REG - Vector Capital PLC - Half Year Results
07/09/2022 07:00
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RNS Number : 5051Y Vector Capital PLC 07 September 2022
7 September 2022
Vector Capital plc
("Vector Capital", "Company" or "Group")
Half Year Results for the period ended 30 June 2022
Vector Capital plc (AIM: VCAP), a commercial lending group that offers secured
loans primarily to businesses located in the United Kingdom, is pleased to
announce its interim results for the six months ended 30 June 2022.
Highlights
· Loan book growth 27% to £51.6m (H1 2021: £40.6m)
· Revenue up 21% to £3.0m (H1 2021: £2.5m)
· PAT up 20% to £1.26m (H1 2021: £1.05m)
· EPS of 2.79p (H1 2021: 2.50p)
· Interim dividend of 1.00p per share (2021: 0.95p), reflecting a strong
performance
Operational Highlights
· Increased wholesale banking facilities from £35m to £40m after the period
end
· Continued investment into technology platform to ensure operational resilience
and efficiency
· Invested in staff training to enhance expertise which has led to an ability to
handle higher volumes and more complex transactions
· Established a new NOMAD and Broker relationship and experienced a pleasing
increase in research coverage
· Best practice ESG policies in place to support responsible lending and
encourage sustainability across the business
Agam Jain, CEO of Vector Capital, commented: "I am pleased to report a very
healthy set of interim results despite the general economic environment in
which we are operating. The Ukraine war, high inflation and rising base rates
pose a challenge to all businesses in the UK. The interim results are
therefore an affirmation of our efficient business model as we continue to
enhance shareholder value.
"The loan book at the end of the period was £51.6m (30 June 2021: £40.6m, 31
December 2021: £46.3m). The average monthly loan book value for the six month
period was £50.8m (H1 2021 average monthly loan book: £38.4m, 2021 average
monthly loan book: £40.8m).
"Although the economic backdrop remains uncertain, we are still seeing a
steady stream of good proposals coming through our broker network.
"No doubt there will be some regional corrections in the property market
during the coming months, however we expect to continue to deliver excellent
growth and profits."
Enquiries
Vector Capital plc
Robin Stevens (Chairman)
020 8191 7615
Agam Jain (CEO)
WH Ireland
Limited
020 7220 1666
Chris Hardie, Jessica Cave, Megan Liddell
IFC Advisory
Limited
020 3934 6630
Graham Herring, Florence Chandler, Zach Cohen
Notes to Editors
Vector Capital Plc provides secured, business-to-business loans to SMEs based
principally in England and Wales. Loans are typically secured by a first
legal charge against real estate. The Group's customers typically borrow for
general working capital purposes, bridging ahead of refinancing, land
development and property acquisition. The loans provided by the Group are
typically for renewable 12-month terms with fixed interest rates.
CHAIRMAN'S STATEMENT
It is my pleasure to present our 2022 interim results for the six months ended
30 June 2022, which report consolidated pre-tax profits of £1,556,000 (30
June 2021: £1,298.000), and to propose an interim dividend of 1.00 pence per
share payable on 30 September 2022. The results for the first half of the year
reflect the continued development of the business linked to building the
Group's loan book to £51.6m (30 June 2021: £40.6m) and creating a leading
market presence in the provision of secured loans to the small and
medium-sized enterprises (SMEs) sector.
It is very pleasing to report that since the period-end, we have increased our
wholesale banking facilities from £35m to £40m, providing scope for
additional lending within the Group's prescribed terms as opportunities arise.
While the UK economy, like many others, is beset by concerns around rising
interest rates, higher inflation, severe cost of living concerns linked to
power and foodstuffs, supply chain dislocation and political uncertainty, for
us the UK property lending market in which we operate has to date remained
resilient.
The Group's half year results, recording revenue growth of 20.8%, and an
increase in net profit before tax of 19.9% compared with the corresponding
period last year, combined with an 27% rise in the value of the loan book
during H1 2022, is based on the continued hard work of the executive team, the
quality of the underlying operational systems and the robustness of the
business model.
Despite the uncertainties in the immediate economic outlook in the UK, we
remain keen to build on the Group's strong business foundations and to
continue to grow the loan book utilising our own capital resources, the
increased facilities provided by our wholesale lenders and, on a selective
basis, co-funding arrangements. This will involve continued vigilance over the
quality, value and liquidity of the underlying security taken.
We are very mindful of our wider environmental, social and governance
responsibilities to shareholders and other stakeholders and we are following
what we believe to be market best practice and developing procedures to
address these important issues. Details of our ESG policies and procedures,
aimed principally at responsible lending and encouraging sustainability and
avoidance of waste in all we do, are set out on the Company's website
www.vectorcapital.co.uk (http://www.vectorcapital.co.uk)
The results for the period, were only possible thanks to the efforts of the
Company's executive team and my fellow Board members and considerable thanks
are due to them and our business partners.
We believe that our team has the skills and experience to continue to build
the business and to capitalise on the opportunities that are expected to arise
through the rest of 2022 and beyond. As a result, I am optimistic about the
prospects of the business and view the future with confidence.
Robin Stevens
Chairman
6 September 2022
CHIEF EXECUTIVE'S STATEMENT
Introduction
I am pleased to report a very healthy set of interim results despite the
general economic environment. The Ukraine war, high inflation and rising base
rates pose a challenge to all businesses in the UK. The interim results are
therefore an affirmation of our efficient business model.
The loan book at the end of the period was £51.6m (30 June 2021: £40.6m, 31
December 2021: £46.3m). The average monthly loan book value for the six month
period was £50.8m (H1 2021 average monthly loan book: £38.4m, 2021 average
monthly loan book: £40.8m).
The average interest rate achieved on loans for the period was 11.69% p.a. (H1
2021: 11.87%, 12 months to Dec 21 was 11.84%).
Pre-tax profit for the six month period was £1.56m (H1 2021: £1.30m).
Diverse portfolio
Our loan book security portfolio comprises:
• residential investment properties
• residential refurbishments
• mixed use (commercial ground floor with flats above)
• commercial (warehouse, retail, hospitality)
• development projects (construction of houses and flats)
• land with planning permission
Our intended direction of travel is to increase our weighting towards smaller
residential refurbishments.
Total %
Residential (internal refurb, investment, buy to let) 29,079,987 56%
Commercial (retail, hotel, golf, etc.) 11,620,744 23%
Land & Development 4,991,599 10%
Mixed (Residential & Commercial) 4,844,644 9%
2(nd) charge 767,023 1%
Other 300,000 1%
51,603,997 100%
Funding
Our capital and liquidity remain healthy, and we continue to be in a position
to fund selected new loan opportunities. After the period end our wholesale
banking lines increased to £40m, available primarily for residential
transactions.
We still have very low gearing so there is good scope to use suitable debt
facilities to continue to increase the loan book.
The increased Bank of England base rates will filter through to our debt
facilities which the Company will look to pass on to customers.
Infrastructure
We implemented a major software platform upgrade in Q2 this year which has
further improved our operational efficiency.
Gordon Robinson was appointed as a Non-Executive Director in February 2022.
Gordon has 30 years of senior banking experience and has added considerable
sector expertise to the Group.
Apart from this appointment we have not needed to increase our head count and
the current operational team is well able to handle the expected growth of
activity.
Dividend
On the basis of the financial performance in the first half of the year, an
increased dividend of 1.00 pence per share is being declared (2021: 0.95
pence). This will be paid on 30 September 2022 to shareholders on the register
on 16 September 2022.
Outlook
As mentioned at the outset, the economic backdrop remains uncertain, but we
are still seeing a steady stream of good proposals coming through our broker
network.
This is true for our industry sector as a whole. Data compiled by our trade
body ASTL (Association of Short-Term Lenders) shows 12 months growth in loan
books of members from circa £5 billion to £6 billion to end June 2022.
No doubt there will be some regional corrections in the property market during
the coming months, however, we expect to continue to deliver excellent growth
and profits.
Agam Jain
Chief Executive Officer
6 September 2022
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2022
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2022 2021 2021
Notes £'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Revenue 3 2,980 2,467 5,275
Cost of sales (289) (228) (502)
Gross profit 2,691 2,239 4,773
Other income -
Administrative expenses (307) (378) (703)
Operating profit 2,384 1,861 4,070
Finance income - - 2
Finance costs (828) (563) (1,245)
Profit on ordinary activities before taxation 1,556 1,298 2,827
Income tax expense 4 (296) (247) (538)
Profit after taxation 1,260 1,051 2,289
Other comprehensive income - - -
Total comprehensive income attributable to the shareholders of the Company 1,260 1,051 2,289
Pro-forma basic and diluted earnings per share
attributable to the owners of the Company (pence) 9 2.79 2.50 5.24
Condensed Consolidated Statements of Financial Position
For the six months ended 30 June 2022
Notes 30 June 2022 30 June 31 December 2021
2021
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Non-Current assets
Property, plant and equipment 5 2 3 3
2 3 3
Current assets
Trade and other receivables 6 52,223 41,067 46,565
Cash and bank balances 737 971 1,527
52,960 42,038 48,092
Total Assets 52,962 42,041 48,095
Current liabilities
Trade and other payables 7 28,140 18,653 23,858
Income tax payable 296 247 288
28,436 18,900 24,146
Total Liabilities 28,436 18,900 24,146
Equity
Share capital 8 226 226 226
Share premium 20,876 20,876 20,876
Group reorganisation reserve 188 188 188
Retained earnings 3,236 1,851 2,659
24,526 23,141 23,949
Total Equity and Liabilities 52,962 42,041 48,095
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2022
Share Share premium Group reorganisation reserve Retained profits Total equity
capital
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2021 210 19,502 188 1,401 21,301
Issue of share capital 16 1,374 - - 1,390
Profit for the six months ended 30 June 2021 - - - 1,051 1,051
Dividends paid - - - (601) (601)
Balance at 30 June 2021 226 20,876 188 1,851 23,141
Profit for the six months ended 31 December 2021 - - - 1,238 1,238
Dividends paid - - - (430) (430)
Balance at 31 December 2021 226 20,876 188 2,659 23,949
Profit for the six months ended 30 June 2022 - - - 1,260 1,260
Dividends paid - - - (683) (683)
Balance at 30 June 2022 226 20,876 188 3,236 24,526
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2022
Six Months ended 30 June Six Months ended 30 June Year ended 31 December
2022 2021 2021
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Cash flow from operating activities
Profit for the period before taxation 1,556 1,298 2,827
Adjustment for:
Interest expense 828 563 1,195
Depreciation 1 1 1
Tax paid (289) (205) (455)
Operating cash flows before movements in working capital 2,096 1,657 3,568
(Increase) in trade and other receivables (5,658) (4,104) (9,601)
Increase/(decrease) in trade and other payables 4,283 623 5,827
Cash generated from/ (absorbed in) operating activities 721 (1,824) (206)
Interest paid (828) (563) (1,195)
Net cash absorbed in operating activities (107) (2,387) (1,401)
Cash flows (for)/from investing activities
Acquisition of property, plant and equipment - - -
Net cash generated from investing activities - - -
Cash flows (for)/from financing activities
Issue of new shares - 1,390 1,390
Equity dividends paid (683) (601) (1,031)
Net cash (absorbed in)/generated from financing activities (683) 789 359
Net (decrease) in cash & cash equivalents (790) (1,598) (1,042)
Cash and equivalent at beginning of period 1,527 2,569 2,569
Cash and equivalent at end of period 737 971 1,527
Notes to the Interim Financial Statements
For the six months ended 30 June 2022
1. Basis of Preparation
The interim financial statements of Vector Capital Plc are unaudited condensed
financial statements for the six months ended 30 June 2022. These include
unaudited comparatives for the six months ended 30 June 2022 together with
audited comparatives for the year ended 31 December 2021. The financial
information for the six months ended 30 June 2022 does not constitute
statutory financial statements within the meaning of section 434 of the
Companies Act 2006. A copy of the audited financial statements for the year
ended 31 December 2021 is available on the Company's website. The auditor's
opinion on those financial statements was unqualified and did not draw
attention to any matters by way of an emphasis of matter paragraph. These
interim condensed financial statements have been prepared on the basis of the
accounting policies expected to apply for the financial year to 31 December
2022 based on the recognition and measurement principles of United Kingdom
adopted International Financial Reporting Standards (IFRS), in accordance with
the provisions of the Companies Act 2006, applicable to companies reporting
under IFRS.
The financial statements have been prepared under the historical cost
convention. The Group's presentation and functional currency is Sterling (£).
The interim financial statements do not include all of the information
required for full annual financial statements and do not comply with all the
disclosures in IAS 34 'Interim Financial Reporting', and should be read in
conjunction with the Group's annual financial statements to 31 December 2021.
Accordingly, whilst the interim statements have been prepared in accordance
with IFRS, they cannot be construed as being in full compliance with IFRS. The
preparation of financial statements in conformity with United Kingdom adopted
International Financial Reporting Standards (IFRS) requires the use of certain
critical accounting estimates. It also requires management to exercise its
judgement in the process of applying the Group's accounting policies. The
accounting policies adopted are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31
December 2021.
2. General information
The condensed consolidated financial information comprises the financial
information of Vector Capital Plc, Vector Asset Finance Ltd and Vector
Business Finance Ltd (the Group).
The principal activities of the entities in the Group are as follows: -
Name of company Country of incorporation Principal activities
Vector Capital Plc England and Wales Holding company
Vector Business Finance Ltd England and Wales Commercial lending
Vector Asset Finance Ltd England and Wales Commercial lending
There have been no significant changes in these activities during the relevant
financial periods.
3. Segmental reporting
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Operating Group that are regularly reviewed by
the chief operating decision maker (which takes the form of the Board of
Directors) as defined in IFRS 8, in order to allocate resources to the segment
and to assess its performance.
Based on management information there is one operating segment. Revenues are
reviewed based on the services provided.
No customer has accounted for more than 10% of total revenue during the
periods presented.
4. Income Tax expense
The tax charge on profits assessable has been calculated at the rates of tax
prevailing, based on existing legislation, interpretation and practices in
respect thereof.
5. Property, plant and equipment
Fixture, fittings and equipment
30 Jun 22 30 Jun 21 31 Dec 21
(Unaudited (Unaudited)£'000 (Audited`)
£'000 £'000
Cost
Brought forward 5 5 5
Additions - - -
Disposals - - -
Carried forward 5 5 5
Accumulated depreciation
Brought forward 2 1 1
Depreciation 1 1 1
Carried forward 3 2 2
NBV c/fwd 2 3 3
NBV b/fwd 3 4 4
6. Trade and other receivables
30 Jun 22 30 Jun 21 31 Dec 21
(Unaudited) (Unaudited) (Audited)
Current £'000 £'000 £'000
Trade receivables 51,604 40,604 46,263
Prepayments and accrued income 619 463 302
Total 52,223 41,067 46,565
At 30 June 2022 54% of trade receivables were held by third party
secure funding via the block discounting facility (30 Jun 21: 61%, 31 Dec 21:
68%).
7. Trade and other payables
30 Jun 22 30 Jun 21 31 Dec 21
(Unaudited) (Unaudited) (Audited)
Current £'000 £'000 £'000
Trade payable 31 26 18
Amounts owed to parent company 3,000 3,000 3,000
Other payables 25,070 15,481 20,346
Accruals and deferred income 39 146 509
Total 28,140 18,653 23,858
Other payables includes loan finance of £24,882k (30 Jun 21: £15,417k, 31
Dec 21: £20,335k) which is secured against associated loans assigned by way
of block discounting.
8. Called up share capital
Authorised Nominal value 30 Jun 22 30 Jun 21 31 Dec 21
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
45,244,385 Ordinary Shares £0.005 226 226 226
9. Basic and diluted earnings per share
The calculation of earnings per share is based on the following earnings and
number of shares.
30 Jun 22 30 Jun 21 31 Dec 21
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Total comprehensive income for the period, used in the calculation of total
basic and diluted profit per share
1,261 1,051 2,289
Weighted average number of ordinary shares for the purpose of basic and 45,244,385 42,079,055 43,687,987
diluted profit per share
Earnings per share
Basic and diluted earnings per share 2.79 2.50 5.24
10. Significant related party transactions
The Group owed £3 million to its parent company, Vector Holdings
Ltd (30 Jun 21 £3 million, 31 Dec 21: £3 million). During the period the
Company paid interest totalling £75k to Vector Holdings Ltd in relation to
the balance owed as per the loan agreement (30 Jun 21: £75k, 31 Dec 21:
£150k).
During the period the Company paid £513k in dividends to Vector Holdings Ltd
(30 Jun 21: £486k, 31 Dec 21: £809k).
11. Subsequent events
There were no significant subsequent events which warranted disclosure.
12. Half Year Report
A copy of this half year interim report, as well as the annual statutory
accounts to 31 December 2021 are available on the Company's website at
www.vectorcapital.co.uk/investors/corporate-documents
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