REG - Vector Capital PLC - Half Year Results
05/09/2023 07:00
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RNS Number : 3359L Vector Capital PLC 05 September 2023
5 September 2023
Vector Capital plc
("Vector Capital", "Company" or "Group")
Half Year Results for the period ended 30 June 2023
Vector Capital Plc (AIM: VCAP), a commercial lending group that offers secured
loans primarily to businesses located in England and Wales, is pleased to
announce its interim results for the six months ended 30 June 2023.
Highlights
· Revenue for the period £2.9m (H1 2022: £3.0m) reflecting a prudent approach
to new lending.
· Profit before tax £1.3m (H1 2022: £1.6m) reflecting an increase in the
doubtful debt reserve of £167,000 and an inflationary effect on overheads.
· Loan book at 30 June 2023 £48.8m (December 2022: £53.2m), as a result of net
redemptions during the period.
· Interim dividend of 1.00p per share (2022: 1.00p), recognising a resilient
performance in challenging market conditions.
Operational Highlights
· Increase in wholesale banking facilities from £40m to £45m during the
period.
·
Extended and more flexible facilities to allow greater capacity for loans
secured on second charges.
· Continued investment in the technology platform to improve operational
resilience and efficiency.
· Further engagement in staff training and development.
· Best practice ESG policies in place to support responsible lending and
encourage sustainability across the business.
Agam Jain, CEO of Vector Capital, commented: "We are very pleased to report a
robust set of interim results. The trading climate for the first six months of
this year has been set by the backdrop of historic base rate rises from 0.10%
in March 2020 to 5% in June 2023, and now 5.25 %. For those borrowers
experiencing difficulty, our approach is to be flexible and supportive where
we believe that the circumstances justify this methodology.
Our strategy this year has been to seek to maintain higher liquidity, with a
correspondingly lower loan book and reduced wholesale borrowings. To the
extent that we lend our own capital we can now earn a much higher return than
previously. We have a strong capital base which provides the Board with a high
level of confidence that we can weather continued or increased economic
headwinds.
Our pipeline is healthy with a steady stream of enquiries from our Broker
network allowing us to pick and choose the deals that suit us."
Enquiries
Vector Capital Plc
Robin Stevens
(Chairman) c/o
IFC Advisory
Agam Jain (CEO)
WH Ireland
Limited
020
7220 1666
Hugh Morgan, Chris Hardie, Darshan Patel
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
I am pleased to present our 2023 Interim Results for the six months ended 30
June 2023, which report consolidated pre-tax profits of £1,274,000 (2022
£1,556,000), and to propose an interim dividend of 1.00 pence per share
payable on 29 September 2023 (2022 1.00 pence).
The results for the first half of the year should be seen in the light of the
combined effects of the well-publicised headwinds in the UK economy, as
borrowers struggle with continuingly rising interest rates, inflationary
pressure on input prices and falling property prices; almost the perfect storm
for any sector. Against this challenging backdrop, the Group's results show
considerable resilience and reflect our strong capital base, our selective and
cautious lending policy, our proven loan management systems and the experience
of the executive management team. The reduction in the Group's loan book to
£48.8m from £53.2m during the period from 31 December 2022, was to be
expected where the terms of trade of many SME borrowers are being squeezed.
While these conditions prevail, our aim is to maximise the return to
shareholders on our capital base. Our overall aim remains to create a leading
market presence in the provision of secured loans to the SME sector, which our
strong capital position in these challenging conditions may well accelerate as
other lenders trading on the margins struggle.
During the period we extended and deepened our wholesale banking facilities
such that we can now utilise up to £45 million (31 December 2022 £40
million) from these sources, of which £2.5 million can be applied to loans
secured by second charges, thus providing scope for additional and in some
cases higher-margin lending as opportunities arise and market conditions
improve. We are also selectively developing our co-lending relationships, and
the Company's parent company, Vector Holdings Limited has increased its loan
to the Company from £3 million to £4 million.
Despite the uncertainties in the immediate economic outlook in the UK and the
likely continuing relatively high interest rates through to 2025, we remain
determined to build on the Group's strong business foundations, to maximise
returns from our existing capital base and to build the loan book utilising
the debt facilities described above.
We are increasingly aware of our 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.
The Group's half year results are based on the continued hard work of the
executive team, to whom considerable thanks is due, the quality of the
underlying operational systems and the robustness of the business model.
Thanks, are also due to my fellow Board members and our business partners.
We believe that our team has the skills and experience to adapt to the
challenges presented by the UK economic conditions and to continue to build
the business by capitalising on the opportunities that are expected to arise
through the rest of 2023 and beyond.
Robin Stevens
Chairman
4 September 2023
Chief Executive's Statement
Background
The trading climate for the first six months of this year has been set by the
backdrop of historic base rate rises from 0.10% in March 2020 to 5% in June
2023, and now to 5,25%, the highest rate since April 2008. For the mortgage
sector, these are circumstances not experienced by many lenders or borrowers.
The tool used by the Bank of England to control inflation has hit some of our
borrowing customers extremely hard. Our principal market consists of borrowers
that take loans to refurbish or develop land and property.
Our borrowers have been faced with multiple issues of rising building material
costs and long lead times since 2022. This has led to cost overruns and
delays. On top of this, they are now faced with substantial interest rate
rises. This has a negative bearing on project viability and the ability of
some borrowers to re-finance their developments.
Stressed Loans
For those borrowers experiencing difficulty, our approach is to be flexible
and supportive where we believe that the circumstances justify this approach.
We do this by agreeing to re-schedule monthly payments and capital repayments.
Where we are not satisfied with the financial viability of a borrowers' loan,
we work with the borrowers to give time for them to sell or re-finance and, if
necessary, appoint an LPA Receiver to sell the property. Bearing in mind the
circumstances prevailing this year, the number of receiver appointments has
increased over previous years.
Our expectation is that we will recover our full capital in almost all cases
and also the fees and accrued interest in most cases, albeit with consequent
delays of 4-12 months. In accordance with our normal policy, we have made
provision for estimated doubtful debts with the results for the period and the
impact on our results is within the margins we had stress tested. It should be
stressed that we have not written off any debts in the current period under
review but are taking a prudent view due to the macro-economic environment. We
have a strong capital base which provides the Board with a high level of
confidence that we can weather continued or increased economic headwinds.
Excellent Interim Results
Against these adverse market conditions, I am very pleased to report that
Vector has delivered an excellent set of results and we expect to continue to
pay attractive dividends.
The unaudited profit before tax for the period was £1.3m on a revenue of
£2.9m (£1.6m and £3.0m, respectively, 30 June 2022).
At 30 June 2023 the loan book was £48.8m (31 December 2022, £53.2m), and the
consolidated net assets were £25.4m (31 December 2022, £25.1m).
We are fortunate to have a very strong capital base that allows us the
flexibility and security to capitalise on the market opportunities that still
exist in these challenging times.
We will propose an interim dividend of 1.00 pence per share payable on 29
September 2023 (2022 1.0 pence.
Loan Book KPIs
HY 2023 % FY 2022 %
Residential 27,234,055 55.80% 30,351,346 57.02%
Commercial 11,681,461 23.93% 11,643,949 21.87%
Land & Development 5,050,619 10.35% 4,681,424 8.79%
Mixed 3,937,194 8.07% 4,707,648 8.84%
2nd charge 492,023 1.01% 1,545,273 2.90%
Other 415,000 0.85% 300,000 0.56%
48,810,352 100.00% 53,229,641 100.00%
The loans we have issued to the various market segments that we serve remain
broadly similar.
The average rate achieved during the period was 10.18% p.a. (June 2022, 11.69%
p.a.)
The average loan size was £474,000 spread over 103 live loans. (June 2022,
£532,000)
Security held at 30 June 2023 was estimated at £84m giving an average LTV of
58.10% (June 2022, 59.41%).
The loan balances are stated net of provisions of £367,000 at 30 June 2023
(December 2022, £200,000)
Operational review
Our strategy this year has been to seek to maintain higher liquidity, with a
correspondingly lower loan book and reduced wholesale borrowings. To the
extent that we lend our own capital we can now earn a much higher return than
previously.
Our pipeline is healthy with a steady stream of enquiries from our Broker
network allowing us to pick and choose the deals that suit us.
Our wholesale banking rates have inevitably increased. However, the rates are
still viable for us to continue to drawdown against the facilities. Our
facilities are currently £45m and we do not need to seek a further increase
this year.
The existing operational team is extremely efficient and provides a fast
response time to brokers and borrowers alike. We remain lean and have not
needed to increase the head count in the period.
Outlook
Vector is in a healthy financial position with a strong capital base and we
remain keen to return to a growth path when market conditions allow. However,
we still remain cautious and will wait to see the impact on our market when
the base rates stabilise. There is strong demand for our loans, we have good
support from our lenders, and we remain excited about capitalising on the
opportunities ahead, albeit selectively.
Agam Jain
Chief Executive Officer
4 September 2023
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2023
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2023 2022 2022
Notes £'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Revenue 3 2,851 2,980 5,928
Cost of sales (156) (289) (429)
Gross profit 2,695 2,691 5,499
Administrative expenses (532) (307) (911)
Operating profit 2,163 2,384 4,588
Finance income - - 3
Finance costs (889) (828) (1,782)
Profit on ordinary activities before taxation 1,274 1,556 2,809
Income tax expense 4 (305) (296) (534)
Profit after taxation 969 1,260 2,275
Other comprehensive income - - -
Total comprehensive income attributable to the shareholders of the Company 969 1,260 2,275
Pro-forma basic and diluted earnings per share
attributable to the owners of the Company (pence) 9 2.14 2.79 5.03
Condensed Consolidated Statements of Financial Position
For the six months ended 30 June 2023
Notes 30 June 2023 30 June 31 December 2022
2022
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Non-Current assets
Property, plant and equipment 5 1 2 1
1 2 1
Current assets
Trade and other receivables 6 49,422 52,223 53,997
Cash and bank balances 479 737 688
49,901 52,960 54,685
Total Assets 49,902 52,962 54,686
Current liabilities
Trade and other payables 7 20,230 28,140 25,800
Income tax payable 307 296 240
20,537 28,436 26,040
Non-Current liabilities
Trade and other payables 7 4,000 - 3,558
Total Liabilities 24,537 28,436 29,598
Equity
Share capital 8 226 226 226
Share premium 20,876 20,876 20,876
Group reorganisation reserve 188 188 188
Retained earnings 4,075 3,236 3,798
25,365 24,526 25,088
Total Equity and Liabilities 49,902 52,962 54,686
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2023
Share Share premium Group reorganisation reserve Retained profits Total equity
capital
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 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
Profit for the six months ended 31 December 2022 - - - 1,015 1,015
Dividends paid - - - (453) (453)
Balance at 31 December 2022 226 20,876 188 3,798 25,088
Profit for the six months ended 30 June 2023 - - - 969 969
Dividends paid - - - (692) (692)
Balance at 30 June 2023 226 20,876 188 4,075 25,365
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2023
Six Months ended 30 June Six Months ended 30 June Year ended 31 December
2023 2022 2022
£'000 £'000 £'000
(Unaudited) (Unaudited) (Audited)
Cash flow from operating activities
Profit for the period before taxation 1,274 1,556 2,809
Adjustment for:
Interest expense 889 828 1,782
Depreciation - 1 1
Finance income - - (3)
Tax paid (238) (289) (581)
Operating cash flows before movements in working capital 1,925 2,096 4,008
(Increase)/decrease in trade and other receivables 4,575 (5,658) (7,432)
Increase/(decrease) in trade and other payables (5,131) 4,283 5,499
Cash generated from operating activities 1,369 721 2,075
Interest paid (889) (828) (1,782)
Net cash generated from/(absorbed in) operating activities 480 (107) 293
Cash flows (for)/from investing activities
Finance income - - 3
Net cash generated from investing activities - - 3
Cash flows (for)/from financing activities
Amounts introduced by directors 3 - 1
Equity dividends paid (692) (683) (1,136)
Net cash (absorbed in)/generated from financing activities (689) (683) 1,135
Net (decrease) in cash & cash equivalents (209) (790) (839)
Cash and equivalent at beginning of period 688 1,527 1,527
Cash and equivalent at end of period 479 737 688
Notes to the Interim Financial Statements
For the six months ended 30 June 2023
1. Basis of Preparation
The interim consolidated financial statements of Vector Capital Plc (the
"Company") are unaudited condensed financial statements for the six months
ended 30 June 2023. These include unaudited comparatives for the six months
ended 30 June 2022 together with audited comparatives for the year ended 31
December 2022. 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 2022 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 2023 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 2022.
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 2022.
2. General information
The condensed consolidated financial information comprises the financial
information of the Company, 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 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 23 30 Jun 22 31 Dec 22
(Unaudited (Unaudited)£'000 (Audited`)
£'000 £'000
Cost
Brought forward 5 5 5
Additions - - -
Disposals - - -
Carried forward 5 5 5
Accumulated depreciation
Brought forward 4 2 2
Depreciation - 1 2
Carried forward 4 3 4
NBV c/fwd 1 2 1
NBV b/fwd 1 3 3
6. Trade and other receivables
30 Jun 23 30 Jun 22 31 Dec 22
(Unaudited) (Unaudited) (Audited)
Current £'000 £'000 £'000
Trade receivables 48,810 51,604 51,709
Prepayments and accrued income 612 619 768
Total 49,422 52,223 52,477
Non-Current
Trade receivables - - 1,520
49,422 52,223 53,997
At 30 June 2023 48% of trade receivables were held by third party secure
funding via the block discounting facility (30 Jun 22: 54%, 31 Dec 22: 72%).
Trade receivables due after more than 1 year is not considered material and
therefore not reflected separately on the Balance Sheet.
7. Trade and other payables
30 Jun 23 30 Jun 22 31 Dec 22
(Unaudited) (Unaudited) (Audited)
Current £'000 £'000 £'000
Trade payable 38 31 11
Amounts owed to parent company - 3,000 -
Other payables 20,082 25,070 25,556
Accruals and deferred income 110 39 233
Total 20,230 28,140 25,800
Non-Current
Amounts owed to parent company 4,000 - 3,000
Other creditors - - 558
4,000 - 3,558
Other payables includes loan finance of £20,069k (30 Jun 22: £24,882k, 31
Dec 22: £26,100k) which is secured against associated loans assigned by way
of block discounting.
8. Called up share capital
Authorised Nominal value 30 Jun 23 30 Jun 22 31 Dec 22
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
45,244,385 Ordinary £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 23 30 Jun 22 31 Dec 22
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Total comprehensive income for the period, used in the calculation of total
basic and diluted profit per share
969 1,260 2,275
Weighted average number of ordinary shares for the purpose of basic and 45,244,385 45,244,385 45,244,385
diluted profit per share
Earnings per share
Basic and diluted earnings per share (pence) 2.14 2.79 5.03
10. Significant related party transactions
The Group owed £4 million to its parent company, Vector Holdings Ltd (30 Jun
22 £3 million, 31 Dec 22: £3 million). During the period the Company paid
interest totalling £97k to Vector Holdings Ltd in relation to the balance
owed as per the loan agreement (30 Jun 22: £75k, 31 Dec 22: £150k).
During the period the Company paid £520k in dividends to Vector Holdings Ltd
(30 Jun 22: £513k, 31 Dec 22: £853k).
11. Subsequent events
There were no significant subsequent events which warranted disclosure.
12. Half Year Report
A copy of this interim report, as well as the annual statutory accounts to 31
December 2022 are available on the Company's website at
www.vectorcapital.co.uk/investors/corporate-documents
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