REG - Non-Standard Fin - Unaudited half year results to 30 June 2017 <Origin Href="QuoteRef">NSF.L</Origin> - Part 2
03/08/2017 07:08
- Part 2: For the preceding part double click ID:nRSC9673Ma
1,163 1,377
Loss after tax (1,831) (3,004) (4,835) (6,142)
16 Adjusted to exclude amortisation of acquired intangibles related to the
acquisition of Loans at Home and Everyday Loans
Normalised administrative expenses for the period were £2.2m (2016: £1.8m) and
include head office costs associated with the running of the plc as well as
advisory and other related expenses associated with the review of potential
acquisition targets. In addition, the Group incurred £3.7m of amortisation of
intangible assets (2016: £4.8m) recognised on the acquisition of both Loans at
Home and Everyday Loans. There were no exceptional charges versus £0.6m in the
prior year that related to stamp duty paid at completion on the acquisition of
Everyday Loans. Net finance cost fell significantly as the prior year included
the non-utilisation fee on the Everyday Loans bank facility prior to the
drawdown at completion.
IFRS 9
The International Accounting Standard Board's introduction of a new accounting
standard covering financial instruments becomes effective for accounting
periods beginning on or after 1 January 2018. This standard replaces IAS39:
Financial Instruments: Recognition and Measurement.
The new standard requires that lenders (i) provide for the expected credit
loss ('ECL') from performing assets over the following year as a result of
defaults forecast in the year and (ii) provide for the ECL over the life of
the asset where that asset has seen a significant deterioration in credit
risk. As a result, whilst the underlying cash flows from the asset are
unchanged, IFRS9 will have the effect of bringing forward provisions into
earlier accounting periods.
This will result in a one-off adjustment to receivables and reserves on
adoption of the new standard and will result in later recognition of profits,
particularly in fast growing businesses such as Everyday Loans, Loans at Home
and TrustTwo. The Group is continuing to work on quantifying the impact of
IFRS 9 and expects to be in a position to provide a summary of the impact on
the 2016 full year results at an investor day to be held during the fourth
quarter of 2017.
Principal risks
There are a number of potential risks and uncertainties which could have a
material impact on the Group's performance over the remaining six months of
the financial year and could cause reported and 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 2016
(which is available for download at www.nonstandardfinance.com) and relate to
the following areas:
§ Conduct - risk of poor outcomes for our customers or other key stakeholders as a result of the Group's actions that may result in censure or penalty;
§ Regulation - risk through changes to regulations or a failure to comply with existing rules and regulations;
§ Credit - risk of loss through poor underwriting or a diminution in the credit quality of the Group's customers;
§ Business strategy 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 - whilst uncertainty in global financial markets remains following the UK's decision to leave the European Union, there is a risk that the Group may be unable to secure sufficient finance in the future; 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 August 2017
Statement of Directors' responsibilities
The Directors confirm that, to the best of their knowledge, the unaudited
condensed interim financial statements have been prepared in accordance with
IAS 34 as adopted by the European Union, and that the interim report includes
a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R,
namely:
· An indication of important events that have occurred during the first six months of the financial year and their impact on the unaudited condensed interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
· Material related party transactions that have occurred in the first six months of the financial year and any material changes in the related party transactions described in the last annual report and financial statements.
The current directors of Non-Standard Finance plc are listed in the 2016
Annual Report & Financial Statements. Niall Booker was appointed to the board
on 9 May 2017. There have been no other changes in directors during the six
months ended 30 June 2017. A list of current directors is also maintained on
the Non-Standard Finance website: www.nonstandardfinance.com.
The maintenance and integrity of the Non-Standard Finance website is the
responsibility of the Directors. The work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the unaudited
condensed interim financial statements since they were initially presented on
the website.
Legislation in the United Kingdom governing the preparation and dissemination
of unaudited condensed interim financial statements may differ from
legislation in other jurisdictions.
On behalf of the Board of Directors
Nick Teunon
Chief Financial Officer
Independent review report to Non-Standard Finance plc
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 2017 which comprises the income statement, the balance sheet, the
statement of changes in equity, the cash flow statement and related notes 1 to
10. We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
issued by the Auditing Practices Board. 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.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34 "Interim Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. 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.
Conclusion
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 2017 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
3 August 2017
Financial statements
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2017
Note Before fair value adjustments, amortisation of acquired intangibles and exceptional items Fair value adjustments, amortisation of acquired intangibles and exceptional items Six months ended 30 June 2017 Six months ended 30 June 2016
£'000 £'000 £'000 £'000
Revenue 52,235 (5,938) 46,297 29,123
Impairments (14,041) - (14,041) (9,891)
Administrative expenses (29,707) (3,709) (33,416) (23,307)
Operating profit/(loss) 3 8,486 (9,647) (1,160) (4,075)
Exceptional items - - - (626)
Profit/(loss) on ordinary activities before interest and tax 8,486 (9,647) (1,160) (4,701)
Finance cost (3,059) - (3,059) (1,301)
Profit/(loss) on ordinary activities before tax 5,427 (9,647) (4,219) (6,002)
Tax on profit/(loss) on ordinary activities 5 (1,146) 1,833 687 1,084
Profit/(loss) for the period 4,282 (7,814) (3,532) (4,918)
Total comprehensive loss for the period (3,532) (4,918)
Loss attributable to:
- Owners of the parent (3,532) (4,918)
- Non-controlling interests - -
Loss per share
Note Six months ended 30 June 2017 Six months ended 30 June 2016
Pence Pence
Basic and diluted 4 (1.11) (1.67)
There are no recognised gains or losses other than disclosed above and there
have been no discontinued activities in the period.
Condensed consolidated statement of financial position as at 30 June 2017
Note 30 June 2017 31 December 2016
£'000 £'000
ASSETS
Non-current assets
Goodwill 132,070 132,070
Intangible assets 13,703 17,412
Property, plant and equipment 6,938 5,459
152,711 154,941
Current assets
Amounts receivable from customers 7 182,152 180,413
Trade and other receivables 11,132 9,709
Cash and cash equivalents 4,745 5,215
198,029 195,337
Total assets 350,740 350,278
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 8,929 8,005
Total current liabilities 8,929 8,005
Non-current liabilities
Deferred tax liability 4,163 5,890
Bank loans 94,950 87,300
Total non-current liabilities 99,113 93,190
Equity
Share capital 15,852 15,852
Share premium 254,995 254,995
Retained loss (28,404) (22,019)
242,443 248,828
Non-controlling interests 255 255
Total equity 242,698 249,083
Total equity and liabilities 350,740 350,278
These financial statements were approved by the Board of Directors on 3 August
2017.
Signed on behalf of the Board of Directors
Nick Teunon
Chief Financial Officer
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2017
Share capital Share premium Retained loss Non-controlling interest Total
£'000 £'000 £'000 £'000 £'000
At 31 December 2015 5,264 92,714 (13,070) 255 85,163
Total comprehensive loss for the period - - (4,918) - (4,918)
Transactions with owners, recorded directly in equity:
Issue of shares 10,588 162,281 - - 172,869
At 30 June 2016 15,852 254,995 (17,988) 255 253,114
Total comprehensive loss for the period - - (3,080) - (3,080)
Transactions with owners, recorded directly in equity:
Dividends paid - - (951) - (951)
Issue of shares - - - - -
At 31 December 2016 15,852 254,995 (22,019) 255 249,083
Total comprehensive loss for the period - - (3,532) - (3,532)
Transactions with owners, recorded directly in equity:
Dividends paid - - (2,853) - (2,853)
Issue of shares - - - - -
At 30 June 2017 15,852 254,995 (28,404) 255 242,698
Condensed consolidated statement of cash flows
for the six months ended 30 June 2017
Note Six months ended 30 June 2017 Six months ended 30 June 2016
£'000 £'000
Net cash used in operating activities 8 (515) (14,813)
Cash flows used in investing activities
Purchase of property, plant and equipment (2,213) (1,989)
Proceeds from sale of property, plant and equipment 520 -
Acquisition of subsidiary - (230,784)
Net cash used in investing activities (1,693) (232,773)
Cash flows from financing activities
Finance cost (3,059) (1,301)
Debt raising 7,650 73,700
Dividends paid (2,853) -
Proceeds from issue of share capital - 172,869
Net cash from financing activities 1,738 245,268
Net decrease in cash and cash equivalents (470) (2,318)
Cash and cash equivalents at beginning of period 5,215 7,320
Cash and cash equivalents at end of period 4,745 5,002
Notes to the condensed set of financial statements for the six months ended 30
June 2017
General Information
Non-Standard Finance plc is a public limited company incorporated and
domiciled in the United Kingdom. The address of the registered office is 5th
Floor, 6 St Andrew Street, London, EC4A 3AE.
The unaudited condensed interim financial statements do not constitute the
statutory financial statements of the Group within the meaning of section 434
of the Companies Act 2006. The statutory financial statements for the year
ended 31 December 2016 were approved by the Board of Directors on 31 March
2017 and have been delivered to the Registrar of Companies. The report of the
auditors on those financial statements was unqualified, did not draw attention
to any matters by way of emphasis and did not contain any statement under
section 498(2) or (3) of the Companies Act 2006.
The unaudited condensed interim financial statements for the six months ended
30 June 2017 have been reviewed, not audited, and were approved by the Board
of Directors on 3 August 2017.
1. Basis of preparation
The unaudited condensed interim financial statements for the six months ended
30 June 2017 have been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the European Union. The unaudited condensed interim
financial statements should be read in conjunction with the statutory
financial statements for the year ended 31 December 2016 which have been
prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union.
The Directors have reviewed the Group's budgets, plans and cash flow forecasts
for 2017 together with outline projections for the subsequent years. Based on
this review, they are satisfied that the Group has adequate resources to
continue to operate for the foreseeable future. For this reason, the Directors
continue to adopt the going concern basis in preparing the unaudited condensed
interim financial statements.
2. Accounting policies
The accounting policies applied in preparing the unaudited condensed interim
financial statements are consistent with those used in preparing the statutory
financial statements for the year ended 31 December 2016.
Taxes on profits in interim periods are accrued using the tax rate that will
be applicable to expected total annual profits.
The carrying value of financial assets and financial liabilities are not
materially different to the fair value.
New and amended standards and interpretations need to be adopted in the first
interim financial statements issued after their effective date (or date of
early adoption). There are no new IFRSs or IFRICs that are effective for the
first time for the six months ended 30 June 2017 which have a material impact
on the Group.
3. 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
Everyday Loans (branch-based lending), Loans at Home (home credit), TrustTwo
(guarantor lending) and Central (head office activities). The Group's
operations are all located in the United Kingdom and all revenue is
attributable to customers in the United Kingdom.
Six months ended 30 June 2017 Everyday Loans Loans at Home TrustTwo1 Central 2017
£'000 £'000 £'000 £'000 £'000
Interest income 28,204 22,526 1,505 - 52,235
Fair value unwind on acquired loan portfolio (5,938) - - - (5,938)
Total revenue 22,266 22,526 1,505 - 46,297
Operating profit/(loss) before amortisation 3,902 790 109 (2,252) 2,549
Amortisation of intangible assets - - - (3,709) (3,709)
Operating profit/(loss) before exceptional items 3,902 790 109 (5,961) (1,160)
Exceptional items - - - - -
Finance cost (2,482) (357) (183) (37) (3,059)
Profit/(loss) before taxation 1,420 433 (74) (5,998) (4,219)
Taxation (408) (82) 14 1,163 687
Profit/(loss) for the period 1,012 351 (60) (4,835) (3,532)
Everyday Loans Loans at Home TrustTwo1 Central Consolidation adjustments2 2017
£'000 £'000 £'000 £'000 £'000 £'000
Total assets 145,592 36,783 10,491 273,993 (116,120) 350,740
Total liabilities (94,279) (10,331) - 365 (3,797) (108,042)
Net assets 51,313 26,452 10,491 274,358 (119,916) 242,698
Capital expenditure 898 1,315 - - - 2,213
Depreciation of plant, property and equipment 256 299 - 26 - 581
Amortisation of intangible assets - - - (3,709) - (3,709)
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 £13.7m, goodwill of £132.1m, deferred tax liability of £4.2m, fair value of loan book of £9.9m and the elimination of intra group balances.
Six months ended 30 June 2016 Everyday Loans Loans at Home TrustTwo3 Central 2016
£'000 £'000 £'000 £'000 £'000
Interest income 10,047 20,700 568 - 31,315
Fair value unwind on acquired loan portfolio (1,979) (213) - - (2,192)
Total revenue 8,068 20,487 568 - 29,123
Operating profit/(loss) before amortisation 1,655 623 269 (1,815) 732
Amortisation of intangible assets - - - (4,807) (4,807)
Operating profit/(loss) before exceptional items 1,655 623 269 (6,622) (4,075)
Exceptional items - - - (626) (626)
Finance cost (787) (176) (67) (271) (1,301)
Profit/(loss) before taxation 868 447 202 (7,519) (6,002)
Taxation (164) (89) (40) 1,377 1,084
Profit/(loss) for the period 704 358 162 (6,142) (4,918)
Everyday Loans Loans at Home TrustTwo3 Central Consolidation adjustments4 2016
£'000 £'000 £'000 £'000 £'000 £'000
Total assets 123,746 33,754 7,598 273,927 (93,516) 345,509
Total liabilities (85,458) (8,433) (4,247) (784) 6,527 (92,395)
Net assets 38,288 25,321 3,351 273,143 (86,989) 253,114
Capital expenditure 1,083 928 59 159 - 2,229
Depreciation of plant, property and equipment 57 177 3 14 - 251
Amortisation of intangible assets - - - 4,807 - 4,807
3 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.
4 Consolidation adjustments include the acquisition intangibles of £23m, goodwill of £132.1m, deferred tax liability of £9.2m, fair value of loan book of £120m 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.
4. Loss per share
Six months ended 30 June 2017 Six months ended 30 June 2016
Retained loss attributable to Ordinary Shareholders (£'000) (3,532) (4,918)
Weighted average number of Ordinary Shares 317,049,682 294,851,859
Basic and diluted loss per share (pence) (1.11) (1.67)
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.
Six months ended 30 June 2017 Six months ended 30 June 2016
'000 '000
Weighted average number of potential Ordinary Shares that are not currently dilutive 5,539 5,539
5. Taxation
The tax charge for the period has been calculated by applying the Directors'
best estimate of the effective tax rate for the financial year of 19% (2016:
20%), to the profit before tax for the period.
6. Dividends
The Directors have declared an interim dividend in respect of the six months
ended 30 June 2017 of 0.5 pence per share (interim dividend 2016: 0.3 pence
per share) which will amount to a dividend payment of £1,585,248 (2016:
£951,000). This dividend is not reflected in the balance sheet as it will be
paid after the balance sheet date.
7. Amounts receivable from customers
30 June 2017 31 December 2016
£'000 £'000
Credit receivables 206,653 204,775
Loan loss provision (24,501) (24,362)
Amounts receivable from customers 182,152 180,413
The movement on the loan loss provision for the period relates to the
provision at Loans at Home, Everyday Loans and TrustTwo for the period. 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
30 June 2017 31 December 2016
£'000 £'000
Not past due or impaired 147,128 145,041
Past due but not impaired 24,744 25,418
Impaired 10,280 9,954
182,152 180,413
30 June 2017 31 December 2016
£'000 £'000
Loans at Home1 past due not impaired:
One week overdue 3,936 6,278
Two weeks overdue 1,772 2,129
Three or four weeks overdue 2,288 1,879
7,995 10,286
1 Loans at Home make weekly collections.
Everyday Loans2 past due not impaired:
Up to one month overdue 16,749 15,132
16,749 15,132
2 Everyday Loans make monthly collections.
Analysis on movement of loan loss provision
£'000
At 31 December 2015 1,923
Provision on acquisition of Everyday Loans in April 2016 6,105
Charge for the year 23,201
Amounts written off during the year (4,378)
Unwind of discount (2,489)
At 31 December 2016 24,362
Charge for the period 14,041
Amounts written off during the year (12,967)
Unwind of discount (936)
At 30 June 2017 24,501
The average EIR used during the period ended 30 June 2017 for Loans at Home
was 305% (2016: 316%) and for Everyday Loans was 46.9% (2016: 45.0%).
8. Net cash used in operating activities
Six months ended 30 June 2017 Six months ended 30 June 2016
£'000 £'000
Operating loss (1,160) (4,701)
Taxation paid (1,471) (1,503)
Depreciation 581 251
Amortisation of intangible assets 3,709 4,807
Fair value unwind on acquired loan book 5,938 2,192
(Profit)/loss on disposal of property, plant and equipment (367) -
(Increase)/decrease in amounts receivable from customers (7,677) (3,259)
(Increase)/decrease in other receivables (1,423) (6,050)
Decrease/(increase) in payables 1,355 (6,550)
Cash used in operating activities (515) (14,813)
9. Related party transactions
Transactions between the company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. There have been no changes in the nature of related party transactions
as described in note 27 to the 2016 Annual Report & Financial Statements.
10. Subsequent events
On 3 August 2017, the Group agreed to acquire 100% of George Banco Limited, a
company based in England which operates in the guaranteed loans market, for
cash consideration of £53.5m. Since 30 June 2017, the Group has also secured
£225m of debt funding provided by institutional investors and a £35m RCF from
Royal Bank of Scotland. These funds have been used to refinance the Group's
existing bank facilities and also to fund the acquisition of George Banco
Limited.
Appendix - Regulatory overview
There have been a number of developments on the regulatory front since the
start of 2017 that may have a bearing on the Group's activities and business
operations in the future. Some of the more pertinent developments are
summarised below.
§ On 31 July 2017 the FCA published its feedback statement following its call for input into High Cost Credit and also issued a consultation into creditworthiness and affordability in consumer credit. The Group is reviewing these documents and, if appropriate, will provide a response to the FCA.
§ The Financial Ombudsman Service published its annual review report for 2016/17 on 13 July 2017. The report showed there were rises in the number of complaints about consumer credit providers especially instalment, payday and guarantor lending.
§ On 11 July 2017, the Taylor Review of Modern Working Practices was published, making a number of recommendations to government regarding the definition of workers and the principles which workers and employers should be expected to adopt.
§ On 4 July 2017, the FCA published a consultation on staff incentives, remuneration and performance management in consumer credit. The review aims to help firms identify practices that may promote inappropriate behaviour by company representatives that in turn could result in poor customer outcomes.
§ The Financial Guidance and Claims Bill, that create the framework for a single financial guidance body, was introduced in the Queen's speech and had its second reading in the House of Lords on 5 July.
§ The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 came into force on 26 June 2017. They implement the EU's 4th Directive on Money Laundering and replace the Money Laundering Regulations 2007.
§ On 23 June 2017, the FCA published its impact assessment on the amendments to the guarantor lending rules pursuant to PS15/23.
§ On 18 April 2017, the FCA published its Mission, Sector Views and Business Plan for 2017. Each provides a valuable insight into the views, objectives and operating parameters adopted by the FCA in carrying out its duties. They also refer to some of the thematic reviews that the FCA expects to undertake in the future.
§ On 3 April 2017 the FCA published a consultation on its proposed measures to address persistent credit card debt and to require credit card firms to use their data to identify customers at risk of financial difficulties.
§ The FCA closed its call for input into High-Cost Credit on 15 February 2017. The review covered the payday lending cap, unauthorised overdrafts as well as a broader review of all forms of high-cost credit, including home-collected credit.
§ On 19 January 2017, the FCA published its final guidance on how consumer credit firms should address the matter of default notices in respect of guarantor loans. This was a revision to previous guidance having taken into account a number of responses made.
This information is provided by RNS
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