Preliminary results for the year ended 31 December
2023
Action taken to reset and rebuild for sustainable
growth
London - 27 March 2024 - Vanquis Banking Group
plc ('the Group'), the specialist bank, today published its
preliminary results for the twelve months to the end of December
2023.
Ian McLaughlin, Chief
Executive Officer, commented: "Today's results and strategy seminar highlight the
considerable challenges we are managing as we reset our business.
We also describe our opportunity to grow, to deliver benefit to our
customers and increase adjusted return on tangible equity (ROTE)
from 3.2% in 2023 to the mid-teens by 2026.
"After a first half loss
in 2023, we generated adjusted profit before tax of £30.4m in the
second half, reflecting cost management actions and impairment
provision releases. We assembled the right leadership team and took
some important first steps, creating a healthier mix of price and
volume driven growth, simplifying our operating model and taking
out costs. We have established solid foundations for the
transformation of our business.
"We have a strong sense of
social purpose and a unique market position. We have a better
understanding than ever before of how to serve our large and
growing customer base. We will build our position as their chosen
banking partner, deploying unique assets like Snoop, improving
operational effectiveness and managing our capital to support our
growth ambitions. We do have a period of hard work and change ahead
of us. It is still early days, but we are making
progress."
Key financial results
|
|
|
2023
£m
|
20221
£m
|
Change
%
|
|
Net interest income
|
|
442.6
|
432.7
|
2
|
|
Non-interest income
|
|
46.2
|
48.0
|
(4)
|
|
Total income
|
|
488.8
|
480.7
|
2
|
|
Impairment charges
|
|
(166.1)
|
(66.1)
|
151
|
|
Risk-adjusted income
|
|
322.7
|
414.6
|
(22)
|
|
Operating costs
|
|
(327.1)
|
(304.5)
|
(7)
|
|
Statutory (loss)/profit before tax from cont.
ops
|
|
(4.4)
|
110.1
|
(104)
|
|
|
|
|
|
|
|
Adjusted profit before tax2
|
|
24.9
|
126.6
|
(80)
|
|
Adjusted operating
costs3
|
|
(297.8)
|
(288.0)
|
(3)
|
|
|
|
|
|
|
|
Metrics
|
|
|
|
|
|
Adjusted EPS
(p)4
|
|
6.8 |
38.7
|
(82)
|
|
Basic (LPS)/EPS
(p)5
|
|
(2.4)
|
32.8
|
(107)
|
|
Net receivables at 31
December
|
|
2,175
|
1,913
|
14
|
|
Gross receivables
(average)6
|
|
2,325
|
2,039
|
14
|
|
Net interest
margin7
|
|
19.0%
|
21.2%
|
(2)
|
|
Risk-adjusted
margin8
|
|
13.9%
|
20.3%
|
(6)
|
|
Cost:income
ratio9
|
|
60.9%
|
59.9%
|
(1)
|
|
Adjusted
ROTE10
|
|
3.2%
|
21.8%
|
(19)
|
|
CET1 ratio11
|
|
20.5% |
26.4%
|
(6)
|
2023
headlines
After a first half loss,
the new management team took rapid action in 2H23 to improve
performance
· After an adjusted loss before tax of £(5.5)m in 1H23, the
Group generated adjusted profit before tax of £30.4m in 2H23. The
statutory loss before tax was £(14.5)m in 1H23, followed by a
statutory profit after tax of £10.1m in 2H23.
· The key drivers of profitability in the second half
were:
o
Pro-active management of volume growth,
which contained net receivables growth to
2.7% in 2H23 compared to 10.7% in 1H23, to end the year at
£2,175m (FY22: £1,913m).
o
Upward re-pricing strategy in Vehicle
Finance and Cards to reflect the rising interest rate environment
while shielding vulnerable customers.
o
Non repeatable provision releases of
£74.5m primarily from IFRS 9 impairment model
recalibration.
o
Rapid action to simplify the operating
model and reduce duplication which led to the removal of c.350
roles: this delivered cost savings of in 2023 and will in total
deliver c.£60m of cost savings.
·
Net interest margin stabilised at 19.0% in 2H23.
·
Impairments increased significantly year on year due to
higher new originations, reduced benefits of enhancements in IFRS 9
modelling and post model releases compared to 2022, lower debt sale
profits and lower revaluation of the post charge-off asset.
The underlying credit quality of the book remains
stable.
The Group maintained a robust capital position
with a CET1 ratio of 20.5%, within the Group's updated CET1 target
range of 19.5 to 20.5%.
Strategy
update
At its strategy seminar on the
afternoon of 27 March 2024, the Group will describe how it intends
to grow its business, deliver benefits to a broader customer base
and increase adjusted ROTE from
3.2% in 2023 to the mid-teens by 2026.
The key components of this
transition are as follows.
·
In depth market research, which has identified a
core target market of 23m consumers in the 'under financial
pressure' and 'stretched but managing' cohorts.
·
Favourable market conditions, with a market
credit deficit in our target market of £2bn and growing.
·
An increasingly diversified and differentiated
customer proposition which serves three core customer
needs
o Help me
borrow healthily.
o Help me
feel in control of my everyday spending.
o Help me
build a financial safety net.
·
Broadened distribution channels including a new
partnership with H&T Pawnbrokers to help customers who do not
qualify for other sources of credit.
·
Benefits from technology transformation
programme, which is progressing well.
·
Leveraging Snoop across the Group to integrate
the Snoop team's fintech experience and harness Snoop's platform,
data, proposition, distribution and customer incubation.
·
Further development of risk management
capabilities, with enhanced data and modelling to enable "not yet"
options for customers and reduce impairment levels.
·
Operational efficiency through finalising the
Group's offshoring programme, a new strategy for debt sales, a
revised approach to collections and technology
transformation.
·
The Group's existing structural advantages,
notably strong capital and liquidity and access to retail
funding.
Outlook
The Group is continuing to take
significant steps in the first quarter of 2024 to redevelop its
customer proposition and reset pricing. With the implementation of
these changes, the Group expects to return to modest lending growth
from the start of the second quarter.
The Group is not a subject of the
FCA's review of historical motor finance commission arrangements
and sales.
Nevertheless, the Group has been
experiencing significant levels of third-party complaint submissions. Reviewing them is causing an
increase in administration costs. While the vast majority of these
complaints are not upheld, the associated costs are likely to
materially impact the Group's profitability in 2024. The Group has
taken proactive legal steps to address this situation.
The Group remains on track to
deliver the benefits of its previously announced cost saving
commitments.
Allowing for the factors described
above, the Group expects to deliver a low single digit adjusted
ROTE in 2024.
In 2025, the Group intends to
deliver accelerated but disciplined growth across its full range of
products. However, the near-term adverse impact of IFRS 9
accounting requirements linked to receivables growth means that the
Group's adjusted ROTE is expected to remain in the low single
digits, as it continues its repositioning and
transformation.
In 2026, the Group intends to
deliver an adjusted ROTE in the mid-teens. This significant
improvement will be driven by a return to sustainable income
growth, together with the benefits of greater efficiency and
significant payback from its technology infrastructure
investment.
Today's guidance* is summarised as
follows. It is supported by expected non-linear receivables growth
of
8-12% CAGR.
|
|
FY23
|
FY24 guidance
|
FY26 target
|
|
NIM (exc. 2nd charge
mortgages)
|
19.0%
|
19%
|
19%
|
|
NIM (inc. 2nd charge
mortgages)
|
19.0%
|
>18%
|
>17%
|
|
Cost: Income ratio
|
60.9%
|
60-63%**
|
49% or less
|
|
Retail funding (% of all
funding)
|
83.7%
|
>85%
|
>85%
|
|
CET1 ratio
|
20.5%
|
19.5-20.5%***
|
-
|
|
ROTE
|
3.2%
|
Low single digits
|
Mid-teens
|
* All measures are on an adjusted
basis
** Adjusted operating costs
broadly flat to 2023 exclude complaint costs
*** Based on a current regulatory
requirements and risk appetite
Dividends
The Board proposes a final
dividend of 1.0p per share for 2023, subject to final regulatory
approvals. The Group also signals its intention to pay a dividend
of up to 1.0p per share for 2024, subject to Board and regulatory
approvals, with measured progression in 2025. From 2026, following
full implementation of the new strategy, the Board will revisit the
capital allocation policy and reset the level of dividend from
which to maintain a progressive policy
thereafter.
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_FY23
Vanquis Banking Group will host a
strategy seminar this afternoon from 14:00 to 17:00 at Deutsche
Numis, 45 Gresham St, London EC4V 7BF. Attendance in person is
encouraged to maximise the opportunity to meet the management team.
If you wish to attend via webcast, please use this link:
https://brrmedia.news/VANQ_SS
Materials for the results
presentation will be published at:
https://www.vanquisbankinggroup.com/shareholder-hub/results-reports-and-presentations/
, and materials for the strategy seminar will be
added at 1pm.
Enquiries
Analysts and
shareholders
Miriam McKay, Interim Head
of Investor Relations
miriam.mckay@vanquisbankinggroup.com
07577 390666
Media
Richard King, Head of
Corporate Affairs
richard.king@vanquisbankinggroup.com
07919 866876
Simone Selzer, Nick
Cosgrove - Brunswick
vanquisbankinggroup@brunswickgroup.com
0207 4045959
Footnotes
1. The presentation of the income
statement in this report is consistent with that in the Annual
Report and Accounts for 31 December 2022, with the exception of
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 now being recognised within interest income, and certain
elements of vehicle finance income, which were previously reported
in interest income now being recognised in other
income.
2. Adjusted profit before tax is
stated before amortisation of acquisition intangibles, discontinued
operations and exceptional items.
3. Adjusted operating costs
are operating costs excluding exceptional items and amortisation of
acquisition intangibles.
4. Adjusted EPS is calculated
as profit after tax from continuing operations, excluding the
amortisation of acquisition intangibles and exceptional items for
the 12 months ended 31 December, divided by the weighted average
number of shares in issue.
5. Basic (LPS)/EPS is
calculated as (loss)/profit after tax from continuing operations
for the 12 months ended 31 December, divided by the weighted
average number of shares in issue.
6. Average of gross customer
interest earning balances for the 13 months ended 31
December.
7. Net interest margin is
calculated as interest income less interest expense for the 12
months ended 31 December as a percentage of average gross
receivables for the 13 months ended 31 December.
8. Risk-adjusted margin is
defined as risk-adjusted income for the 12 months ended 31 December
as a percentage of average gross receivables for the 13 months
ended 31 December.
9. Operating costs, excluding
exceptional items and amortisation of acquisition intangibles as a
percentage of total income, for the 12 months ended 31
December.
10. ROTE is defined as adjusted
profit after tax net of fair value gains for the 12 months ended 31
December as a percentage of average adjusted tangible equity for
the 13 months ended 31 December. 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. The CET1 ratio is defined
as the ratio of the Group's 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.
Chief Executives Officer's
review
Introduction
After I started at Vanquis Banking
Group on 26 July 2023, we immediately experienced a significant
fall in our share price as the market reacted to an unsatisfactory
set of interim results on 28 July. I spent my first five months
rapidly implementing the immediate changes required to put us on a
path to better performance. We also initiated a thorough strategic
review which will be presented at our strategy seminar on 27 March
2024. I have been extremely impressed with how my colleagues have
responded and I am looking forward to working with them for the
benefit of our customers as we bring our new strategic ambition to
life.
Reflections on
2023
Despite some serious challenges
being evident, I also discovered many positives. First and
foremost, our people really care about doing the right thing for
our customers; there is a genuine sense of social purpose. Progress
had also been made in creating a fit-for-purpose corporate
structure, including differentiating ourselves through access to
retail funding. However, the business had been operating in product
silos and the communication and alignment between teams was not
where it needed to be. This had led to duplication in functions and
there was little evidence of cost discipline. Particularly evident
was a lack of visibility and accountability of centrally held
costs.
Financially, the Group generated a
£5.5m adjusted loss before tax from continuing operations in the
first six months of 2023 (1H22: profit £54.3m), despite 11% growth
in net receivables (1H22: 0%). Costs rose by 6% in the 6 month
period to 1H23, compared to 1H22 and net interest margin (NIM)
declined by 2.5% to 19.1% (1H22: 21.6%). The Group recorded a
statutory loss before tax from continuing operations of £14.5m
(1H22: profit of £46.9m). These results drove a 29% decline in our
share price on the day of publication and crystallised the need for
swift remedial action as well as a fundamental review of our
strategic direction.
Immediate action was taken in the
second half of 2023 to moderate lending growth, reduce IFRS 9
strain, reduce costs and implement appropriate price rises to
improve product profitability. In our Q3 trading statement on 17
October 2023, we committed to deliver adjusted PBT for the year of
£25-30m, and I am pleased that the business traded broadly in line
with our expectations, delivering adjusted PBT of £24.9m (FY22:
£126.6m). We recorded a statutory loss after tax for the year of
£(6.0)m. H2 performance benefitted from a combination of cost
management actions and impairment provision releases. Moderation of
net receivables growth in the second half led to year-on-year
receivables growth of 14%, and swift action on costs contributed to
a 10% half-on-half reduction in adjusted operating costs. NIM for
the year amounted to 19.0% (FY22: 21.2%), reflecting the higher
funding costs and lower asset yield. Our key financial ratio is
adjusted return on tangible equity (ROTE). This rose from (1.8%) in
1H23 to 3.2% for FY23.
Three further priorities were
established to help restore overall performance and
credibility.
1. Refreshed our
Executive team to create the right mix of customer experience,
capability and personal values with five new hires in key roles -
Chief Customer Officer, Chief Financial Officer, Chief Technology
Officer, Chief Digital, Data and Analytics Officer, and Chief of
Staff - alongside seven seasoned Vanquis Banking Group executives
in Operations, Transformation, HR, Communications, Risk, Legal, and
Internal Audit.
2. Better
communication to engage our colleagues, partners and other key
stakeholders on the need for substantial change.
3. Simplifying
our operating model and removing duplication, to deliver total
savings of c.£60m in 2024 - without compromising on customer
service.
In summary, we have demonstrated
an ability to set and execute plans at pace and are seeing early
progress from this. However, we still have a lot to do.
Strategy
I am excited by the output of our
North Star strategic review and am looking forward to turning our
plans into reality. We have a new sense of purpose - 'to deliver
caring banking so our customers can make the most of life's
opportunities'. The power of purpose to unite and motivate an
organisation is immense. For us, the social purpose, the 'S' at the
centre of ESG, is vital. Environmental and Governance objectives
are also critical, and we will fulfil all our ESG responsibilities,
but the 'S' of social purpose is at the heart of our
business.
We have always cared about the
customers we serve: now we have fundamentally changed the way we
organise ourselves to serve them even better. Previously, we
defined our customers by risk categories and organised our business
around product lines. Now, we put their needs at the very heart of
the way we operate. We undertook deep analysis using a
well-respected financial segmentation model, augmented by our own
customer research and data. From this, we identified three core
customer needs:
·
Help me borrow healthily.
·
Help me feel in control of my everyday
spending.
·
Help me build a financial safety net.
We are expanding our customer
proposition to meet these needs and we are restructuring our
service operation to serve them more effectively. We will refresh
our distribution strategy, meet our customers where they are, and
develop new partnerships to introduce ourselves to them.
Over time, we aspire to measure
our success through a series of customer KPIs which are somewhat
unusual in the banking sector, such as lifetime value, the increase
we can drive in customers' credit scores and the cumulative value
of savings delivered to customers by Snoop. To these we will add
more traditional measures of sustainable performance such as
adjusted ROTE and Cost:Income ratio.
Key initiatives for
2024
As we start to implement our North
Star strategy, these initiatives will be our top priorities in
2024:
·
Develop compelling propositions for core customer
needs.
·
Establish exceptional 'through the journey'
management of risk.
·
Drive our distribution strategy to meet our
customers where they naturally are and improve our costs of
acquisition.
·
Establish Snoop as a uniquely valuable first
point of customer contact.
·
Continue to improve operational effectiveness,
for example by building on our successful offshoring
programme.
·
Embed strong leadership and innovation,
specifically in digital, data and analytics.
·
Better manage our complaint volumes.
Outlook
Our customers have proved their
resilience in the face of cost of living pressures, and no
discernible impact has been seen in the business's credit
performance. We operate in a clearly defined, growing market sector
and have attractive points of differentiation versus current peers
(for example, Snoop and lower funding costs). As a business, we
have short term challenges to address, however I am confident that
our new strategy will deliver good outcomes for our customers and
attractive and sustainable returns for our shareholders over the
medium and longer term.
We are currently experiencing
significant levels of third-party complaint submissions many of
which are speculative in nature. The majority of complaints,
which primarily relate to lending origination rather than in-life
servicing and are in respect of a wide range of different matters
with no common theme or systemic issue, lack substance and are not
upheld. However, the higher than normal volumes and reviewing
them is materially impacting our costs and we are therefore
exploring proactive legal steps to address the
situation.
The next two years, 2024 and 2025,
will be periods of restructuring for Vanquis Banking Group. We are
already taking significant steps to redevelop our customer
proposition and reset pricing, and we expect to return to
modest lending growth from the start of the second quarter of 2024.
In 2025, we intend to deliver accelerated but disciplined growth
across our full range of products, but the near-term adverse impact
of IFRS 9 accounting requirements linked to receivables growth
means that adjusted ROTE is expected to remain in the low single
digits.
Looking ahead to 2026, we expect
to be delivering an adjusted ROTE in the mid-teens driven by a
return to sustainable income growth serving a broader customer
base; together with the benefits of greater efficiency and
significant payback from our technology infrastructure
investment.
Conclusion
Reflecting on the huge amount of
change we have driven in a very short period of time, I want to pay
tribute to my colleagues for the way they have embraced it. Thank
you, to each and every one of you. I also want to thank our
investors for trusting us to turn this business around. The change
programme ahead of us will be challenging and exciting. Success is
in the hands of a very talented and dedicated team. As the UK's
largest specialist finance provider, we have unmatched dedication
to our chosen customers and substantial potential to grow by
meeting their needs. We relish the challenge ahead and our
colleagues are absolutely focused on delivering caring banking so
our customers can make the most of life's opportunities. This is
when Vanquis is at its best. It's what we call 'Banking with
Heart'.
Financial
review
Group
performance
The Group's 2023 results
are as follows:
|
|
2023
£m
|
2022
£m
|
|
Interest income
|
556.0
|
491.5
|
|
Interest expense
|
(113.4)
|
(58.8)
|
|
Net
interest income
|
442.6
|
432.7
|
|
Fee and commission income
|
44.2
|
47.0
|
|
Fee and commission
expense
|
(1.7)
|
(2.8)
|
|
Net
fee and commission income
|
42.5
|
44.2
|
|
Other income
|
3.7
|
3.8
|
|
Total income
|
488.8
|
480.7
|
|
Impairment charges
|
(166.1)
|
(66.1)
|
|
Risk-adjusted income
|
322.7
|
414.6
|
|
Operating costs
|
(327.1)
|
(304.5)
|
|
Statutory (loss)/profit before taxation from continuing
operations
|
(4.4)
|
110.1
|
|
Tax charge for continuing
operations
|
(1.6)
|
(27.8)
|
|
Statutory (loss)/profit after taxation from continuing
operations
|
(6.0)
|
82.3
|
|
Loss after taxation from
discontinued operations
|
-
|
(4.9)
|
|
Statutory (loss)/profit for the year attributable to equity
shareholders
|
(6.0)
|
77.4
|
|
|
|
|
|
Add back:
|
|
|
|
Tax charge
|
1.6
|
27.8
|
|
Amortisation of acquisition
intangibles
|
7.9
|
7.5
|
|
Exceptional items
|
21.4
|
9.0
|
|
Loss after taxation from
discontinued operations
|
-
|
4.9
|
|
Adjusted profit before tax
|
24.9
|
126.6
|
To enhance transparency and understanding of our financial
performance, the Group has taken the decision in the current year
to enhance the presentation of our financial performance to
initially focus on the statutory income statement with a
reconciliation to adjusted profit before tax, which is a primary
measure to assess our financial performance. All periods presented
have been retrospectively re-presented. 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 the financial statements.
Profit/(loss) before tax
The Group's statutory loss before
tax, including amortisation of acquisition intangibles and
exceptional items, was £4.4m; prior year profit before tax was
£110.1m, or £99.4m including the discontinued consumer credit
division (CCD).
The Group reported a lower
adjusted profit before tax of £24.9m (2022: £126.6m). Total income
of £488.8m (2022: £480.7m) was £8.1m higher, driven by higher
receivables across all product lines and repricing initiatives in
cards, offset by higher funding costs. Impairments of £166.1m
(2022: £66.1m) reflect higher new originations, comparatively
reduced benefits of enhancements in IFRS 9 models and post-model
releases than in 2022, lower debt sale profits, and lower
revaluation of the post charge-off asset. The back book underlying
asset quality remained broadly stable. Higher costs of £327.1m
(2022: £304.5m) from inflationary headwinds, elevated customer
compensation claims from claims management companies and higher
exceptional costs. Exceptional costs of £21.4m were recognised in
2023 (2022: £9.0m), including transformation costs of £17.0m (2022:
£5.3m), comprising redundancy and outsourcing (£9.4m), property
exit costs (£4.1m) and strategic consultancy (£3.5m).
Income
Net interest income increased by
2% to £442.6m (2022: £432.7m) with interest income rising 13%
driven by receivables growth in the first three quarters of 2023.
The Group's funding cost increased from £58.8m in 2022 to £113.4m
in 2023, as market savings rates on retail deposits increased from
their historically low levels as the UK bank base rate has moved
upwards.
The Group's NIM, net interest
income as a percentage of average gross receivables, decreased by
2.2% from 21.2% in 2022 to 19.0% in 2023, reflecting the higher
funding costs and lower asset yields in both vehicle finance and
personal loans. Management actions, including repricing, taken
during the second half of 2023 increased 4Q23 NIM by 0.2% relative
to 3Q23.
Fee and commission income reduced
4% to £42.5m (2022: £44.2m). The Repayment Option Plan (ROP) has
been discontinued; excluding ROP, underlying fee and commission
income increased £2.8m year-on-year.
Impairment / Cost of Risk
Impairments have benefited from a
release of provisions no longer required in credit cards and
vehicle finance, arising from ongoing IFRS 9 model refinements
(£57.7m in 2023), and the full release of the cost of living
post-model adjustment (£10.8m). The level of releases in 2023
(£74.5m) were lower than releases in 2022 (£94.1m), contributing to
a higher impairment charge this year.
The macroeconomic environment, the
minimal impact of the cost of living crisis, and refreshed model
parameters reflecting the refocus onto lower-risk market segments,
are the predominant reasons for release of provision. Underlying
asset quality remained high and delinquency trends remained
stable.
The Group's cost of risk, defined
as impairment charges as a percentage of average gross receivables,
has increased from 3.2% in 2022 to 7.1% in 2023.
Risk-adjusted net interest margin,
defined as risk-adjusted net interest income as a percentage of
average gross receivables, has decreased from 20.3% in 2022 to
13.9% in 2023 as a result of higher impairment charges and higher
funding costs.
The Group's coverage ratio has
reduced from 24% at December 2022 to 21% at December 2023,
reflecting the current nature of the macroeconomic environment, the
release of impairment provision no longer required predominantly
due to IFRS 9 model refinement, and the stable underlying credit
quality of our portfolios.
Costs (Adjusted)
Excluding amortisation of
acquisition intangibles and exceptional items described above,
adjusted operating costs increased 3% to £297.8m (2022: £288.0m).
Proactive management actions taken during the second half of 2023
has in part mitigated cost headwinds. These headwinds include
inflation and heightened (speculative) customer complaints from
claims management companies. The Group has continued investment in
the diversification of customer propositions and the IT investment
in the Gateway platform. Cost management is being embedded as a
core discipline throughout the Group, and transformation cost
savings are on track to meet £60m savings target as advised at 3Q23
with full benefit expected in 2024.
Tax
The tax charge of £1.6m (2022:
£27.8m) on the loss before tax (profit in 2022) reflects the
mainstream corporation tax rate of 23.5% (2022: 19.0%) on the
Group's (loss)/profit before tax, exceptional items and
amortisation of acquisition intangibles, generating a tax charge of
£7.7m (2022: £29.4m), a tax credit of £4.3m (2022: £0.2m), and a
tax credit of £1.8m (2022: £1.4m) respectively.
The tax charge arises principally
from adverse impacts of (a) non-deductible expenses of £0.9m (2022:
£0.9m), (b) prior year adjustments of £1.5m (2022: beneficial
impact £3.6m) as a result of write offs of deferred tax assets
which are no longer supportable and lower than anticipated share
prices on vesting of share awards offset in 2022 by the beneficial
impact of agreeing historic tax liabilities; (c) revaluing deferred
tax balances in credit cards and loans of £1.3m (2022: £3.2m) to
reflect from 1 April 2023 the reduction in the bank corporation tax
surcharge rate from 8% to 3% and the increase in the threshold
below which banking profits are not subject to surcharge from £25m
to £100m; (d) net of the beneficial impact of £1.4m (2022: £nil)
from using brought forward capital losses to offset capital gains.
The tax charge for 2022 also reflected the adverse impact of the
bank corporation tax surcharge of £8.4m and a net beneficial impact
of £2.3m from transactions with discontinued operations including
payment for losses at a discounted price.
Adjusted Return on Tangible Equity (ROTE)
The Group's adjusted ROTE has
decreased from 21.8% in 2022 to 3.2% in 2023, reflecting the lower
adjusted PBT in 2023.
Earnings per share (EPS)
With the £83.4m decrease in the
Group's profit after tax, the basic earnings per share has
decreased from 32.8p in 2022 to 2.4p loss per share in 2023. The
adjusted basic earnings per share has decreased from 38.7p per
share in 2022 to 6.8p in 2023.
Dividends
The Board proposes a final
dividend of 1.0p per share for 2023, subject to final regulatory
approvals. The Group also signals its intention to pay a dividend
of up to 1.0p per share for 2024, subject to Board and regulatory
approvals, with measured progression in 2025. From 2026, following
full implementation of the new strategy, the Board will revisit the
capital allocation policy and reset the level of dividend from
which to maintain a progressive policy thereafter.
Balance sheet
|
|
|
|
|
Assets
|
|
|
|
Cash and balances at central
banks
|
743.3
|
464.9
|
|
Amounts receivable from
customers1
|
2,171.9
|
1,905.4
|
|
Pension asset
|
38.2
|
30.7
|
|
Goodwill and other
intangibles
|
146.8
|
134.5
|
|
Other assets
|
108.5
|
127.8
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Retail deposits
|
1,950.5
|
1,100.6
|
|
Bank and other
borrowings2
|
582.5
|
815.4
|
|
Trade and other payables
|
44.1
|
62.6
|
|
Other liabilities
|
48.5
|
69.8
|
|
|
|
|
|
|
|
|
1 Amounts receivable from
customers in 2023 are presented net of £3.2m (2022: £7.9m) fair
value adjustment for portfolio hedged risk. Underlying receivables
from customers are £2,175.1m (2022: £1,913.3m).
2 Bank and other borrowings
in 2023 are presented net of £1.0m (2022: £4.6m) fair value
adjustment for hedged risk. Underlying bank and other borrowings
are £583.5m (2022: £820.0m).
Assets have increased by 21% to
£3,209m driven by growth in receivables, and higher balances placed
with the Bank of England, driven by the surplus deposits raised
from customers.
Receivables from customers
increased by £266.5m (14.0%) in the year from £1,905.4m in 2022 to
£2,171.9m in 2023. Strong growth in the first half of 2023 was
partially offset by management action to moderate growth in
the second half of the year to enhance the capital
position.
Liabilities have increased by 28%
to £2,626m as retail deposits increased by 77% following management
actions to promote retail savings products offered by the
Group.
Liquidity and funding
The Group's liquidity is almost
entirely held in the Bank of England reserve account (2023:
£703.3m, 2022: £478.2m). This represents a significant level
of excess liquidity and a liquidity coverage ratio of 1,263%
(2022: 1,139%).
At 31 December 2023, the bank had
retail deposit funding of £1,950.5m (2022: £1,100.6m), and was
able to deliver the required funding base at an attractive cost
compared to wholesale alternatives, and the Group is now
significantly funded by retail deposits (84% of total funding). All
outstanding senior unsecured wholesale funding has now been
extinguished for cost efficiency, although the Group maintains its
access to the wholesale markets via its £2bn Euro Medium
Term Note programme updated in 2023. Ongoing funding
diversification is provided by modest levels of private
securitisation and Bank of England funding collateralised by
both vehicle finance and credit card assets, together with further
retail funding capabilities developed through 2023 to include
notice accounts and, imminently, easy access and ISAs. The Group's
cost of funds rose from 2.8% to 4.4% but remains below market
benchmark interest rates, reflecting changes to the Group's funding
mix post-waiver, and the stable contractual term duration of the
Group's funding.
Capital
The Group maintains a robust
capital position with CET1 ratio of 20.5% (2022: 26.4%) and a
total capital ratio of 30.6% (2022: 37.5%). This is within the
Group's updated CET1 target of 19.5% to 20.5% and represents a
surplus of £142.5m (Tier 1) and £283.4m (total capital) above the
Group's total capital requirement and regulatory combined buffers.
As permitted, the Group elected to phase in the impact of adopting
IFRS 9 over a five-year period, and has now fully unwound the
transition adjustment as the transition period ended on 1 January
2023. The overall reduction in the capital ratio in 2023 reflects
mainly the scheduled unwind of the final IFRS 9 adjustment on 1
January 2023, together with additional capital required to be held
for higher lending in the year.
Further information on the impact
of the IFRS 9 transitional arrangements is provided in the Group's
Pillar 3 disclosures available on the Group's website,
www.vanquisbankinggroup.com.
Operating
review
Product trading performance
|
|
Cards
|
Vehicle
Finance
|
Loans
|
Other
|
Corporate
Centre
|
Total
|
|
2023
£m
|
2023
£m
|
2023
£m
|
2023
£m
|
2023
£m
|
2023
£m
|
|
Interest income
|
371.0
|
150.3
|
25.9
|
0.4
|
8.4
|
556.0
|
|
Interest expense
|
(51.6)
|
(28.7)
|
(4.0)
|
(0.2)
|
(28.9)
|
(113.4)
|
|
Net
interest income
|
319.4
|
121.6
|
21.9
|
0.2
|
(20.5)
|
442.6
|
|
Fee and commission income
|
44.2
|
-
|
-
|
-
|
-
|
44.2
|
|
Fee and commission
expense
|
(1.7)
|
-
|
-
|
-
|
-
|
(1.7)
|
|
Net
fee and commission income
|
42.5
|
-
|
-
|
-
|
-
|
42.5
|
|
Other income
|
1.3
|
2.0
|
-
|
0.4
|
-
|
3.7
|
|
Total income
|
363.2
|
123.6
|
21.9
|
0.6
|
(20.5)
|
488.8
|
|
Impairment charges
|
(130.0)
|
(15.2)
|
(20.9)
|
-
|
-
|
(166.1)
|
|
Risk-adjusted income
|
233.2
|
108.4
|
1.0
|
0.6
|
(20.5)
|
322.7
|
|
Adjusted operating costs
|
(167.8)
|
(49.5)
|
(16.0)
|
(3.6)
|
(60.9)
|
(297.8)
|
|
Adjusted PBT / (LBT)
|
65.4
|
58.9
|
(15.0)
|
(3.0)
|
(81.4)
|
24.9
|
|
|
Cards
|
Vehicle
Finance
|
Loans
|
Other
|
Corporate Centre
|
Total
|
|
2022
£m
|
2022
£m
|
2022
£m
|
2022
£m
|
2022
£m
|
2022
£m
|
|
Interest income
|
337.4
|
137.7
|
13.1
|
-
|
3.3
|
491.5
|
|
Interest expense
|
(22.4)
|
(22.1)
|
(1.2)
|
-
|
(13.1)
|
(58.8)
|
|
Net
interest income
|
315.0
|
115.6
|
11.9
|
-
|
(9.8)
|
432.7
|
|
Fee and commission income
|
47.0
|
-
|
-
|
-
|
-
|
47.0
|
|
Fee and commission
expense
|
(2.8)
|
-
|
-
|
-
|
-
|
(2.8)
|
|
Net
fee and commission income
|
44.2
|
-
|
-
|
-
|
-
|
44.2
|
|
Other income
|
0.9
|
2.9
|
-
|
-
|
-
|
3.8
|
|
Total income
|
360.1
|
118.5
|
11.9
|
-
|
(9.8)
|
480.7
|
|
Impairment charges
|
(16.8)
|
(40.8)
|
(8.5)
|
-
|
-
|
(66.1)
|
|
Risk-adjusted income
|
343.3
|
77.7
|
3.4
|
-
|
(9.8)
|
414.6
|
|
Adjusted operating costs
|
(164.8)
|
(39.7)
|
(19.1)
|
-
|
(64.4)
|
(288.0)
|
|
Adjusted PBT / (LBT)
|
178.5
|
38.0
|
(15.7)
|
-
|
(74.2)
|
126.6
|
Corporate centre
The corporate centre includes
Operations, Technology & Change, and support functions which
collectively serve the needs of the wider Group. Costs excluding
exceptional items were £60.9m (2022: £64.4m), £3.5m lower than
prior year. Excluding inflation headwinds, costs were £7m lower
than prior year, primarily due to management action taken in the
second half of 2023 to realise savings through new transformation
initiatives, optimisation of resources, and process efficiency
drives, as part of the commitment to reduce Group costs by
£60m.
Funding costs of £28.9m (2022:
£13.1m) were higher year-on-year due to the higher interest rate
environment. Interest income of £8.4m (2022: £3.3m) was higher due
to higher interest rates on higher cash reserves in the BOE reserve
account.
Credit cards - Continues to attract new customer
bookings
|
|
Twelve months ended 31 December |
|
|
2023
£m
|
2022
£m
|
Change
(%)
|
|
Total customer numbers
('000)
|
1,375.5
|
1,540.8
|
(10.7)
|
|
New customer bookings
('000)
|
267.3
|
224.6
|
19.0
|
|
Period-end receivables
|
1,277.7
|
1,181.6
|
8.1
|
|
Average gross
receivables1
|
1,416.9
|
1,331.9
|
6.4
|
|
|
|
|
|
|
Interest income
|
371.0
|
337.4
|
10.0
|
|
Interest expense
|
(51.6)
|
(22.4)
|
130.4
|
|
Net interest income
|
319.4
|
315.0
|
1.4
|
|
Net fee and commission
income
|
42.5
|
44.2
|
(3.8)
|
|
Other income
|
1.3
|
0.9
|
44.4
|
|
Total income
|
363.2
|
360.1
|
0.9
|
|
Impairment charges
|
(130.0)
|
(16.8)
|
673.8
|
|
Risk adjusted income
|
233.2
|
343.3
|
(32.1)
|
|
Adjusted operating costs
2
|
(167.8)
|
(164.8)
|
1.8
|
|
Adjusted PBT contribution 3
|
65.4
|
178.5
|
(63.4)
|
|
|
|
|
|
|
Asset yield (%)
4
|
24.7
|
25.0
|
(0.3)
|
|
Cost of risk (%)
5
|
(9.2)
|
(1.3)
|
(7.9)
|
|
Risk adjusted margin (%)
6
|
16.5
|
25.8
|
(9.3)
|
1 Average of gross customer
interest earning balances for the 13 months ended 31
December.
2 Adjusted operating costs
are stated before exceptional items.
3 Adjusted PBT contribution
is stated as profit before tax before exceptional
costs.
4 Interest income from
customer receivables for the 12 months ended 31 December as a
percentage of average gross receivables.
5 Impairment charges for the
12 months ended 31 December as a percentage of average gross
receivables.
6 Total income, excluding
exceptional items less impairment charge for the 12 months ended 31
December as a percentage of average gross
receivables.
The Group's credit card business
is a leading player in the non-prime Credit Card market. In 2023,
we received Moneyfacts Consumer Awards winner - Credit Card App of
the Year and Credit Builder Card Provider of the Year,
together with two Card and Payments Awards for 'Best Customer
Service' and for the 'Best Benefits/Loyalty Scheme'.
We offer our card products to a
broad spectrum of customers but are focused particularly on
providing access to a credit card customers who may struggle to
obtain one from a mainstream provider. We support our
customers through great service whether it be our award-winning app
or the people in our customers service teams.
In 2023, we extended our digital
service to customers by offering Apple Pay, as well as new features
within the Vanquis App including enabling customers to view their
card information and PIN, and a new way for customers to register
for Google Wallet from within the Vanquis App. Take-up of all these
new features has been strong, with over 450k of our customers
already signing up to Apple Pay.
We are committed to continuously
improving our services and support for customers, and in 2023 we
sought to embed new ways of working based on an 'empathic design'
approach and conducted a significant piece of qualitative research
to deeply understand our customers, putting our customers at the
very heart of how we design and improve our customer
journeys.
From a service rating perspective,
Vanquis credit card's latest 2023 Institute of Customer Service
(ICS) Satisfaction Index score is 86.8 vs an all-sector average of
77.7. We aim to make our customer experience effortless, and these
results directly demonstrate the progress we have made.
Total customer numbers decreased
by 10.7% to 1,375.5k, as of December 2023 (2022: 1,540.8k), which
in part was driven by a campaign to close dormant accounts at the
end of the year for customers who no longer needed/wanted their
Vanquis card.
New customer bookings for the year
were 267.3k, up from 224.6k in 2022, as a result of expanding the
range of promotional offers to new customers and working with
affiliates and our partner for our co-branded card
(thimbl).
For FY23, the credit cards
reported adjusted PBT contribution of £65.4m (2022: £178.5m) and
period-end net receivables of £1,277.7m (2022:
£1,181.6m).
Throughout 2023, the management
team has focused on increasing customer engagement and new customer
growth, delivering 6.4% growth in average receivables to £1,416.9m
(2022 £1,331.9m), partly due to the uptake of digital wallet usage
amongst customers.
During the second half of the
year, deliberate action was taken to moderate growth to improve
profitability by reducing the day one impact of IFRS 9 driven
expected credit losses from new business.
Total income was up 0.9% to
£363.2m (2022: £360.1m), due to net interest income increasing by
1.4% to £319.4m (2022: £315.0m), net fee and commission income
declining by 3.8% to £42.5m (2022: £44.2m), and other income
increasing by 44.4% to £1.3m (2022: £0.9m). Asset yield reduced
from 25.0% to 24.7%.
Interest expense rose from £22.4m
to £51.6m as market savings rates and UK bank base rate moved
upwards, impacting the Group's funding cost.
Risk adjusted income fell £110.1m
to £233.2m (2022: £343.3m), as a result of impairment charges
rising to £130.0m (2022: £16.8m). Impairments benefited from a
release of provisions no longer required arising from ongoing IFRS
9 model refinements (£17.0m) and the full release of the cost of
living post model adjustment (£10m), but the level of releases in
2023 were lower than releases in 2022. Impairment provision
releases (£92.5m) last year related to Covid-19 and model
recalibration. Underlying asset quality remained stable
year-on-year. The annualised cost of risk increased from 1.3% to
9.2%, and risk adjusted margin fell to 16.5% (2022:
25.8%).
Adjusted operating costs increased
by 1.8% to £167.8m (2022: £164.8m), against a backdrop of
significant inflation and growth in customer
acquisition.
Vehicle Finance - continued robust
performance
|
|
Twelve
months ended 31 December
|
|
|
2023
£m
|
2022
£m
|
Change
(%)
|
|
Total customer numbers
('000)
|
111.7
|
100.0
|
11.7
|
|
New customer bookings
('000)
|
50.8
|
42.1
|
20.7
|
|
Period-end receivables
|
792.2
|
655.4
|
20.9
|
|
Average gross receivables
1
|
784.7
|
656.6
|
19.5
|
|
|
|
|
|
|
Interest income
|
150.3
|
137.7
|
9.2
|
|
Interest expense
|
(28.7)
|
(22.1)
|
29.9
|
|
Net interest income
|
121.6
|
115.6
|
5.2
|
|
Other income
|
2.0
|
2.9
|
(31.0)
|
|
Total income
|
123.6
|
118.5
|
4.3
|
|
Impairment charges
|
(15.2)
|
(40.8)
|
(62.7)
|
|
Risk adjusted income
|
108.4
|
77.7
|
39.5
|
|
Adjusted operating costs
2
|
(49.5)
|
(39.7)
|
24.7
|
|
Adjusted PBT contribution 3
|
58.9
|
38.0
|
55.0
|
|
|
|
|
|
|
Asset yield (%)
4
|
19.2
|
21.0
|
(1.8)
|
|
Cost of risk (%)
5
|
(1.9)
|
(6.2)
|
4.3
|
|
Risk adjusted margin (%)
6
|
13.8
|
11.8
|
2.0
|
1 Average of gross customer
interest earning balances for the 13 months ended 31
December.
2 Adjusted operating costs
are stated before exceptional items.
3 Adjusted PBT contribution
is stated as profit before tax before exceptional
costs.
4 Interest income from
customer receivables for the 12 months ended 31 December as a
percentage of average gross receivables.
5 Impairment charges for the
12 months ended 31 December as a percentage of average gross
receivables.
6 Total income, excluding
exceptional items less impairment charge for the 12 months ended 31
December as a percentage of average gross
receivables.
The Group's vehicle finance
business is a significant player in the non-prime UK vehicle
finance market, as recognised by the numerous awards won in 2023,
reflecting our hard work, passion, and dedication.
We are experts in helping
customers to access finance when they might have struggled to get
approval from mainstream lenders. Our customers represent one in
five of UK adults who have a poor credit history but need a
reliable car, motorbike, or van to suit their lifestyle and
financial situation. Our core product is a Conditional Sale
Agreement, which is a type of vehicle finance that helps spread the
cost of a used vehicle over time, instead of paying for it all
upfront. This is different to the other types of vehicle finance,
like Hire Purchase (HP) or Personal Contract Purchase (PCP), as a
Conditional Sale Agreement has no additional fee to own the
vehicle; once the customer has made the final repayment, they
legally own the vehicle. A Conditional Sale Agreement uses a fixed
APR, so monthly payments are predictable and remain the same for
the duration of the agreement, which is typically between 36-60
months.
Good customer outcomes are
important to us, and once a customer is with us, we're focused on
helping them to achieve the best outcomes possible, whether that's
simply paying their finance each month until they own their used
vehicle, or for example by supporting them if they're able to
settle their agreement early. We also understand that customers may
experience difficulties during their agreement, and
we're focused on supporting them should that happen.
We have a range of options that allow us to help customers get
back on track, or to otherwise exit the agreement in the
'best way possible'.
Total customer numbers grew 11.7%
to 111.7k, as of December 2023 (2022: 100.0k). This has been
achieved through several initiatives that have included technology
investment in Moneybarn Direct, targeted retention of customers,
and entry into the Personal Contract Hire market.
New customer bookings for the year
were 50.8k, up 20.7% from 42.1k in 2022, as a result of
strengthened distribution and competitive pricing. The improved
price competitiveness was due to our funding costs from retail
deposits being comparatively lower than the wholesale funding
relied upon by most of our competitors. Notably, Moneybarn Direct,
our direct to customer channel, had a strong year with approvals up
82%.
For FY23, vehicle finance reported
an adjusted PBT contribution of £58.9m (2022: £38.0m) and
receivables at the end of the period up 20.9% to £792.2m (2022:
£655.4m).
Throughout 2023, management
focused on sustainable growth, delivering 19.5% growth in average
gross receivables to £784.7m (2022: £656.6m), with deliberate
action taken to moderate growth in the second half of the year to
improve profitability by reducing the day one impact of IFRS 9
driven expected credit losses from new business.
Interest income rose by 9.2% to
£150.3m (2022: £137.7m), delivering 19.2% annualised asset yield
(2022: 21.0%).
Net interest income rose by 5.2%
to £121.6m (2022: £115.6m), as a result of the increase in
receivables being offset by rising interest expense due to market
savings rates and UK bank base rate moving upwards, impacting the
Group's funding cost.
Other income fell to £2.0m (2022:
£2.9m), with total income amounting to £123.6m (2022:
£118.5m).
Risk adjusted income increased by
£30.7m to £108.4m (2022: £77.7m), benefiting from impairments
reducing £25.6m to £15.2m (2022: £40.8m). The impairment reduction
reflects IFRS 9 model refinements and recalibration leading to an
impairment provision release of £47.0m in 2023 (2022: £0.5m), as
Vehicle Finance has purposefully transitioned towards the lower
credit risk near prime market. This one-off impairment
provision release masks higher expected losses from receivables
growth (£18.1m) particularly evident during the first half of 2023.
As a result, cost of risk dropped from 6.2% to 1.9%.
The risk adjusted margin improved
to 13.8% (2022: 11.8%).
Adjusted operating costs rose by
£9.8m (24.7%) to £49.5m (2022: £39.7m) with efficiency gains offset
by increased complaints costs driven primarily by spurious claims
from claims management companies, and higher volume.
Vehicle finance has never entered
into discretionary broker commission arrangements.
Unsecured Personal Loans - A stable year-on-year
performance
|
|
Twelve
months ended 31 December
|
|
|
2023
£m
|
2022
£m
|
Change
(%)
|
|
Total customer numbers
('000)
|
43.7
|
34.4
|
27.0
|
|
New customer bookings
('000)
|
29.6
|
27.0
|
9.6
|
|
Period-end receivables
|
102.4
|
76.3
|
34.2
|
|
Average gross
receivables1
|
123.1
|
50.9
|
141.8
|
|
|
|
|
|
|
Interest income
|
25.9
|
13.1
|
97.7
|
|
Interest expense
|
(4.0)
|
(1.2)
|
233.3
|
|
Net interest income
|
21.9
|
11.9
|
84.0
|
|
Total income
|
21.9
|
11.9
|
84.0
|
|
Impairment charges
|
(20.9)
|
(8.5)
|
145.9
|
|
Risk-adjusted income
|
1.0
|
3.4
|
(70.6)
|
|
Operating costs
|
(16.0)
|
(19.1)
|
(16.2)
|
|
LBT contribution
|
(15.0)
|
(15.7)
|
(4.5)
|
|
|
|
|
|
|
Asset yield (%)
2
|
21.0
|
25.7
|
(4.7)
|
|
Cost of risk
(%)3
|
(17.0)
|
(16.7)
|
(0.3)
|
|
Risk adjusted margin
(%)4
|
0.8
|
6.7
|
(5.9)
|
1 Average of gross customer
interest earning balances for the 13 months ended 31
December.
2 Interest income from
customer receivables for the 12 months ended 31 December as a
percentage of average gross receivables.
3 Impairment charges for the
12 months ended 31 December as a percentage of average gross
receivables.
4 Total income, excluding
exceptional items less impairment charge for the 12 months ended 31
December as a percentage of average gross
receivables.
The Group's unsecured personal
loan business was established to provide our customers with a
broader range of borrowing options, with a product tailored to the
non-prime market. Most customers are taking out a personal loan to
either consolidate other debts or to enable them to make home
improvements, although the full range of reasons for borrowing
includes a wide range of purposes.
When selecting their loan,
customers are looking for a loan that provides them with the amount
of money they need, with repayments over a period that makes their
monthly payment affordable, at the lowest possible price (APR).
From extensive market research, we have identified that our
customers value repayment certainty and flexibility if
circumstances change, so we offer fixed APRs for the period of the
loan, no penalty fees for additional interest charged for missed or
late payments and there is no retention of interest when customers
pay off the loan early.
Total customer numbers grew 27.0%
to 43.7k, as of December 2023 (2022: 34.4k).
New customer bookings for the year
were 29.6k, up 9.6% from 27.0k in 2022, driven by the expansion of
the product range offered to both existing and new to Vanquis
customers, with Vanquis branded loans launched on the new
technology platform.
Loans customers are highly
satisfied by their Vanquis loan and the service they receive. This
is evidenced by loans customers giving their loan a Net Promoter
Score of 51, a customer satisfaction score of 89% and by 89% of
customers also saying that they would use a Vanquis loan again. The
Vanquis loan product was also the winner of 'Best Loan Provider' in
the 2023 Consumer Credit Awards.
For FY23, personal loans reported
a LBT contribution of £(15.0)m loss (2022: £(15.7)m) and
receivables at the end of the period up 34.2% to £102.4m (2022:
£76.3m).
Personal loans average gross
receivables increased 141.8% to £123.1m (2022: £50.9m). Deliberate
action was taken to moderate growth in the second half of the year
to improve profitability by reducing the day one impact of IFRS 9
driven expected credit losses from new business. This included a
temporary pause in active marketing of personal loans as we
undertook the Group wide strategic refresh.
Interest income rose by 97.7% to
£25.9m (2022: £13.1m), delivering 21.0% asset yield (2022: 25.7%),
as a result of the year-on-year receivables growth and
introduction of lower APR loans as part of the product range
expansion.
Interest expense rose by 233.3% to
£4.0m, reflecting receivables growth and rising interest expense
due to market savings rates and the UK bank base rate moving
upwards, impacting the Group's funding cost.
Net interest income was up 84.0%
to £21.9m (2022: £11.9m).
Risk adjusted income decreased by
£2.4m to £1.0m (2022: £3.4m), as a result of an increase in
impairment from £8.5m to £20.9m. The increase in impairment
reflects a recalibration of expected losses as we refine our
underwriting parameters on this relatively immature portfolio,
resulting in the cost of risk increasing to 17.0% from
16.7%.
The risk adjusted margin declined
to 0.8% (2022: 6.7%).
Operating costs were ongoing,
albeit lower by £3.1m to £16.0m (2022: £19.1m), largely due to
reduced technology investment.
Snoop - Helps our customers save money
Snoop is an award-winning fintech
that uses open banking and Expand AI to help users save money and
manage their finances more effectively. The app helps its customers
build their financial capability, and targets annual savings of up
to £1,500. Snoop demonstrably improves financial wellbeing with
over 15,000 four and five-star reviews, and from a survey of 500
users, a 95% customer recommendation rate, and 80% of users
reporting increased financial confidence. As such, it is an
important addition to the Group's customer
proposition.
Leveraging Snoop's innovative
technology and data capabilities will also unlock valuable
opportunities for the Group. Test marketing of Snoop to Vanquis
customers progressed ahead of expectations in 4Q23 and we will
continue to actively promote Snoop to our 1.5 million strong
customer base in 2024. This will position the Group as a relevant
presence in their daily lives, drive improved creditworthiness and
support improved borrowing and debt management.
Snoop's impact extends beyond
individual users, offering businesses valuable insights into
evolving consumer spending behaviours. In 4Q23, Snoop launched
SpendMapper, a self-service business intelligence dashboard.
SpendMapper leverages over £100bn of real-time spending data to
help businesses understand how and where consumers spend, and how
this is changing. Further scaling the business in 2024 will enrich
Snoop's data insight proposition and enhance the Group's overall
data capabilities.
Snoop was incorporated into the
Group on 7 August 2023, and the business reported an adjusted
loss before tax of £(2.5)m from the date of incorporation to 31
December 2023.
Principal Risks and Uncertainties
Group Principal Risks are those
risks most critical to the alignment of the Group Strategy.
Principal risk categories and associated risk appetite statements
are reviewed and approved by the Board on an annual basis,
effectively defining Vanquis Banking Group's overall risk
appetite.
Customer Risk
This is defined as the risk of
customer detriment due to poor design, distribution and execution
of products and services or other activities which could lead to
unfair customer outcomes or regulatory censure. The Group has a set
of detailed risk appetite statements, metrics and thresholds in
place in relation to the fair treatment and management of our
customers.
Regulatory Risk
This is defined as the risk that
our systems and controls do not support effective regulatory
compliance and we fail to meet the expectations of our
regulators. We aim to avoid material
regulatory breaches and, in the event that they do occur, we will
correct them promptly and learn from our
mistakes.
Financial Crime Risk
This is defined as the risk that
the Group's products and services are used to facilitate financial
crime against the Group, customers or third parties. The Group
operates a strong and risk-proportionate set of systems and
controls to detect and prevent financial crime. The Group is
committed to complying with applicable legislation for the
management of Financial Crime Risk, ensuring that it meets the
minimum requirements and expectations of the regulatory bodies and
those set by legislation for managing Financial Crime Risk
effectively.
Capital Risk
This is defined as the risk that
the Group fails to maintain the minimum regulatory capital
requirements and a management buffer on a consolidated basis to
cover risk exposures and withstand a severe stress as identified as
part of the Internal Capital Adequacy Assessment Process (ICAAP).
The Group and Bank operate within a defined capital risk appetite,
with thresholds reported to and monitored by Group Boards.
Additional metrics and thresholds have been developed for the Group
and Vanquis Bank. All thresholds have been calibrated above the
Recovery & Resolution Plan (RRP) triggers in order to provide
advance warning of threshold breaches.
Funding and Liquidity
Risk
This is defined as the risk that
the Group has insufficient financial resources to meet its
obligations (cash or collateral requirements) as they fall due,
resulting in the failure to meet regulatory liquidity requirements,
or is only able to secure such resources at excessive cost. The
Group's current funding strategy seeks to maintain a secure funding
structure by maintaining access to the liquid retail deposits
market and committed facilities to meet the Group's liquidity and
funding requirements. The Group maintains access to diversified
sources of funding comprising: (i) retail deposits; (ii)
securitisation of the cards and vehicle finance books; (iii)
liquidity and funding facilities at the Bank of England; and (iv)
access to wholesale market funding and debt capital via its EMTN
programme.
Market Interest Rate Risk in the
Banking Book (IRRBB) Risk
This is defined as the risk that
the net value of, or net income arising from, assets and
liabilities is impacted as a result of changes in market prices or
rates, specifically interest rates, currency rates or equity
prices. The Group's corporate policies do not permit it to
undertake position taking or trading books of this type and
therefore it does not do so.
Credit Risk
This is defined as the risk of
unexpected credit losses arising through either adverse
macroeconomic factors or parties with whom the Group has contracted
failing to meet their financial obligations. Credit Risk appetite
has been refreshed with metrics and thresholds grouped by product
lines to enable more focused monitoring and management action to
remain within appetite on a timely basis. Regular reporting is in
place which allows daily monitoring of new business quality,
collections performance and concentration analysis. Extensive work
has been undertaken to enhance credit worthiness and affordability
procedures.
People Risk
This is defined as the risk that
we have insufficient operational capacity and colleagues with the
right skills in meeting our financial, customer and regulatory
responsibilities. In managing our people risk, we ensure we have
adequate controls across the whole colleague life cycle covering
the onboarding, development and management of our colleagues.
This extends to ensuring we have sufficient operational capacity
and colleagues with the right skills in meeting our financial,
customer and regulatory responsibilities.
Technology and Information
Security Risk
This is defined as the risk
arising from compromised or inadequate technology, security and
data that could affect the confidentiality, integrity or
availability of the Group's data or systems. This risk is managed
in conjunction with Operational Risk with additional and particular
focus on cyber and technology infrastructure.
Operational Risk
This is defined as the risk of
loss resulting from inadequate or failed internal processes, people
and systems or from external events. The three lines of defence
model throughout the Group ensures there are clear lines of
accountability between management who own the risks, oversight by
the risk function and independent assurance provided by Internal
Audit.
Model Risk
This is defined as the risk of
financial losses where models fail to perform as expected due to
poor governance (including design and operation). A Group model
risk management framework and model risk policy is embedded with a
model inventory in place to ensure periodic review and strict
change control.
Strategic Performance
Risk
This is defined as the risk of
making and/ or executing poor strategic decisions related to
acquisitions, products, distribution, etc. as a result of
ineffective governance arrangements, processes and controls. Board
Governance Manual and Delegated Authorities Matrix (DAM) are in
place to provide a framework for key decision making at all levels
across the Group. Executive Director scorecards are in place with
reward incentives based on a combination of financial and
non-financial measures.
Consolidated financial statements
Consolidated income statement for the year ended 31
December
|
|
Note
|
2023
|
2022
|
|
Continuing operations
|
|
£m
|
£m
|
|
Interest income
|
3
|
556.0
|
491.5
|
|
Interest expense
|
|
(113.4)
|
(58.8)
|
|
Net
interest income
|
|
442.6
|
432.7
|
|
Fee and commission income
|
4
|
44.2
|
47.0
|
|
Fee and commission
expense
|
|
(1.7)
|
(2.8)
|
|
Net
fee and commission income
|
|
42.5
|
44.2
|
|
Other income and net fair value
gains
|
|
3.7
|
3.8
|
|
Total income
|
|
488.8
|
480.7
|
|
Impairment charges
|
9
|
(166.1)
|
(66.1)
|
|
Risk-adjusted income
|
|
322.7
|
414.6
|
|
Operating costs
|
|
(327.1)
|
(304.5)
|
|
Statutory (loss)/profit before taxation from continuing
operations
|
4
|
(4.4)
|
110.1
|
|
Tax charge for continuing
operations
|
|
(1.6)
|
(27.8)
|
|
Statutory (loss)/profit after taxation from continuing
operations
|
|
(6.0)
|
82.3
|
|
Loss after tax from discontinued operations
|
5
|
-
|
(4.9)
|
|
Statutory (loss)/profit for the year attributable to equity
shareholders
|
|
(6.0)
|
77.4
|
|
Add back:
|
|
|
|
|
Tax charge for continuing
operations
|
|
1.6
|
27.8
|
|
Amortisation of acquisition
intangibles
|
|
7.9
|
7.5
|
|
Exceptional items
|
|
21.4
|
9.0
|
|
Loss after taxation from
discontinued operations.
|
|
-
|
4.9
|
|
Adjusted profit before tax
|
|
24.9
|
126.6
|
Consolidated statement of comprehensive income for the year
ended 31 December
|
|
Note
|
2023
|
2022
|
|
|
|
£m
|
£m
|
|
(Loss)/profit for the year attributable to equity
shareholders
|
|
(6.0)
|
77.4
|
|
Items that will not be reclassified
subsequently to the income statement:
|
|
|
|
|
- actuarial movements on retirement
benefit asset
|
13
|
6.4
|
(84.2)
|
|
- tax on items taken directly to
other comprehensive income
|
6
|
(1.5)
|
16.0
|
|
- impact of change in UK tax rate
on items in other comprehensive income
|
6
|
(0.1)
|
5.0
|
|
Other comprehensive (expense)/income
for the year
|
|
4.8
|
(63.2)
|
|
Total comprehensive (expense)/income for the
year
|
|
(1.2)
|
14.2
|
(Loss)/earnings per share
|
|
Note
|
2023
|
2022
|
|
|
|
pence
|
pence
|
|
Basic
|
7
|
(2.4)
|
30.8
|
|
Diluted
|
7
|
(2.3)
|
30.5
|
The above (loss)/earnings per share
is on a Group basis including discontinued operations.
Dividends per share
|
|
Note
|
2023
|
2022
|
|
|
|
pence
|
pence
|
|
Interim
dividend
|
8
|
5.0
|
5.0
|
|
Final dividend
|
8
|
1.0
|
10.3
|
The total cost of dividends paid in
the year was £38.4m (2022:
£42.8m).
Consolidated balance sheets
|
|
Note
|
31
December
2023
|
31
December 2022 (restated1)
|
1
January 2022 (restated1)
|
|
|
|
£m
|
£m
|
£m
|
|
ASSETS
|
|
|
|
|
|
Cash and cash equivalents
|
|
743.3
|
464.9
|
717.7
|
|
Amounts receivable from
customers
|
9
|
2,171.9
|
1,905.4
|
1,687.0
|
|
Trade and other
receivables
|
|
55.9
|
50.6
|
18.8
|
|
Investments held at fair value
through profit and loss
|
11
|
5.4
|
10.7
|
9.1
|
|
Current tax asset
|
|
8.1
|
-
|
-
|
|
Property, plant and
equipment
|
|
8.1
|
8.3
|
8.4
|
|
Right of use assets
|
|
23.2
|
32.4
|
47.9
|
|
Goodwill
|
10
|
72.4
|
71.2
|
71.2
|
|
Other intangible assets
|
12
|
74.4
|
63.3
|
52.3
|
|
Retirement benefit asset
|
13
|
38.2
|
30.7
|
112.2
|
|
Derivative financial
instruments
|
|
1.3
|
11.3
|
3.1
|
|
Deferred tax assets
|
6
|
6.5
|
14.5
|
6.9
|
|
TOTAL ASSETS
|
4
|
3,208.7
|
2,663.3
|
2,734.6
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Trade and other payables
|
|
44.1
|
62.8
|
95.6
|
|
Current tax liabilities
|
|
-
|
-
|
5.6
|
|
Provisions
|
14
|
5.8
|
5.2
|
72.1
|
|
Lease liabilities
|
|
40.9
|
49.3
|
58.9
|
|
Retail deposits
|
|
1,950.5
|
1,100.6
|
1,018.5
|
|
Bank and other borrowings
|
|
582.5
|
815.4
|
845.2
|
|
Derivative financial
instruments
|
|
1.8
|
15.3
|
-
|
|
Total liabilities
|
|
2,625.6
|
2,048.6
|
2,095.9
|
|
Equity attributable to owners of the parent
|
|
|
|
|
|
Share capital
|
|
53.2
|
52.6
|
52.6
|
|
Share premium
|
|
276.3
|
273.5
|
273.3
|
|
Merger reserve
|
|
278.2
|
278.2
|
278.2
|
|
Other reserves
|
|
12.1
|
12.4
|
9.8
|
|
Retained earnings
|
|
(36.7)
|
(2.0)
|
24.8
|
|
Total equity
|
4
|
583.1
|
614.7
|
638.7
|
|
TOTAL LIABILITIES AND EQUITY
|
|
3,208.7
|
2,663.3
|
2,734.6
|
1 Refer to accounting
policies for detail of restatement.
Consolidated statement of changes in shareholders'
equity
|
|
Share
capital
£m
|
Share
premium
£m
|
Merger
reserve
£m
|
Other
reserves
£m
|
Retained
earnings
£m
|
Total
£m
|
|
At
31 December 2021
|
52.6
|
273.3
|
278.2
|
9.8
|
17.3
|
631.2
|
|
Prior year
adjustment1
|
-
|
-
|
-
|
-
|
7.5
|
7.5
|
|
At
1 January 2022
|
52.6
|
273.2
|
278.2
|
9.8
|
24.8
|
638.7
|
|
Profit for the year
|
-
|
-
|
-
|
-
|
77.4
|
77.4
|
|
Other comprehensive
(expense)/income:
|
|
|
|
|
|
|
|
- actuarial movements on retirement
benefit asset (note 13)
|
-
|
-
|
-
|
-
|
(84.2)
|
(84.2)
|
|
- tax on items taken directly to other
comprehensive income (note
6)
|
-
|
-
|
-
|
|
16.0
|
16.0
|
|
- impact of change in UK tax rate
(note 6)
|
-
|
-
|
-
|
-
|
5.0
|
5.0
|
|
Other comprehensive (expense) for
the year
|
-
|
-
|
-
|
|
(63.2)
|
(63.2)
|
|
Total comprehensive income for the
year
|
-
|
-
|
-
|
|
14.2
|
14.2
|
|
Dividends
|
-
|
-
|
-
|
-
|
(42.8)
|
(42.8)
|
|
Purchase of own shares
|
-
|
-
|
-
|
-
|
(0.7)
|
(0.7)
|
|
Issue of share capital
|
-
|
0.2
|
-
|
-
|
-
|
0.2
|
|
Share-based payment
charge
|
-
|
-
|
-
|
5.1
|
-
|
5.1
|
|
Transfer of share-based payment
reserve on vesting of share awards
|
-
|
-
|
-
|
(2.5)
|
2.5
|
-
|
|
At 31 December 2022
|
52.6
|
273.5
|
278.2
|
12.4
|
(2.0)
|
614.7
|
|
At 1 January 2023
|
52.6
|
273.5
|
278.2
|
12.4
|
(2.0)
|
614.7
|
|
Loss for the year
|
-
|
-
|
-
|
-
|
(6.0)
|
(6.0)
|
|
Other comprehensive
income/(expense):
|
|
|
|
|
|
|
|
- actuarial movements on
retirement benefit asset (note 13)
|
-
|
-
|
-
|
-
|
6.4
|
6.4
|
|
- tax on items taken
directly to other
comprehensive income (note
6)
|
-
|
-
|
-
|
-
|
(1.5)
|
(1.5)
|
|
- impact of change in UK tax rate
(note 6)
|
-
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
|
Other comprehensive income for the
year
|
-
|
-
|
-
|
-
|
4.8
|
4.8
|
|
Total comprehensive expense for
the year
|
-
|
-
|
-
|
-
|
(1.2)
|
(1.2)
|
|
Dividends
|
-
|
-
|
-
|
-
|
(38.4)
|
(38.4)
|
|
Issue of share capital
|
0.6
|
2.8
|
-
|
-
|
-
|
3.4
|
|
Share-based payment
charge
|
-
|
-
|
-
|
4.6
|
-
|
4.6
|
|
Transfer of share-based payment
reserve on vesting of share awards
|
-
|
-
|
-
|
(4.9)
|
4.9
|
-
|
|
At 31 December 2023
|
53.2
|
276.3
|
278.2
|
12.1
|
(36.7)
|
583.1
|
1 Refer to accounting
policies for detail of restatement.
The rights issue in April 2018 was
undertaken through a cash box structure which allowed merger relief
to be applied to the issue of shares rather than recording share
premium. The full merger reserve is now considered
distributable.
Consolidated statement of cash flows for the year ended 31
December
|
|
Note
|
2023
|
20221
|
|
|
|
£m
|
£m
|
|
Cash flows from operating activities
|
|
|
|
|
Cash (used in)/generated from
operations
|
15
|
(175.0)
|
(148.1)
|
|
Finance costs paid
|
|
(76.1)
|
(48.8)
|
|
Finance income received
|
|
26.6
|
5.4
|
|
Tax paid
|
|
(6.0)
|
(13.4)
|
|
Net
cash used in operating activities
|
|
(230.5)
|
(204.9)
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
Purchase of intangible
assets
|
12
|
(19.0)
|
(29.2)
|
|
Purchase of property, plant and
equipment
|
|
(3.3)
|
(3.6)
|
|
Proceeds from sale of available for
sale investment
|
|
6.4
|
-
|
|
Acquisition of a
subsidiary
|
|
(2.9)
|
-
|
|
Net
cash used in investing activities
|
|
(18.8)
|
(32.8)
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Proceeds from bank and other
borrowings
|
|
1,100.0
|
330.0
|
|
Repayment of bank and other
borrowings
|
|
(523.3)
|
(288.4)
|
|
Payment of lease
liabilities
|
|
(11.2)
|
(10.8)
|
|
Dividends paid to Company
shareholders
|
|
(38.4)
|
(42.8)
|
|
Purchase of shares for share
awards
|
|
-
|
(0.7)
|
|
Proceeds from issue of share
capital
|
|
0.1
|
0.2
|
|
Net
cash generated from/(used in) financing
activities
|
|
527.2
|
(12.5)
|
|
|
|
|
|
|
Net
increase/(decrease) in cash, cash equivalents and
overdrafts
|
|
277.9
|
(250.2)
|
|
Cash, cash equivalents and
overdrafts at beginning of year
|
|
463.9
|
714.1
|
|
Cash, cash equivalents acquired from
Snoop
|
|
-
|
-
|
|
Cash, cash equivalents and overdrafts at end of
year
|
|
741.8
|
463.9
|
|
|
|
|
|
|
Cash, cash equivalents and overdrafts at end of year
comprise:
|
|
|
|
|
Cash at bank and in hand
|
|
743.3
|
464.9
|
|
Overdrafts (held in bank and other
borrowings)
|
|
(1.5)
|
(1.0)
|
|
Total cash, cash equivalents and overdrafts
|
|
741.8
|
463.9
|
1 2022 cash flows reclassified between proceeds from and
repayments of bank and other borrowings within cash flows from
financing activities due to netting of retail deposit retained
amounts totaling £155.5m
Cash at bank and in hand includes
£681.5m (2022: £420.5m) 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. Basis of
preparation
The preliminary announcement has
been prepared in accordance with the Listing Rules of the FCA and
is based on the 2023 financial statements which have been prepared
under International Financial Reporting Standards (IFRS) as adopted
by the UK, International Financial
Reporting Interpretations Committee (IFRIC) interpretations and the
Companies Act 2006.
The financial information set out
in this announcement does not constitute the Group's statutory
accounts for the year ended 31 December 2023 or the year ended 31
December 2022 but is derived from those accounts. Statutory
accounts for the year ended 31 December 2022 have been delivered to
the Registrar of Companies, and those for the year ended 31
December 2023 will be delivered to the Registrar of Companies
before the Company's annual general meeting. The auditors have
reported on those accounts: their reports were unqualified, did not
draw attention to any matters by way of emphasis and did not
contain statements under s498(2) or (3) of the Companies Act
2006.
The statutory 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, in doing so, the Board reviewed
detailed forecasts for the three year period to December 2026 and
also considered less detailed forecasts for 2027 and 2028. These
higher-level outer year forecasts do not contain any information
which would cause different conclusions to be reached over the
longer-term viability of the Group. The assessment included
consideration of the Group's principal risks and uncertainties,
with a focus on capital and liquidity, and this assessment remains
valid for 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%. This shows that the Group is able to maintain
sufficient capital headroom above 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 years
presented.
Prior year restatement
In the current year, as part of
the Group's continual focus on improving the precision of its IFRS
9 impairment models, it was identified within vehicle finance that
recovery cash flows were being discounted to the date of default
rather than the reporting date. This led to cash flows being
discounted too heavily and therefore a higher core model impairment
provision being historically recognised. In 2021, this would have
resulted in a reduction in Group loss after tax of £7.5m, an
increase in vehicle finance receivables of £9.3m and a reduction in
the current tax asset of £1.8m. Management considers that a prior
period restatement is appropriate and has retrospectively restated
the 2022 balance sheet which has resulted in an increase in vehicle
finance receivables of £9.3m, a reduction in the current tax asset
of £1.8m and a corresponding increase of £7.5m through retained
earnings.
Change in presentation of income statement
In line with our continued
repositioning as a specialist banking group, the Group changed the
presentation of its income statement in the Annual Report and
accounts for the year ended 31 December 2022 to align with the
wider banking industry.
The presentation of the income
statement in this report is consistent with that in the Annual
Report and Accounts for 31 December 2022, with the exception of
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
now being recognised within
interest income, and certain elements of vehicle finance income
which were previously reported in interest income now being
recognised in other income.
All periods presented in this
report have been retrospectively re-presented. 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.
3.
Interest income
|
Interest receivable from:
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Customer receivables
|
525.7
|
484.0
|
|
Cash balances held on deposit and
other interest
|
25.6
|
5.4
|
|
Net fair value gains on derivative
financial instruments
|
4.7
|
2.1
|
|
Total income
|
556.0
|
491.5
|
4.
Segment reporting
|
|
Cards
|
Vehicle
Finance
|
Loans
|
Second
charge mortgages
|
Snoop
|
Corporate Centre
|
Total
|
|
|
2023
|
2023
|
2023
|
2023
|
2023
|
2023
|
2023
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Interest income
|
371.0
|
150.3
|
25.9
|
0.4
|
-
|
8.4
|
556.0
|
|
Interest expense
|
(51.6)
|
(28.7)
|
(4.0)
|
(0.2)
|
-
|
(28.9)
|
(113.4)
|
|
Net
interest income
|
319.4
|
121.6
|
21.9
|
0.2
|
-
|
(20.5)
|
442.6
|
|
Fee and commission income
|
44.2
|
-
|
-
|
-
|
-
|
-
|
44.2
|
|
Fee and commission
expense
|
(1.7)
|
-
|
-
|
-
|
-
|
-
|
(1.7)
|
|
Net
fee and commission income
|
42.5
|
-
|
-
|
-
|
-
|
-
|
42.5
|
|
Other income
|
1.3
|
2.0
|
-
|
-
|
0.4
|
-
|
3.7
|
|
Total income
|
363.2
|
123.6
|
21.9
|
0.2
|
0.4
|
(20.5)
|
488.8
|
|
Impairment charges
|
(130.0)
|
(15.2)
|
(20.9)
|
-
|
-
|
-
|
(166.1)
|
|
Risk-adjusted income
|
233.2
|
108.4
|
1.0
|
0.2
|
0.4
|
(20.5)
|
322.7
|
|
Adjusted operating costs
|
(167.8)
|
(49.5)
|
(16.0)
|
(0.7)
|
(2.9)
|
(60.9)
|
(297.8)
|
|
Adjusted PBT/(LBT)
|
65.4
|
58.9
|
(15.0)
|
(0.5)
|
(2.5)
|
(81.4)
|
24.9
|
|
Exceptional items
|
|
|
|
|
|
(21.4)
|
(21.4)
|
|
Amortisation of acquisition
intangibles
|
|
|
|
|
|
(7.9)
|
(7.9)
|
|
Statutory loss before taxation on continuing
operations
|
|
|
|
|
|
(110.6)
|
(4.4)
|
|
Tax charge for continuing
operations
|
|
|
|
|
|
|
(1.6)
|
|
Statutory loss after taxation on continuing
operations
|
|
|
|
|
|
|
(6.0)
|
|
Loss after taxation on
discontinued
operations
|
|
|
|
|
|
|
-
|
|
Statutory loss for the year attributable to equity
shareholders
|
|
|
|
|
|
|
(6.0)
|
|
|
|
|
|
|
|
|
|
|
|
Cards
|
Vehicle
Finance
|
Loans
|
Second
charge mortgages
|
Snoop
|
Corporate Centre
|
Total
|
|
|
2022
|
2022
|
2022
|
2022
|
2022
|
2022
|
2022
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Interest income
|
337.4
|
137.7
|
13.1
|
-
|
-
|
3.3
|
491.5
|
|
Interest expense
|
(22.4)
|
(22.1)
|
(1.2)
|
-
|
-
|
(13.1)
|
(58.8)
|
|
Net
interest income
|
315.0
|
115.6
|
11.9
|
-
|
-
|
(9.8)
|
432.7
|
|
Fee and commission income
|
47.0
|
-
|
-
|
-
|
-
|
-
|
47.0
|
|
Fee and commission
expense
|
(2.8)
|
-
|
-
|
-
|
-
|
-
|
(2.8)
|
|
Net
fee and commission income
|
44.2
|
-
|
-
|
-
|
-
|
-
|
44.2
|
|
Other income
|
0.9
|
2.9
|
-
|
-
|
-
|
-
|
3.8
|
|
Total income
|
360.1
|
118.5
|
11.9
|
-
|
-
|
(9.8)
|
480.7
|
|
Impairment charges
|
(16.8)
|
(40.8)
|
(8.5)
|
-
|
-
|
-
|
(66.1)
|
|
Risk-adjusted income
|
343.3
|
77.7
|
3.4
|
-
|
-
|
(9.8)
|
414.6
|
|
Adjusted operating costs
|
(164.8)
|
(39.7)
|
(19.1)
|
-
|
-
|
(64.4)
|
(288.0)
|
|
Adjusted PBT/(LBT)
|
178.5
|
38.0
|
(15.7)
|
-
|
-
|
(74.2)
|
126.6
|
|
Exceptional items
|
|
|
|
|
|
(9.0)
|
(9.0)
|
|
Amortisation of acquisition
intangibles
|
|
|
|
|
|
(7.5)
|
(7.5)
|
|
Statutory (loss)/profit before taxation on continuing
operations
|
|
|
|
|
|
(90.6)
|
110.1
|
|
Tax charge for continuing
operations
|
|
|
|
|
|
|
(27.8)
|
|
Statutory profit after taxation on continuing
operations
|
|
|
|
|
|
|
82.3
|
|
Loss after taxation on
discontinued
operations
|
|
|
|
|
|
|
(4.9)
|
|
Statutory profit for the year attributable to equity
shareholders
|
|
|
|
|
|
|
77.4
|
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 the current year. The amortisation
charge in 2023 amounted to £7.9m (2022: £7.5m).
Revenue between business segments
is not material.
Exceptional items for continuing
operations represent a net exceptional charge of £21.4m in 2023
(2022: £9.0m) and comprise:
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Strategy consultancy
costs
|
(3.5)
|
(3.8)
|
|
Redundancy - outsourcing and other
staff exits
|
(7.2)
|
(1.5)
|
|
Other outsourcing costs
|
(2.2)
|
-
|
|
Property exit costs
|
(4.1)
|
-
|
|
Total transformation costs
|
(17.0)
|
(5.3)
|
|
Other exceptional costs:
|
|
|
|
Snoop acquisition costs
|
(3.0)
|
-
|
|
Legal and other advice
|
(1.0)
|
-
|
|
Repayment Option Plan (ROP)
provision release
|
2.0
|
-
|
|
CCD liquidation/scheme
costs
|
(2.4)
|
(3.7)
|
|
Total exceptional items
|
(21.4)
|
(9.0)
|
|
|
Segment assets
|
Segment
liabilities
|
Net
assets/(liabilities)
|
|
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Credit cards, personal loans and
second charge mortgages
|
2,195.7
|
1,795.6
|
(1,802.0)
|
(1,410.7)
|
393.7
|
384.9
|
|
Vehicle finance
|
896.1
|
770.1
|
(683.2)
|
(589.7)
|
212.9
|
180.4
|
|
Central
|
29.4
|
504.8
|
(58.4)
|
(72.7)
|
(29.0)
|
432.1
|
|
Other
|
11.8
|
-
|
(6.3)
|
-
|
5.5
|
-
|
|
Continuing operations before intra-group
elimination
|
3,133.0
|
3,070.5
|
(2,549.9)
|
(2,073.1)
|
583.1
|
997.4
|
|
Discontinued operations
|
-
|
-
|
-
|
(382.7)
|
-
|
(382.7)
|
|
Intra-group elimination
|
75.7
|
(407.2)
|
(75.7)
|
407.2
|
-
|
-
|
|
Total Group
|
3,208.7
|
2,663.3
|
(2,625.6)
|
(2,048.6)
|
583.1
|
614.7
|
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 recognised within Vanquis Bank Limited and are
therefore combined for balance sheet reporting purposes.
5. Discontinued
operations
The Group closed its CCD business
comprising home credit and Satsuma loans during 2021 and in
accordance with IFRS 5 'Non‑current Assets Held for Sale and
Discontinued Operations'
these businesses are presented as discontinued
operations.
The loss for discontinued
operations for 2023 is £nil. No amounts are included in the Group
income statement in the current year. Subsequently the basic and
diluted loss per share for discontinued operations in 2023 is
£nil.
The loss for discontinued
operations for 2022 was £4.9m resulting in a basic and diluted loss
per share of 2.0p. The loss for discontinued operations in 2022
included: interest expense of £6.2m; operating costs of £9.1m; an
exceptional release of £4.6m; and a tax credit of £5.8m.
There were no cash flows arising
from discontinued operations in 2023. In 2022 discontinued
operations generated cash of £0.1m in respect of operating
activities, generated £nil in respect of investing activities and
used £0.1m in respect of financing activities.
Cash flows relating to exceptional
items in 2022 were £4.6m in respect of operating
activities.
During the year the discontinued
operations generated cash of £nil (2022: £0.1m) in respect of
operating activities, generated £nil (2022: £nil) in respect of
investing activities and used £nil (2022: £0.1m) in respect of
financing activities. Discontinued operations cash flows relating
to exceptional items was £nil (2022: release of £4.6m) in respect
of operating activities
6.
Tax charge
The tax charge/(credit) in the
income statement is as follows:
|
|
|
|
|
2023
|
|
|
Continuing
operations
|
|
|
Adjusted
PBT
|
Exceptional
items
|
Amortisation
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
Profit/(loss) on ordinary activities before
tax
|
24.9
|
(21.4)
|
(7.9)
|
(4.4)
|
|
Profit/(loss) before tax multiplied
by standard rate of corporation tax in the UK of 23.5%
|
5.8
|
(5.0)
|
(1.8)
|
(1.0)
|
|
Effects of:
|
|
|
|
|
|
- impact of change in UK tax rate
(note (a))
|
1.3
|
-
|
-
|
1.3
|
|
- write off of deferred tax assets
(note (b))
|
0.3
|
-
|
-
|
0.3
|
|
- adjustments in respect of prior
years (note (c))
|
1.5
|
-
|
-
|
1.5
|
|
- non-deductible general expenses (note (d))
|
0.2
|
0.7
|
-
|
0.9
|
|
- benefit of capital losses (note
(e))
|
(1.4)
|
-
|
-
|
(1.4)
|
|
Total tax charge/(credit)
|
7.7
|
(4.3)
|
(1.8)
|
1.6
|
|
|
2022
|
|
|
Continuing operations
|
Discontinued operations
|
|
|
Adjusted
PBT
|
Exceptional items
|
Amortisation
|
Total
|
Adjusted
PBT
|
Exceptional items
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Profit/(loss) on ordinary activities before
tax
|
126.6
|
(9.0)
|
(7.5)
|
110.1
|
(15.3)
|
4.6
|
(10.7)
|
|
Profit/(loss) before tax multiplied
by standard rate of corporation tax in the UK of 19%
|
24.1
|
(1.7)
|
(1.4)
|
21.0
|
(2.9)
|
0.9
|
(2.0)
|
|
Effects of:
|
|
|
|
|
|
|
|
|
- impact of change in UK tax rate
(note (a))
|
3.2
|
-
|
-
|
3.2
|
-
|
-
|
-
|
|
- write off of deferred tax assets
(note (b))
|
0.2
|
-
|
-
|
0.2
|
-
|
-
|
-
|
|
- adjustments in respect of prior
years (note (c))
|
(4.4)
|
0.8
|
-
|
(3.6)
|
(6.5)
|
0.4
|
(6.1)
|
|
- non-deductible general expenses (note (d))
|
0.2
|
0.7
|
-
|
0.9
|
0.6
|
(0.4)
|
0.2
|
|
- benefit
of capital losses
(note e)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
- impact of bank corporation tax
surcharge (note (f))
|
8.4
|
-
|
-
|
8.4
|
-
|
-
|
-
|
|
- impact of lower tax rates overseas
and overseas losses (note (g))
|
-
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
(0.2)
|
|
- prior year adjustments related to
transfer pricing and losses (note (h))
|
1.0
|
-
|
-
|
1.0
|
(1.0)
|
-
|
(1.0)
|
|
- discount on payment for losses of
discontinued operations (note (i))
|
(3.3)
|
-
|
-
|
(3.3)
|
3.3
|
-
|
3.3
|
|
Total tax charge/(credit)
|
29.4
|
(0.2)
|
(1.4)
|
27.8
|
(6.6)
|
0.8
|
(5.8)
|
|
|
|
|
|
|
|
|
|
(a) Impact of change of UK tax rate
In 2021, changes were enacted to
increase the mainstream corporation tax rate from 19% to 25% with
effect from 1 April 2023. At 31 December 2021, deferred tax
balances were remeasured at 25%, and in the case of credit cards
and loans, at the combined mainstream corporation tax rate (25%)
and bank corporation tax surcharge rate (8%) of 33% to the extent
that the temporary differences on which deferred tax had been
calculated were expected to reverse, or the tax loss was expected
to be utilised, after 1 April 2023.
In 2022, further changes were
enacted which, with effect from 1 April 2023, reduced the bank
corporation tax surcharge rate from 8% to 3% and increase the bank
corporation tax surcharge allowance, being the threshold below
which banking profits are not subject to the surcharge, from £25m
to £100m.
Deferred tax balances at 31
December 2023 and movements in deferred tax balances during the
year have therefore been measured at 25% (2022: 25%), and in the
case of credit cards and personal loans, at the combined mainstream
corporation tax rate (25%) and the bank corporation tax surcharge
charge rate (3%) of 28% (2022: 28%) except to the extent the
temporary differences reverse when profits from credit cards and
personal loans are expected to be below the bank surcharge
threshold, in which case deferred tax balances have been measured
at the combined rate of 25% (2022: 25%).
A tax charge of £1.3m (2022:
charge of £3.2m) represents the income statement adjustment to
deferred tax as a result of these changes. In 2022, an additional
deferred tax credit of £5.0m was taken directly to other
comprehensive income in respect of items reflected in other
comprehensive income.
(b) Write off of deferred tax assets
In 2023 the tax charge in respect
of deferred tax assets written off amounts to £0.3m (2022: £0.2m)
and relates to share scheme awards where future deductions are
expected to be lower than previously anticipated.
(c) Adjustment in respect of prior years
The tax charge of £1.5m in respect
of prior years (2022: £9.7m tax credit) is due to lower tax
deductions in respect of share scheme awards as a result of a lower
than anticipated share price on vesting and adjustments to write
off deferred tax assets which are no longer supportable.
In 2022, the tax credit of £9.7m
in respect of prior years comprised: (a) a net release of tax
liabilities in respect of prior years of continuing operations of
£3.6m following agreement of certain historical tax matters with
HMRC; (b) a £7.5m reinstatement of deferred tax assets in respect
of certain losses and temporary differences of discontinued
operations which were written off in 2021 but for which tax relief
was considered to be available in 2022; and (c) a £1.4m tax charge
in respect of a reduction in tax losses of the discontinued
operations available for group relief in prior years.
(d) Non-deductible general expenses
These primarily comprise
exceptional costs in respect of the acquisition of
Snoop.
In 2022, these primarily
comprised: (a) in the case of discontinued operations, costs for
which tax deductions may not be available post closure of the
business net of the release of the provision for costs associated
with the FCA investigation into affordable lending in CCD, part of
which is non-taxable; and (b) in the case of continuing operations,
the cost of certain projects for which it was considered a tax
deduction may not be available.
(e) Benefit of capital losses
The conversion and subsequent sale
in 2023 of a further tranche of the preferred stock in Visa Inc
gave rise to a capital gain which has been partially offset by
brought forward capital losses in respect of which a deferred tax
asset was not previously recognised. This gives rise to a
beneficial impact on the tax charge of £1.4m (2022:
£nil).
(f) Impact of bank corporation tax
surcharge
The adverse impact of the bank
corporation tax surcharge amounts to £nil (2022: £8.4m) as the
taxable profits of credit cards and personal loans is below the
annual threshold (£25m to 31 March 2023; £100m thereafter) below
which banking profits are not subject to the surcharge.
In 2022, the adverse impact of the
bank corporation tax surcharge amounted to £8.4m and represented
tax at the bank
corporation tax surcharge rate of
8% on credit cards and personal loans taxable profits in excess of
£25m where taxable profits are calculated ignoring the benefit of
losses elsewhere in the Group, including capital losses.
(g) Impact of lower tax rates overseas and overseas
losses
Prior to its closure in 2021, the
home credit business in the Republic of Ireland was subject to tax
at the Republic of Ireland statutory tax rate of 12.5% rather than
the UK statutory mainstream corporation tax rate of 19.0%. In 2022,
no tax liability arose on the release of various provisions and
accruals following the closure of the Irish business giving a
favourable impact on the tax charge of £0.2m, all of which related
to discontinued operations.
(h) Prior year adjustments related to transfer pricing and
losses
In 2022 this comprised a £1.0m
credit related to discontinued operations net of a £1.0m charge
related to continuing operations and relates to transfer pricing
adjustments between the continuing operations and discontinued
operations in prior years, as well as adjustments related to prior
year tax losses of the discontinued operation which were
surrendered as group relief to the continuing operation and which
the continuing operation paid for at a discounted price.
(i) Discount on payment for losses of discontinued
operation
In 2022 this comprised a credit of
£3.3m related to continuing operations and a £3.3m charge related
to discontinued
operations, and related to tax
losses of the discontinued operation which had been surrendered as
group relief to the continuing operation and which the continuing
operation paid for at a discounted price. The overall impact on the
tax charge was £nil.
Tax on exceptional items
The tax credit in respect of
exceptional items amounts to £4.3m (2022: £0.6m tax charge) and
comprises a £4.3m credit (2022: £0.2m credit) relating to
continuing operations and £nil (2022: £0.8m charge) related to
discontinued operations.
In 2023:
- The £4.3m tax credit represents
a tax credit in respect of all exceptional costs with the exception
of costs in respect of the acquisition of Snoop in the current year
for which tax deductions may not be available.
In 2022:
- The £0.2m tax credit relating to
continuing operations represents a tax credit in respect of all
exceptional costs of the continuing operations with the exception
of certain project costs for which it is considered tax deductions
may not be available.
- The £0.8m tax charge relating to
discontinued operations represents the tax charge on the release of
certain provisions and accruals for which tax deductions were
previously claimed with the exception of those relating to the
Irish branch which are non-taxable.
The tax (charge)/credit on items
taken directly to other comprehensive income is as
follows:
|
|
2023
|
2022
|
|
Tax credit on items taken directly
to other comprehensive income
|
£m
|
£m
|
|
Deferred tax (charge)/credit on
actuarial movements on retirement benefit asset
|
(1.5)
|
16.0
|
|
Impact of change in UK tax
rate
|
(0.1)
|
5.0
|
|
Total tax (charge)/credit on items taken directly to other
comprehensive income
|
(1.6)
|
21.0
|
The tax (charge)/credit on items
taken directly to other comprehensive income relates entirely to
continuing operations.
The movement in the deferred tax
balance during the year can be analysed as follows:
|
|
2023
|
2022
|
|
Asset/(liability)
|
£m
|
£m
|
|
At 1 January
|
14.5
|
6.9
|
|
Charge to the income
statement
|
(2.3)
|
(10.2)
|
|
Acquisition of Snoop
|
(2.8)
|
-
|
|
(Charge)/credit on other
comprehensive income prior to impact of change in UK tax
rate
|
(1.5)
|
16.0
|
|
Impact of change in UK tax
rate:
|
|
|
|
- charge to the income
statement
|
(1.3)
|
(3.2)
|
|
- (charge)/credit to other
comprehensive income
|
(0.1)
|
5.0
|
|
At
31 December
|
6.5
|
14.5
|
7.
(Loss)/earnings per share
Basic (loss)/earnings per share
(L)/EPS is calculated by dividing the (loss)/profit for the year
attributable to equity shareholders by the weighted average number
of ordinary shares outstanding during the year less the number of
shares held by the Employee Benefit Trust which are used to satisfy
the share awards such as DBP, PSP, LTIS, RSP and 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
Deferred Bonus Plan (DBP) (previously the Performance Share Plan
(PSP)), the Long Term Incentive Scheme (LTIS), the Restricted Share
Plan (RSP) and the Company Share Option Plan (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 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 (L)/EPS for continuing operations and the Group are set out
below:
|
|
2023
|
2022
|
|
|
Earnings
|
Weighted average
number
of shares
|
Per
share
amount
|
Earnings
|
Weighted average
number
of
shares
|
Per
share
amount
|
|
Continuing operations
|
£m
|
m
|
pence
|
£m
|
m
|
pence
|
|
Basic (loss)/earnings per share
|
(6.0)
|
253.0
|
(2.4)
|
82.3
|
250.9
|
32.8
|
|
Dilutive effect of share options and
awards
|
-
|
9.8
|
0.1
|
-
|
2.8
|
(0.4)
|
|
Diluted (loss)/earnings per share
|
(6.0)
|
262.8
|
(2.3)
|
82.3
|
253.7
|
32.4
|
|
|
2023
|
2022
|
|
|
Earnings
|
Weighted average
number
of shares
|
Per
share
amount
|
Earnings
|
Weighted average
number
of
shares
|
Per
share
amount
|
|
Group
|
£m
|
m
|
pence
|
£m
|
m
|
pence
|
|
Basic (loss)/earnings per share
|
(6.0)
|
253.0
|
(2.4)
|
77.4
|
250.9
|
30.8
|
|
Dilutive effect of share options and
awards
|
-
|
9.8
|
0.1
|
-
|
2.8
|
(0.3)
|
|
Diluted (loss)/earnings per share
|
(6.0)
|
262.8
|
(2.3)
|
77.4
|
253.7
|
30.5
|
The directors have elected to show
an adjusted earnings per share prior to the amortisation of
acquisition intangibles which arose on the acquisition of vehicle
finance in August 2014 and prior to exceptional items (see note 3).
This is presented to show the adjusted earnings per share generated
by the continuing and Group operations. A reconciliation of
continuing and Group basic/diluted earnings/(loss) per share to
adjusted basic and diluted earnings per share is as
follows:
|
|
|
2023
|
2022
|
|
|
|
|
Earnings
|
Weighted
average
number
of shares
|
Per
share
amount
|
Earnings
|
Weighted
average
number
of
shares
|
Per
share
amount
|
|
|
Continuing operations
|
£m
|
m
|
pence
|
£m
|
m
|
pence
|
|
|
Basic (loss)/earnings per share
|
(6.0)
|
253.0
|
(2.4)
|
82.3
|
250.9
|
32.8
|
|
|
Amortisation of acquisition
intangibles, net of tax
|
6.1
|
-
|
2.4
|
6.1
|
-
|
2.4
|
|
|
Exceptional items, net of
tax
|
17.1
|
-
|
6.8
|
8.8
|
-
|
3.5
|
|
|
Adjusted basic earnings per share
|
17.2
|
253.0
|
6.8
|
97.2
|
250.9
|
38.7
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss)/earnings per share
|
(6.0)
|
262.8
|
(2.3)
|
82.3
|
253.7
|
32.4
|
|
|
Amortisation of acquisition
intangibles, net of tax
|
6.1
|
-
|
2.4
|
6.1
|
-
|
2.4
|
|
|
Exceptional items, net of
tax
|
17.1
|
-
|
6.4
|
8.8
|
-
|
3.5
|
|
|
Adjusted diluted earnings per share
|
17.2
|
262.8
|
6.5
|
97.2
|
253.7
|
38.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023
|
2022
|
|
|
|
|
Earnings
|
Weighted
average
number
of shares
|
Per
share
amount
|
Earnings
|
Weighted
average
number
of
shares
|
Per
share
amount
|
|
|
Group
|
£m
|
m
|
pence
|
£m
|
m
|
pence
|
|
|
Basic (loss)/earnings per share
|
(6.0)
|
253.0
|
(2.4)
|
77.4
|
250.9
|
30.8
|
|
|
Amortisation of acquisition
intangibles, net of tax
|
6.1
|
-
|
2.4
|
6.1
|
-
|
2.4
|
|
|
Exceptional items, net of
tax
|
17.1
|
-
|
6.8
|
5.0
|
-
|
2.0
|
|
|
Adjusted basic earnings per share
|
17.2
|
253.0
|
6.8
|
88.5
|
250.9
|
35.2
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss)/earnings per share
|
(6.0)
|
262.8
|
(2.3)
|
77.4
|
253.7
|
30.5
|
|
|
Amortisation of acquisition
intangibles, net of tax
|
6.1
|
-
|
2.4
|
6.1
|
-
|
2.4
|
|
|
Exceptional items, net of
tax
|
17.1
|
-
|
6.4
|
5.0
|
-
|
2.0
|
|
|
Adjusted diluted earnings per share
|
17.2
|
262.8
|
6.5
|
88.5
|
253.7
|
34.9
|
|
|
|
|
|
|
|
|
|
|
|
8.
Dividends
|
|
|
2023
|
2022
|
|
|
|
£m
|
£m
|
|
2022 interim - 5.0p per
share
|
|
-
|
12.7
|
|
2022 final - 10.3p per
share
|
|
25.7
|
30.1
|
|
2023 interim - 5.0p per
share
|
|
12.7
|
-
|
|
|
|
38.4
|
42.8
|
The directors are recommending a
final dividend in respect of the financial year ended 31 December
2023 of 1.0p per share which will amount to an estimated dividend
of £2.6m. If approved, this dividend will be paid on 30 May 2024 to
shareholders who were on the register of members at 19 April
2024.
9. Amounts
receivable from customers
|
|
2023
|
2022
(restated)
|
|
|
£m
|
£m
|
|
|
|
|
|
Credit cards
|
1,277.7
|
1,181.6
|
|
Vehicle finance
|
792.2
|
655.4
|
|
Personal loans
|
102.4
|
76.3
|
|
Second charge mortgages
|
2.8
|
-
|
|
Total
|
2,175.1
|
1,913.3
|
|
Fair value adjustment for portfolio
hedged risk
|
(3.2)
|
(7.9)
|
|
Total group
|
2,171.9
|
1,905.4
|
The fair value adjustment for the
portfolio hedge risk relates to the unamortised hedged accounting
adjustment in relation to the balance guaranteed swap, where hedge
accounting has been discontinued.
An analysis of receivables by IFRS
9 stages is set out below:
|
|
2023
|
|
|
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
|
(18.2)
|
(27.0)
|
(306.8)
|
(352.0)
|
|
Personal loans
|
(6.3)
|
(2.4)
|
(6.4)
|
(15.1)
|
|
Second charge mortgages
|
-
|
-
|
-
|
-
|
|
Total group
|
(109.7)
|
(87.0)
|
(369.1)
|
(565.8)
|
|
|
|
|
|
|
|
Net
receivables
|
|
|
|
|
|
Credit cards
|
1,115.6
|
103.8
|
58.3
|
1,277.7
|
|
Vehicle finance
|
373.5
|
197.8
|
220.9
|
792.2
|
|
Personal loans
|
97.8
|
3.1
|
1.5
|
102.4
|
|
Second charge mortgages
|
2.8
|
-
|
-
|
2.8
|
|
Total group
|
1,589.7
|
304.7
|
280.7
|
2,175.1
|
|
|
2022
(restated)
|
|
|
Stage
1
|
Stage
2
|
Stage
3
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
Gross receivables
|
|
|
|
|
|
Credit cards
|
1,116.6
|
148.7
|
186.7
|
1,452.0
|
|
Vehicle finance
|
351.0
|
169.3
|
452.0
|
972.3
|
|
Personal loans
|
78.1
|
2.1
|
5.3
|
85.5
|
|
Second charge mortgages
|
-
|
-
|
-
|
-
|
|
Total group
|
1,545.7
|
320.1
|
644.0
|
2,509.8
|
|
|
|
|
|
|
|
Allowance account
|
|
|
|
|
|
Credit cards
|
(93.2)
|
(58.2)
|
(119.0)
|
(270.4)
|
|
Vehicle finance
|
(15.9)
|
(25.8)
|
(275.2)
|
(316.9)
|
|
Personal loans
|
(5.0)
|
(0.7)
|
(3.5)
|
(9.2)
|
|
Second charge mortgages
|
-
|
-
|
-
|
-
|
|
Total group
|
(114.1)
|
(84.7)
|
(397.7)
|
(596.5)
|
|
|
|
|
|
|
|
Net
receivables
|
|
|
|
|
|
Credit cards
|
1,023.4
|
90.5
|
67.7
|
1,181.6
|
|
Vehicle finance
|
335.1
|
143.5
|
176.8
|
655.4
|
|
Personal loans
|
73.1
|
1.4
|
1.8
|
76.3
|
|
Second charge mortgages
|
-
|
-
|
-
|
-
|
|
Total group
|
1,431.6
|
235.4
|
246.3
|
1,913.3
|
A breakdown of the in-model and
post-model overlays for credit cards is shown below:
|
Credit Cards
|
|
|
|
2023
|
2022
|
|
|
|
|
|
£m
|
£m
|
|
Core model
|
|
|
|
209.4
|
254.1
|
|
New Model (under)/overlays (note
(a))
|
|
|
|
(12.7)
|
-
|
|
Post Model
(under)/overlays
|
|
|
|
2.0
|
16.3
|
|
Total allowance account
|
|
|
|
198.7
|
270.4
|
|
|
|
|
|
|
|
|
|
|
|
|
2023
£m
|
2022
£m
|
|
Post
model (under)/overlays:
|
|
|
|
|
|
|
Affordability risk event (note
(b))
|
|
|
|
-
|
0.3
|
|
Persistent debt (note
(c))
|
|
|
|
-
|
2.8
|
|
Cost of living (note (d))
|
|
|
|
-
|
10.0
|
|
Recoveries (note (e))
|
|
|
|
-
|
2.5
|
|
Other (note (f))
|
|
|
|
2.0
|
0.7
|
|
Total post model (under)/overlays
|
|
|
|
2.0
|
16.3
|
|
|
|
|
|
|
|
|
Total (under)/overlays
|
|
|
|
(10.7)
|
16.3
|
(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, has taken 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 has
indicated the need for a model rebuild PMA at Dec'23. The resultant
level of ECL provision is considered to more accurately reflect the
Groups' current exposure to credit risk and takes into account how
our receivables mix has evolved throughout recent months. It is
expected this new model PMA will be retired when the incumbent IFRS
9 models are substituted with the new suite of IFRS 9 models during
1H24.
(b) Affordability
An additional IFRS 9 impairment
provision has 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 has been fully released in
2023.
(c) Persistent debt
A post-model overlay was
calculated to refine provisioning for those customers who have been
in Persistent Debt for 36 months (PD36). These customers have been
split into two categories: those who have responded to
communications and agreed to pay down their outstanding balance;
and those who are making minimum payments but have not responded.
This overlay has been fully released in 2023.
(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 since, however the underlying
credit metrics of the book remained stable and showed no signs of
significant increase in credit risk. In 2023, both the 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 has
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 in-model and
post-model overlays for vehicle finance is shown below:
|
Vehicle finance
|
|
|
2023
£m
|
2022
(restated)
£m
|
|
|
Core model
|
|
|
403.4
|
319.4
|
|
|
New Model (under)/overlays (note
(a))
|
|
(47.0)
|
-
|
|
|
Post Model
(under)/overlays
|
|
(4.4)
|
(2.5)
|
|
|
Total allowance account
|
|
352.0
|
316.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023
£m
|
2022
£m
|
|
|
Post-model overlays:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fraud (note (b))
|
|
|
(5.2)
|
(3.0)
|
|
|
Cost of living (note (c))
|
|
|
|
-
|
0.5
|
|
|
Borrowers in financial difficulty
(note (d))
|
|
|
|
0.8
|
-
|
|
|
Total post model (under)/overlays
|
|
(4.4)
|
(2.5)
|
|
|
Total (under)/overlays
|
|
|
(51.4)
|
(2.5)
|
|
(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) Cost of living
A cost of living overlay was fully
released in 2023. Refer to Cards section for further
details.
(d) Borrowers in financial difficulty
An overlay has been recognised for
a selection of customer accounts that are deemed to be borrowers in
financial difficulty.
A breakdown of the in-model and
post-model overlays for personal loans is shown below:
|
Personal loans
|
|
|
|
2023
£m
|
2022
£m
|
|
Core model
|
|
|
|
13.1
|
8.6
|
|
New Model (under)/overlays (note
(a))
|
|
|
|
2.0
|
-
|
|
Post Model
(under)/overlays
|
|
|
|
-
|
0.6
|
|
Total allowance account
|
|
|
|
15.1
|
9.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023
£m
|
2022
£m
|
|
Post-model overlays:
|
|
|
|
|
|
|
Cost of living (note (b))
|
|
|
|
-
|
0.3
|
|
Other
|
|
|
|
-
|
0.3
|
|
Total post model (under)/overlays
|
|
|
|
-
|
0.6
|
|
Total (under)/overlays
|
|
|
|
2.0
|
0.6
|
(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:
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Credit cards
|
130.0
|
16.8
|
|
Vehicle finance
|
15.2
|
40.8
|
|
Personal loans
|
20.9
|
8.5
|
|
Total impairment charge
|
166.1
|
66.1
|
The movement in directly
attributable acquisition costs included within amounts receivable
from customers can be analysed as follows:
|
|
2023
|
2022
|
|
|
Credit
Cards
|
Loans
|
Vehicle
finance
|
Second charge
mortgages
|
Total
|
Cards
|
Loans
|
Vehicle
finance
|
Second
charge mortgages
|
Group
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Total
|
|
Brought forward
|
30.3
|
1.3
|
44.3
|
-
|
75.9
|
29.4
|
0.2
|
32.4
|
-
|
62.0
|
|
Capitalised
|
15.1
|
1.5
|
37.6
|
0.1
|
54.3
|
11.9
|
1.8
|
30.2
|
-
|
43.9
|
|
Amortised
|
(13.1)
|
(1.6)
|
(25.9)
|
-
|
(40.6)
|
(11.0)
|
(0.7)
|
(18.3)
|
-
|
(30.0)
|
|
Carried forward
|
32.3
|
1.2
|
56.0
|
0.1
|
89.6
|
30.3
|
1.3
|
44.3
|
-
|
75.9
|
10.
Acquisition of
Snoop
The Group completed the
acquisition of the entire share capital of Usnoop Limited, which
trades as Snoop, on 7 August 2023 for consideration of £8.7m. Snoop
is a money-saving financial technology company with customers
across the UK.
The acquisition will provide Snoop
with significant scale, allowing access to Vanquis Banking Group's
1.5 million customers who will benefit from the app, as well
as the support to grow the Snoop proposition. The acquisition marks
an important step for the Group as a specialist banking group
allowing it to bring a money management and saving app into its
customer proposition.
Costs of £3.0m associated with the
acquisition including due diligence, legal, advisory and tax fees
have been charged as an exceptional cost in the year.
An assessment of the fair values
of the identifiable assets and liabilities of Snoop as at the
acquisition date was performed and they are as follows:
|
|
Book value on
acquisition
|
Fair value
adjustment
|
Recognised on
acquisition
|
|
£m
|
£m
|
£m
|
0B0BIntangible assets (note (a))
|
-
|
11.1
|
11.1
|
1B1BDeferred tax liabilities (note (b))
|
-
|
(2.8)
|
(2.8)
|
2B2BCash
and cash equivalents
|
0.2
|
-
|
0.2
|
3B3BTrade
and other receivables
|
0.6
|
-
|
0.6
|
4B4BTrade
and other payables
|
(1.6)
|
-
|
(1.6)
|
5B5BNet
identifiable (liabilities)/assets required
|
(0.8)
|
8.3
|
7.5
|
6B6BGoodwill
|
|
|
1.2
|
7B7BConsideration
|
|
|
8.7
|
The fair value adjustments applied
to Snoop's net assets comprise:
a) £11.1m attributed to intangible
assets, recognising £10.1m of internally generated core platform
and technology developed and used by the Snoop business, and £1.0m
in relation to the 'Snoop' brand name, which is well recognised
within the UK consumer bank/personal finance app market (see note
12); and
b) the tax effect of the fair
value adjustments resulting in the recognition of a deferred tax
liability of £2.8m assumed over the expected useful economic life
of the intangible assets acquired.
The fair value of the
consideration at the acquisition date consists of:
(i)
£3.1m of cash consideration;
(ii)
2,588,253 of ordinary shares in Vanquis Banking Group plc with a
nominal value of £0.5m and a market value of £3.3m. £0.5m has been
recognised as an increase in share capital with the remaining £2.8m
being recognised in share premium; and
(iii)
£2.3m of contingent consideration dependent on the performance of
the acquiree by the end of 2026. This has been determined by an
independent third party using a Monte Carlo simulation for
determining the future revenues of the acquiree. The range of
outcomes in the contingent consideration payable is not considered
to be materially different.
The goodwill of £1.2m represents
the difference between the consideration and the fair value of the
net assets acquired. In accordance with the Group's accounting
policies, goodwill is not amortised but is subject to an annual
impairment review. None of the goodwill is expected to be
deductible for corporation tax purposes.
Snoop has generated revenues of
£0.4m and losses of £2.5m in the period from acquisition to 31
December 2023, which are included in the consolidated statement of
comprehensive income for the year. If Snoop had been part of the
Group for the 12 months to 31 December 2023, Group total income
would be £489.6m and the statutory loss before tax would be
£9.2m.
11.
Investments
|
|
2023
|
2022
|
|
£m
|
£m
|
8B8BVisa
Inc. shares
|
5.4
|
10.7
|
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 on 21
June 2016. In consideration for Vanquis Bank Limited's interest in
Visa Europe Limited, Vanquis Bank Limited received cash
consideration of €15.9m (£12.2m) on completion, preferred stock
with an approximate value of €10.7m and deferred cash consideration
of €1.4m which was received in 2019.
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.
As at 31 December 2023, the total
fair value of £5.4m of Visa shares comprised preferred stock only.
During the year, common stock (35,200 Class A Common shares) was
fully sold on 24 February 2023 for $219.13 per share.
12.
Other intangible
assets
|
|
2023
|
2022
|
|
|
Acquisition
intangibles
|
Computer
software
|
Total
|
Acquisition intangibles
|
Computer
software
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Cost
|
|
|
|
|
|
|
|
At 1 January
|
75.0
|
68.5
|
143.5
|
75.0
|
43.5
|
118.5
|
|
Additions
|
11.1
|
19.0
|
30.1
|
-
|
29.2
|
29.2
|
|
Disposals
|
-
|
(2.4)
|
(2.4)
|
-
|
(4.2)
|
(4.2)
|
|
At 31 December
|
86.1
|
85.1
|
171.2
|
75.0
|
68.5
|
143.5
|
|
|
|
|
|
|
|
|
|
Accumulated amortisation and impairment
|
|
|
|
|
|
|
|
At 1 January
|
62.5
|
17.7
|
80.2
|
55.0
|
11.2
|
66.2
|
|
Charged to the income
statement
|
7.9
|
10.6
|
18.5
|
7.5
|
8.5
|
16.0
|
|
Disposals
|
-
|
(1.9)
|
(1.9)
|
-
|
(2.0)
|
(2.0)
|
|
At 31 December
|
70.4
|
26.4
|
96.8
|
62.5
|
17.7
|
80.2
|
|
|
|
|
|
|
|
|
|
Net
book value
|
|
|
|
|
|
|
|
At 31 December
|
15.7
|
58.7
|
74.4
|
12.5
|
50.8
|
63.3
|
|
At 1 January
|
12.5
|
50.8
|
63.3
|
20.0
|
32.3
|
52.3
|
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 comprise £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.
Research and development
expenditure recognised within operating costs during 2023 was £0.8m
(2022: £1.0m).
Additions to computer software in
the year of £19.0m (2022: £29.2m) comprise £18.9m (2022: £28.4m) of
internally generated assets and £0.1m (2022: £0.8m) of externally
purchased software.
The £18.9m (2022: £28.4m) of
internally generated assets predominantly relates to the
development of systems and applications for the credit cards and
personal loans businesses. The charge for continuing operations
includes amortisation of £18.5m (2022: £16.0m).
13.
Retirement benefit asset
The Group operates a defined
benefit scheme: the Provident Financial Staff Pension Scheme. The
scheme is of the funded, defined benefit type. 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 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.
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:
|
|
2023
|
2022
|
|
£m
|
£m
|
|
Fair value of scheme
assets
|
512.9
|
520.7
|
|
Present value of defined benefit
obligation
|
(474.7)
|
(490.0)
|
9B9BNet
retirement benefit asset recognised in the balance
sheet
|
38.2
|
30.7
|
The amounts recognised in the income
statement were as follows:
|
|
2023
|
2022
|
|
£m
|
£m
|
|
Administration costs and
taxes
|
(1.1)
|
(1.6)
|
|
Interest on scheme
liabilities
|
(23.0)
|
(14.4)
|
|
Interest on scheme assets
|
24.4
|
16.5
|
|
Net
credit recognised in the income statement
|
0.3
|
0.5
|
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:
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Fair value of scheme assets at 1
January
|
520.7
|
898.8
|
|
Interest on scheme assets
|
24.4
|
16.5
|
|
Actuarial movements on scheme
assets
|
(7.8)
|
(366.2)
|
|
Contributions by the
Group
|
0.8
|
2.2
|
|
Net benefits paid out
|
(25.2)
|
(30.6)
|
|
Fair value of scheme assets at 31 December
|
512.9
|
520.7
|
Movements in the present value of
the defined benefit obligation were as follows:
|
|
2023
|
2022
|
|
£m
|
£m
|
|
Present value of defined benefit
obligation at 1 January
|
(490.0)
|
(786.6)
|
|
Current service cost
|
(1.1)
|
(1.6)
|
|
Interest on scheme
liabilities
|
(23.0)
|
(14.4)
|
|
Actuarial movement -
experience
|
1.2
|
(6.6)
|
|
Actuarial movement - demographic
assumptions
|
19.3
|
5.4
|
|
Actuarial movement - financial
assumptions
|
(6.3)
|
283.2
|
|
Net benefits paid out
|
25.2
|
30.6
|
|
Present value of defined benefit obligation at 31
December
|
(474.7)
|
(490.0)
|
The principal actuarial
assumptions used at the balance sheet date were as
follows:
|
|
2023
|
2022
|
|
%
|
%
|
|
Price inflation - RPI
|
3.10
|
3.25
|
|
Price inflation - CPI
|
2.60
|
2.75
|
|
Rate of increase to pensions in
payment
|
2.95
|
3.05
|
|
Inflationary increases to pensions
in deferment
|
2.60
|
2.75
|
|
Discount rate
|
4.65
|
4.80
|
The pension increase assumption
shown above applies to pensions increasing in payment each year in
line with RPI up to 5%. Pensions accrued prior to 2000 are
substantially subject to fixed 5% increases each year. In deferment
increases prior to retirement are linked to CPI.
The mortality assumptions are
based on the self-administered pension scheme (SAPS) series 3
tables (2022: SAPS series 3 tables):
- female non-pensioners: 105% of the 'Middle' table (2022: 105%
of the 'Middle' table);
- male
non-pensioners: 105% of the 'Middle' table (2022: 105% of the
'Middle' table);
- female pensioners: 102% of the 'Middle' table (2022: 102% of
the 'Middle' table); and
- male
pensioners: 99% of the 'All' table (2022: 99% of the 'All'
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) 2022
model with a long-term improvement trend of 1.00% per annum and a
modest allowance of 0% for the experience during 2020 and 2021
(where mortality was higher due to coronavirus, which leads to
lower assumed future improvements in mortality) and 50% for 2022.
All other available parameters for the mortality improvements model
were adopted at the default (core) level. Under these mortality
assumptions, the life expectancies of members are as
follows:
|
|
Male
|
Female
|
|
|
2023
|
2022
|
2023
|
2022
|
|
years
|
years
|
years
|
years
|
|
Current pensioner aged 65
|
21.2
|
21.7
|
22.9
|
23.3
|
|
Current member aged 45 from age
65
|
21.1
|
21.6
|
23.8
|
24.3
|
|
|
|
|
|
|
If the discount rate decreased by
0.5% (2022: 2%), the net retirement benefit asset would have been
increased by approximately £31m (2022: £160m).
An analysis of amounts recognised
in the statement of comprehensive income is set out
below:
|
|
2023
|
2022
|
|
£m
|
£m
|
|
Actuarial movements on scheme
assets
|
(7.8)
|
(366.2)
|
|
Actuarial movements on scheme
liabilities
|
14.2
|
282.0
|
|
Total movement recognised in other comprehensive income in
the year
|
6.4
|
(84.2)
|
|
Cumulative movement recognised in other comprehensive
income
|
(148.3)
|
(154.7)
|
14.
Provisions
|
|
2023
|
2022
|
|
|
Scheme
£m
|
ROP
£m
|
Customer
compliance
£m
|
Others
£m
|
Total
£m
|
Scheme
£m
|
ROP
£m
|
Customer
compliance
£m
|
Others
£m
|
Total
£m
|
|
At 1 January
|
1.2
|
2.0
|
1.4
|
0.6
|
5.2
|
53.5
|
2.1
|
3.4
|
13.1
|
72.1
|
|
Created in the year
|
-
|
-
|
10.7
|
0.3
|
11.0
|
2.6
|
-
|
1.1
|
-
|
3.7
|
|
Reclassified in the year
|
-
|
-
|
-
|
0.6
|
0.6
|
-
|
-
|
1.6
|
-
|
1.6
|
|
Utilised in the year
|
(0.2)
|
-
|
(8.4)
|
(0.2)
|
(8.8)
|
(54.9)
|
(0.1)
|
(1.5)
|
(7.5)
|
(64.0)
|
|
Released in the year
|
-
|
(2.0)
|
(0.2)
|
-
|
(2.2)
|
-
|
-
|
(3.2)
|
(5.0)
|
(8.2)
|
|
At 31 December
|
1.0
|
-
|
3.5
|
1.3
|
5.8
|
1.2
|
2.0
|
1.4
|
0.6
|
5.2
|
The Scheme of Arrangement (the Scheme): £1.0m (2022:
£1.2m)
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.
ROP provision: £nil (2022: £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 the
year.
Customer compliance: £3.5m (2022: £1.4m)
The customer compliance provision
relates to general customer compliance matters and includes an
element to cover
spurious, speculative complaints
submitted by claims management companies.
During 2023 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. During the second half of
2023 this activity has begun to stabilise within vehicle finance,
with attention of the CMCs turning to the cards product. This
higher volume drives a lower uphold rate given the vast majority of
complaints lack substance and are not upheld. Customer remediation
costs relate to a wide range of different matters primarily in
respect of lending origination but with no common theme or systemic
issue.
Other: £1.3m (2022: £0.6m)
This predominantly relates to
onerous contracts which originally related to CCD and the
dilapidations provisions.
15.
Reconciliation
of (loss)/profit after tax to cash (used in)/generated from
operations
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
(Loss)/profit after taxation
|
(6.0)
|
77.4
|
|
Adjusted for:
|
|
|
|
- tax charge/(credit)
|
1.6
|
22.0
|
|
- finance costs
|
113.4
|
65.0
|
|
- share-based payment
charge
|
4.6
|
5.1
|
|
- retirement benefit (credit)/charge
prior to exceptional pension credit
|
(0.3)
|
(0.5)
|
|
- amortisation of intangible
assets
|
18.5
|
16.0
|
|
- exceptional impairment of ROU
asset
|
4.1
|
-
|
|
- provisions created in the
year
|
11.0
|
3.7
|
|
- provisions released in the
year
|
(0.2)
|
(3.6)
|
|
- exceptional release of
provisions
|
(2.0)
|
(4.6)
|
|
- provisions utilised in the
year
|
(8.8)
|
(64.0)
|
|
- depreciation of property, plant
and equipment and right of use assets
|
9.1
|
12.1
|
|
- loss on disposal of property,
plant and equipment
|
1.3
|
0.9
|
|
- loss on disposal of intangible
assets
|
0.5
|
2.2
|
|
- hedge ineffectiveness
|
(13.8)
|
(3.7)
|
|
- proceeds from
derivatives
|
-
|
11.8
|
|
- fair value movements on Visa
shares
|
(0.9)
|
(1.6)
|
|
- contributions into the retirement
benefit scheme
|
(0.8)
|
(2.2)
|
|
Changes in operating assets and
liabilities
|
|
|
|
- amounts receivable from
customers
|
(261.8)
|
(226.3)
|
|
- trade and other
receivables
|
(4.8)
|
(22.8)
|
|
- trade and other
payables
|
(22.0)
|
(31.2)
|
|
Cash used in operations
|
(157.3)
|
(144.3)
|
16. 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.
Directors' responsibility statement
Each of Sir Peter Estlin,
Chairman; Ian McLaughlin, Chief Executive Officer; Dave Watts,
Chief Finance Officer; Angela Knight, Senior Independent Director;
Paul Hewitt, Non-Executive Director; Elizabeth Chambers,
Non-Executive Director; Margot James, Non-Executive Director,
Graham Lindsay, Non-Executive Director, and Michele Greene,
Non-Executive Director confirms that, to the best of his or her
knowledge that:
(i) the group
financial statements which have been prepared in accordance with
IFRS as adopted by the UK, give a true and fair view of the assets,
liabilities, financial position and profit of the group, the
company and the undertakings included in the consolidation taken as
a whole; and
(ii) the Strategic Report
contained in the 2023 Annual Report and Financial Statements
includes a fair review of the development and performance of the
business and the position of the company and group, and the
undertakings included in the consolidation taken as a whole, and a
description of the principal risks and uncertainties they
face.
Information for
shareholders
1. The
2023 Annual Report and Financial Statements together with the
notice of the annual general meeting will be posted to shareholders
on or around 16 April 2024.
2. The
annual general meeting will be held on 15 May 2024 at the offices
of Clifford Chance LLP, 10 Upper Bank Street, Canary Wharf, London,
E14 5JJ.