REG - Vanquis Banking Grp - Interim Results for six months ended 30 June 2024
01/08/2024 07:00
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RNS Number : 7520Y Vanquis Banking Group PLC 01 August 2024
Interim results for the six months ended 30 June 2024
Strategic plan updated after one-off write downs: mid-teens ROTE target in
2026 maintained
London - 1 August 2024 - Vanquis Banking Group plc ('the Group'), the
specialist bank, today published its results for the six months ended 30 June
2024.
Ian McLaughlin, Chief Executive Officer, commented: "We are making good
progress on our business transformation and refreshed customer proposition
presented in March. New customer volumes grew in the first half at better
margins, leading to overall receivables growth in June. We continued driving
operational efficiency and are on track to achieve £60m in cost savings by
year-end.
"As announced on 16 July, we recognised one-off items amounting to £40m in
the first half, which relate to our review of Vehicle Finance Stage 3
receivables (£29m, of which £16m relates to prior periods) and management
actions taken in the period (£11m). As a result our financial position is now
clearer and more stable.
"We have revisited our strategic plan and are making further changes to
deliver an additional £15m in cost savings by the end of 2025, along with new
revenue initiatives. We expect modest receivables growth in 2H24. We remain on
track to deliver low single digit ROTE in 2025 and mid-teens ROTE in 2026, in
line with previous guidance.
"As the largest specialist finance provider for financially underserved
customers, Vanquis occupies a unique role in the UK banking system. We look
forward to continuing to support our customers to make the most of life's
opportunities."
Key financial results for the six months ended 30 June
1H 24 1H 23 Change
(restated)(1) %
£m £m
Net interest income 214.5 214.5 -
Non-interest income 19.5 22.6 (13.7)
Total income 234.0 237.1 (1.3)
Impairment charges (101.3) (93.0) (8.9)
Risk-adjusted income 132.7 144.1 (7.9)
Operating costs (179.2) (166.0) (7.9)
Statutory loss before tax (46.5) (21.9) (112.3)
Adjusted loss before tax(2) (26.8) (12.9) (107.8)
Adjusted operating costs(3) (159.5) (157.0) 1.6
Metrics
Gross customer interest earning balances(4) 2,254.2 2,370.7 (4.9)
Adjusted LPS (p)(5) (8.3) (3.6) (130.6)
Basic LPS (p)(6) (14.1) (6.3) (123.8)
Net interest margin(7) 18.8% 18.7% 0.1
Risk-adjusted margin(8) 11.6% 12.5% (0.9)
Cost:income ratio(9) 68.2% 66.2% (2.0)
Adjusted ROTE(10) (11.5%) (5.2%) (6.3)
TNAV per share (£)(11) 1.5 1.7 (11.8)
Tier 1 ratio(12) 19.8% 21.1% (1.3)
Update of strategic plan
Vanquis Management has updated its strategic plan.
· No change to purpose and strategy: Vanquis has a unique role to
play in delivering caring banking so that customers can make the most of
life's opportunities.
· Continued development of customer proposition.
· Continued implementation of Gateway transformation plan.
· Further business streamlining to deliver an additional £15m of
cost savings by the end of 2025.
· Opportunities for further revenue optimisation in Credit Cards.
· Target Tier 1 capital ratio reset to 18.5 - 19.5%, reflecting the
Group's clearer and more stable financial position.
1H24 headlines
Business performance: progress with business transformation, financial
position now clearer and more stable
· Gross Customer Interest Earning Balances at 30 June of
£2,254.2m, a decline of 5% (1H23: £2,370.7m).
o New customer acquisitions grew ahead of plan.
o Overall reduction in receivables was due to proactive volume management in
2H23, along with reduced customer spending and higher debt repayments.
o Decline in receivables moderated in April and May, with a slight increase
in June.
· NIM: stable at 18.8% (1H23: 18.7%).
· Net Interest Income: stable at £214.5m (1H23: £214.5m), with
initial re-pricing initiatives now complete.
· Impairment Charges: increased by 9% to £101.3m (1H23: £93.0m).
o £9.7m downward revaluation of Vehicle Finance Stage 3 debt and charge-off
assets: debt sales expected later this year.
o Lower benefits from model enhancements and recoveries.
o Reduced origination and stable underlying credit performance were positive
drivers.
· Adjusted Operating Costs: increased by 1.6% to £159.5m (1H23:
£157.0m).
o On track to achieve c.£60m previously announced cost savings by the end
of 2024.
o £10m in one-off items, mainly the write-down of development costs for a
now redundant mobile app, property dilapidations and other sundry balances.
· Adjusted Loss Before Tax: £26.8m (1H23: £12.9m).
o Excluding one-off items and the revaluation of Vehicle Finance Stage 3
balances, the Group adjusted loss before tax would have been £1.5m.
Customer proposition update: proposition strengthened to meet customer needs
Cards
· Initial repricing initiatives complete.
· Balance transfer products launched.
Vehicle Finance
· Repricing programme complete.
· Asset class expansion implemented.
Loans
· Existing customer proposition re-launched with a strong
risk-adjusted margin.
Second Charge Mortgages
· Forward flow agreement signed with Interbridge Mortgages.
· Expanded agreement with Selina Finance.
· Strong start with 2Q24 originations above plan.
Savings
· Delivering cost-effective funding through an expanded product
range, 30/60-day notice accounts, and Cash ISAs.
Snoop
· Embedded as a key strategic enabler within Vanquis.
· Customer acquisition performing well with over 24,000 Vanquis
customers added in 1H24.
· New credit score feature used by approximately 80,000 customers.
· Snoop bill switching capability integrated into the Vanquis app.
Gateway
· Technology transformation progressing rapidly, and first key
milestone delivered: a single customer-centric contact centre platform
servicing multiple products and enhancing the customer experience.
Complaints: improved complaints handling while engaging with regulators to
address industry-wide issues
· Complaints costs in line with expectations.
· Flexible and more cost-effective complaint handling capability by
offshore providers, with artificial intelligence being used to automate the
logging of complaints.
· Continuing to engage with regulators to address complaints issues
on an industry-wide basis.
· Financial Ombudsman's consultation: charging Claims Management
Companies and other professional representatives could reduce the persistent
harm that current poor practices are causing both firms and consumers and
ensure a fairer distribution of financial responsibility.
· Legal proceedings are ongoing against the CMC responsible for the
most spurious claims.
Capital and funding: renewed focus on deploying capital for profitable
receivables growth
· Statutory losses and one-off items resulted in a Tier 1 ratio of
19.8% at 30 June 2024 (1H23: 21.1%).
· Strong liquidity and funding, with retail funding at 86.5% (1H23:
76.1%) and partial early repayment of £75m TSFME funding.
Dividend
The Board does not propose to pay an interim dividend (1H23: 5p) for 1H24.
Outlook*
The Group's short-term objective is to return the business to modest
receivables growth in 2H24.
The Group remains on track to deliver low single digit ROTE in 2025 and
mid-teens ROTE in 2026, in line with previous guidance.
FY24 guidance Revised FY24 guidance
(March 2024)
NIM (inc. 2(nd) charge mortgages) >18% No change
Cost: Income ratio 60-63% 62-65%
Retail funding (% of all funding) >85% No change
Tier 1 ratio 19.5-20.5% 18.5-19.5%**
ROTE Low single digits A loss for 2024
* All measures are on an adjusted basis
** Based on a current regulatory requirements and risk appetite
Results webcast and strategy seminar
Ian McLaughlin, CEO, and Dave Watts, CFO, will host a results webcast at 08:30
today. To register your attendance, please use this link:
https://brrmedia.news/VANQ_IR_24 (https://brrmedia.news/VANQ_IR_24)
Materials for the results presentation will be published at:
https://www.vanquisbankinggroup.com/shareholder-hub/results-reports-and-presentations/
(https://www.vanquisbankinggroup.com/shareholder-hub/results-reports-and-presentations/)
Enquiries
Analysts and shareholders
Miriam McKay, Interim Head of Investor Relations
miriam.mckay@vanquis.com (mailto:miriam.mckay@vanquis.com)
07577 390666
Media
Simone Selzer, Nick Cosgrove - Brunswick
vanquisbankinggroup@brunswickgroup.com
(mailto:vanquisbankinggroup@brunswickgroup.com)
0207 4045959
Footnotes
1. As part of the Group's review into Vehicle Finance Stage 3 assets,
it was identified that cash flows expected to be received from contracts
identified for debt sale were being included within the impairment provision
beyond the expected sale date. The Groups results have been retrospectively
restated for all periods presented in this report, with the impact outlined in
Note 2 of the financial statements.
2. Adjusted loss before tax is stated before amortisation of
acquisition intangibles and exceptional items.
3. Adjusted operating costs are operating costs excluding exceptional
items and amortisation of acquisition intangibles.
4. Gross customer interest earning balances excludes post charge off
assets and deferred acquisition costs, which are included in Gross
Receivables. As part of the review into the Vehicle Finance Stage 3 assets and
review of our internal management reporting, it was identified that £51.6m of
gross receivables were excluded from gross interest earning balances. KPIs
using this metric have therefore been retrospectively represented for all
periods presented in this report. There is no impact to total gross
receivables or net receivables as a result of this change.
5. Adjusted LPS is calculated as loss after tax, excluding the
amortisation of acquisition intangibles and exceptional items for the 6 months
ended 30 June, divided by the weighted average number of shares in issue.
6. Basic LPS is calculated as loss after tax for the 6 months ended 30
June, divided by the weighted average number of shares in issue.
7. Net interest margin is calculated as interest income less interest
expense for the period multiplied by 365/181 as a percentage of average gross
receivables for the 7 months ended 30 June.
8. Risk-adjusted margin is defined as risk-adjusted income for the
period multiplied by 365/181 as a percentage of average gross receivables for
the 7 months ended 30 June.
9. Operating costs, excluding exceptional items and amortisation of
acquisition intangibles as a percentage of total income, for the period.
10. Adjusted ROTE is defined as adjusted profit after tax net of fair value
gains for the period multiplied by 365/181 as a percentage of average adjusted
tangible equity for the 7 months ended 30 June. Adjusted tangible equity is
stated as equity after deducting the Group's pension asset, net of deferred
tax, the fair value of derivative financial instruments, net of deferred tax,
less intangible assets and goodwill.
11. . TNAV per share is calculated as average adjusted tangible equity,
divided by the weighted average number of shares in issue during the period.
12. The Tier 1 ratio is defined as the ratio of the Group's Tier 1
(currently all held as CET1) to the Group's risk-weighted assets measured in
accordance with the CRR.
Forward looking statements
This report may contain certain "forward looking statements" regarding the
financial position, business strategy or plans for future operations of
Vanquis Banking Group. All statements other than statements of historical fact
included in this document may be forward looking statements. Forward looking
statements also often use words such as "believe", "expect", "estimate",
"intend", "anticipate" and words of a similar meaning. By their nature,
forward looking statements involve risk and uncertainty that could cause
actual results to differ from those suggested by them. Much of the risk and
uncertainty relates to factors that are beyond Vanquis Banking Group's ability
to control or estimate precisely, such as future market conditions and the
behaviours of other market participants, and therefore undue reliance should
not be placed on such statements which speak only as at the date of this
report. Vanquis Banking Group does not assume any obligation to, and does not
intend to, revise or update these forward-looking statements, except as
required pursuant to applicable law or regulation. No statement in this
announcement is intended as a profit forecast or estimate for any period. No
statement in this announcement should be interpreted to indicate a particular
level of profit and, as a consequence, it should not be possible to derive a
profit figure for any future period from this report.
Financial review
Group performance
The Group's 2024 interim results are as follows:
Six months ended 30 June
2024 2023(1)
£m (restated)
£m
Interest income 285.2 264.8
Interest expense (70.7) (50.3)
Net interest income 214.5 214.5
Fee and commission income 20.1 21.5
Fee and commission expense (0.8) (0.7)
Net fee and commission income 19.3 20.8
Other income 0.2 1.8
Total income 234.0 237.1
Impairment charges (101.3) (93.0)
Risk-adjusted income 132.7 144.1
Operating costs (179.2) (166.0)
Statutory loss before taxation (46.5) (21.9)
Tax credit 10.7 6.0
Statutory loss for the year attributable to equity shareholders (35.8) (15.9)
Add back:
Tax credit (10.7) (6.0)
Amortisation of acquisition intangibles 4.2 3.7
Exceptional items 15.5 5.3
Adjusted loss before tax (26.8) (12.9)
(1) Refer to note 2 in financial statements for detail of restatement.
The Group reported an adjusted loss before tax of £26.8m (1H23 restated:
£12.9m), which reflects a number of one off items recognised in the period
including £12.8m (1H23: £7.6m) in relation to the review of Vehicle Finance
Stage 3 balances as indicated during the strategy seminar on 27 March 2024,
with a view to future potential debt sales. Vehicle Finance has been
exhibiting an ever growing stage 3 gross receivable balance with a
corresponding large and increasing ECL provision being held. As part of the
review, receivables eligible for a potential debt sale were fully charged off
resulting in a post charge off asset (PCOA) of £17.8m being recognised. The
total impact of the review was £28.9m, with £12.8m recognised in 1H24 and
£7.4m in 1H23 (2H23: £0.2m) due to a prior period restatement being
required. The impact on the opening balance sheet was £8.5m. The full impact
of the restatement is set out in note 2 of the financial statements.
In addition, there were £11.5m of other one off items related to the
write-down of development costs for a now redundant mobile app, property
dilapidations and other sundry balances.
Including amortisation of acquisition intangibles and exceptional items, the
Group loss before tax was £46.5m (1H23 restated: £21.9m).
The Credit Card business reported adjusted profit before tax for the period of
£20.2m (1H23: £33.9m) and receivables ended the period at £1,151m (1H23:
£1,224m). The Vehicle Finance business generated adjusted loss before tax of
£3.3m (1H23 restated adjusted profit before tax: £8.2m) and receivables
ended the period at £760m (1H23 restated: £748m). The Personal Loans
business generated adjusted loss before tax of £3.8m (1H23: £9.3m) and
receivables ended the period at £68m (1H23: £130m). The Second Charge
Mortgages business generated adjusted profit before tax of £0.4m (1H23
adjusted loss before tax: £0.3m) and receivables ended the period at £32m
(1H23: £nil).
On an adjusted basis, the Group reported an adjusted basic loss per share of
8.3p (1H23 restated 3.6p). On a statutory basis, the Group reported a basic
loss per share of 14.1p (1H23 restated: 6.3p) for 1H24 reflecting the
statutory loss after tax of £35.8m (1H23 restated: £15.9m).
Summary Balance sheet
30 June 2024 31 December 2023 30 June 2023 1 January 2023
(restated) (restated) (restated)
£m £m £m £m
Assets
Cash and balances at central banks 772.8 743.3 447.3 464.9
Amounts receivable from customers1 2,008.5 2,155.8 2,096.4 1,896.9
Pension asset 34.4 38.2 36.8 30.7
Goodwill and other intangibles 132.6 146.8 136.5 134.5
Other assets 136.8 110.6 153.2 128.0
3,085.1 3,194.7 2,870.2 2,655.0
Liabilities
Retail deposits 1,937.5 1,950.5 1,445.3 1,100.6
Bank and other borrowings2 504.1 582.5 706.6 815.4
Trade and other payables 49.6 44.1 64.0 62.8
Other liabilities 64.2 48.5 82.3 69.8
2,555.4 2,625.6 2,298.2 2,048.6
(1) Amounts receivable from customers are presented net of £1.9m (FY23:
£3.2m, 1H23: £5.3m, FY22: £7.9m) fair value adjustment for portfolio hedged
risk. Underlying receivables from customers are £2,010.4m (FY23: £2,159.0m,
1H23: £2,101.7m, FY22: £1,904.8m).
(2) Bank and other borrowings are presented net of £3.7m (FY23: £1.0m, 1H23:
£11.5m, FY22: £4.6m) fair value adjustment for hedged risk. Underlying bank
and other borrowings are £507.8m (FY23: £583.5m, 1H23: £718.1m, FY22:
£820.0m).
Operating review
Product trading performance
Six months ended 30 June 2024
Cards Vehicle Finance Loans Other(1) Corporate Centre Total
£m £m £m £m £m £m
Interest income 202.6 69.8 9.2 1.0 2.6 285.2
Interest expense (38.4) (19.9) (2.0) (0.4) (10.0) (70.7)
Net interest income 164.2 49.9 7.2 0.6 (7.4) 214.5
Fee and commission income 19.3 - - 0.8 - 20.1
Fee and commission expense (0.7) - - (0.1) - (0.8)
Net fee and commission income 18.6 - - 0.7 - 19.3
Other income (0.1) - - 0.3 - 0.2
Total income 182.7 49.9 7.2 1.6 (7.4) 234.0
Impairment charges (66.1) (30.3) (4.9) - - (101.3)
Risk-adjusted income 116.6 19.6 2.3 1.6 (7.4) 132.7
Adjusted operating costs (96.4) (22.9) (6.1) (5.2) (28.9) (159.5)
Adjusted PBT / (LBT) 20.2 (3.3) (3.8) (3.6) (36.3) (26.8)
Six months ended 30 June 2023 (restated)
Cards Vehicle Finance Loans Other(1) Corporate Centre Total
£m £m £m £m £m £m
Interest income 175.1 72.8 12.3 - 4.6 264.8
Interest expense (20.7) (12.3) (1.9) - (15.4) (50.3)
Net interest income 154.4 60.5 10.4 - (10.8) 214.5
Fee and commission income 21.5 - - - - 21.5
Fee and commission expense (0.7) - - - - (0.7)
Net fee and commission income 20.8 - - - - 20.8
Other income 0.2 1.6 - - - 1.8
Total income 175.4 62.1 10.4 - (10.8) 237.1
Impairment charges (55.4) (26.6) (11.0) - - (93.0)
Risk-adjusted income 120.0 35.5 (0.6) - (10.8) 144.1
Adjusted operating costs (86.1) (27.3) (8.7) (0.3) (34.6) (157.0)
Adjusted PBT / (LBT) 33.9 8.2 (9.3) (0.3) (45.4) (12.9)
(1) Other includes Snoop and Second Charge Mortgages
Credit Cards
Six months ended 30 June
2024 2023 Change
£m £m (%)
Total customer numbers ('000) 1,320.9 1,617.3 (18.3)
New customer bookings ('000) 56.8 182.8 (68.9)
Period-end receivables 1,150.6 1,223.9 (6.0)
Average gross customer interest earning balances(1) 1,340.4 1,400.9 (4.3)
Interest income from customer receivables 183.6 166.5 10.3
Interest income from cash balances held on deposit 19.0 8.6 120.9
Interest expense (38.4) (20.7) 85.5
Net interest income 164.2 154.4 6.3
Net fee and commission income 18.6 20.8 (10.6)
Other income (0.1) 0.2 150.0
Total income 182.7 175.4 4.2
Impairment charges (66.1) (55.4) 19.3
Risk adjusted income 116.6 120.0 (2.8)
Adjusted operating costs (96.4) (86.1) 12.0
Adjusted PBT contribution (2) 20.2 33.9 (40.4)
Asset yield (%) (3) 27.5 24.0 3.5
Cost of risk (%) (4) (9.9) (8.0) (1.9)
Risk adjusted margin (%) (5) 17.5 17.3 0.2
(1) Calculated as the average of month end gross receivables,
excluding post charge off assets and deferred acquisition costs, for the 7
months ended 30 June.
(2) Adjusted PBT contribution is stated before tax and exceptional
items.
(3 ) Interest income from customer receivables for the period
multiplied by 365/181 as a percentage of average gross receivables for the 7
months ended 30 June.
(4) Impairment charges for the period multiplied by 365/181 as a
percentage of average gross receivables for the 7 months ended 30 June.
(5) Total income, excluding exceptional items less impairment charge
for the period multiplied by 365/181 as a percentage of average gross
receivables for the 7 months ended 30 June.
For 1H24, the Group's credit card business reported adjusted PBT of £20.2m
(1H23: £33.9m) and receivables at the end of the period of approximately
£1,151m (Dec'23: £1,278m; 1H23: £1,224m).
New customer bookings for the period were 57k, down from 183k in 1H23,
reflecting the temporary cessation of balance transfers, purchase offers, and
the credit builder product on affiliate channels in September 2023 following a
strategic review of the profitability of the portfolio. The credit builder
product was relaunched on the affiliate channel and balance transfers
recommenced in Q2'24. Credit card customer numbers decreased to 1,321k as at
30 June (FY23: 1,376k; 1H23: 1,617k). Active customer numbers, defined as
customers with activity on their card in the last month, also fell to 1,097k
(FY23: 1,190k; 1H23: 1,260k).
During the period, credit line increases issued to customers were
approximately £65m (1H23: £169m), c. 60% lower than 1H23 due to pausing
credit line increases in Aug'23 amid the same business rationale for
moderating acquisition volume. Credit line increases were resumed in Apr'24.
At the end of June, the average utilisation rate was approximately 47% (1H23:
47%). Receivables ended the period at £1,151m (FY23: £1,278m; 1H23:
£1,224m), representing a reduction of 6% year on year.
The credit card business generated interest income of £202.6m during the
period, versus £175.1m in 1H23. This reflects price increases on the customer
receivable in Nov'23 and in 1H24, with a resultant increase in the asset yield
to 27.5% (1H23: 24.0%). Interest income was also favourably impacted by
increased returns from funds placed at the Bank of England.
Funding costs increased to £38.4m during the period, versus £20.7m in 1H23,
reflecting the 34% increase in retail deposit balances (1H24: £1,938m; 1H23:
£1,445m) and rising interest rates. Net fee and commission income reduced in
1H24 to £18.6m (1H23: £20.8m) reflecting the lower active customer numbers.
The impairment charge for 1H24 was £66.1m (1H23: £55.4m) as a result of
higher debt sales and post charge off activity in 1H24. The annualised cost
of risk was 9.9% (1H23: 8.0%).
Costs increased to £96.4m during the period versus £86.1m in 1H23 reflecting
the write-down of development costs for a now redundant mobile app and
increased costs from complaints and FOS fees. These were partly offset by
savings from overall cost management actions, including headcount reduction,
to mitigate the impact of inflation on the business's cost base.
For the remainder of 2024, the credit card business is focused on building
receivables with initiatives across acquisition and existing customers,
including new pricing, balance transfer and purchase offers.
Vehicle Finance
Six months ended 30 June
2024 2023 Change
(restated)(1) (%)
£m £m
Total customer numbers ('000) 109.9 110.9 (0.9)
New customer bookings ('000) 19.4 31.0 (37.4)
Period-end receivables 760.5 748.2 1.6
Average customer gross interest earning balances(2) 851.0 802.0 6.1
Interest income 69.8 72.8 (4.1)
Interest expense (19.9) (12.3) 61.8
Net interest income 49.9 60.5 (17.5)
Other income - 1.6 (100)
Total income 49.9 62.1 (19.6)
Impairment charges (30.3) (26.6) 13.9
Risk adjusted income 19.6 35.5 (44.8)
Adjusted operating costs (22.9) (27.3) (16.1)
Adjusted (LBT)/PBT contribution (3) (3.3) 8.2 (140.2)
Asset yield (%) (4) 16.5 18.3 (1.8)
Cost of risk (%) (5) (7.2) (6.7) (0.5)
Risk adjusted margin (%) (6) 4.6 8.9 (4.3)
(1) As part of the Group's review into Vehicle Finance Stage 3 assets,
it was identified that cash flows expected to be received from contracts
projected to be received from customers on contracts identified for debt sale
were being included beyond the expected sale date in addition to the cash
flows from the debt sale. Vehicle Finance results have been retrospectively
restated with the impact outlined in Note 2 of the financial statements.
(2) Calculated as the average of month end gross receivables,
excluding post charge off assets and deferred acquisition costs, for the 7
months ended 30 June. As part of the review into the Vehicle Finance Stage 3
assets and review of our internal management reporting it was identified that
£51.6m of gross receivables were excluded incorrectly from the presentation
of gross interest earning balances. There was no impact on the balance sheet
as a result of this. KPIs using this metric have therefore been
retrospectively represented for all periods presented in this report.
(3) Adjusted (loss)\profit before tax contribution is stated before
tax and exceptional items.
(4 ) Interest income for the period multiplied by 365/181 as a
percentage of average gross receivables for the 7 months ended 30 June.
(5) Impairment charges for the period multiplied by 365/181 as a
percentage of average gross receivables for the 7 months ended 30 June.
(6) Total income, excluding exceptional items less impairment charge
for the period multiplied by 365/181 as a percentage of average gross
receivables for the 7 months ended 30 June.
The Group's vehicle finance business generated adjusted loss before tax of
£3.3m (1H23 restated adjusted profit before tax: £8.2m) for 1H24 and
receivables at the period end were £761m (1H23 restated: £748m),
representing growth of 1.6% year on year.
During 1H24 a review was undertaken of the vehicle finance stage 3 assets as
indicated during the strategy seminar held on 27 March 2024, with a view to
future potential debt sales. Vehicle Finance has been exhibiting an ever
growing stage 3 gross receivable balance with a corresponding large and
increasing ECL provision being held. As part of the review, a previously
recognised debt sale asset has been removed (£19.8m) and receivables eligible
for a potential debt sale were fully charged off resulting in a post charge
off asset of £17.8m being recognised (PCOA). As a result of charging off the
receivables there has been a reduction in gross receivables of £260.2m and a
release of impairment provision of £252.5m. The review also included a £3.1m
write off of deferred acquisition costs which related to accounts that were
charged off.
As part of the review, it was identified that cash flows expected to be
received from contracts identified for debt sale were being included beyond
the expected sale date. This led to a lower ECL provision being recognised.
As a result, Management consider that a prior period restatement is
appropriate and has retrospectively restated its results. The total impact of
the review was £28.9m, with £12.8m recognised in 1H24 and £7.6m in 1H23.
The full impact of the restatement of £16.1m is set out in note 2 of the
financial statements.
New business volumes in 1H24 decreased by 38% to 19k (1H23: 31k). The prior
year saw strong new business volumes notwithstanding the challenging
macroeconomic backdrop. Volumes reduced in 1H24 due to actions taken at the
end of 2023 to moderate lending growth. The vehicle finance business ended the
period with 110k customers (1H23: 111k). The average loan size was stable at
approximately £8.6k (1H23: £8.4k).
At the end of June, receivables stood at £761m (1H23 restated: £748m),
reflecting the bookings in the period offset by the impact of the stage 3
write offs.
Interest income during 1H24 decreased to £69.8m (1H23 restated: £72.8m)
which included a £3.1m write off for deferred acquisition costs for contracts
associated with the stage 3 review which have now been charged off. The
annualised asset yield decreased year on year to 16.5% versus 18.3% (restated)
in 1H23, reflecting the impact of the £3.1m write off and new business being
written in the lower risk near-prime segment.
Interest costs increased during the period to £19.9m from £12.3m in 1H23,
reflecting the growth in and a higher cost of funds received from the Group.
As a result of this and the lower asset yield profile, the net interest margin
fell to 11.8% versus 15.2% a year earlier.
Impairment for the period increased to £30.3m (1H23 restated: £26.6m), which
includes £9.7m (1H23: £7.4m) in relation to the stage 3 review. The charge
also reflects higher expected credit losses from the IFRS 9 impact of loan
book growth, partly mitigated by the continued shift to lower risk customers.
The annualised cost of risk increased to 7.2% from 6.7% (restated) in 1H23.The
risk-adjusted margin reduced to 4.6% (1H23 restated: 8.9%), also impacted by
the higher funding costs noted above.
Costs decreased to £22.9m (1H23: £27.3m) reflecting a reduction in spurious
claims from several claims management companies and savings from cost
management actions, including headcount reduction.
During 2H24, the vehicle finance business will continue to seek ways to
improve its customer offering and grow its addressable markets, with new asset
class differentiation and more competitive pricing in the near prime, lower
risk segments.
Personal Loans
Six months ended 30 June
2024 2023 Change
£m £m (%)
Total customer numbers ('000) 33.1 50.1 (34.0)
New customer bookings ('000) 1.2 25.4 (95.3)
Period-end receivables 67.8 129.6 (47.7)
Average gross customer interest earning balances(1) 95.0 115.5 (17.7)
Interest income 9.2 12.3 (25.2)
Interest expense (2.0) (1.9) 5.3
Net interest income 7.2 10.4 (30.8)
Total income 7.2 10.4 (30.8)
Impairment charges (4.9) (11.0) (55.5)
Risk-adjusted income 2.3 (0.6) (483.3)
Operating costs (6.1) (8.7) (29.9)
LBT contribution (3.8) (9.3) (59.1)
Asset yield (%) (2) 19.5 21.5 (2.0)
Cost of risk (%)(3) (10.4) (19.2) 8.8
Risk adjusted margin (%)(4) 4.9 (1.0) 5.9
(1) Calculated as the average of month end gross receivables,
excluding post charge off assets and deferred acquisition costs, for the 7
months ended 30 June.
(2) Interest income for the period multiplied by 365/181 as a
percentage of average gross receivables for the 7 months ended 30 June.
(3) Impairment charges for the period multiplied by 365/181 as a
percentage of average gross receivables for the 7 months ended 30 June.
(4) Total income, excluding exceptional items less impairment charge for the
period multiplied by 365/181 as a percentage of average gross receivables for
the 7 months ended 30 June.
The Group's personal loans business temporarily paused all new lending in
September 2023, to both Existing Market and Open Market customers. Following
the Group wide strategic refresh concluding in March 2024, lending to Existing
Market customers re-commenced in mid-April 2024. The Group have withdrawn from
the Open Market loans and have no near-term plans to return to this market
segment.
Total customer numbers of 33.1k at the end of June were 34.0% lower year on
year, reflecting the pause to new lending from mid-September. Lending volumes
during 1H24 were 1k, versus 25k in 1H23 because the prior year saw significant
growth due to the business's Open Market positioning and expansion of the
product range offered to both existing and new customers.
At the end of June, receivables stood at £68m (1H23: £130m), reflecting the
new lending pause, collect out of the loans portfolio from mid-September, and
lower year to date new business volumes.
The personal loans business generated interest income of £9.2m during the
period (1H23: £12.3m), 25% lower than the prior year driven by lower average
receivables. Asset yield was 19.5% versus 21.5% in 1H23, with the decrease
attributed to the impact on the portfolio of new business bookings across 2023
at lower price points with the focus on lower risk near-prime customers.
The impairment charge for 1H24 decreased to £4.9m, from £11.0m in 1H23,
predominantly driven by lower new business volumes and the associated day one
impact of IFRS 9 expected credit losses from new business. The annualised cost
of risk for the period was 10.4% (1H23: 19.2%), which resulted in the
risk-adjusted margin improving to 4.9% (1H23: 1.0%).
Interest costs for the period increased to £2.0m (1H23: £1.9m) despite a
lower average receivables balance year on year due to higher market savings
rates and the UK bank base rate increasing during 2023.
Costs decreased during the period to £6.1m (1H23: £8.7m) due to lower
internal recharges, along with lower marketing and IT spend.
Snoop
Since acquisition in August 2023, Snoop has continued to grow its active user
base, adding nearly 30,000 new customers per month in 1H24. Development of the
app has continued at pace, with over 400 technical and product releases since
acquisition, including the launch of credit score which had around 80,000
users in 1H24, and the integration of switching capability into the Vanquis
mobile app. Snoop loss before tax of £4.0m in 1H24 reflects £1m of income
offset by £5m of costs.
Second charge mortgages
Following the launch of second charge mortgages in Sep'23 volumes have
increased through 1H24, particularly in Q2'24, following the launch of
Interbridge Mortgages in May'24 and an expanded forward flow agreement with
Selina Finance. New mortgage origination volumes in the period of 500 (1H23:
nil) resulted in a closing receivable of £32m (1H23: £nil) and a reported
adjusted profit before tax of £0.4m (1H23: adjusted loss before tax of
£0.3m).
Corporate Centre
Corporate Centre contribution was a loss of £36.3m (1H23: £45.4m). Net
interest expense has reduced reflecting lower interest income due to lower
balances held in the liquid asset buffer centrally and a lower funding expense
as a lower charge is being retained centrally. Costs have reduced by £5.7m
from £34.6m in 1H23 to £28.9m in 1H24 reflecting management actions to
reduce costs including headcount reduction.
Exceptional items
An exceptional cost of £15.5m was recognised in 1H24 (1H23 £5.3m). This
includes transformation costs of £16.0m (1H23: £2.9m) reflecting (i)
consultancy costs £7.8m (1H23: £nil); (ii) redundancy and outsourcing costs
£5.1m (1H23: £2.9m) and; (iii) property related exit costs £3.1m (1H23:
£nil). Non transformation credit of £0.5m (1H23: £2.4m) includes legal
costs of £0.5m offset by a release of the remaining Scheme of Arrangement
provision of £1.0m as the requirements for the discharging of liabilities
have been met. 1H23 also include £2.4m in relation to additional costs in
relation to the liquidation of the CCD companies and the Scheme.
Tax
The tax credit for the period on loss before tax, amortisation of acquisition
intangibles and exceptional items is £5.7m (1H23 restated: £3.8m). The tax
credit reflects:
· For 1H24, the adverse impact of writing off deferred tax assets
in respect of share scheme awards where tax deductions are expected to be
lower than previously expected;
· For 1H23, (a) the favourable impact of offsetting capital losses
on which a deferred tax asset has not previously been recognised to reduce the
capital gain arising on the disposal of shares following the partial
conversion of the preferred stock in Visa Inc; and (b) the adverse impact of
the bank corporation tax surcharge which prior to 31 March 2023 applies at a
rate of 8% to the annual profits of Vanquis Bank in excess of £25m and after
31 March 2023 applies a rate of 3% to Vanquis Bank's annual profits in excess
of £100m and (c) the adverse impact of writing off deferred tax assets in
respect of share scheme awards where tax deductions are expected to be lower
than previously expected.
· The tax credit (1H23: credit) reflects the recognition of
deferred tax assets in respect of losses and other temporary differences on
the basis the Group expects to have sufficient taxable profits in the future
to enable such deferred tax assets to be recovered.
· The tax credit in respect of exceptional items amounts to £3.9m
(1H23: £1.3m). The tax credits in the current and prior periods represent tax
relief in respect of exceptional costs which are considered to be tax
deductible.
Funding and capital
The Group has strong capital and liquidity positions:
· The Group is holding £717m of high-quality liquid resources with
the Bank of England and has a Liquidity Coverage Ratio of 557%, amounting to
£589m above the Group's regulatory Liquidity Coverage Ratio requirement, as
at 30 June 2024.
· The Group's balance sheet position at the end of June remained
robust, with regulatory capital of £559m (£359m of which is Tier 1, held
entirely as CET1), a total capital ratio of 30.8% and a Tier 1 ratio of 19.8%,
versus requirements of 16.4% and 13.4% respectively 1 (#_ftn1) . Total
capital includes the Group's £200m Tier 2 capital instrument.
The Group has transitioned to a traditional bank funding model in which the
Group's funding consists of; (i) retail deposits (fixed term and notice
accounts); (ii) securitisation of the credit cards and vehicle finance books;
and (iii) liquidity and funding facilities at the Bank of England. In 2024,
the Group has added repo capability to allow for some of its retained
securitisation notes to be used as a contingent funding source.
The retail deposits prevailing market conditions remain liquid, recognizing
rates payable have increased during 2023 and 2024. Notwithstanding this, the
Group retains access to wholesale market funding and debt capital via its
£2bn EMTN programme. Vanquis Bank has diversified its retail deposit funding
mix through more cost-effective behaviouralised deposits and ISAs following
the launch of 30- and 60-day notice accounts and ISAs in 1H24.
The Group continues to adopt a prudent approach to managing its funding and
liquidity resources within risk appetite, and will continue to optimise these
resources when new opportunities become available to the Group.
At 30 June 2024, the Group's Tier 1 ratio was 19.8% (1H23: 21.1%) and the
Total Capital Ratio was 30.8% (1H23: 31.4%). CET1 decreased from £410m to
£359m since 1H23 and total own funds decreased from £610m to £559m. The
regulatory capital headroom above the minimum total regulatory requirement of
16.4% was £263m at the period end. The decrease in headroom from £312m at 30
June 2023 (versus the TCR and combined buffer) predominantly reflects the
increase in the UK countercyclical buffer from 1% to 2% in 2H23, the
statutory losses incurred in the period from June 2023 to June 2024 (including
one-off items), offset by a reduction in risk-weighted exposures to £1,813m
(1H23: £1,940m), which was predominantly attributable to risk-weighted
lending assets.
The Group has in place a Capital Principal Risk Policy, which sets out the
framework in which the Group aims to maintain a secure funding and capital
structure and establishes defined capital risk appetite. Adherence to the
policy ensures that the Group maintains minimum capital levels and that the
capital held at business division levels is adequate to support the
businesses' underlying requirements and is sufficient to support growth in
that business. Internal capital is allocated to business lines and risk
categories, calibrated to maximise return on equity while remaining within the
risk appetite.
The distribution of dividends is aligned with the Group's growth targets,
whilst continuing to meet the required capital levels in line with regulatory
requirements and internal risk appetite. The policy requires subsidiaries,
including Vanquis Bank, to maintain sufficient capital to meet regulatory
requirements, manage for 12 months growth and investment whilst maintaining a
management buffer. Thereafter and where applicable Vanquis Bank is required to
distribute a dividend to the Group.
Principal risks and uncertainties
Effective management of risk is critical to enable us to optimise our
shareholder return whilst maximising our business opportunities and positive
outcomes for all our key stakeholders, including shareholders, customers,
colleagues and regulators.
Our principal risks are the risks most significant to the Group's strategy and
business model and formally articulated within the Group's Risk Management
Framework (RMF). Principal risk categories and their supporting risk appetite
statements are reviewed and approved by the Board annually. These define the
Group's overall risk appetite and recognising changes to our risk profile. How
we manage our principal risks are set out below.
Risk Pillar 1: Customer and Conduct
P1 - Customer: Robust practices to support responsible lending for borrowers
under financial pressure and provide appropriate solutions to meet our
customers' needs are in place. We continually seek improvement to our product
governance processes and customer outcome monitoring activity through the
Board-approved conduct risk framework. We met our Consumer Duty Day Two
requirements and now focus on continuing to embed it and enhance our
governance and accountability.
P2 - Regulatory: As a dual regulated firm, we need to adapt to the regulatory
environment as it continues to develop to ensure our lending is sustainable,
suitable and affordable. We regularly undertake horizon scanning to keep
abreast of new regulation and assess the impact to the business and delivery
to plan. SMCR responsibilities are aligned to the RMF and Group Delegated
Authorities Manual (GDAM). Each SMF has clear ownership of the processes,
risks and controls they are accountable for, which are recorded within the
Group's integrated risk management system, Riskonnect.
P3 - Financial Crime: Industry-standard prevention and detection systems are
in place covering fraudulent transactions, suspicious activity, customer
screening and application fraud. These are regularly reviewed and refined to
ensure effectiveness. A detailed business-wide financial crime risk
assessment is in place to measure financial crime risk consistently and
effectively across all new and existing products. The Financial Crime Risk
Forum provides oversight and challenge on the Group's financial crime risk
systems and controls. The Group MLRO provides twice-annual updates to the Risk
Committee.
Risk Pillar 2: Financial
P4 - Capital: The Group and Bank operate within a defined capital risk
appetite, with thresholds reported to and monitored by the Board, Risk
Committee and Assets and Liabilities Committee (ALCO). On 16 July, the Group
announced that following a comprehensive review of its balance sheet, several
one-off revaluations totalling c.£40m have been made. This resulted in the
Group's Tier 1 ratio reducing to 19.8% as at the 30 June. The Group is
currently reforecasting to assess the impact on its strategy and considering
appropriate mitigating actions to ensure capital is utilised in the most
efficient and effective way.
The capital framework is reviewed by the Board as part of the annual ICAAP.
Capital is held to meet Pillar 1 requirements, the most significant elements
for the Group and Bank being credit and operational risks. We also hold
capital to meet Pillar 2A requirements, as assessed in the ICAAP.
P5 - Funding and Liquidity: The Group and the Bank maintain sufficient liquid
assets, both in terms of amount and quality, to meet daily cash flow needs and
stressed scenarios driven by the Group's own risk assessment and regulatory
requirements. Liquid assets solely comprise of reserves held with the Bank of
England. Funding and liquidity metrics are monitored through daily liquidity
reporting, reported monthly at ALCO meetings and quarterly to the Risk
Committee and Board. The Group maintains access to diversified sources of
retail deposits funding, in addition to the securitisation of the cards and
vehicle finance books and contingent liquidity at the Bank of England.
Throughout 2024, the Group and Bank have maintained funding and liquidity
ratios in excess of regulatory requirements.
The funding and liquidity framework is reviewed by the Board as part of the
annual ILAAP. ALCO is responsible for managing the balance sheet structure,
including the funding plan and its risks.
P6 - Market: The Group and the Bank do not take significant unmatched
positions and do not operate trading books. Some financial assets and
liabilities are linked to an underlying index, such as Sterling Overnight
Index Average (SONIA) or Bank of England base rate. The principal market risks
that the Group and Bank are exposed to are interest rate risk and basis
risk. The market risk position is reported monthly to ALCO.
P7 - Credit: The Group's credit quality remains stable. We continue to
enhance our strategies to maintain this asset quality during a challenging
economic environment from the cost-of-living crisis. Affordability
strategies have been adjusted to account for increased cost-of-living and
expected inflation. Work is ongoing to redevelop the credit scorecards and
lending strategies to enable growth whilst maintaining or improving credit
loss rates. These enhancements are expected to roll-out over the next 6-9
months across the portfolios.
Risk Pillar 3: Operational
P8 - Operational: The Group's three lines of defence model ensures clear lines
of accountability between management as risk owners, oversight by the Risk
function and independent assurance provided by Internal Audit. The model,
supported by the RMF, provides continuous integrated assurance over the
effectiveness of key controls and swift response and remediation to issues if
they arise, facilitated through Riskonnect.
The Operational Resilience programme is on track for regulatory deadlines and
continues to test against important business services impacting scenarios. The
supplier management model and third-party risk management framework continue
to be embedded.
P9 - Technology and Information Security: The Group continues to operate on
legacy IT architecture. This is being addressed by the strategic IT
transformation programme, which is progressing in line with expectations and
continues to support the Group's overall strategy. The Group is also
progressing its delivery of key security improvement initiatives against the
overall cyber security strategy, with current focus on delivery of our Zero
Trust/E5 Programme and Red Test action plan, both of which will substantially
improve our overall security posture and materially reduce our risk exposure.
P10 - People: During 2024, we have continued to extend our offshore
outsourcing capability, which has reduced the headcount overall to become
leaner and more efficient and effective in serving our customers. Changes to
our operating model are subject to a structured programme of risk management
and governance to minimise operational disruption and promote colleague
wellbeing. We are committed to being a great place to work, which is a key
focus for our strategy, and continuous improvement based on regular feedback
and engagement from colleagues.
Risk Pillar 4: Strategic
P11 - Strategic Performance: The Group launched a new strategy in Q1 to reset,
strengthen and grow the business in an effective and sustainable manner.
Effective risk management is critical to its delivery and maintaining our
existing commitments in a safe and controlled way. The Board and its
sub-committees make risk-based decisions in the formulation of their business
strategy, in line with the GDAM and risk appetite framework and subject to
independent oversight from the Risk function. Performance against our
strategic and emerging risks is reported to the Risk Committee and Board. We
have established an Executive Risk Committee to strengthen the coordination,
review and delivery of risk management activity.
P12 - Model: Models are widely used across the Group and play an important
role in helping achieve key business decisions, risk management and strategic
objectives. A Model Risk Management Framework is in place, supported by an
independent model validation function and Model Risk Committee that provide
effective model governance and oversight. The IFRS9 models were redeveloped
and implemented in H1. Key focus for H2 is to enhance existing credit risk
scorecards and pricing models across the Group.
Consolidated financial statements
Consolidated income statement for the six months ended 30 June
Note 2024 2023
(restated)(1)
£m £m
Interest income 3 285.2 264.8
Interest expense (70.7) (50.3)
Net interest income 214.5 214.5
Fee and commission income 4 20.1 21.5
Fee and commission expense (0.8) (0.7)
Net fee and commission income 19.3 20.8
Other income and net fair value gains 0.2 1.8
Total income 234.0 237.1
Impairment charges 4 (101.3) (93.0)
Risk-adjusted income 132.7 144.1
Operating costs (179.2) (166.0)
Statutory loss before taxation 4 (46.5) (21.9)
Tax credit 10.7 6.0
Statutory loss for the period attributable to equity shareholders (35.8) (15.9)
Add back:
Tax credit (10.7) (6.0)
Amortisation of acquisition intangibles 4.2 3.7
Exceptional items 4 15.5 5.3
Adjusted loss before tax (26.8) (12.9)
Consolidated statement of comprehensive income for the six months ended 30
June
2024 2023
Note (restated)(1)
£m £m
Loss for the period attributable to equity shareholders (35.8) (15.9)
Items that will not be reclassified subsequently to the income statement:
- actuarial movements on retirement benefit asset 11 (4.5) 5.5
- tax on items taken directly to other comprehensive income 1.1 (1.3)
- impact of change in UK tax rate on items in other comprehensive income - (0.1)
Other comprehensive (expense)/income for the period (3.4) 4.1
Total comprehensive expense for the period (39.2) (11.8)
Loss per share
Note 2024 2023
(restated)(1)
pence pence
Basic 6 (14.1) (6.3)
Diluted 6 (14.1) (6.3)
Dividends per share
Note 2024 2023
pence pence
Interim 7 - 5.0
dividend
Paid in the period(2) 7 1.0 10.3
(1) Refer to note 2 for details of restatement.
(2) Dividends paid in the period were £2.5m (1H23: £25.9m).
Consolidated balance sheets
Note 30 June 31 December 30 June 1 January
2024 2023 2023 2023 (restated)(1)
(restated)(1) (restated)(1)
£m £m £m £m
ASSETS
Cash and cash equivalents 772.8 743.3 447.3 464.9
Amounts receivable from customers 8 2,008.5 2,155.8 2,096.4 1,896.9
Trade and other receivables 82.7 55.9 72.7 50.6
Investments held at fair value through profit and loss 9 5.1 5.4 4.9
10.7
Current tax asset - 8.3 8.7 0.2
Property, plant and equipment 7.4 8.1 7.2 8.3
Right of use assets 18.9 23.2 29.6 32.4
Goodwill 72.4 72.4 71.2 71.2
Other intangible assets 10 60.2 74.4 65.3 63.3
Retirement benefit asset 11 34.4 38.2 36.8 30.7
Derivative financial instruments 12 1.1 1.3 13.4 11.3
Deferred tax assets 5 21.6 8.4 16.7 14.5
TOTAL ASSETS 4 3,085.1 3,194.7 2,870.2 2,655.0
LIABILITIES AND EQUITY
Liabilities
Trade and other payables 49.6 44.1 64.0 62.8
Provisions 13 16.3 5.8 9.6 5.2
Lease liabilities 37.1 40.9 44.9 49.3
Current tax liability 1.2 - - -
Retail deposits 1,937.5 1,950.5 1,445.3 1,100.6
Bank and other borrowings 504.1 582.5 706.6 815.4
Derivative financial instruments 12 9.6 1.8 27.8 15.3
Total liabilities 2,555.4 2,625.6 2,298.2 2,048.6
Equity attributable to owners of the parent
Share capital 53.2 53.2 52.6 52.6
Share premium 276.3 276.3 273.6 273.5
Merger reserves 278.2 278.2 278.2 278.2
Other reserves 14.5 12.1 13.5 12.4
Retained earnings (92.5) (50.7) (45.9) (10.3)
Total equity 4 529.7 569.1 572.0 606.4
TOTAL LIABILITIES AND EQUITY 3,085.1 3,194.7 2,870.2 2,655.0
( )
(1) Refer to note 2 for details of restatement.
Consolidated statement of changes in shareholders' equity
Share Share Merger reserve Other Retained
capital premium £m £m reserves Earnings Total £m
£m £m £m
At 31 December 2022 52.6 273.5 278.2 12.4 (2.0) 614.7
Prior period restatement(1) - - - - (8.3) (8.3)
At 1 January 2023 52.6 273.5 278.2 12.4 (10.3) 606.4
Loss for the period (restated)(1) - - - - (15.9) (15.9)
Other comprehensive income/(expense):
- actuarial movements on retirement benefit asset (note 10) - - - 5.5 5.5
-
- tax on items taken directly to other - - - (1.3) (1.3)
comprehensive income -
- impact of change in UK tax rate - - - - (0.1) (0.1)
Other comprehensive income for the period - - - - 4.1 4.1
Total comprehensive expense for the period - - - - (11.8) (11.8)
Increase in share premium - 0.1 - - - 0.1
Share-based payment charge - - - 3.2 - 3.2
Transfer of share-based payment reserve on vesting of share awards - - (2.1) 2.1 -
-
Dividends - - - - (25.9) (25.9)
At 30 June 2023 and 1 July 2023 52.6 273.6 278.2 13.5 (45.9) 572.0
Profit for the period (restated)(1) - - - - 4.2 4.2
Other comprehensive income/(expense):
- actuarial movements on retirement benefit asset (note 10) - - - - 0.9 0.9
- tax on items taken directly to other - - - - (0.2) (0.2)
comprehensive income
- impact of change in UK tax rate - - - - - -
Other comprehensive income for the period - - - - 0.7 0.7
Total comprehensive income for the period - - - - 4.9 4.9
Dividends - - - - (12.5) (12.5)
Issue of share capital 0.6 2.7 - - - 3.3
Share-based payment charge - - - 1.4 - 1.4
Transfer of share-based payment reserve on vesting of share awards - - - (2.8) 2.8 -
At 31 December 2023 53.2 276.3 278.2 12.1 (50.7) 569.1
At 1 January 2024 53.2 276.3 278.2 12.1 (50.7) 569.1
Loss for the period - - - - (35.8) (35.8)
Other comprehensive (expense)/income:
- actuarial movements on retirement benefit asset (note 10) - - - (4.5) (4.5)
-
- tax on items taken directly to OCI - - - - 1.1 1.1
Other comprehensive expense for the period - - - - (3.4) (3.4)
Total comprehensive expense for the period - - - - (39.2) (39.2)
Share-based payment charge - - - 2.4 - 2.4
Purchase of shares for share awards - - - - (0.1) (0.1)
Dividends - - - - (2.5) (2.5)
At 30 June 2024 53.2 276.3 278.2 14.5 (92.5) 529.7
( )
(1) Refer to note 2 for details of restatement.
Consolidated statement of cash flows for the six months ended 30 June
Six months ended 30 June
Note 2024 2023
(restated)(1)
£m £m
Cash flows from operating activities
Cash generated from/(used in) operations 14 181.0 (169.3)
Finance costs paid (46.5) (40.8)
Finance income received 21.1 10.7
Tax refunded/(paid) 8.1 (6.1)
Net cash generated from/(used in) operating activities 163.7 (205.5)
Cash flows from investing activities
Purchase of intangible assets 10 (5.7) (11.3)
Purchase of property, plant and equipment (4.5) (3.0)
Net cash used in investing activities (10.2) (14.3)
Cash flows from financing activities
Proceeds from bank and other borrowings 264.8 658.9
Repayment of bank and other borrowings (378.4) (425.3)
Payment of lease liabilities (7.0) (5.9)
Dividends paid to Company shareholders (2.5) (25.9)
Purchase of shares for share awards (0.1) -
Proceeds from issue of share capital - 0.1
Net cash (used in)/ generated from financing activities (123.2) 201.9
Net increase/(decrease) in cash, cash equivalents and overdrafts 30.3 (17.9)
Cash, cash equivalents and overdrafts at beginning of period 741.8 463.9
Cash, cash equivalents and overdrafts at end of period 772.1 446.0
Cash, cash equivalents and overdrafts at end of period comprise:
Cash at bank and in hand 772.8 447.3
Overdrafts (held in bank and other borrowings) (0.7) (1.3)
Total cash, cash equivalents and overdrafts 772.1 446.0
(1) Refer to note 2 for details of restatement. 2023 cash flow also
represented for interest income and interest expense to align to income
statement representation.
Cash at bank and in hand includes £716.6m (1H23: £386.5m) in respect of the
liquid assets buffer, including other liquidity resources, held by Vanquis
Bank Limited in accordance with the PRA's liquidity regime.
Notes to the financial information
1. General information and basis of preparation
The company is a public limited company, incorporated and domiciled in the UK.
The address of its registered office is No. 1 Godwin Street, Bradford, BD1
2SU. The company is listed on the London Stock Exchange.
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 2023 were approved by the board of directors on 26 March
2024 and have been delivered to the Registrar of Companies. The report of the
auditor 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 2024 have been reviewed, not audited, and were approved by the board
of directors on 31 July 2024.
The unaudited condensed interim financial statements for the six months ended
30 June 2024 have been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the UK. The unaudited condensed interim financial
statements should be read in conjunction with the statutory financial
statements for the year ended 31 December 2023.
The interim financial statements have been prepared on a going concern basis
under the historical cost convention, as modified by the revaluation of
derivative financial instruments and investments held at fair value through
profit and loss.
In assessing whether the Group is a going concern, the directors have reviewed
the Group's corporate plan as approved in March 2024 and the latest 18 month
forecast approved by Board in July 2024. In doing so, the Board reviewed the
detailed budget for the three year period to December 2026 and the latest
forecast to December 2025 which included further streamlining to deliver
additional cost savings and the introduction of further initiatives to improve
profitability of revenue contracts. The assessment included consideration of
the Group's principal risks and uncertainties, with a focus on capital and
liquidity and the going concern assessment covers a period of 12 months from
the accounts approval date.
The directors have also reviewed the Group's stress testing projections which
are based on a severe but plausible scenario. The stress test scenario
envisages that the UK economy enters a period of stagflation in 2024 with
inflation rising to approximately 8.6% and the UK Bank Rate rising to 6.75%.
As a result, the UK Unemployment rate rises to approximately 8.1%. The stress
test scenario takes into account the availability and effectiveness of
mitigating actions which could be taken by management to avoid or reduce the
impact of the macroeconomic stress. These management actions include reducing
lending growth. This shows that the Group is able to maintain sufficient
capital above the minimum requirements. The directors have reviewed the
Group's reverse stress testing projections to the point of non-viability,
which concluded that the Group's viability only comes into question under an
unprecedented macroeconomic scenario.
2. Accounting policies
Group principal accounting policies under IFRS have been consistently applied
to all the periods presented.
Prior year restatement
In the current year, as part of the Group's review into Vehicle Finance Stage
3 assets, it was identified that cash flows expected to be received from
contracts projected to be received from customers on contracts identified for
debt sale were being included beyond the expected sale date in addition to the
cash flows from the debt sale. This led to a lower ECL provision being
recognised. As a result, Management consider that a prior period restatement
is appropriate and has retrospectively restated its results. The impact of the
restatement is set out below.
Income statement impact 1H23 2H23 FY 2023
£m £m £m
Impairment (7.4) (0.2) (7.6)
Tax credit 1.9 - 1.9
Total income statement impact (5.7) - (5.7)
Balance sheet cumulative impact 2022 closing balance sheet 1H23 FY23
£m £m £m
Receivables (8.5) (15.9) (16.1)
Current tax asset 0.2 0.2 0.2
Deferred tax assets - 1.9 1.9
Retained earnings (8.3) (13.8) (14.0)
Change in presentation of income statement
As part of the work performed on the stage 3 assets and review of our internal
management reporting, it was identified that the presentation of vehicle
finance gross customer interest earning balances were being incorrectly
reduced by £51.6m. KPIs using this metric have therefore been retrospectively
represented for all periods presented in this report. There was no impact to
net receivables or on the reported balance sheet or income statement numbers
as a result of this change.
In the Annual Report and Accounts for 31 December 2023, interest received from
Vanquis Bank Limited's liquid asset buffer and net fair value gains recognised
in relation to the Group's derivative financial instruments previously
reported in other income were represented to be recognised within interest
income, and certain elements of vehicle finance income which were previously
reported in interest income were recognised in other income. The 1H23 numbers
presented in this report have been represented to reflect these changes. After
further review in 1H24, the vehicle finance other income is now presented
within interest income. This change does not constitute a change in accounting
policy and there is no impact on recognition, measurement or profit and loss
in any period presented in this report.
Critical accounting judgements and key sources of estimation uncertainty
The significant accounting judgements exercised by management and key sources
of estimation uncertainty in the
interim financial statements are consistent with those adopted in the
statutory financial statements for the year ended 31 December 2023.
Amounts receivable from customers (note 8)
The Group reviews amounts receivable from customers for impairment at each
balance sheet date. For the purposes of assessing the impairment, customers
are categorised into IFRS 9 stages and cohorts which are considered to be the
most reliable indication of future payment performance. The determination of
expected credit losses involves complex modelling techniques and requires
management to apply significant judgements to calculate expected credit
losses. The most critical judgements are outlined below.
The determination of the significant increase in credit risk (SICR) thresholds
to be used in the models for credit card, vehicle finance and personal loans
require management judgement to optimise the performance and therefore
effectiveness of the staging methodology. Assessments are made to determine
whether there is objective evidence of a SICR which indicates whether there
has been an adverse effect on Probability of Default (PD). A SICR for
customers is when there has been a significant increase in behavioural score
or when one contractual monthly payment has been missed.
For the purpose of IFRS 9, default is assumed when three contractual
repayments have been missed.
The Group's impairment models are subject to periodic monitoring, independent
validation and back testing performed on model components (where appropriate),
including probability of default, exposure at default and loss given default
to ensure management judgements remain appropriate. Limitations in the Group's
impairment models or data inputs may be identified through the ongoing
assessment and validation of the output of the models. In these circumstances,
management makes appropriate adjustments to the Group's allowance for
impairment losses to ensure that the overall provision adequately reflects all
material credit risks. These adjustments are determined by considering the
particular attributes of exposures which have not been adequately captured by
the impairment models and range from changes to model inputs and parameters,
at account level, through to more qualitative post-model adjustments that have
a higher
degree of management judgement. All adjustments are reviewed quarterly and are
subject to internal review and challenge to ensure that amounts are
appropriately calculated.
A breakdown of the post-model adjustments is included within note 8.
Macroeconomic impairment provision adjustments are recognised in the core
model to reflect an increased PD based on future macroeconomic scenarios.
These provisions reflect the potential for future changes in hazard rate, the
number of people who were employed last month but who are unemployed the
following month (derived from unemployment), and debt to income ratio. The
provision reflects the potential for future changes under a range of
forecasts, as analysis has clearly evidenced correlation between hazard rates,
debt to income ratios and credit losses incurred.
Management judgement was required to determine the appropriate macroeconomic
indicators to be used in the model by assessing their correlation with credit
losses incurred by the business. Unemployment is judged to be a key
macroeconomic indicator as analysis has clearly evidenced a correlation
between changes in unemployment and credit losses incurred by the business.
Key sources of estimation uncertainty
The level of impairment recognised is calculated using models which utilise
historical payment performance to generate the estimated amount and timing of
future cash flows from each cohort of customers in each arrears stage. The
models are regularly tested to ensure they retain sufficient accuracy.
Sensitivity analysis has been performed in note 8 which shows the impact of a
1% movement of gross exposure into stage 2 from stage 1 on the allowance
accounts.
During 1H24 a review was undertaken of the vehicle finance stage 3 assets as
indicated during the strategy seminar held on 27 March 2024. Vehicle Finance
has been exhibiting an ever growing stage 3 gross receivable balance with a
corresponding large and increasing ECL provision being held. As part of the
review, receivables eligible for a potential debt sale were fully charged off
resulting in a post charge off asset (PCOA) of £17.8m being recognised. The
receivables within this PCOA have been split into several cohorts and an
expected sale price determined for each cohort. Sensitivity analysis performed
on the valuation indicates a 10% change in price would adjust the valuation by
c.£1.6m.
The charge off process led to a reduction in gross receivables of c.£261m and
a release of impairment provision of £237m. In addition, revised definition
of default criteria implemented as part of the IFRS9 model recalibration
undertaken during 2023, resulted in a re-classification of c.£127m of
receivables from Stage 3 into Stage 1, and a further c.£73m from Stage 2 into
Stage 1 in vehicle finance. As a result, the coverage ratios for vehicle
finance assets has reduced from 32% at FY23 (restated) to 17% at 1H24.
Retirement benefit asset (note 11)
The valuation of the retirement benefit asset is dependent upon a series of
assumptions, the key assumptions being mortality rates and the discount rate
applied to liabilities. The most significant assumption which could lead to
material adjustment is a change in discount rates.
Discount rates are based on the market yields of high-quality corporate bonds
which have terms closely linked with the estimated term of the retirement
benefit obligation. Mortality estimates are based on standard mortality
tables, adjusted where appropriate to reflect the Group's own expected
experience. Sensitivity analysis is performed in note 11.
Other accounting judgements
Intangibles (note 10)
All intangible assets have been reviewed for impairment under IAS 36. Based
on reviews during 1H24 it was identified that certain assets were no longer in
use and have therefore been written off. This includes the Credit Cards mobile
app which has been written off in full as a decision was made to rebuild this
functionality using a more efficient design and build approach leading to an
overall better customer experience. The resulted in a cost of £8.5m being
recognised in 1H24 results.
In addition assets expected to be replaced by the Gateway platform in 2026
have been reviewed: a small number of these assets have been written off, and
the useful economic lives of other assets were reassessed in light of their
expected retirement by the Gateway platform. The impact on the 1H24 results
was £0.1m.
Provisions: Customer remediation complaints (note 13)
During 2023 and into 1H24 the Group experienced elevated levels of customer
compensation claims from claims management companies. The majority of these
claims are speculative in nature, primarily driven by spurious CMC activity,
and related to a wide range of different matters, primarily in respect of the
lending process but with no common theme or systemic issue. During the second
half of 2023 this activity began to stabilise within vehicle finance, with
attention of the CMCs turning to the cards product. In 1H24 the increase in
costs and provision resulted from higher expected FOS fees for cases not
upheld which are expected to subsequently be submitted to FOS for
adjudication.
The cost to the Group of customer remediation costs, which relate to a wide
range of different matters, amounts to £7.3m in 1H24 (1H23: £6.3m; FY23:
£11.7m).
A provision of £8.2m (1H23; £6.0m; FY23: £3.5m) is held at the balance
sheet date for: (i) customer compensation claims received where compensation
may be paid but which have not yet been assessed, upheld or compensation
amounts agreed (£5.2m); and (ii) expected FOS fees for future claims which
may be referred (£3.0m). The provision is determined based on the complaints
volume pipeline at the period end, estimated uphold complaint rates, and
average compensation amounts for each complaint type based on historic data.
Financial Ombudsman Service (FOS) case fees of £750 per case was reduced to
£650 during 1H24 and are payable on all cases referred to the FOS regardless
of outcome. FOS case fees and resource costs incurred in processing complaint
submissions amount to £17.1m (1H23: £7.6m; FY23: £16.8m).Total FOS case
fees incurred by the Group have increased reflecting the increase in total
volumes referred to FOS; this increase is mainly due to the elevated volumes
submitted by CMC's exceeding time bound service level agreements, and is not
an indication of deteriorating underlying issues. These costs are based on
complaints volume pipeline as at the period end, in addition to further
estimated referrals based on historic data. At the period end £8.1m (1H23:
£3.5m; FY23: £4.8m) is included within accruals at 30 June 2024.
3. Interest income
Six months ended 30 June
Interest receivable from: 2024 2023
£m £m
Customer receivables 263.5 251.5
Cash balances held on deposit and other interest 20.3 10.6
Net fair value gains on derivative financial instruments 1.4 2.7
Total income 285.2 264.8
4. Segment reporting
Six months ended 30 June 2024
Second charge mortgages
Vehicle Finance Corporate Centre
Cards Loans Snoop Total
£m £m £m £m £m £m £m
Interest income 202.6 69.8 9.2 1.0 - 2.6 285.2
Interest expense (38.4) (19.9) (2.0) (0.4) - (10.0) (70.7)
Net interest income 164.2 49.9 7.2 0.6 - (7.4) 214.5
Fee and commission income 19.3 - - - 0.8 - 20.1
Fee and commission expense (0.7) - - - (0.1) - (0.8)
Net fee and commission income 18.6 - - - 0.7 - 19.3
Other income (0.1) - - - 0.3 - 0.2
Total income 182.7 49.9 7.2 0.6 1.0 (7.4) 234.0
Impairment charges (66.1) (30.3) (4.9) - - - (101.3)
Risk-adjusted income 116.6 19.6 2.3 0.6 1.0 (7.4) 132.7
Adjusted operating costs (96.4) (22.9) (6.1) (0.2) (5.0) (28.9) (159.5)
Adjusted PBT(LBT) 20.2 (3.3) (3.8) 0.4 (4.0) (36.3) (26.8)
Exceptional items (15.5) (15.5)
Amortisation of acquisition intangibles (4.2) (4.2)
Statutory loss before taxation (56.0) (46.5)
Tax credit 10.7
Statutory loss for the year attributable to equity shareholders (35.8)
Six months ended 30 June 2023 (restated)(1)
Second charge mortgages
Vehicle Finance Corporate Centre
Cards Loans Snoop Total
£m £m £m £m £m £m £m
Interest income 175.1 72.8 12.3 - - 4.6 264.8
Interest expense (20.7) (12.3) (1.9) - - (15.4) (50.3)
Net interest income 154.4 60.5 10.4 - - (10.8) 214.5
Fee and commission income 21.5 - - - - - 21.5
Fee and commission expense (0.7) - - - - - (0.7)
Net fee and commission income 20.8 - - - - - 20.8
Other income 0.2 1.6 - - - - 1.8
Total income 175.4 62.1 10.4 - - (10.8) 237.1
Impairment charges (55.4) (26.6) (11.0) - - - (93.0)
Risk-adjusted income 120.0 35.5 (0.6) - - (10.8) 144.1
Adjusted operating costs (86.1) (27.3) (8.7) (0.3) - (34.6) (157.0)
Adjusted PBT/(LBT) 33.9 8.2 (9.3) (0.3) - (45.4) (12.9)
Exceptional items (5.3) (5.3)
Amortisation of acquisition intangibles
(3.7) (3.7)
Statutory loss before taxation (54.4) (21.9)
Tax credit 6.0
Statutory loss for the year attributable to equity shareholders (15.9)
(1) Refer to note 2 for details of restatement.
Acquisition intangibles represent the fair value of the broker relationships
of £75.0m which arose on the acquisition of Moneybarn in August 2014; the
fair value of intangible assets of £10.1m; and the brand name of £1.0m,
arising on the acquisition of Snoop in 2023. The amortisation charge for the
period amounted to £4.2m (1H23: £3.7m).
Revenue between business segments in not material.
Exceptional items represent an exceptional charge of £15.5m in 2024 (1H23:
£5.3m) and comprise:
Six months ended 30 June
2024 2023
£m £m
Strategy consultancy costs (7.8) -
Property exit costs (3.1) -
Redundancy - outsourcing and other staff exits (2.8) (2.3)
Other outsourcing costs (2.3) (0.6)
Total transformation costs (16.0) (2.9)
Other exceptional costs:
Legal and other advice (0.5)
CCD Scheme and liquidation costs 1.0 (2.4)
Total exceptional items (15.5) (5.3)
Net
Segment assets assets/(liabilities)
30 June 2024 31 December 2023 30 June 2023 30 June 2024 31 December 2023 30 June 2023
(restated)(1) (restated)(1) (restated)(1) (restated)(1)
£m £m £m £m £m £m
Credit cards, personal loans and second charge mortgages 2,101.6 1,875.9 360.6 388.2
2,195.7 393.7
Vehicle finance 875.3 882.1 860.0 189.3 198.9 174.2
Central 34.1 29.4 466.0 (23.8) (29.0) 392.3
Other 13.5 11.8 - 3.6 5.5 -
Continuing operations before intra-group elimination 3,024.5 3,201.9 529.7 954.7
3,119.0 569.1
Discontinued operations - - - - - (382.7)
Intra-group elimination 60.6 75.7 (331.7) - - -
Total Group 3,085.1 3,194.7 2,870.2 529.7 569.1 572.0
( )
(1) Refer to note 2 for details of restatement.
The presentation of segment net assets reflects the statutory assets,
liabilities and net assets of each of the Group's divisions. This results in
an intra-group elimination reflecting the difference between the central
intercompany funding provided to the divisions and the external funding raised
centrally. Credit cards, personal loans and second charge mortgages are all
recognised within Vanquis Bank Limited and are therefore combined for balance
sheet reporting purposes.
Discontinued operations reflect the CCD business comprising home credit and
Satsuma loan which was closed during 2021 and in accordance with IFRS 5
'Non‑current Assets Held for Sale and Discontinued Operations' these
businesses were presented as discontinued operations. There were no amounts
included in the Group income statement in the current year or prior period.
5. Tax credit
The tax credit can be summarised as follows:
Six months ended 30 June
2024 2023
(restated)(1)
£m £m
Adjusted LBT 5.7 3.8
Exceptional items 3.9 1.3
Amortisation of acquisition intangible 1.1 0.9
Total tax credit 10.7 6.0
(1) Refer to note 2 for details of restatement.
The tax credit on loss before tax, amortisation of acquisition intangibles and
exceptional items has been calculated by:
· calculating the best estimate of the effective tax rate for each
division for the financial year, excluding deferred tax asset write offs and,
in 2023, the tax impact of the sale of shares in Visa Inc following the
partial conversion of the preferred stock which relates only to 1H23;
· applying this to the (loss)/profit before tax, amortisation of
acquisition intangibles and exceptional items for the relevant division for
the period and aggregating the resultant amount; and
· adding to this the write off of deferred tax assets in respect of
share scheme awards where tax deductions are expected to be lower than
previously expected net of in 1H23 the beneficial tax impact of utilising
capital losses
on which a deferred tax asset was not previously recognised to reduce capital
gains realised in the first half of the financial year.
This gives a tax credit for the period on loss before tax, amortisation of
acquisition intangibles and exceptional items of £5.7m (1H23 restated:
£3.8m). The tax credit reflects:
· the adverse impact of writing off deferred tax assets in respect
of share scheme awards where tax deductions are expected to be lower than
previously expected; and
· in 1H23 (a) the favourable impact of offsetting capital losses on
which a deferred tax asset has not previously been recognised to reduce the
capital gain arising on the disposal of shares following the partial
conversion of the preferred stock in Visa Inc; and (b) the adverse impact of
the bank corporation tax surcharge which prior to 31 March 2023 applies at a
rate of 8% to the annual profits of Vanquis Bank in excess of £25m and after
31 March 2023 applies a rate of 3% to Vanquis Bank's annual profits in excess
of £100m
· The tax credit (1H23: credit) reflects the recognition of
deferred tax assets in respect of losses and other temporary differences on
the basis the Group expects to have sufficient taxable profits in the future
to enable such deferred tax assets to be recovered.
· The tax credit in respect of exceptional items amounts to £3.9m
(1H23: £1.3m). The tax credits in the current and prior periods represent tax
relief in respect of exceptional costs which are considered to be tax
deductible.
6. Loss per share
Basic loss per share LPS is calculated by dividing the loss for the period
attributable to equity shareholders by the weighted average number of ordinary
shares outstanding during the period less the number of shares held by the
Employee Benefit Trust which are used to satisfy the share awards such as the
Deferred Bonus Plan (DBP), Long Term Investment Scheme (LTIS), Restricted
Share Plan (RSP) and Company Share Option Plan (CSOP).
Diluted L/EPS calculates the effect on L/EPS assuming conversion of all
dilutive potential ordinary shares. Dilutive potential ordinary shares are
calculated as follows:
(i) For share awards outstanding under performance-related share
incentive schemes such as the DBP, LTIS, RSP and the CSOP, the number of
dilutive potential ordinary shares is calculated based on the number of shares
which would be issuable if: (i) the end of the reporting period is assumed to
be the end of the schemes' performance period; and (ii) the performance
targets have been met as at that date
(ii) For share options outstanding under non-performance-related schemes
such as the Save As You Earn scheme (SAYE), a calculation is performed to
determine the number of shares that could have been acquired at fair value
(determined as the average annual market share price of the Company's shares)
based on the monetary value of the subscription rights attached to outstanding
share options. The number of shares calculated is compared with the number of
share options outstanding, with the difference being the dilutive potential
ordinary shares. The Group also presents an adjusted L/EPS, prior to the
amortisation of acquisition intangibles and exceptional items.
Potential ordinary shares are treated as dilutive when, and only when, their
conversion to ordinary shares would decrease earnings per share or increase
loss per share.
Reconciliations of basic and diluted LPS are set out below:
Six months ended 30 June
2024 2023 (restated)(1)
Weighted average Weighted average
number Per number Per
of shares share of shares share
Earnings amount Earnings amount
£m m pence £m m pence
Basic loss per share (35.8) 254.7 (14.1) (15.9) 251.0 (6.3)
Dilutive effect of share options and awards - - - - - -
Diluted loss per share (35.8) 254.7 (14.1) (15.9) 251.0 (6.3)
Six months ended 30 June
2024 2023 (restated)(1)
Weighted average Weighted average
number Per number Per
of shares share of shares share
Earnings amount Earnings amount
£m m pence £m m pence
Basic loss per share (35.8) 254.7 (14.1) (15.9) 251.0 (6.3)
Amortisation of acquisition intangibles, net of tax 0.3 - 0.1 2.8 - 1.1
Exceptional items, net of tax 14.4 - 5.7 4.0 - 1.6
Adjusted basic loss per share (21.1) 254.7 (8.3) (9.1) 251.0 (3.6)
Diluted loss per share (35.8) 254.7 (14.1) (15.9) 251.0 (6.3)
Amortisation of acquisition intangibles, net of tax 0.3 - 0.1 2.8 - 1.1
Exceptional items, net of tax 14.4 5.7 4.0 - 1.6
Adjusted diluted loss per share (21.1) 254.7 (8.3) (9.1) 251.0 (3.6)
( )
(1) Refer to note 2 for details of restatement.
7. Dividends
Six months ended 30 June
2024 2023
£m £m
2022 final - 10.3p per - 25.9
share
2023 final - 1.0p per 2.5
share
Total dividends paid 2.5 25.9
The directors are not recommending an interim dividend in respect of the
period ended 30 June 2024 (1H23: 5.0p).
8. Amounts receivable from customers
30 June 2024 31 December 2023 30 June 2023
(restated)(1) (restated)(1)
£m £m £m
Credit cards 1,150.6 1,277.7 1,223.9
Vehicle finance 760.5 776.1 748.2
Personal loans 67.8 102.4 129.6
Second charge mortgages 31.5 2.8 -
Total 2,010.4 2,159.0 2,101.7
Fair value adjustment for portfolio hedged risk (1.9) (3.2) (5.3)
Total group 2,008.5 2,155.8 2,096.4
(1) Refer to note 2 for details of restatement.
The fair value adjustment for the portfolio hedge risk relates to the hedge
accounting adjustment on the balance guaranteed swap. Hedge accounting was
discontinued in 2H22 and the adjustment is now being amortised over the
remaining life of the vehicle finance receivables.
An analysis of receivables by IFRS 9 stages is set out below:
30 June 2024
Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
Gross receivables
Credit cards 1,115.8 122.0 95.2 1,333.0
Vehicle finance 608.6 122.8 189.5 920.9
Personal loans 68.8 4.0 4.9 77.7
Second charge mortgages 31.5 - - 31.5
Total group 1,824.7 248.8 289.6 2,363.1
Allowance account
Credit cards (76.0) (49.9) (56.5) (182.4)
Vehicle finance (19.7) (21.4) (119.3) (160.4)
Personal loans (5.1) (1.7) (3.1) (9.9)
Second charge mortgages - - - -
Total group (100.8) (73.0) (178.9) (352.7)
Net receivables
Credit cards 1,039.8 72.1 38.7 1,150.6
Vehicle finance 588.9 101.4 70.2 760.5
Personal loans 63.7 2.3 1.8 67.8
Second charge mortgages 31.5 - - 31.5
Total group 1,723.9 175.8 110.7 2,010.4
31 December 2023 (restated) (1)
Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
Gross receivables
Credit cards 1,200.8 161.4 114.2 1,476.4
Vehicle finance 391.7 224.8 527.7 1,144.2
Personal loans 104.1 5.5 7.9 117.5
Second charge mortgages 2.8 - - 2.8
Total group 1,699.4 391.7 649.8 2,740.9
Allowance account
Credit cards (85.2) (57.6) (55.9) (198.7)
Vehicle finance (restated)(1) (18.2) (27.0) (322.9) (368.1)
Personal loans (6.3) (2.4) (6.4) (15.1)
Second charge mortgages - - - -
Total group (109.7) (87.0) (385.2) (581.9)
Net receivables
Credit cards 1,115.6 103.8 58.3 1,277.7
Vehicle finance (restated)(1) 373.5 197.8 204.8 776.1
Personal loans 97.8 3.1 1.5 102.4
Second charge mortgages 2.8 - - 2.8
Total group 1,589.7 304.7 264.6 2,159.0
30 June 2023 (restated) (1)
Stage 1 Stage 2 Stage 3 Total
£m £m £m £m
Gross receivables
Credit cards 1,187.7 139.4 113.0 1,440.1
Vehicle finance 423.0 203.5 487.6 1,114.1
Personal loans 132.8 3.9 5.6 142.3
Second charge mortgages - - - -
Total group 1,743.5 346.8 606.2 2,696.5
Allowance account
Credit cards (96.8) (52.5) (66.9) (216.2)
Vehicle finance (restated)(1) (20.7) (25.6) (319.6) (365.9)
Personal loans (7.7) (1.6) (3.4) (12.7)
Second charge mortgages - - - -
Total group (125.2) (79.7) (389.9) (594.8)
Net receivables
Credit cards 1,090.9 86.9 46.1 1,223.9
Vehicle finance (restated)(1) 402.3 177.9 168.0 748.2
Personal loans 125.1 2.3 2.2 129.6
Second charge mortgages - - - -
Total group 1,618.3 267.1 216.3 2,101.7
(1) Refer to note 2 for details of restatement.
An increase of 1% of the gross exposure into stage 2 from stage 1 would result
in an increase in the allowance account of £4.3m (FY23: £2.7m; 1H23: £2.8m)
based on applying the difference between the coverage ratios from stage 1 to
stage 2 to the movement in gross exposure.
A breakdown of the post-model adjustments for credit cards is shown below:
Credit Cards 30 June 2024 31 December 30 June 2023
2023
£m £m £m
Core model 180.4 209.4 201.5
New Model (under)/overlays (note (a)) - (12.7) -
Post Model (under)/overlays 2.0 2.0 14.7
Total allowance account 182.4 198.7 216.2
30 June 2024 31 December 2023 30 June 2023
£m £m £m
Post model (under)/overlays:
Affordability risk event (note (b)) - - 0.3
Persistent debt (note (c)) - - 2.2
Cost of living (note (d)) - - 10.0
Recoveries (note (e)) - - 2.2
Other (note (f)) 2.0 2.0 -
Total post model (under)/overlays 2.0 2.0 14.7
Total (under)/overlays 2.0 10.7 14.7
(a) Model overlay
Throughout 2023 the Group, in line with its ongoing commitment to continue to
enhance the quality and accuracy of expected credit loss modelling, took steps
to refine and re-calibrate the IFRS 9 model suite across the credit cards,
vehicle finance and personal loans resulting in a release of £57.7m across
all portfolios. Enhanced segmentation, refreshed data calibration, and a
refinement to model input parameters indicated the need for a model rebuild
underlay at Dec'23. The resultant level of ECL provision was considered to
more accurately reflect the Groups' exposure to credit risk and took into
account how our receivables mix had evolved throughout later months of 2023.
The new model underlay was released in 1H24 when the incumbent IFRS9 models
were substituted with the new suite of IFRS 9 models.
(b) Affordability
An additional IFRS 9 impairment provision had been created to cover the
principal balance of those customers impacted by risk events which may need to
be written off. These risk events arose from minor temporary data misalignment
instances impacting a small number of accounts which have now been remediated.
This overlay was fully released in 2023.
(c) Persistent debt
A post-model overlay was calculated to refine provisioning for those customers
who had entered into persistent debt 36 months. These customers were split
into two categories: those who had responded to communications and agreed to
pay down their outstanding balance; and those who were making minimum payments
but had not responded. This overlay was fully released in 2023, as this
model drawback was remediated in the new model and hence included in the model
overlay.
(d) Cost of living
A cost of living overlay was initially raised in 2021 due to rising inflation
and higher energy costs, which might have impacted customers' ability to make
repayments. The actual effect on the customers' ability to make repayments was
closely monitored subsequently, however the underlying credit metrics of the
book remained stable and showed no signs of significant increase in credit
risk. In 2023, both inflation and energy costs started stabilising and
management decided to gradually release the overlay with full release by the
end of 2023.
(e) Recoveries
A post-model overlay was created in 2021 to account for an estimated reduction
in recoveries for debt sold to debt collection agencies. Updated information
and further refinement in understanding the extent of the exposure led to
management fully releasing this overlay in 2023.
(f) Other
Other includes adjustment for fraud and one day interest adjustment due to
known model deficiencies.
A breakdown of the post-model adjustments for vehicle finance is shown below:
Vehicle finance 30 June 2024 31 December 2023 (restated)(1) 30 June 2023 (restated)(1)
£m £m £m
Core model 165.7 419.5 375.9
New Model (under)/overlays (note (a)) - (47.0) -
Post Model (under)/overlays (5.3) (4.4) (10.0)
Total allowance account 160.4 368.1 365.9
30 June 2024 31 December 2023 30 June 2023
£m £m £m
Post-model overlays:
Fraud (note (b)) (5.3) (5.2) (4.4)
Borrowers in financial difficulty (note (c)) - 0.8 -
Cost of living (note (d)) - - 0.5
Near prime customers (note (e)) - - (6.1)
Total post model (under)/overlays (5.3) (4.4) (10.0)
Total (under)/overlays (5.3) (51.4) (10.0)
(1) Vehicle Finance receivables have been retrospectively restated, see note
2
(a) Model overlay
Relates to new model development executed in 2023. Refer to Cards section for
further details.
(b) Fraud
The fraud overlay represents a cohort of live accounts within the vehicle
finance portfolio that have been identified as fraud customers. There is a
corresponding adjustment within gross receivables for these accounts.
(c) Borrowers in financial difficulty
An overlay was recognised for a selection of customer accounts that are
deemed to be borrowers in financial difficulty. The overlay was released in
1H24 as a result of the model update.
(d) Cost of living
The cost of living overlay was fully released in 2023. Refer to Cards
section for further details
(e) Near prime customers
The near prime customers post model overlay was introduced in 2023 due to an
increased volume of new near prime customers, for whom the model did not
accurately predict a significant increase in credit risk for this customer
segment. This was because the Group's available historical data relating to
this segment on which the models operated was minimal, due to low historic
lending volumes to this customer segment. Therefore a post model overlay was
created to address the model shortcomings. This overlay was released in 2H23
as the model was updated to address this limitation.
A breakdown of the post-model adjustments for personal loans is shown below:
Personal loans 30 June 31 December 2023 30 June
2024 £m 2023
£m £m
Core model 9.9 13.1 12.4
New Model (under)/overlays (note (a)) - 2.0 -
Post Model (under)/overlays - - 0.3
Total allowance account 9.9 15.1 12.7
30 June 31 December 2023 30 June
2024 £m 2023
£m £m
Post-model overlays:
Cost of living (note (b)) - - 0.3
Total post model (under)/overlays - - 0.3
Total (under)/overlays - 2.0 0.3
(a) Model overlay
Relates to new model development executed in 2023. Refer to Cards section for
further details.
(b) Cost of living
A cost of living overlay was fully released in 2023. Refer to Cards section
for further details.
The impairment charge in respect of amounts receivable from customers can be
analysed as follows:
Six months ended
2024 2023
(restated)(1)
£m £m
Credit cards 66.1 55.4
Vehicle finance 30.3 26.6
Personal loans 4.9 11.0
Total impairment charge 101.3 93.0
(1) Refer to note 2 for details of restatement.
9. Investments
30 June 2024 31 December 2023 30 June 2023
£m £m £m
Visa Inc. shares 5.1 5.4 4.9
Visa Inc. shares
The Visa Inc shares represent preferred stock in Visa Inc held by Vanquis Bank
Limited following completion of Visa Inc's acquisition of Visa Europe Limited
in 2016.
The valuation of the preferred stock has been determined using the common
stock's value as an approximation as both classes of stock have similar
dividend rights. However, adjustments have been made for: (i) illiquidity; as
the preferred stock is not tradeable on an open market and can only be
transferred to other Visa members; and (ii) future litigation costs which
could affect the valuation of the stock prior to conversion.
10. Other intangible assets
30 June 2024
Acquisition intangibles Computer software Total
£m £m £m
Cost
At 1 January 86.1 85.1 171.2
Additions - 4.5 4.5
Disposals - (14.2) (14.2)
At 30 June 86.1 75.4 161.5
Accumulated amortisation and impairment
At 1 January 70.4 26.4 96.8
Charged to the income statement 4.2 6.0 10.2
Impairment - 8.5 8.5
Disposals - (14.2) (14.2)
At 30 June 74.6 26.7 101.3
Net book value
At 30 June 11.5 48.7 60.2
At 1 January 15.7 58.7 74.4
31 December 2023
Acquisition intangibles Computer software Total
£m £m £m
Cost
At 1 January 75.0 68.5 143.5
Additions 11.1 19.0 30.1
Disposals - (2.4) (2.4)
At 31 December 86.1 85.1 171.2
Accumulated amortisation and impairment
At 1 January 62.5 17.7 80.2
Charged to the income statement 7.9 10.6 18.5
Disposals - (1.9) (1.9)
At 31 December 70.4 26.4 96.8
Net book value
At 31 December 15.7 58.7 74.4
At 1 January 12.5 50.8 63.3
30 June 2023
Acquisition intangibles Computer software Total
£m £m £m
Cost
At 1 January 75.0 68.5 143.5
Additions - 11.3 11.3
Disposals - (2.2) (2.2)
At 30 June 75.0 77.6 152.6
Accumulated amortisation and impairment
At 1 January 62.5 17.7 80.2
Charged to the income statement - 8.9 8.9
Disposals - (1.8) (1.8)
At 30 June 62.5 24.8 87.3
Net book value
At 30 June 12.5 52.8 65.3
At 1 January 12.5 50.8 63.3
Acquisition intangibles represent the fair value of the broker relationships
arising on the acquisition of Moneybarn in August 2014. The intangible asset
was calculated based on the discounted cash flows associated with vehicle
finance core broker relationships and is being amortised over an estimated
useful life of 10 years. Additions to acquisition intangibles in 2023
comprised £10.1m of internally generated core platform and technology, and
£1.0m in relation to the 'Snoop' brand name arising on the acquisition of
Snoop on 7 August 2023.
Additions to computer software of £4.5m (1H23: £11.3m) comprise costs
associated with the Gateway platform development. In 1H24 £8.5m of impairment
relates to the write down of development costs for a mobile app which is now
considered redundant.
11. Retirement benefit asset
The group operates a defined benefit pension scheme: the Provident Financial
Staff Pension Scheme. The scheme is of the funded, defined benefit type and it
is now also closed to future accrual.
The scheme provides pension benefits which were accrued on a final salary and,
more recently, on a cash balance basis. With effect from 1 August 2021 it was
fully closed to future accrual and benefits are no longer linked to final
salary, although accrued benefits are subject to statutory inflationary
increases.
The scheme is a UK registered pension scheme under UK legislation. The scheme
is governed by a Trust Deed and Rules, with trustees responsible for the
operation and the governance of the scheme. The trustees work closely with the
Group on funding and investment strategy decisions. The most recent actuarial
valuation of the scheme was carried out as at 1 June 2021 by a qualified
independent actuary. The valuation used for the purposes of IAS 19 'Employee
benefits' has been based on the results of the 2021 valuation to take account
of the requirements of IAS 19 in order to assess the liabilities of the scheme
at the balance sheet date. Scheme assets are stated at fair value as at the
balance sheet date.
The group is entitled to a refund of any surplus, subject to tax, if the
scheme winds up after all benefits have been paid.
As a result, the Group recognises surplus assets under IAS 19.
The Group is exposed to a number of risks, the most significant of which are
as follows:
- Investment risk - the liabilities for IAS 19 purposes are
calculated using a discount rate set with reference to corporate bond yields.
If the assets underperform this yield a deficit will arise. The scheme has a
long-term objective to reduce the level of investment risk by investing in
assets that better match liabilities.
- Change in bond yields - a decrease in corporate bond yields will
increase the liabilities, although this will be partly offset by an increase
in matching assets.
- Inflation risk - some of the liabilities are linked to inflation.
If inflation increases then liabilities will increase, although this will be
partly offset by an increase in assets. As part of a long-term de-risking
strategy, the scheme has increased its portfolio in inflation matched assets.
- Life expectancies - the scheme's final salary benefits provide
pensions for the rest of members' lives (and for their spouses' lives). If
members live longer than assumed, then the liabilities in respect of final
salary benefits increase.
The net retirement benefit asset recognised in the balance sheet of the Group
is as follows:
30 June 31 December 30 June
2024 2023 2023
£m £m £m
Fair value of scheme assets 481.0 512.9 490.4
Present value of defined benefit obligation (446.6) (474.7) (453.6)
Net retirement benefit asset recognised in the balance sheet 34.4 38.2 36.8
The amounts recognised in the income statement were as follows:
Six months ended 30 June
2024 2023
£m £m
Administration costs and taxes (0.5) (0.5)
Interest on scheme liabilities (10.9) (11.5)
Interest on scheme assets 11.7 12.2
Net credit recognised in the income statement 0.3 0.2
The net credit recognised in the income statement has been included within
operating costs.
Movements in the fair value of scheme assets were as follows:
30 June 31 December 30 June
2024 2023 2023
£m £m £m
Fair value of scheme assets at 1 January 512.9 520.7 520.7
Interest on scheme assets 11.7 24.4 12.2
Actuarial movements on scheme assets (31.4) (7.8) (32.2)
Contributions by the Group 0.4 0.8 0.4
Net benefits paid out (12.6) (25.2) (10.7)
Fair value of scheme assets at period end 481.0 512.9 490.4
Movements in the present value of the defined benefit obligation were as
follows:
30 June 31 December 30 June
2024 2023 2023
£m £m £m
Present value of defined benefit obligation at 1 January (474.7) (490.0) (490.0)
Current service cost (0.5) (1.1) (0.5)
Interest on scheme liabilities (10.9) (23.0) (11.5)
Actuarial movement - experience 26.9 1.2 37.7
Actuarial movement - demographic assumptions - 19.3 -
Actuarial movement - financial assumptions - (6.3) -
Net benefits paid out 12.6 25.2 10.7
Present value of defined benefit obligation at period end (446.6) (474.7) (453.6)
The principal actuarial assumptions used at the balance sheet date were as
follows:
30 June 31 December 2023 30 June 2023
2024
% % %
Price inflation - RPI 3.25 3.10 3.35
Price inflation - CPI 2.75 2.60 2.85
Rate of increase to pensions in payment 3.00 2.95 3.05
Inflationary increases to pensions in deferment 2.75 2.60 2.85
Discount rate 5.25 4.65 5.25
The mortality assumptions are based on the self-administered pension scheme
(SAPS) series 3 tables (2023: SAPS series 3 tables):
- for non-pensioners: 105% of the 'Middle' table (31 December 2023
and 30 June 2023: 105% of the 'Middle' table);
- male pensioners: 99% of the 'All' table (31 December 2023 and 30
June 2023: 99% of the 'All' table); and
- female pensioners: 102% of the 'Middle' table (31 December 2023
and 30 June 2023: 102% of the 'Middle' table).
The above multipliers and table types were chosen following a study of the
scheme's membership. Where the multiplier is greater than 100%, this reflects
a shorter life expectancy within the scheme compared to average pension
schemes, with the opposite being true where the multiplier is less than 100%.
Also, the use of the 'Middle' table typically leads to slightly lower life
expectancy compared to using the corresponding 'All' table.
Future improvements in mortality are based on the Continuous Mortality
Investigation (CMI) 2023 model with a long-term improvement trend of 1.00% per
annum and the core parameters for the initial addition and smoothing parameter
but with a weighting of 0%, 0%, 25%, 25% on 2020, 2021, 2022 and 2023
experience respectively (December 2023: 2022
model and a modest allowance (0%) for the experience during 2020 and 2021 and
50% for 2022. June 2023: 2022 model and a modest allowance (5%) for the
experience during 2020 and 2021).
All other available parameters for the mortality improvements model were
adopted at the default level. Under these mortality assumptions, the life
expectancies of members are as follows:
Male Female
30 June 2024 31 December 30 June 2023 30 June 31 December 30 June
2023 2024 2023 2023
Years Years Years Years Years years
Current pensioner aged 65 21.2 21.2 21.3 23.0 22.9 23.0
Current member aged 45 from age 65 21.1 21.1 21.2 23.9 23.8 23.9
If the discount rate decreased by 0.5% (31 December 2023: 0.5%, 30 June 2023:
2%), the defined benefit obligation (not including any impact on assets) would
have been increased by approximately £27m (31 December 2023: £31m, 30 June
2023: £148m).
An analysis of amounts recognised in the statement of comprehensive income is
set out below:
30 June 31 December 30 June
2024 2023 2023
£m £m £m
Actuarial movements on scheme assets (31.4) (7.8) (32.2)
Actuarial movements on scheme liabilities 26.9 14.2 37.7
Total movement recognised in other comprehensive income in the year (4.5) 6.4 5.5
Cumulative movement recognised in other comprehensive income (152.8) (148.3) (149.2)
In June 2023, the UK High Court issued a ruling in the case of Virgin Media
Limited v NTL Pension Trustees II Limited and others relating to the validity
of certain historical pension changes. This case may have implications for
other defined benefit schemes in the UK, although is subject to possible
appeal in 2024. The Company are aware of this legal ruling and are assessing
whether there is any potential impact upon the Company although currently no
conclusion has been reached therefore no quantification of any potential
impact has been determined.
12. Fair value disclosures
The Group holds the following financial instruments at fair value:
30 June 31 December 30 June
2024 2023 2023
£m £m £m
Financial assets 1.1 1.3 13.4
Derivatives
Visa Inc. shares 5.1 5.4 4.9
6.2 6.7 18.3
Financial liabilities
Derivatives (9.6) (1.8) (27.8)
The Group is counterparty to three derivative financial instruments.
The securitisation balance guarantee (front BGS) swap of £1.1m asset (31
December 2023: £1.3m, 30 June 2023: £13.4m) manages the market risk
associated with movements in interest rates in the accounts of the
securitisation. The front BGS is a bespoke over-the-counter interest rate swap
that resizes in line with changes to the size and expected maturity profile of
the loans in the securitisation. Only the interest rate risk on the portfolio
is hedged; other risks such as credit risk are managed but not hedged.
The Group balance guarantee swap (back BGS) of £1.6m liability (31 December
2023: £1.8m, 30 June 2023: £14.1m) eliminates the front BGS on consolidation
in the Group accounts. The front BGS manages a risk that exists in the SPV
accounts, but does not exist upon consolidation. The back BGS was transacted
at historical rates and in compensation the Group received cash consideration
for taking on a liability.
The front and back BGS naturally hedge and no hedge accounting is applied.
Hedge accounting was discontinued on the front BGS in September 2022 with the
hedging adjustment amortising over the remaining life of the receivables.
Until termination, the hedging arrangement was accounted for under IAS 39
under the portfolio hedging rules.
The Tier 2 swap of £8.0m liability (31 December 2023: £nil, 30 June 2023:
£13.7m) is a vanilla unamortising swap that manages the Group's sensitivity
to changes in interest rates arising from long-dated fixed-rate Tier 2 capital
and short-dated Bank of England reserves. The Tier 2 swap pays annually a
floating rate of daily compounded SONIA and receives a fixed annual rate of
3.521% bi-annually. The swap matures in October 2026.
Except as detailed in the following table, the directors consider that the
carrying value of financial assets and financial liabilities recorded at
amortised cost in the financial statements are approximately equal to their
fair values:
Carrying value Fair value
30 June 31 December 30 June 30 June 31 December 30 June
2024 2023 2023 (restated)(1) 2024 2023 2023
(restated)(1) £m
£m £m £m £m £m
Financial assets
Amounts receivable from customers 2,008.5 2,155.8 2,096.4 (2,332.5) 2,780.5 2,174.4
Financial liabilities
Retail deposits (1,937.5) (1,950.5) (1,445.3) (1,908.7) (1,916.2) (916.2)
Bank and other borrowings (504.1) (582.5) (706.6) (483.0) (561.5) (828.1)
Total (2,441.6) (2,533.0) (2,151.9) (2,391.7) (2,477.7) (1,744.3)
(1) Refer to note 2 for details of restatement.
13. Provisions
Six months ended 30 June 2024
Scheme ROP Customer compliance Others Total
£m £m £m Dilapidations £m £m
£m
At 1 January 1.0 - 3.5 0.3 1.0 5.8
Created in the period - - 9.6 4.9 2.6 17.1
Reclassified in the period - - - - - -
Utilised in the period - - (4.9) - (0.5) (5.4)
Released in the period (1.0) - - - (0.2) (1.2)
Closing balance - - 8.2 5.2 2.9 16.3
Year ended 31 December 2023
Scheme ROP Customer compliance Others Total
£m £m £m Dilapidations £m £m
£m
At 1 January 1.2 2.0 1.4 0.3 0.3 5.2
Created in the period - - 10.7 - 0.3 11.0
Reclassified in the period - - - - 0.6 0.6
Utilised in the period (0.2) - (8.4) - (0.2) (8.8)
Released in the period - (2.0) (0.2) - - (2.2)
Closing balance 1.0 - 3.5 0.3 1.0 5.8
Six months ended 30 June 2023
Scheme ROP Customer compliance Others Total
£m £m £m Dilapidations £m £m
£m
At 1 January 1.2 2.0 1.4 0.3 0.3 5.2
Created in the period - - 2.3 - 2.6 4.9
Reclassified in the period - - - - - -
Utilised in the period (0.2) - (0.3) - - (0.5)
Released in the period - - - - - -
Closing balance 1.0 2.0 3.4 0.3 2.9 9.6
The Scheme of Arrangement (the Scheme): £nil (FY23: £1.0m, 1H23: £1.0m)
The Scheme of Arrangement was sanctioned on 30 July 2021 with the objective to
ensure all customers with redress claims are treated fairly and outstanding
claims are treated consistently for all customers who submit a claim under the
Scheme.
Customer settlements in relation to the Scheme of Arrangement commenced in
2H22 and the majority of the provision has been utilised, with only £0.9m of
provision remaining as at December 2023. The remaining balance represents
unpresented low ‑value customer cheques.
The remaining Scheme provision was fully released in June based on the
following:
· All of the Scheme requirements as regards discharging of
liabilities have been met;
· PwC, as Scheme Supervisors, have confirmed that this is the case
and confirmed that the Scheme closure requirements have been met;
· Clifford Chance have confirmed the above and confirmed that that
any surplus monies standing to the credit of the PFG Fund in SPV should now be
returned to VBG as part of the Scheme termination in accordance with the
Funding Deed.
ROP Provision: £nil (FY23: £nil, 1H23: £2.0m)
The Repayment Option Plan (ROP) provision principally reflects the estimated
cost of the forward flow of ROP complaints more generally which may be
received and in respect of which compensation may need to be paid. During 2023
it was determined that no further amounts were expected to be paid and the
remaining £2.0m was released through exceptionals in 2H23.
Customer compliance: £8.2m (FY23: £3.5m, 1H23: £3.4m)
The customer remediation provision relates to general customer compliance
matters. This includes the costs of processing a temporary uplift in spurious
customer claims from CMCs (uphold rate only 5%), in relation to responsible
lending. An amount for expected FOS fees is also included in the provision.
The provision also includes £3.0m for expected FOS fees to be paid out.
Dilapidations £5.2m (FY23: £0.3m, 1H23: £0.3m)
Additional dilapidations costs recognised in 1H23 and are now being held for
all properties.
Others £2.9m (FY23: £1.0m, 1H23: £3.2m)
This predominantly relates to redundancy costs.
14. Reconciliation of loss after tax to cash generated from operations
Six months ended 30 June
2024 2023
(restated)
£m £m
Loss after taxation (35.8) (15.9)
Adjusted for:
- tax credit (10.7) (6.0)
- finance costs 70.7 50.3
- finance income (21.7) (13.3)
- share-based payment charge 2.4 3.2
- retirement benefit credit (0.3) (0.2)
- exceptional impairment of ROU asset 2.4 3.7
- additions of ROU assets 1.2 -
- provisions created in the year 17.1 4.9
- provisions released in the year (0.2) -
- exceptional release of provisions (1.0) -
- provisions utilised in the year (5.4) (0.5)
- depreciation of property, plant and equipment and right of use assets 8.2 2.3
- loss on disposal of property, plant and equipment 0.1 1.8
- amortisation of intangible assets 10.2 8.9
- impairment of intangible assets 8.5 0.4
- derivative financial instruments 8.8 3.5
- proceeds from derivatives - 6.2
- fair value movements on Visa shares 0.3 (0.4)
- contributions into the retirement benefit scheme (0.4) (0.4)
Changes in operating assets and liabilities
- amounts receivable from customers 148.6 (196.8)
- trade and other receivables (27.5) (22.2)
- trade and other payables 5.5 1.2
Cash generated from/(used) in operations 181.0 (169.3)
15. Contingent liabilities
During the ordinary course of business the Group is subject to other
complaints and threatened or actual legal proceedings (including class or
group action claims) brought by or on behalf of current or former employees,
customers, investors or third parties. This extends to legal and regulatory
reviews, challenges, investigations and enforcement actions combined with tax
authorities taking a view that is different to the view the Group has taken on
the tax treatment in its tax returns. It also extends to tax authorities
taking the view that VAT exempt supplies received by the Group from UK-based
suppliers should be subject to VAT. All such material matters are periodically
assessed, with the assistance of external professional advisors, where
appropriate, to determine the likelihood of the Group incurring a liability.
In those instances where it is concluded that it is more likely than not that
a payment will be made, a provision is established for management's best
estimate of the amount required at the relevant balance sheet date. In some
cases it may not be possible to form a view, for example because the facts are
unclear or because further time is needed to properly assess the merits of the
case, and no provisions are held in relation to such matters.
Alternative performance measures
In addition to statutory results and KPIs reported under International
Financial Reporting Standards (IFRS), the Group provides certain alternative
performance measures (APMs). These APMs are used internally by management and
are also deemed helpful in understanding the Group's performance. These
non-statutory measures should not be considered as replacements for IFRS
measures.
APM Method of calculation Relevance
Adjusted profit before tax A reconciliation of adjusted (loss)/profit before tax from statutory Adjusted (loss)/profit before tax excludes the impact of amortisation of
(loss)/profit for the year attributable to equity shareholders is provided on acquisition intangibles and exceptional items and is used to provide further
the income statement. clarity on the ongoing, underlying financial performance of the divisions and
Group.
Average gross customer interest earning balances Average of gross customer interest earning balances for the 7 months ended 30 This is used to smooth the seasonality of receivables across the divisions in
June. calculating performance KPIs.
Net interest margin (NIM) Interest income less interest expense, excluding exceptional items for the This measure shows the returns generated from customers to allow comparison to
period multiplied by 365/181, as a percentage of average gross customer other banks and banking groups.
interest earning balances.
Risk-adjusted margin - Total income, excluding exceptional items less impairment charges for the This measure shows the returns from customers after impairment charges.
period multiplied by 365/181, as a percentage of average gross customer
interest earning balances.
Asset yield Interest income from customer receivables for the period multiplied by This measure shows the returns generated from customer receivables to allow
365/181, as a percentage of average gross customer interest earning balances. comparison to other banks and banking groups.
Cost of risk Impairment charges for the period multiplied by 365/181, as a percentage of This measure shows the cost of impairment charges on customer receivables to
average gross customer interest earning balances. allow comparison to other banks and banking groups.
Cost:income ratio Operating costs, excluding exceptional items for the period multiplied by This ratio is a measure of the efficiency of the Group's cost base.
365/181 as a percentage of total income, excluding exceptional items for the
period multiplied by 365/181.
Adjusted return on tangible equity (ROTE) Adjusted (loss)/profit after tax net of fair value gains for the period This demonstrates how well the Group's returns are generated from its tangible
multiplied by 365/181 as a percentage of average adjusted tangible equity for equity, removing the impact of whether development has occurred through
the 7 months ended 30 June. Adjusted tangible equity is stated as equity after organic or inorganic growth.
deducting the Group's pension asset, net of deferred tax, and the fair value
of derivative financial instruments, net of deferred tax less intangible
assets and goodwill.
Tangible net asset value per share (TNAV) TNAV per share is calculated as average adjusted tangible equity, divided by It is used for measuring the book value of Group's shares, after deducting
the weighted average number of shares in issue during the period. intangible assets.
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 contained in UK adopted IFRS, and that the interim report includes a
fair review of the information required by DTR 4.2.4R, 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.
A list of current directors is maintained on the Vanquis Banking Group plc
website: www.vanquisbankinggroup.com (http://www.vanquisbankinggroup.com) .
All directors were present throughout the six months ended 30 June 2024 other
than those set out below:
- Andrea Blance stepped down from the Board on 1 February 2024
- Karen Briggs, Oliver Laird and Jacqueline Noakes were appointed to
the Board on 27 March 2024
- Elizabeth Chambers and Margot James stepped down from the Board on
15 May 2024.
The maintenance and integrity of the Vanquis Banking Group website is the
responsibility of the directors. The work carried out by the auditor does not
involve consideration of these matters and, accordingly, the auditor 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.
By order of the board
Ian McLaughlin - Chief Executive Officer Dave Watts - Chief
Financial Officer
31 July 2024
1 Excluding any confidential and management buffers, if applicable.
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