REG - Distribution Finance - Half-year Report
19/09/2024 07:00
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RNS Number : 7774E Distribution Finance Cap. Hldgs PLC 19 September 2024
19 September 2024
Distribution Finance Capital Holdings plc
("DF Capital" or the "Company" together with its subsidiaries the "Group")
Results for the six months ended 30 June 2024
Delivering significant 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 2024.
• Delivered £9.2m profit before tax up 187% on comparable period and
double FY23 outturn (H1: 2023: £3.2m, FY23: £4.6m).
• Record new lending up 17% to £710m (H1 2023: £607m); supported by
£1.1bn of facilities (H1 2023: £926m) and 1,250 dealers (H1 2023: 1,152).
• Loan book reached £603m, up 16% (H1 2023: £519m)
• Net interest margin (NIM) holding strong at 7.8% (H1 2023: 7.5%),
well ahead of 6% target.
• £1.7m recovery on impaired RoyaleLife balance recognised in H1 2024,
with an additional £3m potential upside yet to be recognised and anticipated
in FY25.
• Strong arrears management resulted in low cost of risk (adjusted for
RoyaleLife) at 0.61% (H1 2023: 0.41%), demonstrated by arrears levels (1 day+
past due) remaining at 0.5% of loan book
• Continued cost efficiency, despite inflationary pressures, improved
cost-to-income ratio to 58.8% (H1 2023: 61.5%).
• Double-digit post-tax return on equity of 10.3% achieved (H1 2023: 9.1%),
demonstrating accelerating momentum to mid-to-high teens returns target.
• Retail deposits total £579m (H1 2023: £498m) from over 14,600
accounts.
• Tangible net assets grew to £107m (H1 2023: £98m), with TNAV per
share up 4.9p to 59.6p (H1 2023: 54.7p).
30 June 2024 30 June 2023 31 December 2023
6-month 6-month 12-month
Financial Highlights
Gross revenues (£m) 37.9 27.3 60.4
Profit before taxation (£m) 9.2 3.2 4.6
Profit after taxation (£m) 6.7 2.3 3.2
Loan book principal (£m) 603 519 581
Net assets (£m) 107.6 98.8 100.4
Customer deposits (£m) 579.0 498.4 574.6
Regulatory capital (£m) 100.0 80.2 89.5
Common Equity Tier 1 capital ratio 23.2% 22.7% 22.8%
Regulatory capital (as a % of RWA) 25.9% 22.7% 25.8%
Gross yield 12.1% 10.6% 11.1%
Net interest margin 7.8% 7.5% 7.6%
Average cost of retail deposits 5.1% 3.7% 4.3%
Cost of risk 0.04% 1.55% 2.28%
Impairment loss coverage on loans to customers 0.83% 1.38% 2.50%
Cost income ratio 59% 61% 58%
Basic earnings per share (pence) 3.8 1.0 1.8
Tangible net asset value per share (pence) 59.6 54.7 55.6
Key Performance Indicators
Loans advanced to customers (£m) 710 607 1,200
Number of dealer customers 1,250 1,152 1,182
Number of manufacturer partners 90 86 89
Total credit available to dealers (£m) 1,088 926 1,030
Post period end highlights and outlook
• Loan book seeing normalised seasonality over summer months in line
with expectations
• Launched maiden business saving account
• British Business Bank ENABLE Guarantee extended to £350m; headroom
of £10m in Tier 2 capital facility.
• Potential aggregate capital capacity to grow loan book to at least
£850m, without the requirement for additional dilutive Tier 1 equity raise.
Capacity to support loan book growth beyond £850m at £100m per annum through
organic capital growth from retained earnings.
• Significant progress in organic build of hire purchase capability to
support existing dealers and manufacturers with sales aid financing, expected
to launch H1 2025; will result in significant expansion of market opportunity.
• FY24 year-end loan book expected to be in the range of £650-700m in
line with Board expectations.
Carl D'Ammassa, Chief Executive, commented: "The Group has enjoyed another
period of growth which has unlocked significant improvements in profitability.
We continue to scale the bank efficiently in our core inventory finance
lending space, whilst also making investments to bring to life our stated
ambitions to become a multi-product lender. This hire purchase product will
significantly expand our addressable market opportunity multiple times whilst
also further deepening our relationship with our existing manufacturer and
dealer base. We expect to launch this product for end-users in H1 2025, with
consumer lending being subject to regulatory approval.
These results are a credit to the entire DF Capital team, and we remain
optimistic about our full year performance, despite the on-going
macro-economic outlook driven by higher interest rates."
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/)
+44 (0) 203 100 2000
Panmure Liberum Limited (Nomad and Joint Broker)
Chris Clarke
William King
Anake Singh
Chief Executive's Statement
Continuing to build scale and enhance investor returns
We are delighted to report another period of strong profitability and
continued momentum, delivering pre-tax profit of £9.2m for the first half of
the year including £1.7m recovery on a previously impaired loan, which is
ahead of expectations and up 187% on the same period last year (H1 2023:
£3.2m). We've continued to scale the bank whilst increasing returns and
have carefully managed growth despite the challenges of the macro-economic and
higher interest rate environment.
During the period, we originated record levels of new loans, increasing the
loan book to £603m (30 June 2023: £519m; 31 December 2023 £581m), whilst
delivering net interest margin of 7.8% (H1 2023: 7.5%) significantly above our
6% target. Accordingly, earnings per share in the period increased to 3.8p (H1
2023: 1.0p) and the Group's tangible net asset value per share reached 59.6p,
up 4 pence per share since year end (30 June 2023: 54.7p; 31 December 2023:
55.6p).
The strength of financial performance and our expectations for the balance of
the year reiterate the Board's belief that the Group's strategy is effective,
that our products and services resonate with customers and accordingly we can
continue to profitably scale the bank, moving at pace on our journey to
deliver a mid-to-high teens return on capital over the medium term.
Growing our market share with record loan origination
The Group has continued to see strong momentum originating new loans of £710m
during the six-month period to 30 June 2024, up 17% on the equivalent period
in 2023 (H1 2023: £607m). We have increased our market share across a number
of sectors and now support 90 manufacturer partners (30 June 2023: 86; 31
December 2023: 89) and 1,250 dealers (30 June 2023: 1,152; 31 December 2023:
1,182) having added 165 new dealers in the period. Aggregate dealer loan
facilities at the end of the period totalled £1,088m, up 17% on the prior
year (30 June 2023: £926m) and up 6% on the end of FY23 (31 December 2023:
£1,030m).
The Group's loan book ended the period at £603m up 16% on the equivalent
period in the prior year (30 June 2023: £519m) and in line with seasonal
expectations. New loan origination has undoubtedly been strong throughout
the period, however the Group has seen a normalisation of the seasonality in
loan repayments (i.e. an acceleration of dealer sales during the period from
March to September), a first since the onset of the global pandemic. It is
somewhat reassuring to finally see this normalisation unfold, enabling us to
better forecast seasonal factors that impact the demand for our lending
products in certain sectors at particular points of the year. The Group's loan
book closed August 2024 broadly flat at £593m, in line with seasonal
expectations for the summer months of low manufacturer product and heightened
dealer sales.
Average stock days, which measures the average age of loans outstanding,
remains well within sector tolerances, extending marginally on a portfolio
basis to 149 days at the period end (31 December 2023: 148 days; 30 June 2023:
131 days).
Portfolio By Sector
The following table analyses the portfolio at the reporting date by principal
outstanding:
30 June 2024 30 June 2023 31 December 2023
£million % £million % £million %
Leisure:
Lodges and holiday homes 117.8 19.5% 157.1 30.3% 147.8 25.5%
Motorhomes and caravans 163.4 27.1% 97.1 18.7 % 131.0 22.6%
Marine 62.8 10.4% 48.1 9.3% 55.5 9.6%
Motorsport 33.6 5.6% 28.8 5.5% 27.2 4.7%
Automotive 21.6 3.6% 4.1 0.8% 8.3 1.4%
399.2 66.2% 335.2 64.5% 369.8 63.7%
Commercial:
Transport 104.3 17.3% 112.1 21.6% 130.3 22.4%
Industrial equipment 32.8 5.4% 31.5 6.1% 35.7 6.1%
Agricultural equipment 26.2 4.4% 25.6 4.9% 26.7 4.6%
Other serialised assets 3.5 0.6% - 0.0% - 0.0%
166.8 27.7% 169.2 32.6% 192.7 33.2%
Wholesale and receivables funding 6.1% 14.9 2.9% 18.2 3.1%
36.6
Total loan book principal(1) 602.6 100% 519.3 100% 580.7 100%
(1) Principal balance outstanding at the reporting date for loans and advances
to customers.
Motorhome and caravan new loan origination has been strong during the period,
leading to a 25% growth in the loan book in this sector, predominantly from
existing dealers, as at 30 June 2024 compared to 31 December 2023. Whilst this
is positive, the pace of loan book growth in this sector has been somewhat
slowed by strong dealer sales and the associated loan repayments given we are
repaid in full once an individual asset is sold. The automotive sector has
also grown strongly in this period by over 150% from a relatively low base at
the end of 2023, driven entirely by increased dealers and facility
utilisation. Our revolving inventory finance facility, "Flex", has proven
popular with automotive dealers with faster moving asset sales cycles.
Lending in the lodges and holiday home sector reduced as expected, as dealers
and park operators held less stock as these large volume, discretionary
purchases have been impacted by higher interest rates. Park operators have
seen continued demand for holiday rental units and some dealers have utilised
our rental lending product, to allow them to generate income from unsold
units, whilst also making capital repayments against our loans. The fallout
from RoyaleLife's failure last year continues to have some structural impact
across the market with a number of new operators of RoyaleLife's former parks
continuing in their efforts to stabilise operations, which has seen subdued
demand for new units from these parks.
Across the transport sector, demand from end-users has been muted. This has
driven competitive tension across manufacturers and a higher degree of product
discounting. Dealers in this market have been carefully managing their
inventory levels to better match demand, a trend that has continued over the
summer months, but expected to improve during September in line with the
vehicle registration plate change.
Whilst very early in its evolution, we have enhanced our product offering to
fund serialised faster moving higher volume assets. We expect this to be an
area of significant growth for us as we look beyond 2024, supporting
manufacturers, distributors and dealers in the renewables, technology and
telecoms markets as an example.
Our wholesale and receivables funding activities have continued, growing from
£18.2m at 31 December 2023 to £36.6m at 30 June 2024. Working with
partners (i.e. lending to lenders) allows us to build market intelligence on
the dynamics of lending products that we have future ambitions to launch
ourselves. Additionally, we provided short term receivables financing and
invoice discounting to existing dealers, manufacturers and distributors. We
achieve strong risk adjusted returns from these product sets, but do not
expect lending in these segments to exceed more than 10-15% of the Group's
entire loan book.
Summarised Statement of Comprehensive Income
30 June 2024 30 June 2023 31 December 2023
6-month 6-month 12-month
£'000 £'000 £'000
Gross revenues(1) 37,889 27,259 60,350
Interest expense (15,383) (9,126) (22,336)
Net income(2) 22,506 18,133 38,014
Operating expenses (13,226) (11,148) (21,843)
Impairment charges (106) (3,786) (11,598)
Profit before taxation 9,174 3,199 4,573
Taxation (2,443) (938) (1,418)
Profit after taxation 6,731 2,261 3,155
Other comprehensive income/(loss) 74 (53) 183
Total comprehensive income for the period 6,805 2,208 3,338
Basic earnings per share 3.8p 1.0p 1.8p
(1) Sum of interest and similar income, fee income less fee expenses, net
gains/(losses) from derivatives measured at fair value through profit or loss
and other operating income
(2) Gross revenues less interest and similar expenses
Summarised Statement of Financial Position
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Cash and balances at central banks 86,036 46,642 89,552
Loans and advances to banks 3,496 5,067 3,475
Investment securities 6,175 24,528 14,839
Loans and advances to customers 596,771 513,787 568,044
Taxation asset 5,265 7,574 7,166
Other assets 8,462 5,639 8,862
Total assets 706,205 603,237 691,938
Customer deposits 579,012 498,357 574,622
Financial liabilities 1,127 1,317 1,255
Subordinated liabilities 10,225 - 10,221
Taxation liabilities 670 - 73
Other liabilities 7,598 4,723 5,353
Total liabilities 598,632 504,397 591,524
Total equity 107,573 98,840 100,414
Tangible net asset value per share (pence) 59.6 54.7 55.6
Ongoing strong Net Interest Margin
We have continued to see the positive impact of UK base rate movements on the
Group's Net Interest Margin ("NIM"), which is gross yield less interest
expense. This increased during the period to 7.8% (H1 2023: 7.5%), being well
ahead of our NIM target of 6%.
Gross yield increased by 14% to 12.1% (H1 2023: 10.6%), as the increasing base
rate has been priced into newly originated loans. This coupled with a higher
average loan book through the period saw gross revenues, which predominantly
comprise interest and similar income, increase by 39% to £37.9m (H1 2023:
£27.3m).
In line with the base rate increases over the life of the deposit book, the
average cost of retail deposits increased during the period to 5.1% (H1 2023:
3.7%). 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. We expect ongoing
favourability in NIM in the near-term, however it is less likely to be as
significant over the medium term; unwinding as the base rate reduces and
moving more towards our 6% target over time.
Continuing to deliver operational efficiencies
As we continue to scale the bank, we unlock latent operational leverage.
During the period, we have delivered a reduction in the cost to income ratio
to 59% (H1 2023: 61%). Whilst our platform is already highly digitised, we
continue to recognise the importance of further automation and the need for us
to leverage technology further to provide continuous enhancements to our
service proposition as a competitive differentiator. These investments in
robotic process automation and character-recognition technologies, as well as
deploying new market leading technology solutions have enabled us to provide
new products to our customers. The people resource we require over the near
term to scale our existing lending and retail deposit propositions are
substantively embedded in the business already, allowing us to unlock further
operational leverage on the existing loan book as we continue to grow our
lending. We have commenced the organic build of and investment in a hire
purchase lending capability, which will continue through the balance of this
year, with the launch of associated new lending products expected during 2025.
Operating expenses in the period reached £13.2m, being an increase of 19% (H1
2023: £11.1m) however total operating income increased by 24% over the same
period being £22.5m in H1 2024 (H1 2023: £18.1m), thus demonstrating the
positive widening of the gap between our costs and our income.
Strong credit performance
Despite the challenging macro-economic and higher interest rate environment,
the Group's overdue accounts have continued to perform well and ahead of
expectations through the period. 20 dealers (H1 2023: 29), including 10 cases
in legal recovery, had arrears at least one day past due, representing c1.6%
(H1 2023: c 2.5%) of the Group's dealer base. The Group's total arrears
balance represented c0.5% (H1 2023: 2.5%) of its entire loan book. This very
low level of arrears, which is better than expectations, has continued over
the summer months, with total arrears remaining constant at c0.5% of the
Group's entire loan book and 23 dealers in arrears or in legal recovery at the
end of August 2024.
This strong credit performance continues to reflect the high quality of our
dealer base and our capability to remediate defaults through product
redistribution via our customer network or the sale of our secured assets to
other parties.
The following tables analyse the Group's arrears balance (principal, fees and
interest) and total principal outstanding on the respective loan receivable of
the lending portfolio at the respective reporting dates.
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Arrears - principal repayment, fees and interest:
1 - 30 days past due 427 475 696
31 - 60 days past due 572 1,226 265
61 - 90 days past due 474 219 946
91 + days past due 1,519 11,155 12,102
2,992 13,075 14,009
Total % of loan book 0.5% 2.5% 2.4%
Associated principal balance:
1 - 30 days past due 2,587 1,400 1,253
31 - 60 days past due 1,200 1,385 717
61 - 90 days past due 439 - 1,900
91 + days past due 2,294 13,006 12,821
6,520 15,791 16,691
Total % of loan book 1.1% 3.0% 2.9%
Net impairment losses for the six months ended 30 June 2024 which included a
£1.7m recovery on a previously impaired loan, were £0.1m (H1 2023: £3.8m),
representing a cost of risk for the six months ended 30 June 2024 of 0.04% (H1
2023: 1.55%).
As at 31 December 2023 an almost full provision of c£10m had been made in
respect of RoyaleLife and associated companies ("RoyaleLife") equivalent to
the customers entire outstanding unrecoverable balance at that time. Since
year-end we have proactively looked to make the fullest recovery possible and
have recovered assets and cash of £1.7m, with this write back reducing
impairment losses in the period accordingly. Excluding this RoyaleLife
recovery, the cost of risk would have been 0.61% for the period (H1 2023:
0.41% excluding Royale Life impairments made in this period), well below our
through-the-cycle expectations of 1%. Additionally, in relation to RoyaleLife,
the Group has agreed a further £3m settlement under personal guarantees with
a related party of the guarantor. This settlement is subject to the sale of
property and proceeds are anticipated to be received in the financial year
ending 31 December 2025.
Security Position
30 June 2024 30 June 2023 31 December 2023
% % %
Loan to wholesale value(1) 83% 88% 85%
( )
(1) Wholesale price is the invoice value paid by the dealer to the
manufacturer
In our core inventory finance product, the Group's lending relative to its
security position remains strong with a Loan to Wholesale Value ('LTV') of 83%
(30 June 2023: 88% and 31 December 2023: 85%). This reduction in LTV is
predominantly due to a slowdown in stock turn with an increase in the
associated monthly capital repayments. We do not advance funds measured
against retail prices, which typically represent a mark-up of approximately
20% on the wholesale invoice price.
Award winning deposit raising capability
We continue to operate an effective and well-diversified deposit raising
capability that resonates with our customers. At 30 June 2024 our already
strong customer satisfaction score, as measured by feefo, increased to 4.8 (30
June 2023: 4.7; 31 December 2023: 4.7). We also received feefo's Platinum
Trusted Service Award in January 2024.
£233m of deposits were raised or retained on maturity during the period (H1
2023: £168m), at an average interest rate of 5.2% (H1 2023: 4.4%). We
continue to focus on existing customer retention, with c.60% of maturing
deposits retained through loyalty products and a seamless online product
change process. As at 30 June 2024, we had retail deposits totalling £579m
(30 June 2023: £498m; 31 December 2022: £575m) from over 14,600 accounts.
We have now also launched our first business savings account. Alongside our
existing retail deposit capability this product diversification increases
options as to how we fund our lending activities across a wider depositor base
and price point.
Well capitalised balance sheet supporting growth ambitions
The Group remains well-capitalised to support its near-term growth ambitions.
As at 30 June 2023 the Group's equity stood at £107.6m (30 June 2023:
£98.8m; 31 December 2023: £100.4m).
This level of equity capital, alongside the use of capital efficient
instruments available to the Group as well as on-going retained earnings,
enables us to reach a loan book of c£850m in the near-term. At this level,
profits generated are expected to continue to support further annualised
organic loan book growth in the range of £80-100m per annum without the need
for additional dilutive tier 1 equity capital.
The strong profitability and increased utilisation of the ENABLE Guarantee
with the British Business Bank has led to a positive increase in the CET1
ratio in the period to 23.2% (30 June 2023: 22.7%; 31 December 2023: 22.8%),
sitting well above our regulatory minimum. Regulatory capital which is the
Common Equity Tier 1 capital together with Tier 2 capital increased to
£100.0m (30 June 2023: £80.2m; 31 December 2023 £89.5m) reflecting the
drawing of £10m in H2 2023 under the £20m Tier 2 capital facility with
British Business Investments.
Current outlook
Whilst the macro-economic environment continues to show signs of uncertainty,
it is pleasing to see that our products and services remain in strong demand
and our traditional sectors are now performing in line with historical norms
and seasonality in demand. As we look towards the end of the year, and enter
the re-stocking period, we remain confident about our ability to grow our loan
book across the wider spectrum of businesses we now support in line with
expectations.
We are now well progressed with the organic build of a hire purchase product
and expect the technology and processes to be "launch ready" for the end of
the year, enabling us to work with our dealer and manufacturer partners in a
deeper way by providing loans to their customers and supporting further sales.
We have now applied to the Financial Conduct Authority for consumer lending
permissions, and should our application be successful, we expect to be able to
provide consumer hire purchase, alongside hire purchase to businesses, in H1
2025.
We are now close to four years operating as a bank, having received
authorisation in September 2020. The progress we have made during that time,
not least achieving sustainable levels of profitability by scaling the firm,
but also the culture that is now core to how we operate, are a testament to
the entire DF Capital community. I'm excited about the opportunities ahead.
Carl D'Ammassa
Chief Executive Officer
Financial Highlights and Key Performance Indicators
( )
( )
30 June 2024 30 June 2023 31 December 2023
6-month 6-month 12-month
(Unaudited) (Unaudited) (Audited)
Financial highlights:
Gross revenues (£m) (1) 37.9 27.3 60.4
Profit before taxation (£m) 9.2 3.2 4.6
Profit after taxation (£m) 6.7 2.3 3.2
Loan book principal (£m) (2) 603 519 581
Net assets (£m) (3) 107.6 98.8 100.4
Customer deposits (£m) 579.0 498.4 574.6
Regulatory capital (£m) (4) 100.0 80.2 89.5
Common Equity Tier 1 capital ratio(5) 23.2% 22.7% 22.8%
Regulatory capital (as a % of RWA) (6) 25.9% 22.7% 25.8%
Gross yield(7) 12.1% 10.6% 11.1%
Net interest margin(8) 7.8% 7.5% 7.6%
Average cost of retail deposits(9) 5.1% 3.7% 4.3%
Cost of risk(10) 0.04% 1.55% 2.28%
Impairment loss coverage on loans to customers(11) 0.83% 1.38% 2.50%
Cost income ratio(12) 59% 61% 58%
Basic earnings per share (pence) 3.8 1.0 1.8
Tangible net asset value per share (pence) (13) 59.6 54.7 55.6
Key Performance Indicators:
Loans advanced to customers (£m) 710 607 1,200
Number of dealer customers(14) 1,250 1,152 1,182
Number of manufacturer partners(15) 90 86 89
Total credit available to dealers (£m) (16) 1,088 926 1,030
( )
(1) Sum of interest and similar income, fee income less fee expenses, net
gains/(losses) from derivatives measured at fair value through profit or loss
and other operating income.
(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 (which includes
current year profit) together with Tier 2 capital
(5) Common Equity Tier 1 capital (which includes current year profit) divided
by Risk Weighted Assets
(6) Regulatory capital divided by Risk Weighted Assets
(7) The effective interest rate we charge our customers comprising interest
income and including fees
(8) Total operating income adding back fee expense as a % of average gross
receivables
(9) The weighted average interest rate we pay our depositors
(10) Impairment charges and recoveries and provisions in the period
(annualised) as a % of average gross receivables.
(11) Impairment allowance as a % of gross receivables at the period end
(12) Operating cost as a % of total operating income.
(13) Net assets less intangible assets divided by the weighted average number
of shares in issue
(14) Number of borrower relationships
(15) Number of vendors and manufacturers with whom we have programs that
support our lending
(16) Amount of credit available to our customers to draw (uncommitted)
including existing drawings
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. Gross revenues and net interest margin are deemed
to be alternative performance measures ("APMs") and are defined in the
Appendix.
APMs may be considered in addition to, but not as a substitute for, the
reported IFRS results. The Group believes that these APMs together with the
other metrics presented above, when considered together with reported IFRS
results, provide stakeholders with additional information to better understand
the Group's financial performance.
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 run across many or all of these risk types.
We have chosen at this stage to not pull them out individually, but instead to
manage them across the principal risks framework. A good example of this are
the risks created by climate change. Whilst these risks may crystallise in
full over longer-time horizons, they are already becoming apparent in our
business operations and cut across more than one of the principal risk
categories below.
Principal Risks
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 policies, regulatory monitor,
financial loss, or loss to reputation the firm may suffer as a result of its enterprise-wide compliance and customer-specific risk assessments, compliance
failure to comply with laws, regulations, rules, related self-regulatory monitoring plan, ongoing monitoring of risk metrics and limits, customer risk
organisation standards, and codes of conduct applicable to its activities. DF assessments, regulatory compliance training, Executive Risk Committee
Capital operates within the context of the UK legal and regulatory oversight.
environment. Our Compliance Framework sets out the responsibilities within the
firm to ensure awareness of both current and upcoming legal and regulatory
changes and how the firm plans and implements those requirements
appropriately. Compliance risk also includes the Group's obligations under the
Money Laundering Regulations and covers the Groups exposure to
customer-specific risk assessments, compliance monitoring plan, ongoing
monitoring of risk metrics and limits, customer risk assessments, 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. The Conduct Risk Framework outlines our approach for testing, Code of Ethics, conduct risk training and Executive Risk Committee
ensuring good customer outcomes in line with the New Consumer Duty. It is oversight.
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, sector
counterparty failing to meet their financial obligations to DF Capital. Credit deep-dive reviews, portfolio monitoring, ongoing monitoring of risk metrics
risk is considered the most significant risk faced by DF Capital and can be and limits, hindsight reviews of default events, monitoring of external
broken down into the following categories: 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: Macro-economic
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 2023 Annual Report and Accounts.
As for any organisation, we are exposed to near-term plan risk, given the
comments made about macro-economic risk below.
Relevant updates for these risks are provided below.
Macro-economic risk
Whilst the UK macro-economic environment outlook has slightly improved in
recent months with growth in the economy, falling inflation and the
commencement of Bank of England base rate deductions, the outlook is still
uncertain. Therefore, although we believe the credit quality of the
portfolio to be robust, we still regard the macro-economic risks as elevated.
We also note that the global geopolitical climate remains difficult with the
conflict between Russia and Ukraine and major instability in the middle
east. These events have the potential to escalate in a way that could
potentially cause further supply side shocks, meaning a renewed bout of
inflation and supply chain issues cannot be ruled out.
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
18 September 2024
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 2024 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 32.
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 2024 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
18 September 2024
Condensed Consolidated Statement of Comprehensive Income
6 months 6 months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Interest and similar income 5 37,657 26,542 59,970
Interest and similar expenses 6 (15,383) (9,126) (22,336)
Net interest income 22,274 17,416 37,634
Fee income 7 695 819 1,393
Fee expenses 8 (688) (180) (719)
Net gains/(losses) on derivatives at fair value through profit or loss 9 225 72 (303)
Other operating income - 6 9
Total operating income 22,506 18,133 38,014
Staff costs 10 (7,823) (7,155) (13,431)
Other operating expenses 11 (5,403) (3,993) (8,412)
Net impairment loss on financial assets 13 (106) (3,786) (11,598)
Total operating profit 9,174 3,199 4,573
Profit before taxation 9,174 3,199 4,573
Taxation charge 14 (2,443) (938) (1,418)
Profit after taxation 6,731 2,261 3,155
Other comprehensive income/(loss):
Items that may subsequently be transferred to the income statement:
FVOCI debt securities:
Fair value movements 74 (53) 183
Total other comprehensive income/(loss) for the period, net of tax 74 (53) 183
Total comprehensive income for the period 6,805 2,208 3,338
Earnings per share: pence pence pence
Basic EPS 30 3.8 1.0 1.8
Diluted EPS 30 3.6 1.0 1.7
Condensed Consolidated Statement of Financial Position
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Assets:
Cash and balances at central banks 86,036 46,642 89,552
Loans and advances to banks 3,496 5,067 3,475
Investment securities 27 6,175 24,528 14,839
Derivatives held for risk management 210 - 537
Loans and advances to customers 15 596,771 513,787 568,044
Trade and other receivables 16 5,126 2,340 5,335
Current taxation asset 17 - 55 55
Deferred taxation asset 19 5,265 7,519 7,111
Non-current assets held for sale 50 - -
Property, plant and equipment 1,303 1,220 1,145
Right-of-use assets 20 1,141 1,299 1,227
Intangible assets 632 780 618
Total assets 706,205 603,237 691,938
Liabilities:
Customer deposits 23 579,012 498,357 574,622
Amounts due to banks 180 - -
Derivatives held for risk management 65 1,409 565
Fair value adjustments on hedged liabilities 28 182 (1,579) 424
Financial liabilities 24 1,127 1,317 1,255
Trade and other payables 7,101 4,829 4,297
Provisions 12 70 64 67
Current taxation liability 18 670 - 73
Subordinated liabilities 26 10,225 - 10,221
Total liabilities 598,632 504,397 591,524
Equity:
Issued share capital 22 1,793 1,793 1,793
Share premium 22 - - -
Merger relief 22 94,911 94,911 94,911
Merger reserve (20,609) (20,609) (20,609)
Own shares (439) (364) (401)
Retained earnings 31,917 23,109 24,720
Total equity 107,573 98,840 100,414
Total equity and liabilities 706,205 603,237 691,938
Condensed Consolidated Statement of Changes in Equity
Issued share capital Share premium Merger relief Merger reserve Own shares(1) Retained earnings/ (loss) Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
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 - (39,273) - - - 39,273 -
Balance at 30 June 2023 (Unaudited) 1,793 - 94,911 (20,609) (364) 23,109 98,840
Profit after taxation - - - - - 894 894
Other comprehensive income - - - - - 236 236
Share-based payments - - - - - 512 512
Employee Benefit Trust(1) - - - - (37) (31) (68)
Balance at 31 December 2023 (Audited) 1,793 - 94,911 (20,609) (401) 24,720 100,414
Profit after taxation - - - - - 6,731 6,731
Other comprehensive income - - - - - 74 74
Share-based payments - - - - - 493 493
Employee Benefit Trust(1) - - - - (38) (101) (139)
Balance at 30 June 2024 (Unaudited) 1,793 - 94,911 (20,609) (439) 31,917 107,573
(1)The Group has adopted look-through accounting (see note 1 of the 2023
Annual Report and Accounts) and recognised the Employee Benefit Trust (EBT)
within the consolidated financial statements.
( )
Condensed Consolidated Cash Flow Statement
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
Note £'000 £'000 £'000
Cash flows from operating activities:
Profit before taxation 9,174 3,199 4,573
Adjustments for non-cash items and other adjustments 21 1,948 4,174 13,000
Included in the income statement
Increase in operating assets 21 (28,693) (85,081) (149,456)
Increase in operating liabilities 21 6,654 17,281 94,171
Taxation received 55 - -
Net cash used in operating activities (10,862) (60,427) (37,712)
Cash flows from investing activities:
Purchase of debt securities 27 (4,936) (14,554) (14,554)
Proceeds from sale and maturity of debt securities 27 15,000 13,000 23,000
Interest received from money market funds 3 - -
Interest received on debt securities 27 75 196 383
Purchase of own shares (138) - (67)
Purchase of property, plant and equipment (364) (318) (418)
Purchase of intangible assets (166) (103) (117)
Net cash generated from/(used in) investing activities 9,474 (1,779) 8,227
Cash flows from financing activities:
Repayment of lease liabilities 25 (130) (106) (227)
Issuance of subordinated liabilities 26 - - 10,000
Acquisition of subordinated liabilities - - (51)
Coupon paid on subordinated liabilities (634) - -
Net cash (used in)/generated from financing activities (764) (106) 9,722
Net decrease in cash and cash equivalents (2,152) (62,312) (19,763)
Cash and cash equivalents at start of the period 21 90,867 110,630 110,630
Cash and cash equivalents at end of the period 21 88,715 48,318 90,867
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"), DF Capital Financial Solutions Limited and DF Capital
Retail Finance Limited, which together form the "Group".
DFCH plc is registered and incorporated in England and Wales 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, 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 financial statements included in this
Interim Financial Report have 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 2024 should be read in
conjunction with the annual audited financial statements of Distribution
Finance Capital Holdings plc for the year ended 31 December 2023.
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 2024 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 2024 and 30 June 2023 are unaudited
but has been reviewed by the Company's auditor, Deloitte LLP, and their report
appears on page 17 of this Interim Financial Report. The comparative figures
for the year ended 31 December 2023 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 Reclassification
During the period ended 30 June 2024, the Group invested into a low volatility
money market fund. This is a type of investment security which required
presentation under a new financial statement caption. In addition to this
fund, the Group also hold debt securities in the form of UK treasury bills
(and previously government gilts) which represent a sub-category of investment
securities. These balances which were previously presented as 'debt
securities' within the statement of financial position will now be presented
under 'investment securities' in addition to the balance invested into the
money market fund.
For the period ended 30 June 2024, the Group has reclassified £4,983,000 from
'debt securities' to 'investment securities' (30 June 2023: £24,528,000; 31
December 2023: £14,839,000). Both debt and investment securities operate
under the same accounting policy, IFRS 9 - financial instruments, with the
policy remaining unchanged.
1.5 Going concern
The financial statements are prepared on a going concern basis as the
Directors are satisfied that the Group has adequate resources to continue
operating for a period of at least 12 months from the date of approval of the
financial statements.
In making this assessment the Directors have considered the Group's 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.
1.6 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.
1.7 Foreign currency translation
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.
1.8 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 2024, 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 2023, with the addition of the below policy.
2.1 Non-current assets classified as held for sale
Whilst assessing whether any assets should be classified as held for sale, the
management of the Group ensure that the status of the asset satisfies all the
following criteria as set out within IFRS 5:
§ The carrying amount of the asset will be recovered principally through a
sale transaction rather than through continuing use;
§ The asset is available for immediate sale in its present condition subject
only to terms that are usual and customary for sales of such assets;
§ Its sale must be highly probable and within one year from the date of
classification;
§ Management must be committed to a plan to sell the asset; and
§ The asset is being actively marketed for sale at a sales price reasonable
in relation to its fair value.
In the event an asset satisfies the criteria, prior to reclassification the
asset should be valued in accordance with IFRS
accounting standards applicable to the asset in question.
At initial recognition the asset is measured at the lower of carrying amount
and fair value less costs to sell. Any unrealised
gains or losses are recognised in other comprehensive income. Upon disposal of
the assets the corresponding gain or loss is transferred into the income
statement in the same period as the sale. The assets fair value is reviewed on
an ongoing basis with any further gains or losses recognised through other
comprehensive income.
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
2023 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.
The Group has aligned its assessment of significant increases in credit risk
to its internal threshold criteria for prompting
customer pricing reviews for consistency.
Due to the short-term behavioural term of the current lending portfolio, the
Group has not applied a probationary ("cooling off") period to exposures which
are no longer triggering the stage 2 threshold criteria so these will move
back to stage 1 once the classification criteria is no longer met.
Definition of default
The Group aligns its definition of default to the regulatory definition for
default in all periods presented. The Group applies the regulatory guideline
of 90+ days in arrears and also uses internal and external information, along
with financial and non-financial information, available to the Group to
determine whether a default event has either occurred or is perceived to have
occurred.
Should a default event occur the Group applies a probationary ("cooling off")
period to Stage 3 counterparties before being transferred back to either stage
1 or 2. The probationary period is typically 3 months but is extended up to 12
months for more severe scenarios. During the probationary period the
counterparty must no longer meet the criteria for Stage 3 inclusion for the
entire applicable period.
Estimates
The Group has made the following estimates in the application of the
accounting policies that have a significant risk of material adjustment to the
carrying amount of assets and liabilities:
3.2. Expected credit losses loan impairment
See the Group's Annual Report for the year ended 31 December 2023 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 2024, however certain assumptions have been updated
to reflect changes in circumstances.
Probability of Default ("PD")
In the absence of sufficient internal historical default data, the Group uses
an external credit rating agency to provide credit ratings and corresponding
probability of defaults ("PDs") for the vast majority of the Group's
counterparties. These are "Through-the-Cycle" PDs which represents a long-run
average probability of default, opposed to Point-in-Time PDs which are shorter
term and partially reflect the current economic outlook. Further, the primary
data points which impact credit ratings and PDs are derived from past events,
therefore, PDs are inherently a lagging indicator of expected default activity
over the following 12-month period and longer.
Consequently, the Group utilises external macro-economic forecast data sourced
from an external economics research company to adjust PDs from
Through-the-Cycle to Point-in-Time, and further consider how default activity
may evolve in the future. Following this exercise, as at 30 June 2024 the
Group has applied a 34% scalar increase to its PDs (30 June 2023 40%; 31
December 2023 34%).
A 100% deterioration in PDs (excluding stage 3 exposures, which are already in
default) would result in an additional impairment charge of £2,429,000 at 30
June 2024 (30 June 2023: £1,643,000; 31 December 2023: £1,901,000).
Loss Given Default ("LGD")
The Group reviewed its LGD modelling assumptions as at 30 June 2024 by
comparing actual loss given default values against modelled LGD. The Group
concluded its current LGD modelling was closely aligned to recent historical
actuals.
A 10% reduction in the expected discounted cashflows from the collateral held
by the Group would result in an additional impairment charge of £1,296,000 at
30 June 2024 (30 June 2023: £2,356,000; 31 December 2023: £967,000).
Forward looking macro-economic 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 2024 (Unaudited)
Upside 20% 6,332 1.04%
Base 50% 7,118 1.17%
Downside 20% 8,722 1.44%
Severe downside 10% 14,110 2.33%
Weighted total 100% 7,980 1.32%
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 1.38%
31 December 2023 (Audited)
Upside 20% 13,181 2.22%
Base 50% 13,816 2.33%
Downside 20% 15,243 2.57%
Severe downside 10% 20,037 3.38%
Weighted total 100% 14,596 2.50%
(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 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
Scenario £'000 £'000 £'000
Upside (1,648) (1,661) (1,415)
Base (862) (912) (780)
Downside 742 1,828 647
Severe downside 6,130 5,580 5,441
3.3. Deferred taxation asset
The Group recognises a deferred taxation asset at 30 June 2024 based on the
latest approved financial forecasts through to December 2027 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 macro-economic 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.
The following sensitivities have been modelled to demonstrate the impact of
changes in assumptions on the recoverability of deferred tax assets within the
Bank:
§ A reduction in the base forecast loan book by 20% each year.
§ A reduction in the net interest margin in the base forecast by a factor of
10% each year.
§ An increase in forecast costs of risk by a factor of 50% each year.
§ A 20% increase above forecast of staff costs and other operating expenses
each year.
In each of the individual sensitivities performed above, the reduction in
profitability means the timing of full recovery of the deferred tax asset is
delayed, but in all cases it is expected to be fully utilised within 5 years
and, therefore, the Board is satisfied that these sensitivities do not impact
the level of deferred tax asset to be recognised at 30 June 2024.
In the six-month period ended 30 June 2024, 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.
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 2024
30 June 2023
31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
At amortised cost (using effective interest rate method):
On loans and advances to customers 35,101 25,070 55,203
On loans and advances to banks 2,341 1,213 4,246
On money market fund 6 - -
37,448 26,283 59,449
At FVOCI:
On debt securities 209 259 521
Total interest and similar income 37,657 26,542 59,970
6. Interest and similar expenses
6 months ended 6 months ended Year ended
30 June 2024
30 June 2023 (Unaudited)
31 December 2023
(Unaudited)
(Audited)
£'000 £'000 £'000
At amortised cost (using effective interest rate method):
On customer deposits 14,341 8,741 21,799
On subordinated liabilities 633 - 269
14,974 8,741 22,068
At FVTPL:
Net interest expense on financial instruments hedging liabilities 409 385 268
Total interest and similar expenses 15,383 9,126 22,336
7. Fee Income
6 months ended 6 months ended Year ended
30 June 2024
30 June 2023
31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Facility-related fees 621 819 1,393
Other fee Income 74 - -
Total fee income 695 819 1,393
8. Fee Expense
6 months ended 6 months ended Year ended
30 June 2024
30 June 2023
31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Enable guarantee charges 469 176 648
Financial guarantee charges 196 - 19
Undrawn commitment facility fees 10 - 8
Non-incremental direct costs 13 4 44
Total fee expense 688 180 719
9. Net gains/(losses) from derivatives and other financial instruments at fair
value through profit or loss
6 months ended 6 months ended Year ended
30 June 2024
30 June 2023
31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Net gains/(losses) on:
Interest rate swaps 198 72 (303)
Foreign currency swaps 27 - -
Total net gains/(losses) from derivatives and other financial instruments at 225 72 (303)
FVTPL
10. Staff costs
6 months ended 6 months ended Year ended
30 June 2024
30 June 2023
31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Wages and salaries 5,993 5,672 10,437
Share-based payments 493 393 905
Contractor costs 53 16 22
Social security costs 868 757 1,314
Pension costs arising on defined contribution schemes 416 317 753
Total staff costs 7,823 7,155 13,431
Contractor costs are recognised within personnel costs where the work
performed would otherwise have been performed by employees. Contractor costs
arising from the performance of other services is included within other
operating expenses.
11. Other operating expenses
6 months ended 6 months ended Year ended
30 June 2024
30 June 2023
31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Finance costs 52 17 76
Depreciation 295 230 498
Amortisation of intangible assets 152 201 376
Professional services expenses 1,498 1,006 2,189
Audit and accountancy fees 264 240 418
IT-related expenses 1,710 1,236 2,506
Other operating expenses 1,403 1,063 2,349
Unrealised currency revaluation 29 - -
Total other operating expenses 5,403 3,993 8,412
12. Provisions
Analysis for movements in other provisions:
Leasehold dilapidations
£'000
6 months ended 30 June 2024 (Unaudited)
At start of period 67
Additions -
Utilisation of provision -
Unused amounts reversed -
Unwinding of discount 3
Lease modification -
At end of period 70
6 months ended 30 June 2023 (Unaudited)
At start of period 77
Additions 25
Utilisation of provision -
Unused amounts reversed (10)
Unwinding of discount 2
Lease modification (30)
At end of period 64
Year ended 31 December 2023 (Audited)
At start of period 77
Additions 25
Utilisation of provision -
Unused amounts reversed (10)
Unwinding of discount 5
Lease modification (30)
At end of period 67
13. Net impairment loss on financial assets
6 months ended 6 months ended Year ended
30 June 2024
30 June 2023
31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Movement in impairment allowance in the period (6,769) 3,673 11,034
Write-offs 8,620 113 564
Write-back of amounts written-off (1,745) - -
Total net impairment losses on financial assets 106 3,786 11,598
See note 15 on further analysis of the movement in impairment allowances on
loans and advances to customers.
14. Taxation
Analysis of tax charge recognised in the period:
6 months ended 6 months ended Year ended
30 June 2024
30 June 2023
31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Current taxation charge:
UK corporation tax on profit for the current period 2,443 938 73
Adjustments in respect of prior years - - -
Total current taxation charge 2,443 938 73
Deferred taxation charge:
Current period - - 1,345
Adjustments in respect of prior years - - -
Total deferred taxation charge - - 1,345
Total taxation charge 2,443 938 1,418
Current tax on profits reflects UK corporation tax levied at a rate of 25% for
the period ended 30 June 2024 (30 June 2023: 23.5%; 31 December 2023: 23.5%).
The Company is not subject to the banking surcharge levied at a rate of 3% on
the profits of banking companies chargeable to corporation tax after an
allowance of £100 million 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.
15. Loans and advances to customers
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Loan book principal 602,560 519,348 580,525
Accrued interest and fees 4,099 3,135 3,602
Gross carrying amount 606,659 522,483 584,127
less: impairment allowance (7,980) (7,198) (14,596)
less: effective interest rate adjustment (1,908) (1,498) (1,487)
Total loans and advances to customers 596,771 513,787 568,044
Refer to note 13 for further details on the impairment losses recognised in
the periods.
Ageing analysis of gross loan receivables:
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Not in default:
Not yet past due 598,697 505,480 566,503
Past due: 1 - 30 days 270 268 467
Past due: 31 - 60 days 144 78 35
Past due: 61 - 90 days 55
Past due: 90+ days -
599,166 505,826 567,005
Defaulted:
Not yet past due and past due 1 - 90 days 5,974 5,502 5,020
Past due 90+ days 1,519 11,155 12,102
7,493 16,657 17,122
Total gross carrying amount 606,659 522,483 584,127
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 2024 (Audited) 545,952 21,052 17,123 584,127
Transfer to Stage 1 16,689 (16,612) (77) -
Transfer to Stage 2 (41,655) 41,655 - -
Transfer to Stage 3 (5,530) (3,995) 9,525 -
Net lending/(repayment) 64,355 (22,746) (10,911) 30,698
Write-offs - - (8,166) (8,166)
Total movement in receivables 33,859 (1,698) (9,629) 22,532
As at 30 June 2024 (Unaudited) 579,811 19,354 7,494 606,659
Impairment allowance coverage at 30 June 2024 0.53% 1.02% 62.52% 1.32%
Stage 2 Stage 3 Total
Stage 1
£'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
Impairment 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 2023 (Audited) 410,756 13,323 17,205 441,284
Transfer to Stage 1 42,913 (42,913) -
Transfer to Stage 2 (88,983) 89,328 (345) -
Transfer to Stage 3 (2,617) (3,728) 6,345 -
Net lending/(repayment) 183,883 (34,958) (5,727) 143,198
Write-offs - - (355) (355)
Total movement in receivables 135,196 7,729 (82) 142,843
As at 31 December 2023 (Audited) 545,952 21,052 17,123 584,127
Impairment allowance coverage at 31 December 2023 46.00% 0.76% 69.58% 2.50%
Analysis of impairment losses on loans and advances to customers:
Stage 1 Stage 2 Stage 3 Total
£'000 £'000 £'000 £'000
As at 1 January 2024 (Audited) 2,522 160 11,914 14,596
Transfer to Stage 1 147 (145) (2) -
Transfer to Stage 2 (231) 231 - -
Transfer to Stage 3 (46) (30) 76 -
Remeasurement of impairment allowance (71) 206 1,038 1,173
Net lending/(repayment) 777 (225) 251 803
Write-offs - - (8,592) (8,592)
Total movement in impairment allowance 576 37 (7,229) (6,616)
As at 30 June 2024 (Unaudited) 3,098 197 4,685 7,980
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 impairment 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 2023 (Audited) 1,943 84 1,693 3,720
Transfer to Stage 1 365 (365) -
Transfer to Stage 2 (464) 606 (142) -
Transfer to Stage 3 (16) (174) 190 -
Remeasurement of impairment allowance (1,668) 266 10,870 9,468
Net lending/(repayment) 2,362 (257) (342) 1,763
Write-offs - - (355) (355)
Total movement in impairment allowance 579 76 10,221 10,876
As at 31 December 2023 (Audited) 2,522 160 11,914 14,596
16. Trade and other receivables
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Trade receivables 3,148 1,276 3,965
Impairment allowance (106) (296) (259)
3,042 980 3,706
Other debtors 403 352 452
Accrued income - (89) -
Prepayments 1,681 1,097 1,177
2,084 1,360 1,629
Total trade and other receivables 5,126 2,340 5,335
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 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Not in default:
Not yet past due 2,545 941 3,513
Past due: 1 - 30 days 504 9 21
Past due: 31 - 60 days 51 41 176
Past due: 61 - 90 days 29 - 12
Past due: 90+ days - - 1
3,129 991 3,723
Defaulted:
Not yet past due and past due 1 - 90 days 9 255 65
Past due 90+ days 10 30 177
19 285 242
Total trade receivables 3,148 1,276 3,965
Analysis of movement of impairment losses on trade receivables:
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
At 1 January 259 101 101
Amounts written off (206) (1) (8)
Amounts recovered - - -
Change in impairment allowance due to new trade and other receivables 53 196 166
originated net of those derecognised due to settlement
At period end 106 296 259
17. Current taxation asset
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
At 1 January 55 55 55
Repayments (55) - -
At period end - 55 55
18. Current taxation liability
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
At 1 January (73) - -
Charge to profit and loss account (597) - (73)
Repayments - - -
At period end (670) - (73)
19. Deferred taxation asset
The table below shows the movement in net deferred tax assets:
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
At 1 January 7,111 8,457 8,457
Charge to profit and loss account - - (1,346)
Utilisation of deferred taxation asset (1,846) (938) -
At period end 5,265 7,519 7,111
The Group has an unrecognised deferred tax asset value of £0.7m (30 June
2023: £0.8m, 31 December 2023: £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.
20. Right-of-use assets
Buildings
£'000
Cost:
31 December 2022 (Audited) 1,153
Additions 385
Disposals and write offs -
Lease modifications 567
As at 30 June 2023 (Unaudited) 2,105
Additions 22
Disposals and write offs -
As at 31 December 2023 (Audited) 2,127
Additions 3
Disposals and write offs -
As at 30 June 2024 (Unaudited) 2,130
Accumulated depreciation:
31 December 2022 (Audited) 720
Charge for the period 86
Disposals and write offs -
As at 30 June 2023 (Unaudited) 806
Charge for the period 94
Disposals and write offs -
As at 31 December 2023 (Audited) 900
Charge for the period 89
Disposals and write offs -
As at 30 June 2024 (Unaudited) 989
Carrying amount:
At 30 June 2023 (Unaudited) 1,299
At 31 December 2023 (Audited) 1,227
At 30 June 2024 (Unaudited) 1,141
21. 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 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Cash and balances at central banks 86,036 46,642 89,552
Loans and advances to banks 1,487 1,676 1,315
Money market fund 1,192 - -
Total cash and cash equivalents 88,715 48,318 90,867
Adjustments for non-cash items and other adjustments included in the income
statement:
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Depreciation of property, plant and equipment 206 144 318
Depreciation of right-of-use assets 89 86 180
Amortisation of intangible assets 152 201 376
Share-based payments 493 393 905
Impairment allowances on receivables 106 3,786 11,598
Movement in other provisions - (13) (15)
Interest income on money market funds (3) - -
Interest income on debt securities (209) (259) (521)
Finance costs 52 17 76
Unwind of discount 3 2 5
Interest on subordinated liabilities 633 - 269
Amortisation of subordinated liabilities acquisition costs 5 - 3
Interest in suspense 421 (183) (194)
Total non-cash items and other adjustments 1,948 4,174 13,000
Net change in operating assets:
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Increase in loans and advances to customers (29,060) (65,095) (141,648)
Derivative financial instruments 327 57 (480)
Increase/(decrease) in other assets 40 (20,043) (7,328)
Increase in operating assets (28,693) (85,081) (149,456)
Net change in operating liabilities:
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Increase in customer deposits 4,390 18,622 94,886
Derivative financial instruments (500) 1,367 522
Fair value adjustments for portfolio hedged risk (242) (1,495) 508
Increase/(decrease) in other liabilities 2,830 (1,213) (1,745)
Increase in operating liabilities 6,478 17,281 94,171
22. Equity
30 June 30 June 2023 31 December 2023 30 June 2024 30 June 2023 31 December 2023
2024
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
No. No. No. £'000 £'000 £'000
Authorised:
Ordinary shares of 179,369,199 179,369,199 179,369,199 1,793 1,793 1,793
1p each
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 2023 (Audited) 179,369,199 1,793 39,273 94,911 135,977
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
No transactions within the period - - - - - -
Balance at 31 December 2023 179,369,199 1,793 - 94,911 96,704
(Audited)
No transactions within the period - - - - - -
Balance at 30 June 2023 (Unaudited) 179,369,199 1,793 - 94,911 96,704
Own shares:
Own shares represent 2,677,859 (30 June 2023: 2,963,283; 31 December 2023:
2,926,617) 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 2024 was £780,463 (30 June
2023: £1,022,333; 31 December 2023: £658,489).
23. Customer deposits
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Retail deposits 579,012 498,357 574,622
Total customer deposits 579,012 498,357 574,622
Maturity analysis:
Amounts repayable within one year 476,466 435,159 512,168
Amounts repayable after one year 102,546 63,198 62,454
24. Financial liabilities
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Lease liabilities 1,127 1,267 1,205
Preference shares - 50 50
Total financial liabilities 1,127 1,317 1,255
25. Lease liabilities
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Current 154 128 148
Non-current 973 1,139 1,057
Total lease liabilities 1,127 1,267 1,205
Maturity analysis:
Year 1 252 253 253
Year 2 252 252 252
Year 3 252 252 252
Year 4 253 252 253
Year 5 252 253 252
Onwards 231 482 360
Total lease payments 1,492 1,744 1,622
Finance charges (365) (477) (417)
Total lease liabilities 1,127 1,267 1,205
Movements in lease liabilities in the period:
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
At 1 January 1,205 395 395
Additions - 365 365
Finance costs 52 17 76
Lease payments (130) (106) (227)
Lease modification - 596 596
At period end 1,127 1,267 1,205
26. Subordinated liabilities
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000
Tier 2 notes - 10,000
10,000
Accrued interest - 269
269
Deferred acquisition costs - (48)
(44)
Total subordinated liabilities - 10,221
10,225
In September 2023 the Group entered into a non-dilutive Tier 2 capital
facility from British Business Investments, with an initial £5m drawdown on
inception and a further £5m drawdown in October 2023. The contractual term
dates for the notes are 5 years from the respective drawdown date. The Group
is required to pay bi-annual coupons with a full principal repayment due on
the maturity date.
Refer to note 29 for the maturity profile of the subordinated liabilities
27. Investment securities
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Investments not measured at fair value:
Money market fund 1,192 - -
Debt securities measured at FVOCI:
Treasury bills 4,983 - -
UK government gilts - 24,528 14,839
Total investment securities 6,175 24,528 14,839
Analysis of debt securities movements during the period:
At 1 January 14,839 22,964 22,964
Purchased debt securities 4,936 14,554 14,554
Proceeds from sold or maturing securities (15,000) (13,000) (23,000)
Coupons received (75) (196) (383)
Interest income 209 259 521
Unrealised Gains 74 (53) 183
At period end 4,983 24,528 14,839
Maturity profile of debt securities:
Within 12 months - 24,528 14,839
Over 12 months 4,983 - -
In May 2024 the Group entered into a cross-currency swap to support lending
denominated in non-GBP currencies. Surplus funds from the swap were invested
into a low volatility money market fund to earn a return whilst retaining same
day liquidity. The fund invests in a range of cash holding and short dated
securities which are held to maturity. This materially removes exposure to
market movements, meaning the fund consistently trades at par value.
The fund is a type of investment security which required presentation under a
new financial statement caption. In addition to this fund, the Group also hold
debt securities in the form of UK treasury bills (and previously government
gilts) which represent a sub-category of investment securities. For the period
ended 30 June 2024, the Group has reclassified £4,983,000 from 'debt
securities' to 'investment securities' (30 June 2023: £24,528,000; 31
December 2023: £14,839,000).
28. Hedge accounting
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Hedged liabilities:
Current hedge relationships 199 (1,593) 407
Swap inception adjustment (17) 14 17
Fair value adjustments on hedged liabilities 182 (1,579) 424
As at the period ended 30 June 2024, the Group presently only hedges
liabilities in the form of its customer deposits and subordinated liabilities.
The Group does not hedge its loans and advances to customers given these
assets are expected to reprice within a short time frame.
At present, the Group expects its hedging relationships to be highly effective
as the Group only hedges liabilities for which the fair value movements
between the hedged item and hedging instrument are expected to be highly
correlated.
Further, the Group does not anticipate having to rebalance the hedging
relationship once entered into due to the contractual terms of the hedged
liabilities meaning that the contractual cash flows are highly predictable,
with any deviation likely to be negligible. In the period ended 30 June 2024,
there has been no cancelled or de-designated hedge relationships due to failed
hedge accounting relationships.
29. 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
30 June 2024 (Unaudited) £'000 £'000 £'000 £'000 £'000
Financial assets not measured at fair value:
Cash and balances at central banks 86,036 86,036 86,036 - -
Loans and advances to banks 3,496 3,496 3,496 - -
Investment securities 1,192 1,192 1,192 - -
Loans and advances to customers 596,771 596,771 - - 596,771
Trade receivables 3,042 3,042 - - 3,042
Other receivables 403 403 - - 403
690,940 690,940 90,724 - 600,216
Financial liabilities not measured at fair value:
Customer deposits 579,012 579,500 - - 579,500
Amounts due to banks 180 180 180 - -
Other financial liabilities 1,127 1,127 - - 1,127
Subordinated liabilities 10,225 10,497 - 10,497 -
Trade payables 97 97 - - 97
Other payables 4,317 4,317 - - 4,317
594,958 595,718 180 10,497 585,041
Carrying amount Fair value Level 1 Level 2 Level 3
30 June 2023 (Unaudited) £'000 £'000 £'000 £'000 £'000
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
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
31 December 2023 (Audited) £'000 £'000 £'000 £'000 £'000
Financial assets not measured at fair value:
Cash and balances at central banks 89,552 89,552 89,552 - -
Loans and advances to banks 3,475 3,475 3,475 - -
Loans and advances to customers 568,044 568,044 - - 568,044
Trade receivables 3,706 3,706 - - 3,706
Other receivables 452 452 - - 452
665,229 665,229 93,027 - 572,202
Financial liabilities not measured at fair value:
Customer deposits 574,622 574,177 - - 574,177
Other financial liabilities 1,205 1,205 - - 1,205
Subordinated liabilities 10,221 10,742 - 10,742 -
Trade payables 528 528 - - 528
Other payables 1,148 1,148 - - 1,148
Preference shares 50 50 - - 50
587,774 587,850 - 10,742 577,108
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.
Investment securities
The investment securities carried at amortised cost represent the Groups
investment in a money market fund. Due to the short-term nature of the
underlying investments which are held to maturity, the fund has never deviated
from par value. The carrying value is therefore considered to be approximately
equal to the fair value.
Loans and advances to customers
Due to the short-term nature of loans and advances to customers, their
carrying value is considered to be approximately equal to their fair value.
These items are short term in nature such that the impact of the choice of
discount rate would not make a material difference to the calculations.
Customer deposits
The fair value of fixed rate 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.
Subordinated liabilities
The fair value of the subordinated liabilities is estimated by discounting the
expected cashflows using an interest rate for
similar liabilities with the same remaining maturity rate and credit profile.
Trade and other receivables, other borrowings and other liabilities
These represent short-term receivables and payables and as such their carrying
value is considered to be equal to their fair value.
Financial assets and liabilities included in the statement of financial
position that are measured at fair value:
Carrying Amount Principal Amount Level 1 Level 2 Level 3
30 June 2024 (Unaudited) £'000 £'000 £'000 £'000 £'000
Financial assets measured at fair value:
Debt securities 4,983 5,000 4,983 - -
Derivative assets 210 10,000 - 210 -
5,193 15,000 4,983 210 -
Financial liabilities measured at fair value:
Derivative liabilities 65 10,000 - 65 -
65 10,000 - 65 -
Carrying Amount Principal Amount Level 1 Level 2 Level 3
30 June 2023 (Unaudited) £'000 £'000 £'000 £'000 £'000
Financial assets measured at fair value:
Debt securities 24,528 25,000 24,528 - -
24,528 25,000 24,528 - -
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
31 December 2023 (Audited) £'000 £'000 £'000 £'000 £'000
Financial assets measured at fair value:
Debt securities 14,839 15,000 14,839 - -
Derivative assets 537 45,000 - 57 -
15,376 60,000 14,839 57 -
Financial liabilities measured at fair value:
Derivative liabilities 565 100,000 - 565 -
565 100,000 - 565 -
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 2023 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 2023 for further details of the Group's approach to credit risk
management and impairment provisioning.
Collateral held as security:
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
£'000 £'000 £'000
Fully collateralised - loan-to-value* ratio:
Less than 50% 14,123 4,972 14,261
51% to 70% 63,736 56,006 56,482
71% to 80% 113,066 61,764 93,582
81% to 90% 109,306 80,598 108,833
91% to 100% 274,914 301,148 291,266
Total collateralised lending 575,145 504,488 564,424
Partially collateralised lending - - -
Unsecured lending 31,514 17,995 19,703
* Calculated using wholesale collateral values. Wholesale collateral values
represent the invoice total (including applicable VAT) from the invoice
received from the supplier of the product. The wholesale amount is less than
the recommended retail price (RRP) of the product.
The Group's lending activities are asset based so it expects that the majority
of its exposure is secured by the collateral value of the asset that has been
funded under the loan agreement. The Group has title to the collateral which
is funded under loan agreements. The collateral includes boats, motorcycles,
recreational vehicles, caravans, light commercial vehicles, industrial and
agricultural equipment. The collateral has low depreciation and is not subject
to rapid technological changes or redundancy. There has been no change in the
Group's assessment of collateral and its underlying value in the reporting
period.
The assets are generally in the counterparty's possession, but this is
controlled and managed by the asset audit process. The audit process checks
on a periodic basis that the asset is in the counterparty's possession and has
not been sold out of trust or is otherwise not in the counterparty's control.
The frequency of the audits is initially determined by the risk rating
assessed at the time that the borrowing facility is first approved and is
assessed on an ongoing basis.
Additional security may also be taken to further secure the counterparty's
obligations and further mitigate risk. Further to this, in many cases, the
Group is often granted, by the counterparty, an option to sell-back the
underlying collateral.
Based on the Group's current principal products, the counterparty repays its
obligation under a loan agreement with the Group at or before the point that
it sells the asset. If the asset is not sold and the loan agreement reaches
maturity, the counterparty is required to pay the amount due under the loan
agreement plus any other amounts due. In the event that the counterparty does
not pay on the due date, the Group's customer management process will maintain
frequent contact with the counterparty to establish the reason for the delay
and agree a timescale for payment. Senior Management will review actions on a
regular basis to ensure that the Group's position is not being prejudiced by
delays.
In the event the Group determines that payment will not be made voluntarily,
it will enforce the terms of its loan agreement and recover the asset,
initiating legal proceedings for delivery, if necessary. If there is a
shortfall between the net sales proceeds from the sale of the asset and the
counterparty's obligations under the loan agreement, the shortfall is payable
by the counterparty on demand.
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 2024 30 June 2023 31 December 2023
£'000 % £'000 % £'000 %
Leisure:
Lodges and holiday homes 118,549 19.5% 158,586 30.4% 148,441 25.4%
Motorhomes and caravans 164,020 27.0% 97,414 18.6% 131,478 22.5%
Marine 63,403 10.5% 48,420 9.3% 55,981 9.6%
Motorsport 33,813 5.6% 28,965 5.5% 27,458 4.7%
Automotive 21,803 3.6% 4,107 0.8% 8,366 1.4%
401,588 66.2% 337,492 64.6% 371,724 63.6%
Commercial:
Transport 104,854 17.3% 112,605 21.6% 130,982 22.4%
Industrial equipment 32,986 5.4% 31,644 6.1% 35,926 6.2%
Agricultural equipment 26,488 4.4% 25,835 4.9% 26,995 4.6%
Other serialised assets 3,575 0.6% - 0.0% - 0.0%
167,903 27.7% 170,084 32.6% 193,903 33.2%
37,168 6.1% 14,907 2.8% 18,500 3.2%
Wholesale and receivables funding
Total gross receivables 606,659 100% 522,483 100% 584,127 100%
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 2023 for description of the meanings of Stages 1, 2
and 3.
30 June 2024 (Unaudited) Stage 1 Stage 2 Stage 3 Total
£'000 Portfolio % £'000 Portfolio % £'000 Portfolio % £'000 Portfolio %
Gross carrying
amount:
Above average (Risk rating 1-2) 441,583 73% - 0% 251 0% 441,834 73%
Average 118,170 20% 15,912 3% - 0% 134,082 22%
(Risk rating 3-5)
Below average (Risk rating 6+) 20,058 3% 3,442 1% 7,243 1% 5%
30,743
Total gross carrying amount 579,811 96% 19,354 3% 7,494 1% 606,659 100%
£'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage %
Impairment allowance:
Above average (Risk rating 1-2) (1,544) 0.3% - 0.0% (47) 18.7% 0.4%
(1,591)
Average (1,346) 1.1% (131) 0.8% - 0.0% 1.1%
(1,477)
(Risk rating 3-5)
Below average (Risk rating 6+) (208) 1.0% (66) 1.9% (4,638) 64.0% 16.0%
(4,912)
Total impairment allowance (3,098) 0.5% (197) 1.0% (4,685) 62.5% 1.3%
(7,980)
30 June 2023 (Unaudited) Stage 1 Stage 2 Stage 3 Total
£'000 Portfolio % £'000 Portfolio % £'000 Portfolio % £'000 Portfolio %
Gross carrying
amount:
Above average (Risk rating 1-2) 366,504 70% 0% - 0% 367,182 70%
678
Average 90,005 17% 3% 37 0% 105,144 20%
15,102
(Risk rating 3-5)
Below average (Risk rating 6+) 30,837 6% 1% 16,620 3% 50,157 10%
2,700
Total gross carrying amount 487,346 93% 4% 16,657 3% 522,483 100%
18,480
£'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage %
Impairment allowance:
Above average (Risk rating 1-2) (944) 0.3% 0.2% - 0.0% (945) 0.3%
(1)
Average (1,101) 1.2% 1.1% (1) 4.0% (1,273) 1.2%
(171)
(Risk rating 3-5)
Below average (Risk rating 6+) (304) 1.0% 1.3% (4,641) 27.9% (4,980) 9.9%
(35)
Total impairment allowance (2,349) 0.5% 1.1% (4,642) 27.9% (7,198) 1.4%
(207)
31 December 2023 (Audited) Stage 1 Stage 2 Stage 3 Total
£'000 Portfolio % £'000 Portfolio % £'000 Portfolio % £'000 Portfolio %
Gross carrying
amount:
Above average (Risk rating 1-2) 432,493 74% - 0% 763 0% 433,256 74%
Average 93,568 16% 17,729 3% 1,850 0% 113,147 19%
(Risk rating 3-5)
Below average (Risk rating 6+) 19,891 3% 3,323 1% 14,510 2% 37,724 6%
Total gross carrying amount 545,952 93% 21,052 4% 17,123 3% 584,127 100%
£'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage % £'000 ECL coverage %
Impairment allowance:
Above average (Risk rating 1-2) (1,483) 0.3% - 0.0% (526) 68.9% (2,009) 0.5%
Average (860) 0.9% (150) 0.8% (315) 17.0% (1,325) 1.2%
(Risk rating 3-5)
Below average (Risk rating 6+) (179) 0.9% (10) 0.3% (11,073) 76.3% (11,262) 29.9%
Total impairment allowance (2,522) 0.5% (160) 0.8% (11,914) 69.6% (14,596) 2.5%
See note 15 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 2,545 941 3,513
Past due but not in default 584 50 210
Defaulted 19 285 242
Total gross carrying amount 3,148 1,276 3,965
Impairment allowance (106) (296) (259)
Carrying amount 3,042 980 3,706
See note 16 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 2023 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 2023 for further details of the Group's approach to market risk
management.
30. Earnings per share
30 June 2024 30 June 2023 31 December 2023
(Unaudited)
(Unaudited)
(Audited)
Earnings attributable to ordinary shareholders £'000 £'000 £'000
Profit after tax attributable to the shareholders 6,731 2,261 3,155
Weighted average number of shares, thousands
Basic 179,369 179,369 179,369
Dilutive impact of share-based payment schemes 8,606 - 8,125
187,975 179,369 187,494
Diluted
Earnings per share, pence per share
Basic 3.8 1.0 1.8
Diluted 3.6 1.0 1.7
31. Related party disclosures
During the six months period ended 30 June 2024, 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 2023.
32. Subsequent events
In July 2024 the ENABLE Guarantee with the British Business Bank was upsized
from £250m to £350m.
There have been no other significant events between 30 June 2024 and the date
of approval of the Interim Financial Report that require a change or
additional disclosure in the condensed consolidated interim financial
statements.
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. Gross revenues and net interest margin are deemed
to be alternative performance measures ("APMs") with their definitions set out
below.
Gross revenues (£m):
30 June 2024 30 June 2023 31 December 2023
6-month 6-month 12-month
(Unaudited) (Unaudited) (Audited)
Interest and similar income 37.7 26.5 60.0
Fee income 0.7 0.8 1.4
Fee expenses (0.7) (0.2) (0.7)
Net gains/(losses) on derivatives at fair value through profit or loss and 0.2 0.1 (0.3)
other operating income
Total gross revenues 37.9 27.3 60.4
Net interest margin (%):
30 June 2024 30 June 2023 31 December 2023
6-month 6-month 12-month
(Unaudited) (Unaudited) (Audited)
Total operating income (£m) 22.5 18.1 38.0
Add back: Fee expenses (£m) 0.7 0.2 0.7
Adjusted total operating income (£m) 23.2 18.3 38.7
Average gross receivables (£m) 591 489 509
Net interest margin (%) 7.8% 7.5% 7.6%
APMs may be considered in addition to, but not as a substitute for, the
reported IFRS results. The Group believes that these APMs together with the
other metrics presented above, when considered together with reported IFRS
results, provide stakeholders with additional information to better understand
the Group's financial performance.
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