REG - Non-Standard Fin - Final Results <Origin Href="QuoteRef">NSF.L</Origin> - Part 2
03/03/2017 07:05
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financial brokers that are keen to offer customers an alternative solution to
the market leader. Whilst this required meaningful investment, we began to
see solid month-on-month revenue growth and expect this to increase further
once our infrastructure is fully in place.
Reported results
As at 31 December 2016 the business had a net loan book of £8.8m delivering
reported revenue of £1.8m (2015: n/a) and operating profit of £0.5m (2015:
n/a) reflecting the performance in the eight month period since acquisition.
Year ended 31 December 2016Reported£000 2015Reported£000
Revenue 1,849 -
Impairments (243)
Revenue less cost of sales 1,606
Admin expenses (1,146) -
Operating profit 460 -
Finance cost (198) -
Profit before tax 262 -
Taxation (58) -
Profit after tax 204 -
Pro forma results
On a pro forma basis, Trusttwo generated pro forma revenue of £2.4m (2015:
n/a) and pro forma operating profit of £0.7m (2015: n/a). Administration
costs almost doubled in the second half versus the first half as we invested
in building the infrastructure (people, systems and processes) to be able to
grow revenues substantially in 2017 once all elements of our customer
experience are working as planned.
Year ended 31 December 2016Pro forma16
£000
Revenue 2,416
Impairments (358)
Revenue less impairments 2,058
Admin expenses (1,402)
Operating profit 656
Finance cost (316)
Profit before tax 340
Taxation (68)
Profit after tax 272
Key Performance Indicators17
Period end customer numbers (000) 3.3
Period end loan book (£m) 8.8
Average loan book (£m) 7.7
Revenue yield (%) 31.9
Risk adjusted margin (%) 26.7
Impairment/revenue (%) 14.8
Operating profit margin (%) 27.2
Return on asset17 (%) 8.5
16 Assuming Trusttwo was acquired on 1 January 2016
17 Key performance indicators have been provided using pro forma normalised
data only as reported data only includes performance metrics from the date of
acquisition. All definitions are as per above.
Plans for 2017
We will soon be launching a much improved website that we expect will attract
more customers as well as improve conversion rates further. The new site will
also expand our existing product parameters thereby increasing our appeal to
potential customers that are looking to tailor any offer to best suit their
needs. The launch will be accompanied by a fully-integrated marketing
campaign across all key channels including online, social as well as through
referrals from the Everyday Loans branch network. So far we have been pleased
with the positive response from staff in the branches and hope to make further
progress on increasing the number of referrals and conversion rates during
2017. Financial brokers represent a significant opportunity for Trusttwo and
we have been leveraging Everyday Loans' excellent relationships as well as
building new ones with additional brokers and lead generators for whom the
Trusttwo proposition is more attractive.
With our infrastructure and funding in place, we believe that there is a
substantial opportunity for Trusttwo to become the clear number two in the
UK's guaranteed loans market.
Central costs
Year ended 31 December 2016Normalised18 2016Amortisation of acquired intangibles and exceptional items 2016Reported
£000 £000 £000
Revenue - - -
Admin expenses (3,257) (10,714) (13,971)
Exceptional items - (626) (626)
Operating loss (3,257) (11,340) (14,597)
Finance cost (264) - (264)
Loss before tax (3,521) (11,340) (14,861)
Taxation 374 2,037 2,411
Loss after tax (3,147) (9,303) (12,450)
18 Adjusted to exclude the amortisation of acquired intangibles related to the
acquisition of Loans at Home and Everyday Loans and exceptional items
Period ended 31 December 2015Normalised19 2015Amortisation of acquired intangibles and exceptional items 2015Reported
£000 £000 £000
Revenue - - -
Admin expenses (2,684) (4,030) (6,714)
Exceptional items - (5,542) (5,542)
Operating loss (2,684) (9,572) (12,256)
Finance income 70 - 70
Loss before tax (2,614) (9,572) (12,186)
Taxation - 1,751 1,751
Loss after tax (2,614) (7,821) (10,435)
19 Adjusted to exclude the amortisation of acquired intangibles related to the
acquisition of Loans at Home and Everyday Loans and exceptional items
Normalised administrative expenses, including head office costs and other
expenses associated with the running of the plc (before the amortisation of
acquired intangibles and exceptional items) were £3.3m (2015: £2.7m). The
amortisation of intangible assets acquired as part of the acquisition of Loans
at Home and Everyday Loans was £10.7m (2015: £4.0m) reflecting a full period
of amortisation for Loans at Home and eight months for Everyday Loans. An
exceptional item charge of £0.6m was incurred in the year and related to stamp
duty paid at completion on the acquisition of Everyday Loans (2015: £5.5m).
The charge in the prior year related to acquisition-related expenses. Finance
costs of £0.3m (2015: finance income of £0.1m) were also incurred in the first
half and related to the non-utilisation fee on the Everyday Loans bank
facility prior to the drawdown at completion.
Principal risks
There are a number of potential risks and uncertainties which could have a
material impact on the Group's performance and that could cause reported and
pro forma results to differ materially from expected and historical results
The principal risks facing the Group, together with the Group's risk
management process in relation to these risks, are unchanged from those
reported in the Group's Annual Report for the period ended 31 December 2015
(which is available for download at www.nonstandardfinance.com), save that we
have also now included an additional risk relating to reputation. The
principal risks relate to the following areas:
· Conduct - risk of poor outcomes for our customers or other key stakeholders as a result of the Group's actions;
· Regulation - risk through changes to regulations or a failure to comply with existing rules and regulations;
· Credit - risk of loss through poor underwriting or a diminution in the credit quality of the Group's customers;
· Business strategy and operations - risk that the Group fails to execute its plan as expected or that the outcome from executing such strategy is not as planned;
· Liquidity - while the Group is well-capitalised and has secured committed debt facilities of £95m with an opportunity to increase, with the consent of the banks, to £120m, prevailing uncertainty in global financial markets following the UK's decision to leave the European Union means that there is a risk that the Group may be unable to secure sufficient finance in the future to execute its long-term business strategy; and
· Reputation - a failure to manage one or more of the risks above may damage the reputation of the Group or any of its subsidiaries that in turn may materially impact the future operational and/or financial performance of the Group.
On behalf of the Board of Directors
Nick Teunon
Chief Financial Officer
3 March 2017
Consolidated statement of comprehensive income
For the year ended 31 December 2016
Note Before fair value adjustments, amortisation of acquired intangibles and exceptional items £'000 Fair value adjustments, amortisation of acquired intangibles and exceptional items £'000 Year ended31 Dec 2016 £'000
Revenue 2 81,099 (8,342) 72,757
Impairment/cost of sales (23,201) - (23,201)
Administrative expenses (44,074) (10,714) (54,788)
Operating profit/(loss) 3 13,824 (19,056) (5,232)
Exceptional items - (626) (626)
Profit/(loss) on ordinary activities before interest and tax 13,824 (19,682) (5,858)
Finance (cost)/income (3,484) - (3,484)
Profit/(loss) on ordinary activities before tax 10,340 (19,682) (9,342)
Tax on profit/(loss) on ordinary activities 5 (2,278) 3,622 1,344
Profit/(loss) for the year 8,062 (16,060) (7,998)
Total comprehensive loss for the Period (7,998)
Loss attributable to:
- Owners of the parent (7,998)
- Non-controlling interests -
Loss per share
Note Year ended31 Dec 2016
Pence
Basic and diluted 6 (2.60)
There are no recognised gains or losses other than disclosed above and there
have been no discontinued activities in the year.
For the period ended 31 December 2015
Note Before fair value adjustments, amortisation of acquired intangibles and exceptional items £'000 Fair value adjustments, amortisation of acquired intangibles and exceptional items £'000 Period from incorporation to 31 Dec 2015 £'000
Revenue 2 14,657 (5,456) 9,201
Impairment/cost of sales (3,858) - (3,858)
Administrative expenses (11,340) (4,030) (15,370)
Operating loss 3 (541) (9,486) (10,027)
Exceptional items - (6,135) (6,135)
Loss on ordinary activities before interest and tax (541) (15,621) (16,162)
Finance income 70 - 70
Loss on ordinary activities before tax (471) (15,621) (16,092)
Tax on loss on ordinary activities 5 1,271 1,751 3,022
Profit/(loss) for the year 800 (13,870) (13,070)
Total comprehensive loss for the year (13,070)
Loss attributable to:
- Owners of the parent (13,070)
- Non-controlling interests -
Loss per share
Note Period from incorporationto 31 Dec 2015
Pence
Basic and diluted 6 (21.25)
Consolidated statement of financial position
As at 31 December 2016
Note 31 Dec 2016 £'000 31 Dec 2015 £'000
ASSETS
Non-current assets
Goodwill 8 132,070 40,176
Intangible assets 9 17,412 14,119
Property, plant and equipment 5,459 1,718
154,941 56,013
Current assets
Inventories - 3
Amounts receivable from customers 10 180,413 28,412
Trade and other receivables 10,753 10,275
Cash and cash equivalents 5,215 7,320
196,381 46,010
Total assets 351,322 102,023
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 8,146 13,803
Total current liabilities 8,146 13,803
Non-current liabilities
Deferred tax liability 11 6,793 3,057
Bank loans 87,300 -
Total non-current liabilities 94,093 3,057
Equity
Share capital 13 15,852 5,264
Share premium 13 254,995 92,714
Retained loss (22,019) (13,070)
248,828 84,908
Non-controlling interests 255 255
Total equity 249,083 85,163
Total equity and liabilities 351,322 102,023
Consolidated statement of changes in equity
For the year ended 31 December 2016
Share capital £'000 Share premium £'000 Retained loss £'000 Non-controlling interest £'000 Total £'000
At incorporation - - - - -
Total comprehensive loss for the period - - (13,070) - (13,070)
Transactions with owners, recorded directly in equity:
Issue of shares 5,264 92,714 - 255 98,233
At 31 December 2015 5,264 92,714 (13,070) 255 85,163
Total comprehensive loss for the year - - (7,998) - (7,998)
Transactions with owners, recorded directly in equity: Dividends paid - - (951) - (951)
Issue of shares 10,588 162,281 - - 172,869
At 31 December 2016 15,852 254,995 (22,019) 255 249,083
Consolidated statement of cash flows
For the year ended 31 December 2016
Note Year ended 31 Dec 2016 Period from incorporation to
£'000 31 Dec 2015 £'000
Net cash used in operating activities 14 (23,541) (9,532)
Cash flows from investing activities
Purchase of property, plant and equipment (4,327) (341)
Acquisition of subsidiary (230,784) (81,111)
Net cash used in investing activities (235,111) (81,452)
Cash flows from financing activities
Finance (cost)/income (3,484) 70
Debt raising 87,300 -
Dividends paid (951) -
Proceeds from sale of property, plant and equipment 813 -
Proceeds from issue of share capital 172,869 98,234
Net cash from financing activities 256,547 98,304
Net (decrease)/increase in cash and cash equivalents (2,105) 7,320
Cash and cash equivalents at beginning of year 7,320 -
Cash and cash equivalents at end of year 5,215 7,320
As at 31 December 2016 the Group had cash of £5.2m (2015: £7.3m) with debt of
£87.3m (2015: £nil). This cash balance reflects the acquisition of Everyday
Loans (including Trusttwo) and associated fundraising for the acquisition
together with the trading activities of the Group during the year . The
year-end cash balance also reflects the seasonal peak in lending that takes
place in December at Loans at Home which reduces cash at 31 December, but
subsequently gets collected in the weeks following the year end.
Notes to the preliminary announcement
1. Basis of preparation
The preliminary announcement has been prepared in accordance with the Listing
Rules of the FCA and is based on the 2016 consolidated financial statements
which have been prepared under IFRS as adopted by the European and those parts
of the Companies Act 2006 applicable to companies reporting under IFRS.
The accounting policies applied in preparing the preliminary announcement are
consistent with those used in preparing the statutory financial statements for
the period ended 31 December 2016. The preliminary announcement has been
prepared on a going concern basis consistent with the basis of preparation of
the statutory financial statements for the period ended 31 December 2016.
The preliminary announcement does not constitute the statutory financial
statements of the Group within the meaning of Section 434 of the Companies Act
2006.
The audit of the statutory financial statements for the period ended 31
December 2016 is not yet complete. These accounts will be finalised on the
basis of the financial information presented in this preliminary announcement
and will be delivered to the Registrar of Companies following the Company's
annual general meeting.
The preliminary announcement has been agreed with the Company's auditor for
release.
2. Revenue
Revenue is recognised by applying the EIR to the carrying value of a loan. The
EIR is calculated at inception and represents the rate which exactly discounts
the future contractual cash receipts from a loan to the amount of cash
advanced under the loan, plus directly attributable issue costs. In addition,
the EIR takes account of customers repaying early.
Year ended31 Dec 2016£'000 Period from incorporation to 31 Dec 2015
£'000
Interest income 81,099 14,657
Fair value unwind on acquired loan portfolio (8,342) (5,456)
Total revenue 72,757 9,201
3. Operating profit/(loss) for the year is stated after charging/(crediting):
Year ended31 Dec 2016£'000 Period from incorporation to 31 Dec 2015
£'000
Depreciation of property, plant and equipment 690 198
Amortisation of intangible assets 10,714 4,030
Staff costs 20,345 5,076
Rentals under operating leases 1,110 136
(Profit)/loss on sale of property, plant and equipment (363) 51
Rentals received under operating leases (28) (53)
4. Segment information
Management has determined the operating segments by considering the financial
and operational information that is reported internally to the chief operating
decision-maker, the Board of Directors, by management. For management
purposes, the Group is currently organised into four operating segments
Central (head office activities), Loans at Home (home credit), Everyday Loans
(branch based lending) and Trusttwo (guaranteed lending). The Group's
operations are all located in the United Kingdom and all revenue is
attributable to customers in the United Kingdom.
Year ended 31 December 2016 Everyday Loans £'000 Loans at Home £'000 Trusttwo1£'000 Central £'000 2016 Total£'000
Interest income 37,080 42,170 1,849 - 81,099
Fair value unwind on acquired loan portfolio (7,916) (426) - - (8,342)
Total revenue 29,164 41,744 1,849 - 72,757
Operating profit/(loss) before amortisation 6,848 1,431 460 (3,257) 5,482
Amortisation of intangible assets - - - (10,714) (10,714)
Operating profit/(loss) before exceptional items 6,848 1,431 460 (13,971) (5,232)
Exceptional items - - - (626) (626)
Finance cost (2,699) (323) (198) (264) (3,484)
Profit/(loss) before taxation 4,149 1,108 262 (14,861) (9,342)
Taxation (1,036) 27 (58) 2,411 1,344
Profit/(loss) for the year 3,113 1,135 204 (12,450) (7,998)
Everyday Loans £'000 Loans at Home £'000 Trusttwo1£'000 Central £'000 Consolidation adjustments2£'000 2016 Total£'000
Total assets 136,362 40,258 8,783 274,883 (108,964) 351,322
Total liabilities (98,589) (14,239) - (1,595) 12,184 (102,239)
Net assets 37,773 26,019 8,783 273,288 (96,780) 249,083
Capital expenditure 1,764 2,386 - 177 - 4,327
Depreciation of plant, property and equipment 226 425 - 39 - 690
Amortisation of intangible assets - - - 10,714 - 10,714
1 Trusttwo is supported by the infrastructure of Everyday Loans and only the
net loan book and profit and loss is reported to the board separately and has
therefore been disclosed above.
2 Consolidation adjustments include the acquisition intangibles of £17.4m
(2015: £14.1m), good will of £132.1m (2015: £40.2m), deferred tax liability of
£6.8m (2015: £3.1m), fair value of loan book of £15.8m (2015: £0.4m) and the
elimination of intra group balances.
All inter-segment transactions are transacted on an arm's length basis. The
results of each segment have been prepared using accounting policies
consistent with those of the Group as a whole.
Period ended 31 December 2015 Everyday Loans £'000 Loans at Home £'000 Trusttwo£'000 Central £'000 2015 Total£'000
Interest income - 14,657 - - 14,657
Fair value unwind on acquired loan portfolio - (5,456) - - (5,456)
Total revenue - 9,201 - - 9,201
Operating loss before amortisation - (3,313) - (2,684) (5,997)
Amortisation of intangible assets - - - (4,030) (4,030)
Operating loss before exceptional items - (3,313) - (6,714) (10,027)
Transaction costs - - - (5,542) (5,542)
Redundancy costs - (593) - - (593)
Finance cost - - - (3) (3)
Finance income - - - 73 73
Loss before taxation - (3,906) - (12,186) (16,092)
Taxation - 1,271 - 1,751 3,022
Loss for the period - (2,635) - (10,435) (13,070)
Everyday Loans £'000 Loans at Home £'000 Trusttwo£'000 Central £'000 Consolidation adjustments£'000 2015 Total£'000
Total assets - 34,492 - 101,730 (34,199) 102,023
Total liabilities - (3,735) - (11,121) (2,004) (16,860)
Net assets - 30,757 - 90,609 (36,203) 85,163
Capital expenditure - 295 - 64 - 359
Depreciation of plant, property and equipment - 189 - 9 - 198
Amortisation of intangible assets - - - 4,030 - 4,030
5. Taxation
Year ended31 Dec 2016£'000 Period from incorporation to 31 Dec 2015
£'000
Current tax charge/(credit)
In respect of the current year 2,103 (1,251)
Total current tax charge/(credit) 2,103 (1,251)
Deferred tax credit (3,447) (1,771)
Total tax credit (1,344) (3,022)
The difference between the total tax expense shown above and the amount
calculated by applying the standard rate of UK corporation tax to the profit
before tax is as follows:
Year ended31 Dec 2016 £'000 Period from incorporation to 31 Dec 2015
£'000
Loss before taxation (9,342) (16,092)
Tax on loss on ordinary activities at standard rate of UK corporation tax of 19% (2015: 20%): (1,868) (3,218)
Effects of:
Fixed asset differences (103) -
Expenses not allowable for taxation 132 1,214
Chargeable gains/(losses) 99 -
Adjustment to tax charge in respect of previous periods 72 -
Adjustment to tax charge in respect of previous periods - deferred tax (52) -
Adjust closing deferred tax to average rate of 20% 226 -
Changes in unrecognised deferred tax 151 441
Capital allowances in excess of depreciation - 1
Changes in tax rate - (53)
Timing difference - (21)
Tax adjustments arising on date of acquisition - (1,386)
Total tax credit (1,344) (3,022)
Exceptional items are included within 'expenses not allowable for taxation'
due the nature of the transactions, being in relation to the acquisitions of
Loans at Home and Everyday Loans. At 31 December 2016 exceptional items
totalled £626,000 (2015: £5,542,000)
Reductions in the UK corporation tax rate from 20% to 19% (effective from 1
April 2017) were substantively enacted on 26 October 2015. A further reduction
in the rate from 19% to 17% (effective from 1 April 2020) was substantively
enacted on 6 September 2016. This will reduce the company's future current
tax charge accordingly. The deferred tax liability at 31 December 2016 has
been calculated based on the rate of 19% substantively enacted at the balance
sheet date.
6. Loss per share
Year ended31 Dec 2016 Period from incorporation to 31 Dec 2015
Retained loss attributable to Ordinary Shareholders (£'000) (7,998) (13,070)
Weighted average number of Ordinary Shares at year/period ended 31 December 307,315,588 61,502,789
Basic and diluted loss per share (pence) (2.60p) (21.25p)
The loss per share was calculated on the basis of net loss attributable to
Ordinary Shareholders divided by the weighted average number of Ordinary
Shares. The basic and diluted loss per share is the same, as the exercise of
share options would reduce the loss per share and is anti-dilutive.
Year ended31 Dec 2016'000 Period from incorporation to 31 Dec 2015
'000
Weighted average number of potential Ordinary Shares that are not 5,539 5,539
currently dilutive
7. Dividends
The Directors have recommended a final dividend in respect of the year ended
31 December 2016 of 0.9 pence per share (2015: nil) which will amount to an
estimated final dividend payment of £2,853,000. This final dividend is not
reflected in the balance sheet as it is recommended to be paid after the
balance sheet date.
8. Goodwill
£'000
Cost and net book amount
At incorporation -
Acquisition of subsidiary (Loans at Home) 40,176
At 31 December 2015 40,176
Acquisition of subsidiary (Everyday Loans) 91,894
At 31 December 2016 132,070
The goodwill recognised represents the difference between the purchase
consideration and the net assets acquired (including intangible assets
recognised upon acquisition).
The Group tests goodwill annually for impairment or more frequently if there
are indications that goodwill might be impaired. The assessment of impairment
of goodwill reflects a number of key estimates, each of which can have a
material effect on the carrying value of the asset. These include:
· cash flow forecasts which have been extracted from the budget, which involves inherent uncertainty, particularly in respect of gross loan values, collections performance and the cost base of the business;
· the price earnings multiple applied to the cash flow forecasts;
· estimates made on the disposal costs of the business; and
· the weighted average cost of capital ('WACC') applied to determine the net present value ('NPV') of future cash flows.
The recoverable amount has been determined based on a fair value less cost to
sell calculation. That calculation uses cash flow projections based on
financial budgets approved by management covering a three year period to 31
December 2019, disposal costs have been estimated at 2% and a discount rate
(WACC) of 12% used for the Group. The Directors have estimated the discount
rate using post-tax rates that reflect current market assessments of the time
value of money and the risks specific to the market. None of the goodwill is
tax deductible.
Loans at Home goodwill impairment assessment: Considering the key estimates
above, the Group has identified that the following movements, which may
necessitate an impairment charge to the carrying value of goodwill:
· a 3% reduction in forecast 2019 earnings;
· a 3% reduction in the price earnings multiple;
· an increase in the disposal costs to 5.5%; and/or
· an increase in the WACC to 14%.
Everyday Loans goodwill impairment assessment: It would require a movement of
greater than 20% in all of the judgements and estimates to give rise to a
potential impairment charge to the carrying value of goodwill recognised on
the Everyday Loans acquisition.
At 31 December 2016 the fair value less cost to sell of the goodwill was in
excess of its carrying amount by £36.1m at Everyday Loans (2015: n/a) and
£2.3m at Loans at Home (2015: £51.2m) when applying the lowest valuation as
specified in the accounting policies.
9. Intangible assets
Customer lists£'000 Agent network£'000 Brand£'000 Broker relationships £'000 Technology£'000 Total£'000
Cost
At 1 January 2016 17,312 540 297 - - 18,149
Additions through acquisition 2,050 - 1,497 4,233 6,227 14,007
At 31 December 2016 19,362 540 1,794 4,233 6,227 32,156
Amortisation
At 1 January 2016 3,869 99 62 - - 4,030
Charge for the year 7,856 257 435 1,129 1,038 10,714
At 31 December 2016 11,725 356 497 1,129 1,038 14,744
Net book value
At 31 December 2016 7,637 184 1,297 3,104 5,189 17,412
At 31 December 2015 13,443 441 235 - - 14,119
Intangible assets include intangibles in respect of the customer list and
agent relationships at Loans at Home (formerly Loansathome4u) and acquisition
intangibles in respect of the customer list, broker relationships and credit
decisioning technology at Everyday Loans and the Everyday Loans and Trusttwo
brand.
The fair value of the customer list of Loans at Home and Everyday Loans on
acquisition has been estimated by calculating the Net Present Value (NPV) of
the discounted cash flows from each new re-loan provided to this, discrete set
of known customers. The Board of Directors will re-calculate the NPV at each
future accounting date using the same assumptions, limited to the original
known customer lists.
The fair value of Loans at Home's agent relationships on acquisition has been
estimated by valuing the cost to set up a similar network of trained agents.
The fair value of Everyday Loans' broker relationships on acquisition has been
estimated by calculating the NPV of the discounted cash flows from the cost
avoided each year due to having the broker relationships in place on new loan
volumes written by existing brokers. The Board of Directors will re-calculate
the NPV at each future accounting date using the same assumptions, limited to
the then existing brokers.
The fair value of Everyday Loans' credit decisioning technology on acquisition
has been estimated by assessing the likely commercial level of royalties that
would be payable to a third party were the technology licenced rather than
owned, calculated as a percentage of forecast revenues and discounted to the
date of the transaction. The Board of Directors will assess the technology for
impairment using the same methodology at each future accounting date.
The fair value of the Loans at Home's brand (which at acquisition was
loansathome4u) and Everyday Loans' brand on acquisition has been estimated by
assessing the likely commercial level of royalties that would be payable to a
third party were the brand licenced rather than owned, calculated as a
percentage of forecast revenues and discounted to the date of the transaction.
Due to rebranding, the loansathome4u brand to Loans at Home, the intangible
asset was written off during the period. The Board of Directors will assess
the Everyday Loans brand for impairment using the same methodology at each
future accounting date.
10. Amounts receivable from customers
2016£'000 2015£'000
Credit receivables 204,775 30,335
Loan loss provision (24,362) (1,923)
Amounts receivable from customers 180,413 28,412
Customer receivables originated by the Group are initially recognised at the
amount loaned to the customer plus directly attributable costs. Subsequently,
receivables are increased by revenue and reduced by cash collections and any
deduction for impairment. The Directors assess on an ongoing basis whether
there is objective evidence that customer receivables are impaired at each
balance sheet date.
The movement on the loan loss provision for the period relates to the
provision at Loans at Home for the year and Everyday Loans since the date of
acquisition. The amounts receivable from customers were recognised at fair
value (net loan book value) at the date of acquisition, the amounts receivable
are subsequently measured at amortised cost net of any impairment.
Analysis of overdue receivables from customers
2016£'000 2015£'000
Not past due or impaired 152,464 13,538
Past due but not impaired 21,599 7,819
Impaired 6,350 7,055
180,413 28,412
2016£'000 2015£'000
Loans at Home1 past due not impaired:
One week overdue 6,278 4,571
Two weeks overdue 2,129 1,696
Three or four weeks overdue 1,879 1,552
10,286 7,819
1 Loans at Home make weekly collections.
Everyday Loans2 past due not impaired:
Up to one month overdue 11,313 -
11,313 -
2 Everyday Loans make monthly collections. There is no comparable information
for Everyday Loans as they were acquired on 13 April 2016.
Analysis on movement on loan loss provision
£'000
At incorporation -
Charge for the year 3,896
Unwind of discount (1,973)
At 31 December 2015 1,923
Charge for the year 24,928
Unwind of discount (2,489)
At 31 December 2016 24,362
The average EIR used during the year ended 31 December 2016 for Loans at Home
was 316% (2015: 328%) and for Everyday Loans was 45.0% (2015: n/a).
11. Deferred tax liability
£'000
At incorporation -
Recognition of intangible assets at acquisition1 (4,828)
Current year credit 1,771
At 31 December 2015 (3,057)
Recognition of intangible assets at acquisition1 (7,551)
Current year credit 3,815
At 31 December 2016 (6,793)
1 Refer to note 12
The deferred tax liability was recognised on the intangible assets upon
acquisition of Loans at Home and of Everyday Loans. The intangible assets will
be amortised in future periods for which tax deductions will not be
available.
The deferred tax liability is attributable to temporary timing differences
arising in respect of:
2016£'000 2015£'000
Accelerated tax depreciation (163) (115)
Recognition of intangible assets (6,366) (2,909)
Other short term timing differences (258) (10)
Other losses and deductions (25) -
Property revaluation - (23)
Net deferred tax liability (6,793) (3,057)
For the year ended 31 December 2016 the Company has unused tax losses of
£154,000 (2015: £1,822,000) available for offset against future profits.
However, due to the uncertainty over the likelihood of future profits at the
Company level, the deferred asset has not been recognised on the Company or
Consolidated statement of financial position.
12. Acquisition of Everyday Loans
On 13 April 2016, the Group obtained control of the Everyday Loans Holdings
Limited group, which consists of Everyday Loans Holdings Limited, Everyday
Loans Limited and Everyday Lending Limited. The Group obtained control through
the purchase of 100% of the share capital. The Everyday Loans group
acquisition satisfies two of Non-Standard Finance plc's target sectors,
branch-based unsecured lending and guaranteed loans (Trusttwo).
The fair values of the identifiable assets and liabilities of Everyday Loans
as at the acquisition date were as follows:
Amounts recognised at acquisition date £'000 Fair value adjustments £'000 Total £'000
Intangible assets1 - 14,006 14,006
Property, plant and equipment 563 - 563
Amounts receivable from customers2 115,563 23,749 139,312
Trade receivables 4,259 -
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