Loans advanced to customers (£m) 607 439 1,001
Number of dealer customers(11) 1,152 908 998
Number of manufacturer partners(12) 86 85 90
Total credit available to dealers (£m) (13) 926 724 817
( )
( )
(1) Sum of interest and similar income, fee income, net gains/(losses) on
disposal of financial assets, and net losses from derivatives measured at fair
value through profit or loss
(2) Principal balance outstanding for loans and advances to customers.
(3) The equity held in the Group
(4) Regulatory capital is the Common Equity Tier 1 capital held
(5) The effective interest rate we charge our customers including fees
(6) Gross yield including fees less interest expense
(7)The weighted average interest rate we pay our depositors
(8) Impairments and provisions in the period (annualised) as a % of average
gross receivables.
(9)Impairment allowance as a % of gross receivables at the period end
(10) Operating cost as a % of total operating income.
(11) Number of borrower relationships
(12) Number of vendors and manufacturers with whom we have programs that
support our lending
(13) Amount of credit available to our customers to draw (uncommitted)
Alternative Performance Measures
Certain financial measures disclosed in the Interim Financial 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 above) 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.
Principal Risks
Based on the Group's strategy and business model, there are six principal risk
categories used to help shape our policy and control framework. This
categorisation creates structure for the risk policy framework and clear
ownership/responsibility for assessing risk performance.
There are certain risk themes that cut across many of these risk types. We
have chosen at this stage to manage them within the principal risks framework
rather than separate them out, but keep this approach under active
consideration. The most relevant cross cutting risk is climate change, which
is considered in our risk assessment and controls but has not crystallized to
the extent that we would separate it out into its own principal risk category.
Principal Risks
Operational risk Operational risk is defined as the risk of loss resulting from inadequate or Key risk mitigation tools: operational risk policies, standard operating
failed internal processes, people and systems, or from external events. We procedures, Risk and Control Self Assessments ("RCSAs"), risk event analysis,
have a framework in place which sets out our approach to Operational Risk, key controls testing, ongoing monitoring of risk metrics and limits, scenario
with associated roles and responsibilities further defined in a number of risk analysis, information security and cyber defences, operational risk training,
policies and standard operating procedures covering the various types of Operational Forums aligned to defined customer and internal journeys, change
Operational Risk. Although the overall scope of Operational Risk would cover management framework, operational resilience framework, physical security and
areas of Conduct and Compliance (i.e. regulatory) risks, we believe it makes safety, regular risk training, Executive Risk Committee oversight.
sense to separate these items out as individual principal risks - Conduct Risk
and Compliance Risk respectively given the importance of these risks in the
context of the bank's activities and regulatory environment.
Compliance Risk Compliance risk is the risk of legal or regulatory sanctions, material Key risk mitigation tools:: compliance
financial loss, or loss to reputation the firm may suffer as a result of its
failure to comply with laws, regulations, rules, related self-regulatory policies, regulatory monitor, enterprise-wide
organization standards and codes of conduct applicable to its activities. DF
Capital operates within the context of the UK legal and regulatory compliance and financial crime risk
environment. Our Compliance Framework sets out the responsibilities within the
firm to ensure awareness of both current and upcoming legal and regulatory assessments, compliance monitoring
changes and how the firm plans and implements those requirements
appropriately. Compliance risk also includes the bank's obligations under the plan, ongoing monitoring of risk metrics
Money Laundering Regulations and covers the Group's exposure to financial
crime risks for which associated risk management policies and procedures are and limits, customer risk assessments,
in place.
regulatory compliance training,
Executive Risk Committee oversight.
Conduct Risk We define conduct risk as the risk of detriment caused to DF Capital's Key risk mitigation tools: conduct risk policies, product governance,
customers or financial markets due to inappropriate execution of its business enterprise- wide conduct risk assessment, ongoing monitoring of risk metrics
activities and processes, including the sale of unsuitable products and and limits, monitoring of complaints and customer feedback, key controls
inappropriate behaviours. testing, Code of Ethics, conduct risk training, Executive Risk Committee
oversight, tracking and embedding of the New Consumer Duty requirements.
The Conduct Risk Framework outlines our approach for ensuring good customer
conduct outcomes. It is supported by specific policies covering topics such as
product governance, complaints, and vulnerable customers which detail the
specific steps and responsibilities across the firm. The scope of conduct risk
coverage includes our AIM requirements, with policies such as a Market Abuse
Regime Policy (including Share Dealing Code) and a Substantial and Related
Party Transactions Policy.
Prudential Risk Prudential risk covers three financial risks relating to the bank maintaining Key risk mitigation tools: treasury policies, ICAAP, ILAAP, funds transfer
sufficient resources to ensure it is financially resilient: pricing policy, additional stress testing, ongoing monitoring of risk metrics
and limits, financial planning and forecasting, monitoring of external
· Funding and liquidity risk: The risk that DF Capital is not able environment, Asset & Liability Committee and Executive Risk Committee
to meet its financial obligations as they fall due or that it does not have oversight.
the tenor and composition of funding and liquidity to support its assets.
· Capital risk: The risk that DF Capital has an insufficient amount
or quality of capital to support the regulatory requirements of its business
activities through normal and stressed conditions.
· Market risk (including interest rate risk): The risk of financial
loss through un-hedged or mismatched asset and liability positions due to
interest rate changes. This also includes the risk that assets and liabilities
reference different interest rate bases and the risk of adverse financial
impact from movements in market prices in the value of assets and liabilities.
Roles, responsibilities, and requirements for Liquidity and Capital management
are outlined in the Treasury Policy, with risk appetite taking into account
the results of the bank's ILAAP and ICAAP. The Treasury Policy also outlines
the roles and responsibilities required for identifying, measuring, monitoring
and controlling any interest rate risk which arises due to the mismatch
between assets and liabilities.
Credit Risk Credit risk is the risk of financial loss arising from a customer or Key risk mitigation tools: Credit underwriting criteria, asset audits,
counterparty failing to meet their financial obligations to DF Capital. Credit sector deep-dive reviews, portfolio monitoring, ongoing monitoring of risk
risk is considered the most significant risk faced by DF Capital and can be metrics and limits, hindsight reviews of default events, monitoring of
broken down into the following categories: external environment, Credit Committee and Executive Risk Committee oversight.
· Client Default Risk: The risk of loss arising from a failure of a
borrower to meet their obligations under a credit agreement.
· Credit Concentration Risk: The risk of loss due to the
concentration of credit risk to a specific customer, counterparty, geography,
or industry.
· Repurchase Risk: The risk of loss arising from the failure of a
third-party to meet a claim under a repurchase agreement.
· Security Risk: The risk that an asset used as security to
mitigate a credit loss does not provide the protection to the Company that is
expected, leading to unanticipated losses.
· Counterparty Risk: The failure of a Group counterparty or
derivative provider.
A credit framework and policies are in place to manage DF Capital's credit
risk exposure, covering the roles and responsibilities of the Group's lending
and investment activities.
Strategic Risk Strategic risks are the risks which can adversely impact the ability of DF Key risk mitigation tools: Executive Committee and Board oversight,
Capital in achieving its strategic objectives. These risks may impact comprehensive risk assessments of strategic and financial plans, stress
shareholder value, earnings or growth from poor strategic decisions, improper testing, horizon scanning, ongoing monitoring of macro- and microeconomic
implementation of business strategies or from external events. environment, change management framework.
The level 2 principal risks which fall under this category include:
· Strategic Planning Risk: The risk of strategic plans being
unachievable or unrealistic.
· Execution Risk: The risk of failing to execute the Group's
strategy and failing to deliver key strategic initiatives required to meet the
financial and commercial targets of the Group.
· Strategic Projects Risk: The risk of delay or failure of
strategic projects and programmes.
· External Environment: The risk of failing to address the impact
of external events and competitive threats.
Strategic risks are considered as part of DF Capital's strategic and financial
plans. Stress scenarios are modelled as part of the ICAAP and ILAAP to
determine what level of capital and liquidity the Group will need to hold in
support of its strategic and financial plans.
Enterprise-wide Key and Emerging Risks
The Enterprise-wide key and emerging risks of the Group are: Macroeconomic
risks; Operational execution and change; Cyber risk; and Climate change. Full
details of each emerging risk, including the potential impact of the risk and
how the risk is managed, are set out in the 2022 Annual Report and Accounts.
As for any organisation, we are exposed to near-term plan risk, given the
comments made about macroeconomic risk below.
Relevant updates for these risks are provided below.
Macroeconomic risk
We are operating in a more challenging macro-economic environment where the
impact of high inflation and rising interest rates has been felt across a
number of sectors, where discretionary spend has tightened, adversely
impacting dealer sales. This dynamic has a positive impact on our loan book
balance, as slowing sales means that dealers hold more stock on their
forecourts, and for longer. But a prolonged and/or deep recession could
ultimately lead to a rise in loan losses. The Group is protected through its
various layers of security and is employing enhanced controls in preparation
for an expected turn in the credit cycle.
Statement of Directors' Responsibilities
We, the Directors, confirm that to the best of our knowledge:
§ the interim condensed consolidated financial statements have been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted by the
United Kingdom (UK);
§ the interim report includes a fair review of the performance of the
business and the position of the Group 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 interim report and financial statements, taken as a whole, are fair,
balanced and understandable.
By order of the Board
……………………………
Carl D'Ammassa
Director
28 September 2023
Independent Review Report to Distribution Finance Capital Holdings plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2023 which comprises the condensed consolidated statement of
comprehensive income statement, the condensed consolidated statement of
financial position, the condensed consolidated statement of changes in
equity, the condensed consolidated cashflow statement and related notes 1 to
28.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the AIM Rules of the London Stock Exchange.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the AIM rules of the London Stock Exchange.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
28 September 2023
Condensed Consolidated Statement of Comprehensive Income
6 months 6 months
ended ended Year ended
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Interest and similar income 5 26,542 9,999 25,407
Interest and similar expenses 6 (9,126) (1,865) (6,411)
Net interest income 17,416 8,134 18,996
Fee income 819 540 1,348
Fee expenses (180) - -
Net losses on disposal of financial assets at fair value through other - (17) (17)
comprehensive income
Net gains from derivatives and other financial instruments at fair value 72 (16) 99
through profit or loss
Other operating income 6 5 5
Total operating income 18,133 8,646 20,431
Staff costs 7 (7,155) (5,122) (10,848)
Other operating expenses 9 (3,993) (2,804) (5,983)
Net impairment loss on financial assets 11 (3,786) (704) (2,296)
Total operating profit 3,199 16 1,304
Profit before taxation 3,199 16 1,304
Taxation 12 (938) - 8,457
Profit after taxation 2,261 16 9,761
Other comprehensive loss:
Items that may subsequently be transferred
to the income statement:
FVOCI debt securities:
Amounts transferred to the income statement - 17 17
Fair value movements on debt securities (53) (189) (96)
Total other comprehensive loss for the period, net of tax (53) (172) (79)
Total comprehensive income/(loss) for the period 2,208 (156) 9,682
Earnings per share: pence pence pence
Basic EPS 26 1 0 5
Diluted EPS 26 1 0 5
Condensed Consolidated Statement of Financial Position
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Assets
Cash and balances at central banks 46,642 47,586 107,353
Loans and advances to banks 5,067 20,898 3,848
Debt securities 24,528 31,997 22,964
Derivatives held for risk management 24 - - 57
Loans and advances to customers 13 513,787 305,629 435,883
Trade and other receivables 14 2,340 1,811 1,524
Current taxation asset 15 55 59 55
Deferred taxation asset 16 7,519 - 8,457
Property, plant and equipment 1,220 122 1,045
Right-of-use assets 17 1,299 543 433
Intangible assets 780 972 877
Total assets 603,237 409,617 582,496
Liabilities
Customer deposits 20 498,357 304,377 479,736
Derivatives held for risk management 24 1,409 24 42
Fair value adjustments on hedged liabilities 25 (1,579) (8) (84)
Financial liabilities 21 1,317 499 445
Trade and other payables 4,829 18,557 6,041
Provisions 10 64 75 77
Total liabilities 504,397 323,524 486,257
Equity
Issued share capital 19 1,793 1,793 1,793
Share premium 19 - 39,273 39,273
Merger relief 19 94,911 94,911 94,911
Merger reserve (20,609) (20,609) (20,609)
Own shares 19 (364) (364) (364)
Retained earnings/(loss) 23,109 (28,911) (18,765)
Total equity 98,840 86,093 96,239
Total equity and liabilities 603,237 409,617 582,496
Condensed Consolidated Statement of Changes in Equity
Issued share capital Share premium Merger relief Merger reserve Own shares Retained earnings/ Total
(loss)
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2021 (Audited) 1,793 39,273 94,911 (20,609) (364) (28,945) 86,059
Profit after taxation - - - - - 16 16
Other comprehensive loss - - - - - (172) (172)
Share-based payments - - - - - 190 190
Balance at 30 June 2022 (Unaudited) 1,793 39,273 94,911 (20,609) (364) (28,911) 86,093
Profit after taxation - - - - - 9,745 9,745
Other comprehensive loss - - - - - 93 93
Share-based payments - - - - - 308 308
Balance at 31 December 2022 (Audited) 1,793 39,273 94,911 (20,609) (364) (18,765) 96,239
Profit after taxation - - - - - 2,261 2,261
Other comprehensive loss - - - - - (53) (53)
Share-based payments - - - - - 393 393
Share premium account cancellation(1) - (39,273) - - - 39,273 -
Balance at 30 June 2023 (Unaudited) 1,793 - 94,911 (20,609) (364) 23,109 98,840
(1 ) See note 19 for further details of the share premium account
cancellation transaction in the six-month period ended 30 June 2023.
Condensed Consolidated Cash Flow Statement
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Cash flows from operating activities:
Profit before taxation 3,199 16 1,304
Adjustments for non-cash items and other adjustments included in the income 18 4,174 1,629 4,664
statement
Increase in operating assets 18 (85,081) (60,775) (193,189)
Increase in operating liabilities 18 17,281 21,025 183,809
Taxation received 15 - - 4
Net cash used in operating activities (60,427) (38,105) (3,408)
Cash flows from investing activities:
Purchase of debt securities (14,554) - -
Proceeds from sale and maturity of debt securities 13,000 76,070 85,070
Interest received on debt securities 196 603 746
Purchase of property, plant and equipment (318) (65) (1,041)
Purchase of intangible assets (103) (95) (193)
Net cash (used in)/generated from investing activities (1,779) 76,513 84,582
Cash flows from financing activities:
Repayment of lease liabilities 22 (106) (71) (141)
Net cash used in financing activities (106) (71) (141)
Net (decrease)/increase in cash and cash equivalents (62,312) 38,337 81,033
Cash and cash equivalents at start of the period 18 110,630 29,597 29,597
Cash and cash equivalents at end of the period 18 48,318 67,934 110,630
Notes to the Interim Financial Report
1. Basis of preparation
1.1 General information
The interim condensed 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") and DF Capital Financial Solutions Limited, together form
the "Group".
DFCH plc is registered and incorporated in England and Wales under company
registration number 11911574. The registered office is St James' Building,
61-95 Oxford Street, Manchester, M1 6EJ. The Company's ordinary shares are
admitted to trading on AIM, a market operated by 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 personal
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 personal savings products.
The interim report is 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 accounting
The condensed consolidated set of consolidated financial statements included
in this Interim Financial Report has been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting' ('IAS 34').
The condensed set of financial statements included within this Interim
Financial Report for the six months ended 30 June 2023 should be read in
conjunction with the annual audited financial statements of Distribution
Finance Capital Holdings plc for the year ended 31 December 2022.
The annual consolidated financial statements of Distribution Finance Capital
Holdings plc are prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards Board
("IASB") and the UK adopted IFRS.
The condensed consolidated financial information for the six months ended 30
June 2023 has been prepared using accounting policies consistent with IFRS.
The interim information does not constitute statutory financial statements
within the meaning of section 434 of the Companies Act 2006. The financial
information for the periods ending 30 June 2023 and 30 June 2022 are unaudited
but has been reviewed by the Company's auditor, Deloitte LLP, and their report
appears on page 16 of this Interim Financial Report. The comparative figures
for the year ended 31 December 2022 are the Group's statutory accounts and
have been reported on by its auditor and delivered to the Registrar of
Companies. The report of the auditor on those statutory accounts was
unqualified, did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying their report, and did not
contain a statement under Section 498(2) or (3) of the Companies Act 2006.
1.3 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.
1.4 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 in the foreseeable future. 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. Accordingly,
the Directors have adopted the going concern basis in preparing the Interim
Financial statements.
1.5 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 of these financial statements on the
critical accounting estimates and judgements used within these financial
statements.
1.6 Foreign currencies
The financial statements are expressed in Pounds 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
balance sheet 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.
1.7 New accounting standards issued but not yet effective
The Group assesses on an ongoing basis the impact of new accounting standards
which are not yet effective at the reporting date and the likely impact of the
new accounting standard on the financial statements. At 30 June 2023, the
Group has applied all new IFRS and foresees no additional standards with a
likely material impact to consider at this time.
2. Summary of significant accounting policies
The same accounting policies, presentation and methods of computation are
followed in the condensed consolidated set of financial statements as applied
in the Group's latest annual audited financial statements for the year ended
31 December 2022.
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.
The areas involving the most complex and subjective judgements and areas where
assumptions and estimates are considered to have the most significant effect
on the financial statements are the same as those set out in Note 3 of the
2022 Annual Report and Accounts. A summary and updates regarding these
critical accounting judgements and estimates are set out below.
Judgements
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.
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:
3.2. Expected credit losses loan impairment
See the Group's Annual Report for the year ended 31 December 2022 which
outlines the assumptions the Group includes to best estimate the probability
of default ("PD"), exposure at default ("EAD"); and loss given default ("LGD")
inputs within the impairment model in order to calculate the expected credit
loss ("ECL"). The general design of the impairment model remains unchanged for
the period ended 30 June 2023, however certain assumptions have been updated
to reflect changes in circumstances.
Probability of Default ("PD")
In the six-month period ended 30 June 2023, the Group observed a strong
performance of defaults and a migration of counterparties into lower risk
rating categories, which in turn has reduced the stage 1 and 2 PD in the six
months since the 2022 annual report. The Group is closely monitoring the
evolving macro-economic environment and is aware that some factors within the
Group's PD modelling are lagging indicators. Resultantly, the Group has
elected to increase its PD modelling within the baseline scenario by
approximately 20%, resulting in a £270,000 additional impairment charge. To
support this estimation, the Group has recently engaged with an external
economics research company to provide industry-specific economic forecasts.
A 100% deterioration in PDs (excluding stage 3 exposures, which are already in
default) would result in an additional impairment charge of £1,643,000 at 30
June 2023 (30 June 2022: £871,000; 31 December 2022: £1,130,000).
Loss Given Default ("LGD")
The Group reviewed its LGD modelling assumptions as at 30 June 2023 by
comparing actual loss given default values against modelled LGD. The Group
concluded its current LGD modelling was closely aligned to recent historical
actuals.
Although the Group has observed strong performance in default recoveries
within the six-month period ended 30 June 2023, the Group has elected to
review its LGD modelling assumptions to reflect an uncertain economic outlook.
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. The total additional
impairment charge from these LGD modelling adjustments in the period is
£119,000.
A 10% reduction in the expected discounted cashflows from the collateral held
by the Group would result in an additional impairment charge of £2,356,000 at
30 June 2023 (30 June 2022: £956,000; 31 December 2022: £2,389,000).
The Group's arrears balance includes £10.4m outstanding in respect of a large
single obligor. This obligor has been undergoing a major refinance and
restructure. As a result, its facility is not currently operating in the
normal course, and we are aware of a number of assets that have been sold out
of trust or are missing from confirmed locations. This obligor balance is
therefore assessed as a stage 3 exposure. For those counterparties who are
in stage 3, where there are instances of more complex cases or obligor
default, which remain in progress, the Group undertakes analysis of a range of
scenarios, associating a likely outcome probability against each. These
scenarios, which determine the size of any provision, are based on the
specific circumstances of an individual case, known factors and the Group's
relative security position. Given the probability-based approach to
calculations, any individual case specific provision is unlikely to represent
the anticipated financial impact in either the most positive or least
favourable outcome.
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.
Scenario Probability Weighting ECL Impairment ECL Coverage(1)
(%)
(£'000)
(%)
30 June 2023 (Unaudited):
Upside 15% 5,537 1.05%
Base 55% 6,286 1.19%
Downside 25% 9,026 1.71%
Severe downside 5% 12,778 2.42%
Weighted Total 100% 7,198 1.36%
30 June 2022 (Unaudited):
Upside 15% 1,098 0.35%
Base 60% 1,695 0.55%
Downside 20% 3,311 1.07%
Severe downside 5% 5,889 1.90%
Weighted Total 100% 2,138 0.69%
31 December 2022 (Audited):
Upside 15% 2,427 0.55%
Base 55% 2,823 0.64%
Downside 25% 5,343 1.20%
Severe downside 5% 9,362 2.11%
Weighted Total 100% 3,720 0.84%
(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.
In the event one of the above scenarios occurs and applied a 100% probability
weighting the impact on the impairment allowances would be as follows:
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Scenario £'000 £'000 £'000
Upside (1,661) (1,040) (1,293)
Base (912) (443) (897)
Downside 1,828 1,173 1,623
Severe downside 5,580 3,751 5,642
3.3. Deferred taxation asset
In the year ended 31 December 2022, the Group recognised a deferred taxation
asset, which was based on the latest recently approved financial forecasts
through to December 2026 with the deferred taxation asset being fully utilised
during this period.
The forecast is inherently sensitive to the assumptions and estimates which
underpin it, including macroeconomic conditions (such as interest rates,
inflation and future tax rates), and is dependent on the Group's ability to
successfully execute its strategy. As such, the expected utilisation of the
deferred tax asset may vary significantly.
In the six-month period ended 30 June 2023, the Group has performed favourably
in accordance with the forecasts used to estimate the deferred taxation asset.
The Group has updated its forecasts for actual performance in the elapsed
period to ensure the deferred taxation asset recognition is still valid.
Further, as detailed in note 3 of the audited consolidated financial
statements of the Group for the year ended 31 December 2022, the Group has
performed the same sensitivity analysis and is comfortable there is minimal
risk to the deferred taxation asset recognition.
4. Operating segments
It is the Directors' 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. All customers are currently UK-based only. 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.
5. Interest and similar income
6 months ended 6 months ended Year ended
30 June 2023
30 June 2022
31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
On loans and advances to customers 25,070 9,895 24,333
On loans and advances to banks 1,213 112 1,065
On debt securities - measured at FVOCI 259 (8) 9
Total interest and similar income 26,542 9,999 25,407
6. Interest and similar expenses
6 months ended 6 months ended Year ended
30 June 2023
30 June 2022
31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
On financial liabilities not at fair value through profit or loss:
Customer deposits 8,741 1,873 6,373
On financial liabilities at fair value through profit or loss:
Net interest expense on financial instruments hedging liabilities 385 (8) 38
Total interest and similar expenses 9,126 1,865 6,411
7. Staff costs
6 months ended 6 months ended Year ended
30 June 2023
30 June 2022
31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Wages and salaries 5,672 4,166 8,651
Share based payments 393 190 499
Contractor costs 16 4 75
Social security costs 757 515 1,099
Pension costs arising on defined contribution schemes 317 247 524
Total staff costs 7,155 5,122 10,848
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.
Refer to note 8 for further details on the share option schemes introduced by
the Group in the six-month period ended 30 June 2023.
8. Share-based payments
Summary of movements in long-term incentive schemes during the period:
Options outstanding at start of period Options granted during the period Options forfeited during the period Options exercised during the period Options outstanding at end of the period
Plan No. No. No. No. No.
Six-month period ended 30 June 2023 (Unaudited)
General Award 2020 222,500 - (10,000) - 212,500
General Award 2021 160,248 - (6,000) - 154,248
General Award 2022 385,511 - (15,000) - 370,511
General Award 2023 - 365,000 (10,000) - 355,000
Manager CSOP Award 384,298 - - - 384,298
Manager PSP Award 853,334 - - - 853,334
CEO Recruitment Award 900,000 - - - 900,000
Senior Manager Award 2020 885,000 - (173,200) - 711,800
Senior Manager Award 2021 144,370 - - - 144,370
Senior Manager Award 2022 1,765,000 - - - 1,765,000
Senior Manager Award 2023 - 3,725,000 - - 3,725,000
Leader & High Performer Award 2022 201,022 5,000 - - 206,022
Leader & High Performer Award 2023 - 615,000 - - 615,000
Recruitment Award 2023 - 300,000 - - 300,000
Sharesave scheme 1,068,212 - (139,775) - 928,437
Total 6,969,495 5,010,000 (353,975) - 11,625,520
Six-month period ended 30 June 2022 (Unaudited)
General Award 2020 287,500 - (50,000) - 237,500
General Award 2021 216,000 - (33,000) - 183,000
General Award 2022 - 450,000 (15,000) - 435,000
Manager CSOP Award 385,298 - - - 385,298
Manager PSP Award 853,334 - - - 853,334
CEO Recruitment Award 900,000 - - - 900,000
Senior Manager Award 2020 885,000 - - - 885,000
Senior Manager Award 2021 114,370 30,000 - - 144,370
Senior Manager Award 2022 - 1,365,000 - - 1,365,000
Leader & High Performer Award 2022 - 220,000 - - 220,000
Total 3,641,502 2,065,000 (98,000) - 5,608,502
Year ended 31 December 2022 (Audited)
General Award 2020 287,500 - (65,000) - 222,500
General Award 2021 216,000 3,000 (58,752) - 160,248
General Award 2022 - 450,000 (64,489) - 385,511
Manager CSOP Award 385,298 - (1,000) - 384,298
Manager PSP Award 853,334 - - - 853,334
CEO Recruitment Award 900,000 - - - 900,000
Senior Manager Award 2020 885,000 - - - 885,000
Senior Manager Award 2021 114,370 30,000 - - 144,370
Senior Manager Award 2022 - 1,765,000 - - 1,765,000
Leader & High Performer Award 2022 - 220,000 (18,978) - 201,022
Sharesave scheme - 1,693,596 (625,384) - 1,068,212
Total 3,641,502 4,161,596 (833,603) - 6,969,495
During the six-month period ended 30 June 2023, the Group granted the
following to employees:
General Award
Nil cost options over 365,000 ordinary shares of £0.01 each of the current
share capital of the Company were granted to all employees (excluding
Directors) in April 2023. These options vest over a 3-year period and are not
subject to specific performance conditions.
Senior Manager Award
Members of the Group's Executive Committee and other senior managers were
granted nil-cost options over 3,725,000 ordinary shares of £0.01 each of the
current share capital of the Company in April 2023. These options vest over a
3-year period and are subject to specific non-market performance conditions.
Two Directors of the Group were granted options as part of this award. Carl
D'Ammassa and Gavin Morris were granted 1,168,000 and 753,000 shares
respectively.
Leader & High Performer Award
Managers and high performers (excluding Directors) were granted nil-cost
options over 620,000 ordinary shares of £0.01 each of the current share
capital of the Company during February 2023 to April 2023. These options vest
over a 3-year period and are not subject to specific performance conditions.
Recruitment Award
Senior managers were granted nil-cost options over 300,000 ordinary shares of
£0.01 each of the current share capital of the Company in April 2023. These
options vest over a 3-year period and are not subject to specific performance
conditions.
9. Other operating expenses
6 months ended 6 months ended Year ended
30 June 2023
30 June 2022
31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Finance costs 17 10 21
Depreciation 230 147 318
Amortisation of intangible assets 201 189 382
Professional services expenses 1,246 782 1,831
IT-related expenses 1,236 889 1,862
Other operating expenses 1,063 787 1,569
Total other operating expenses 3,993 2,804 5,983
10. Provisions
Analysis for movements in other provisions:
Leasehold dilapidations Total
£'000 £'000
6 months ended 30 June 2023 (Unaudited)
At start of period 77 77
Additions 25 25
Utilisation of provision - -
Unused amounts reversed (10) (10)
Unwinding of discount 2 2
Lease modification (30) (30)
At end of period 64 64
6 months ended 30 June 2022 (Unaudited)
At start of period 73 73
Additions - -
Utilisation of provision - -
Unused amounts reversed - -
Unwinding of discount 2 2
At end of period 75 75
Year ended 31 December 2022 (Audited)
At start of period 73 73
Additions - -
Utilisation of provision - -
Unused amounts reversed - -
Unwinding of discount 4 4
At end of period 77 77
11. Net impairment loss on financial assets
6 months ended 6 months ended Year ended
30 June 2023
30 June 2022
31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Movement in impairment allowance in the period 3,673 513 2,028
Write-offs 113 191 268
Write-back of amounts written-off - - -
Total net impairment losses on financial assets 3,786 704 2,296
See note 13 on further analysis of the movement in impairment allowances on
loans and advances to customers.
12. Taxation
Analysis of tax charge recognised in the period:
6 months ended 6 months ended Year ended
30 June 2023
30 June 2022
31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Current taxation charge:
UK corporation tax on profit for the current period 938 - 586
Adjustments in respect of prior years - - -
Total taxation charge 938 - 586
Deferred taxation (credit)/charge:
Current period - - (9,043)
Adjustments in respect of prior years - - -
Total deferred taxation (credit)/charge - - (9,043)
Total taxation charge/(credit) 938 - (8,457)
On 1 April 2023, the UK corporation tax rate increased from 19% to 25%,
resulting in the current UK corporation tax on profits being levied at a
blended rate of 23.5% for the period ended 30 June 2023 (30 June 2022: 19%, 31
December 2022: 19%). Further, on 1 April 2023, the banking surcharge rate
reduced from 8% to 3% and the Bank Surcharge Allowance increased from £25m to
£100m profits 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 30 June 2023, the Group has an estimated unrecognised deferred tax asset of £0.8m (30 June 2022: £7.3m, 31 December 2022: £0.7m) from prior taxable losses.
Further details on the Group's deferred taxation asset can be found in note 16.
13. Loans and advances to customers
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Loan book principal 519,348 307,619 439,282
Accrued interest and fees 3,135 1,041 2,002
Gross carrying amount 522,483 308,660 441,284
less: impairment allowance (7,198) (2,138) (3,720)
less: effective interest rate adjustment (1,498) (893) (1,681)
Total loans and advances to customers 513,787 305,629 435,883
Refer to note 11 for further details on the impairment losses recognised in
the periods.
Ageing analysis of gross loan receivables:
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Not in default:
Not yet past due 505,480 304,834 422,845
Past due: 1 - 30 days 268 307 136
Past due: 31 - 60 days 78 - 1,074
Past due: 61 - 90 days - - 25
Past due: 90+ days - - -
505,826 305,141 424,080
Defaulted:
Not yet past due and past due 1 - 90 days 5,502 3,463 11,319
Past due 90+ days 11,155 56 5,885
16,657 3,519 17,204
Total gross carrying amount 522,483 308,660 441,284
Analysis of gross loan receivables in accordance with impairment losses:
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2023 (Audited) 410,756 13,323 17,205 441,284
Transfer to Stage 1 23,053 (23,053) - -
Transfer to Stage 2 (43,568) 43,913 (345) -
Transfer to Stage 3 (1,286) (901) 2,187 -
Net lending/(repayment) 98,391 (14,802) (2,358) 81,231
Write-offs - - (32) (32)
Total movement in receivables 76,590 5,157 (548) 81,199
As at 30 June 2023 (Unaudited) 487,346 18,480 16,657 522,483
Loss allowance coverage at 30 June 2023 0.48% 1.12% 27.87% 1.38%
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2022 (Audited) 239,327 9,585 542 249,454
Transfer to Stage 1 1,316 (1,306) (10) -
Transfer to Stage 2 (8,639) 8,643 (4) -
Transfer to Stage 3 (1,522) (2,388) 3,910 -
Net lending/(repayment) 56,546 3,597 (753) 59,390
Write-offs (17) - (167) (184)
Total movement in receivables 47,684 8,546 2,976 59,206
As at 30 June 2022 (Unaudited) 287,011 18,131 3,518 308,660
Loss allowance coverage at 30 June 2022 0.41% 0.40% 25.07% 0.69%
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2022 (Audited) 239,327 9,585 542 249,454
Transfer to Stage 1 6,920 (6,597) (323) -
Transfer to Stage 2 (29,077) 29,081 (4) -
Transfer to Stage 3 (1,731) (16,739) 18,470 -
Net lending/(repayment) 195,333 (2,007) (1,310) 192,016
Write-offs (16) - (170) (186)
Total movement in receivables 171,429 3,738 16,663 191,830
As at 31 December 2022 (Audited) 410,756 13,323 17,205 441,284
Loss allowance coverage at 31 December 2022 0.47% 0.63% 9.84% 0.84%
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 2023 (Audited) 1,943 84 1,693 3,720
Transfer to Stage 1 108 (108) - -
Transfer to Stage 2 (195) 337 (142) -
Transfer to Stage 3 (8) (148) 156 -
Remeasurement of impairment allowance (679) 126 3,139 2,586
Net lending/(repayment) 1,180 (84) (172) 924
Write-offs - - (32) (32)
Total movement in loss allowance 406 123 2,949 3,478
As at 30 June 2023 (Unaudited) 2,349 207 4,642 7,198
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2022 (Audited) 1,142 155 421 1,718
Transfer to Stage 1 18 (17) (1) -
Transfer to Stage 2 (60) 60 - -
Transfer to Stage 3 (10) (43) 53 -
Remeasurement of impairment allowance - 64 624 688
Net lending/(repayment) 93 (146) (48) (101)
Write-offs - - (167) (167)
Total movement in loss allowance 41 (82) 461 420
As at 30 June 2022 (Unaudited) 1,183 73 882 2,138
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2022 (Audited) 1,142 155 421 1,718
Transfer to Stage 1 76 (73) (3) -
Transfer to Stage 2 (146) 146 - -
Transfer to Stage 3 (13) (421) 434 -
Remeasurement of impairment allowance (24) 143 1,028 1,147
Net lending/(repayment) 908 134 (17) 1,025
Write-offs - - (170) (170)
Total movement in loss allowance 801 (71) 1,272 2,002
As at 31 December 2022 (Audited) 1,943 84 1,693 3,720
14. Trade and other receivables
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Trade receivables 1,276 919 850
Impairment allowance (296) (168) (101)
980 751 749
Other debtors 352 271 273
Accrued income (89) 33 94
Prepayments 1,097 756 408
1,360 1,060 775
Total trade and other receivables 2,340 1,811 1,524
All trade receivables are due within one year and typically due for payment
within 30 days of invoice.
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:
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Not in default:
Not yet past due 941 617 563
Past due: 1 - 30 days 9 149 27
Past due: 31 - 60 days 41 1 2
Past due: 61 - 90 days - 1 -
Past due: 90+ days - - -
991 768 592
Defaulted:
Not yet past due and past due 1 - 90 days 255 49 194
Past due 90+ days 30 102 64
285 151 258
Total trade receivables 1,276 919 850
Analysis of movement of impairment losses on trade receivables:
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
At 1 January 101 75 75
Amounts written off (1) (4) (19)
Amounts recovered - - -
Change in loss allowance due to new trade and other receivables originated net 196 97 45
of those derecognised due to settlement
At period end 296 168 101
15. Current taxation asset
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
At 1 January 55 59 59
(Charge)/credit to profit and loss account - - (586)
Repayments - - (4)
Adjustments in respect of prior years - - -
Utilisation of deferred taxation asset - - 586
At period end 55 59 55
16. Deferred taxation asset
The table below shows the movement in net deferred tax assets:
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
At 1 January 8,457 - -
(Charge)/credit to profit and loss account - - 8,457
Adjustments in respect of prior years - - -
Utilisation of deferred taxation asset (938) - -
At period end 7,519 - 8,457
The Group has an unrecognised deferred tax asset value of £0.8m (30 June
2022: £7.3m, 31 December 2022: £0.7m) which is not expected to be utilised
for the foreseeable future.
On 1 April 2023, the UK corporation tax rate increased from 19% to 25%, and
the Banking Surcharge rate reduced from 8% to 3%, with an increase in the
Banking Surcharge Allowance from £25m to £100m. The Group has used these tax
rates to calculate the deferred tax balances.
17. Right-of-use assets
Buildings
£'000
Cost:
31 December 2021 (Audited) 1,138
Additions 1
Disposals and write offs -
Lease modifications 6
As at 30 June 2022 (Unaudited) 1,145
Additions 3
Disposals and write offs -
Lease modifications 5
As at 31 December 2022 (Audited) 1,153
Additions 385
Disposals and write offs -
Lease modifications 567
As at 30 June 2023 (Unaudited) 2,105
Accumulated depreciation:
31 December 2021 (Audited) 497
Charge for the period 105
Disposals and write offs -
As at 30 June 2022 (Unaudited) 602
Charge for the period 118
Disposals and write offs -
As at 31 December 2022 (Audited) 720
Charge for the period 86
Disposals and write offs -
As at 30 June 2023 (Unaudited) 806
Carrying amount:
At 30 June 2022 (Unaudited) 543
At 31 December 2022 (Audited) 433
At 30 June 2023 (Unaudited) 1,299
In the six-month period ended 30 June 2023, the Group entered into a new lease
agreement for additional office space at its existing Manchester headquarters.
The Group expects to utilise the right-of-use asset to the contractual
maturity date in August 2030. The Group recognised additions of £394,000 in
respect to the new lease agreement.
For an existing lease agreement, the Group expected to enact a contractual
break clause in 2025 for its lease agreement of the Manchester headquarters
office, however, following the signing of the agreement for additional space,
the Group now expects for the original lease agreement to also elapse at the
contractual end date in August 2030. Consequently, the Group has recognised
£567,000 in lease modifications to reflect the increased expected term of the
lease agreement.
Further, in the six-month period ended 30 June 2023, the Group reversed
£10,000 for an unused dilapidations provision for a prior period terminated
office lease agreement.
18. Notes to the cash flow statement
Cash and cash equivalents:
For the purpose of the statement of cash flows, cash and cash equivalents
comprise cash on demand and overnight deposits classified as cash and balances
at central banks (unless restricted) and balances within loans and advances to
banks. The following balances have been identified as being cash and cash
equivalents:
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Cash and balances at central banks 46,642 47,586 107,353
Loans and advances to banks 1,676 20,348 3,277
Total cash and cash equivalents 48,318 67,934 110,630
Adjustments for non-cash items and other adjustments included in the income
statement:
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Depreciation of property, plant and equipment 144 42 95
Depreciation of right-of-use assets 17 86 105 223
Loss on disposal of property, plant and equipment - - -
Amortisation of intangible assets 201 189 382
Loss on disposal of intangible assets - - -
Share based payments 7 393 190 499
Impairment allowances on receivables 11 3,786 704 2,296
Movement in other provisions 10 (13) - 4
Interest income on debt securities 5 (259) 8 (9)
Realised loss on debt securities - 17 -
Finance costs 9 17 10 21
Unwind of discount 10 2 2 4
Interest in suspense (183) 362 1,149
Total non-cash items and other adjustments 4,174 1,629 4,664
Net change in operating assets:
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Increase in loans and advances to customers (65,095) (58,968) (190,709)
Derivative financial instruments 57 - (57)
Increase in other assets (20,043) (1,807) (2,423)
Increase in operating assets (85,081) (60,775) (193,189)
Net change in operating liabilities:
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Increase in customer deposits 18,622 7,521 182,879
Derivative financial instruments 1,367 24 42
Fair value adjustments for portfolio hedged risk (1,495) (8) (84)
(Decrease)/increase in other liabilities (1,213) 13,488 972
Increase in operating liabilities 17,281 21,025 183,809
19. Equity
30 June 30 June 2022 31 December 2022 30 June 2023 30 June 2022 31 December 2022
2023
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
No. No. No. £'000 £'000 £'000
Authorised:
Ordinary shares of 1p each 179,369,199 179,369,199 179,369,199 1,793 1,793 1,793
Allotted, issued and fully paid: Ordinary shares of 1p each 179,369,199 179,369,199 179,369,199 1,793 1,793 1,793
Analysis of the movements in share capital:
Date No. of shares Issue Price Share Capital Share Premium Merger Relief Total
# £ £'000 £'000 £'000 £'000
Balance at 1 January 2022 (Audited) 179,369,199 1,793 39,273 94,911 135,977
No transactions within the period - - - - - -
Balance at 30 June 2022 (Unaudited) 179,369,199 1,793 39,273 94,911 135,977
No transactions within the period - - - - - -
Balance at 31 December 2022 179,369,199 1,793 39,273 94,911 135,977
(Audited)
Share premium account cancellation 29-Jun-23 - - - (39,273) - (39,273)
Balance at 30 June 2023 (Unaudited) 179,369,199 1,793 - 94,911 96,704
At the Company's annual general meeting on 24 May 2023 (the "AGM"), a
resolution was passed to cancel the Company's share premium account. The
purpose of the proposed cancellation was to create additional distributable
reserves and to provide the Company with greater flexibility and headroom in
the future to: pay ordinary course dividends; undertake a share buyback;
redeem preference shares; or to fund purchases by its Employee Benefit Trust
of shares in the capital of the Company. As set out in the notice of the AGM,
the Directors intend to apply £50,000 of the distributable reserves which the
capital reduction has created to fund the redemption by the Company of the
50,000 non-voting redeemable preference shares of £1.00 each in the capital
of the Company.
To be effective, the cancellation required Court approval which the Group has
obtained and thus making the cancellation effective. This follows the Court
order approving the reduction of capital which was registered with Companies
House on 29 June 2023.
Own shares:
Own shares represent 2,963,283 (30 June 2022: 2,963,283; 31 December 2022:
2,963,283) ordinary shares held by the Group's Employee Benefits Trust to meet
obligations under the Company's share and share option plans. The shares are
stated at cost and their market value at 30 June 2023 was £1,022,333 (30 June
2022: £1,037,149; 31 December 2022: £992,700).
20. Customer deposits
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Retail deposits 498,357 304,377 479,736
Total customer deposits 498,357 304,377 479,736
Amounts repayable within one year 435,159 273,445 364,674
Amounts repayable after one year 63,198 30,932 115,062
498,357 304,377 479,736
21. Financial liabilities
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Lease liabilities 1,267 449 395
Preference Shares 50 50 50
Total financial liabilities 1,317 499 445
Lease liabilities:
Refer to note 22 for further details on movements of lease liabilities during
the six-month period ended 30 June 2022.
22. Lease liabilities
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Current 128 118 145
Non-current 1,139 331 250
Total lease liabilities 1,267 449 395
Maturity analysis:
Year 1 253 137 162
Year 2 252 184 184
Year 3 252 168 79
Year 4 252 - -
Year 5 253 - -
Onwards 482 - -
Total lease payments 1,744 489 425
Finance charges (477) (40) (30)
Total lease liabilities 1,267 449 395
Movements in lease liabilities in the period:
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
At 1 January 395 504 504
Additions 365 - -
Finance costs 17 10 21
Lease payments (106) (71) (141)
Lease modification 596 6 11
At period end 1,267 449 395
In the six-month period ended 30 June 2023, the Group entered into a new lease
agreement for additional office space at its Manchester headquarters. The
Group has recognised £365,000 of additional lease payment obligations in
respect to this new agreement.
In conjunction to the above new lease, the Group reviewed the expected term of
the existing lease agreement of the Manchester headquarters office, which
resulted in a lease modification of £596,218 - refer to note 17 for further
details.
23. Financial instruments
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
£'000 £'000 £'000 £'000 £'000
30 June 2023 (Unaudited)
Financial assets not measured at fair value:
Cash and balances at central banks 46,642 46,642 46,642 - -
Loans and advances to banks 5,067 5,067 5,067 - -
Loans and advances to customers 513,787 513,787 - - 513,787
Trade receivables 980 980 - - 980
Other receivables 352 352 - - 352
566,828 566,828 51,709 - 515,119
30 June 2023 (Unaudited)
Financial liabilities not measured at fair value:
Customer deposits 498,357 494,379 - - 494,379
Other financial liabilities 1,267 1,267 - - 1,267
Trade payables 469 469 - - 469
Other payables 2,106 2,106 - - 2,106
Preference shares 50 50 - - 50
502,249 498,271 - - 498,271
Carrying amount Fair value Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000 £'000
30 June 2022 (Unaudited)
Financial assets not measured at fair value:
Cash and balances at central banks 47,586 47,586 47,586 - -
Loans and advances to banks 20,898 20,898 20,898 - -
Loans and advances to customers 305,629 305,629 - - 305,629
Trade receivables 751 751 - - 751
Other receivables 330 330 - - 330
375,194 375,194 68,484 - 306,710
30 June 2022 (Unaudited)
Financial liabilities not measured at fair value:
Customer deposits 304,377 303,640 - - 303,640
Other financial liabilities 449 449 - - 449
Trade payables 172 172 - - 172
Other payables 16,882 16,882 - - 16,882
Preference shares 50 50 - - 50
321,930 321,193 - - 321,193
Carrying amount Fair value Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000 £'000
31 December 2022 (Audited)
Financial assets not measured at fair value:
Cash and balances at central banks 107,353 107,353 107,353 - -
Loans and advances to banks 3,848 3,848 3,848 - -
Loans and advances to customers 435,883 435,883 - - 435,883
Trade receivables 749 749 - - 749
Other receivables 273 273 - - 273
548,106 548,106 111,201 - 436,905
31 December 2022 (Audited)
Financial liabilities not measured at fair value:
Customer deposits 479,736 478,800 - - 478,800
Other financial liabilities 395 395 - - 395
Trade payables 218 218 - - 218
Other payables 3,377 3,377 - - 3,377
Preference shares 50 50 - - 50
483,776 482,840 - - 482,840
Fair values for level 3 assets were calculated using a discounted cash flow
model and the Directors consider that the carrying amounts of financial assets
and liabilities recorded at amortised cost are approximate to their fair
values.
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.
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 retail deposits has been estimated by discounting
future cash flows at current market rates of interest. Retail 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.
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
£'000 £'000 £'000 £'000 £'000
30 June 2023 (Unaudited)
Financial assets measured at fair value:
Debt securities 24,528 25,000 24,528 - -
24,528 25,000 24,528 - -
30 June 2023 (Unaudited)
Financial liabilities measured at fair value:
Derivative liabilities 1,409 165,000 - 1,409 -
1,409 165,000 - 1,409 -
Carrying Amount Principal Amount Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000 £'000
30 June 2022 (Unaudited)
Financial assets measured at fair value:
Debt securities 31,997 32,000 31,997 - -
31,997 32,000 31,997 - -
30 June 2022 (Unaudited)
Financial liabilities measured at fair value:
Derivative liabilities 24 5,000 - 24 -
24 5,000 - 24 -
Carrying Amount Principal Amount Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000 £'000
31 December 2022 (Audited)
Financial assets measured at fair value:
Debt securities 22,964 23,000 22,964 - -
Derivative assets 57 70,000 - 57 -
23,021 93,000 22,964 57 -
31 December 2022 (Audited)
Financial liabilities measured at fair value:
Derivative liabilities 42 20,000 - 42 -
42 20,000 - 42 -
Debt securities
The debt 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 debt 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.
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.
Refer to the audited financial statement of the Group for the year ended 31
December 2022 for further details of the Group's approach to capital
management.
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
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.
Refer to the audited financial statement of the Group for the year ended 31
December 2022 for further details of the Group's approach to credit risk
management and impairment provisioning.
Collateral held as security:
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Fully collateralised
Loan-to-value* ratio:
Less than 50% 4,972 3,955 2,798
51% to 70% 56,006 20,957 36,764
71% to 80% 61,764 34,002 63,239
81% to 90% 80,598 36,212 69,499
91% to 100% 301,148 213,203 264,118
Total collateralised lending 504,488 308,329 436,418
Partially collateralised lending - - -
Unsecured lending 17,995 331 4,866
* 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.
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 Group's gross receivable balance for loans and advances to
customers is split by industry as follows:
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
£'000 Portfolio % £'000 Portfolio % £'000 Portfolio %
Gross carrying amount:
Lodges and holiday homes 158,586 30% 94,696 31% 118,156 27%
Motorhomes and caravans 97,414 19% 58,103 19% 83,420 19%
Transport 112,605 22% 54,489 18% 113,595 26%
Marine 48,420 9% 36,786 12% 47,713 11%
Industrial equipment 31,644 6% 27,561 9% 30,159 7%
Motor vehicles 28,965 6% 17,490 6% 20,767 5%
Agricultural equipment 25,835 5% 19,535 6% 24,555 6%
Automotive 4,107 1% - 0% 2,919 1%
Wholesale and receivables funding 14,907 3% - 0% - 0%
Total gross carrying amount 522,483 100% 308,660 100% 441,284 100%
Credit quality of borrowers:
An analysis of the Group's credit risk exposure for loan and advances per
class of financial asset, internal rating and "stage" is provided in the
following tables. Refer to the audited financial statements of the Group for
the year ended 31 December 2022 for description of the meanings of Stages 1, 2
and 3.
30 June 2023 (Unaudited) Stage 1 Stage 2 Stage 3 Total
£'000 Portfolio % £'000 Portfolio % £'000 Portfolio % £'000 Portfolio %
Gross carrying amount:
Above average (Rating 1-2) 366,504 70% 678 0% - 0% 367,182 70%
Average (Rating 3-5) 90,005 17% 15,102 3% 37 0% 105,144 20%
Below average (Rating 6+) 30,837 6% 2,700 1% 16,620 3% 50,157 10%
Total gross carrying amount 487,346 93% 18,480 4% 16,657 3% 522,483 100%
£'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage %
Impairment allowance:
Above average (Rating 1-2) (944) 0.3% (1) 0.2% - 0.0% (945) 0.3%
Average (Rating 3-5) (1,101) 1.2% (171) 1.1% (1) 4.0% (1,273) 1.2%
Below average (Rating 6+) (304) 1.0% (35) 1.3% (4,641) 27.9% (4,980) 9.9%
Total impairment allowance (2,349) 0.5% (207) 1.1% (4,642) 27.9% (7,198) 1.4%
30 June 2022 (Unaudited) Stage 1 Stage 2 Stage 3 Total
£'000 Portfolio % £'000 Portfolio % £'000 Portfolio % £'000 Portfolio %
Gross carrying amount:
Above average (Rating 1-2) 188,489 61% - 0% - 0% 188,489 61%
Average (Rating 3-5) 72,424 23% 17,279 6% 710 0% 90,413 29%
Below average (Rating 6+) 26,098 8% 852 0% 2,808 1% 29,758 10%
Total gross carrying amount 287,011 93% 18,131 6% 3,518 1% 308,660 100%
£'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage %
Impairment allowance:
Above average (Rating 1-2) (302) 0.2% - 0.0% - 0.0% (302) 0.2%
Average (Rating 3-5) (533) 0.7% (66) 0.4% (465) 65.5% (1,064) 1.2%
Below average (Rating 6+) (348) 1.3% (7) 0.8% (417) 14.8% (772) 2.6%
Total impairment allowance (1,183) 0.4% (73) 0.4% (882) 25.1% (2,138) 0.7%
31 December 2022 (Audited) Stage 1 Stage 2 Stage 3 Total
£'000 Portfolio % £'000 Portfolio % £'000 Portfolio % £'000 Portfolio %
Gross carrying amount:
Above average (Rating 1-2) 267,000 61% 6,629 2% - 0% 273,629 62%
Average (Rating 3-5) 110,818 25% 5,433 1% 14,757 3% 131,008 30%
Below average (Rating 6+) 32,938 7% 1,261 0% 2,448 1% 36,647 8%
Total gross carrying amount 410,756 93% 13,323 3% 17,205 4% 441,284 100%
£'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage %
Impairment allowance:
Above average (Rating 1-2) (475) 0.2% (17) 0.3% - 0.0% (492) 0.2%
Average (Rating 3-5) (981) 0.9% (46) 0.8% (1,292) 8.8% (2,319) 1.8%
Below average (Rating 6+) (487) 1.5% (21) 1.7% (401) 16.4% (909) 2.5%
Total impairment allowance (1,943) 0.5% (84) 0.6% (1,693) 9.8% (3,720) 0.8%
See note 13 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:
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Status at balance sheet date
Not past due, nor defaulted 941 617 563
Past due but not in default 50 151 29
Defaulted 285 151 258
Total gross carrying amount 1,276 919 850
Loss allowance (296) (168) (101)
Carrying amount 980 751 749
See note 14 for analysis of the movements in gross trade receivables and
impairment allowances in terms of IFRS 9 staging.
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.
Refer to the audited financial statement of the Group for the year ended 31
December 2022 for further details of the Group's approach to liquidity risk
management.
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.
The Group's treasury function is responsible for managing the Group's exposure
to all aspects of market risk within the operational limits set out in the
Group's treasury policies, with the overall objective of managing market risk
in line with the Group's risk appetite. The Asset and Liability Committee
approves the Group's treasury policies and receives regular reports on all
aspects of market risk exposure, including interest rate risk.
Refer to the audited financial statement of the Group for the year ended 31
December 2022 for further details of the Group's approach to market risk
management.
24. Derivatives
Derivative financial instruments are used by the Group for risk management
purposes in order to minimise or eliminate the impact of movements in interest
rates and foreign exchange rates. Derivatives are not used for trading or
speculative purposes.
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
30 June 2023 (Unaudited)
Derivative assets:
Interest rate risk hedging - - - -
Derivative liabilities:
Interest rate risk hedging (1,409) (1,409) 1,380 (29)
30 June 2022 (Unaudited)
Derivative assets:
Interest rate risk hedging - - - -
Derivative liabilities:
Interest rate risk hedging (24) (24) 50 26
31 December 2022 (Audited)
Derivative assets:
Interest rate risk hedging 57 57 (28) 29
Derivative liabilities:
Interest rate risk hedging (42) (42) 98 56
All derivative instruments which have been entered into are transacted against
SONIA. Interest rate swaps are used to manage interest rate risk associated
with the Group's customer deposits portfolio only. Due to the short-term
duration of the Group's loans and advances to customers portfolio, and the
ability to reprice the interest charged, the Group's interest rate risk on the
loan portfolio is limited so the Group does not hedge against this risk.
Derivative assets and liabilities include a variation margin receivable of
£1,380,000 (30 June 2022: £50,000, 31 December 2022: £70,000) with swap
counterparties to mitigate credit risk for both parties. Further, the Group
holds £2,000,000 (30 June 2022: £500,000, 31 December 2022: £500,000) of
independent collateral with banks for the swap facility, which is not included
within the above table.
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
30 June 2023 (Unaudited)
Derivative assets - - - - -
Derivative liabilities 165,000 - 155,000 10,000 -
165,000 - 155,000 10,000 -
30 June 2022 (Unaudited)
Derivative assets - - - - -
Derivative liabilities 5,000 - 5,000 - -
5,000 - 5,000 - -
31 December 2022 (Audited)
Derivative assets 70,000 - 30,000 40,000 -
Derivative liabilities 20,000 5,000 - 15,000 -
90,000 5,000 30,000 55,000 -
The Group has 9 (30 June 2022: 1, 31 December 2022: 6) active derivative
contracts with an average fixed rate of 4.60% (30 June 2022: 0.92%, 31
December 2022: 4.21%).
25. Hedge accounting
30 June 2023 30 June 2022 31 December 2022
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Hedged liabilities
Current hedge relationships (1,593) (4) (77)
Swap inception adjustment 14 (4) (7)
Fair value adjustments on hedged liabilities (1,579) (8) (84)
As at the period ended 30 June 2023, the Group presently only hedges
liabilities in the form of its customer deposits. The Group does not hedge its
loans and advances to customers given these assets are expected to reprice
within a short time frame.
At present, the Group expects its hedging relationships to be highly effective
as the Group hedges fixed term deposit accounts 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 the fixed term deposits with
depositors. In the period ended 30 June 2023, 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:
30 June 2023 (Unaudited) 30 June 2022 (Unaudited) 31 December 2022 (Audited)
Hedged item Hedging instrument Hedged item Hedging instrument Hedged item Hedging instrument
£'000 £'000 £'000 £'000 £'000 £'000
Customer deposits:
Carrying amount of hedged item/nominal value of hedging instrument 168,165 165,000 5,025 5,000 90,505 90,000
Cumulative fair value adjustments (1,579) (1,409) (8) (24) (84) -
Fair value adjustments for the period (1,495) (1,409) (8) (24) (84) -
In the Consolidated Statement of Financial Position, £nil (30 June 2022:
£nil, 31 December 2022: £57,000) of hedging instruments were recognised
within derivative assets; and £1,409,000 (30 June 2022: £24,000, 31 December
2022: £42,000) within derivative liabilities.
26. Earnings per share
6 months ended 6 months ended Year ended
30 June 2023
30 June 2022
31 December 2022
(Unaudited)
(Unaudited)
(Audited)
Number of shares # # #
At period end 179,369,199 179,369,199 179,369,199
Basic
Weighted average number of shares in issue during period 179,369,199 179,369,199 179,369,199
Diluted
Effect of weighted average number of options outstanding for the period - - -
Diluted weighted average number of shares and options for the period 179,369,199 179,369,199 179,369,199
Earnings attributable to ordinary shareholders £'000 £'000 £'000
Profit after tax attributable to the shareholders 2,261 16 9,761
Earnings per share pence pence pence
Basic 1 0 5
Diluted 1 0 5
27. Related party disclosures
In the six-month period ended 30 June 2023, Directors Carl D'Ammassa and Gavin
Morris were awarded share options as a long-term incentive plan, refer to note
8 for further details.
Otherwise, during the six months period ended 30 June 2023, all other related
party transactions have had no material effect on the financial position or
performance of the Group. The related party transactions remain similar in
nature to those disclosed in the audited financial statements of the Group for
the year ended 31 December 2022.
28. Subsequent events
On 8 September 2023 the Group announced it had secured a new £20m Tier 2
Capital Facility from British Business Investments, a wholly-owned commercial
subsidiary of the British Business Bank. The facility, which has a term of
10 years, can be drawn in quarterly tranches of up to £5m with each tranche
having a fixed coupon. £5m was drawn under this facility on 22 September
2023.
In August 2023 the ENABLE Guarantee with the British Business Bank was upsized
from £175m to £250m.
There have been no other significant events between 30 June 2023 and the date
of approval of the Interim Financial Report that require a change or
additional disclosure in the condensed consolidated interim financial
statements.
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