TIDMNSF
RNS Number : 8457X
Non-Standard Finance PLC
28 April 2023
PRESS RELEASE
Non-Standard Finance plc
('Non-Standard Finance', 'NSF', the 'Company' or the
'Group')
Audited full year results to 31 December 2022
28 April 2023
-- The Group continued to face significant regulatory and
financial challenges in 2022, many of which have continued into
2023.
-- The Net loan book of the Group reduced from GBP208m to
GBP177m as a result of the administration of the home credit
division and continued collect out of guarantor loans. Despite the
ongoing uncertain macroeconomic and regulatory environment, the net
loan book of the branch-based lending division increased by 6% from
GBP157.2m to GBP167.0m.
-- Normalised and reported revenue was down 25% to GBP98.3m (2021: GBP131.4m)
-- Normalised loss before tax of GBP24.6m (2021: normalised loss before tax of GBP16.7m)
-- Total exceptional charges of GBP31.8m (2021: GBP12.9m) meant
that the reported loss before tax was GBP56.4m (2021: reported loss
of GBP29.6m).
-- Following the impact of the Covid-19 pandemic and regulatory
issues, the home credit division went into administration on 15
March 2022.
-- Regulatory reviews resulted in the guarantor loans division
being placed into managed run-off in 2021.
-- The launch of a scheme of arrangement (the "Scheme") in March
2023 is designed to reach a resolution with regard to the payment
of redress to customers with valid claims both in respect of the
guarantor loans division and the branch-based lending division
(although there were no systemic issues with branch-based lending,
claims in relation to the division have been included in the Scheme
to ensure an equitable treatment of customers).
-- Should the Scheme be sanctioned, the Group's intention is to
proceed with its planned restructuring and recapitalisation (the
"Proposed Recapitalisation") to fund the partial payment of redress
claims, restore the Group's balance sheet and return the
branch-based business to profitable trading.
-- The Proposed Recapitalisation has the support in principle of
NSF's largest shareholder and the Group's secured lenders, subject
to agreement on the terms and other conditions described below and,
in the case of NSF's largest shareholder, further diligence on and
its assessment of the Group's revised business plan and financial
projections. Completion of the Proposed Recapitalisation is subject
to the agreement of terms between lenders and the Group's largest
shareholder, and a number of conditions, including Court sanction
of the Scheme, shareholder approval, the take-up of shares under
the equity raise and execution of definitive documents. Assuming
all the above outlined conditions are satisfied ("the Conditions")
NSF expects the Proposed Recapitalisation to complete at the end of
Q2 2023 or the start of Q3 2023.
-- The Group has also agreed with its secured lenders to
implement an alternative transaction (the "Alternative
Transaction") if the Scheme is sanctioned but the Conditions to the
Proposed Recapitalisation are not satisfied and / or the Proposed
Recapitalisation fails, which would preserve the Group's
branch-based lending business as a going concern but which, if
implemented, would result in no recovery for the Group's current
shareholders,
-- Should the Scheme fail, there would be a material risk of the
entire Group becoming insolvent.
-- Cash balances decreased to GBP32.8 million (2021: GBP114.6
million) predominantly because of the repayment of the Group's
revolving credit facility and a repayment towards the debt
facility.
-- Whilst the Group's loan to value ratio was higher than the
level permitted under its loan to value covenant at each quarter
end in 2022, it remains a going concern and has received temporary
waivers to enable it to pursue a Scheme and raise additional
capital which would reduce loan to value levels, fund customer
redress, and strengthen the Group's balance sheet.
-- Current trading - Since the start of 2023 we have seen growth
in loan issuance in branch-based lending and better than expected
collection performance, and are consequently trading ahead of
budget.
Financial summary
2022 2021
Year to 31 December GBP000 GBP000 % change
----------------------------------- -------- -------- --------
Normalised revenue(1) 98,337 131,387 -25%
Reported revenue 98,337 131,387 -25%
Normalised operating profit(1) 4,460 9,299 -52%
Reported operating profit 4,460 7,092 37%
-47%
Normalised loss before tax(1) (24,591) (16,680) (3)
-90%
Reported loss before tax (56,359) (29,610) (3)
-47%
Normalised loss after tax(1) (24,591) (16,755) (3)
-90%
Reported loss after tax (56,359) (29,685) (3)
-47%
Normalised earnings per share(2) (7.87)p (5.36)p (3)
-90%
Reported (loss) per share (18.04)p (9.50)p (3)
Full-year dividend per share 0.00p 0.00p 0%
----------------------------------- -------- -------- --------
1 See glossary of alternative performance measures and key
performance indicators in the Appendix.
2 Basic and diluted (loss) earnings per share is calculated as
normalised loss after tax of GBP(24.6)m (2021: GBP(18.6)m) divided
by the weighted average number of shares in issue of 312,437,422
(2021: 312,437,422).
3 Adverse movement.
Jono Gillespie, Group Chief Executive Officer, said
"Despite facing ongoing regulatory and liquidity challenges
throughout the year, the underlying performance of Everyday Lending
Ltd (trading as Everyday Loans) was pleasing as it sought to
rebuild the loan book.
The Group is working hard to resolve the regulatory challenges
faced with the convening hearing for the Group's Scheme of
Arrangement taking place later today.
Having worked extensively with the Scheme Customer Committee,
our lenders and key shareholder to reach a sustainable solution for
the business and partial payment of customer redress, we are
hopeful that the Scheme will progress and be sanctioned.
We are hopeful that the Scheme process will conclude towards the
end of June 2023 and that this will then enable us to proceed with
the recapitalisation of the business, through either the Proposed
Recapitalisation or Alternative Transaction as previously
announced.
If successful, the Proposed Recapitalisation or Alternative
Transaction fund the partial payment of redress claims and underpin
the future growth of the Group's branch-based lending business -
Everyday Loans.
The Group's loan to value ratio was higher than the levels
permitted at each quarter end in 2022, but we have continued to
trade throughout with the support of our secured lenders, who have
granted fortnightly waivers (currently until 17 May 2023) pending a
conclusion to the Scheme process and the recapitalisation (or
alternative lender-led transaction).
If the Scheme is not sanctioned by the Court, or the Scheme is
sanctioned but the Proposed Recapitalisation and the Alternative
Transaction fail, then the Group would remain insolvent and the
most likely outcome would be a Group-wide insolvency (most likely
administration), resulting in no return for the current
shareholders, a significantly reduced return for secured lenders
and minimal or no cash recovery for customers with valid redress
claims. In the event that the Scheme is sanctioned, and the
Alternative Transaction takes place (due to the failure of the
Proposed Recapitalisation), there would be no recovery for the
Company's shareholders.
It is clear that consumers face a difficult period as the cost
of living crisis continues. However, experience suggests this could
increase the demand for credit and present a significant
opportunity for companies in a non-standard credit sector that
fulfils a vital role by supporting millions of consumers who have
limited savings. Previous recessions have shown that prime lenders
tend to be particularly risk averse, tightening their lending
criteria and leaving a large and expanding pool of higher quality
applicants seeking access to regulated and responsible credit
markets. Assuming we are able to raise capital as planned, the
Group will be well placed to serve any such increase in
demand."
Context for results
On 15 March, 2022 it was announced that the Group's home credit
division had gone into administration and so the 2022 results
include the home credit division up to 14 March 2022, after which
the division was derecognised from the Group in line with IFRS
accounting standards. The results therefore include exceptional
items totalling GBP19.4m in relation to the derecognition and
impairments associated with the home credit division. Exceptional
items also include GBP12.4m in relation to the Scheme being pursued
by the Group with further detail provided below (refer note 6 to
the financial statements for further information).
Normalised divisional results
The table below provides an analysis of the 'normalised' results
for the Group for the 12-month period to 31 December 2022.
Management believes that by removing the impact of exceptional
items, the normalised results provide a clearer view of the
underlying performance of the Group
Branch-based Guarantor Central
Year ended 31 Dec lending Home credit loans costs Group
2022 Normalised(1) GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ------------ ----------- --------- --------- ---------
Revenue 84,470 7,315 6,552 - 98,337
Other operating income 173 - - - 173
Modification loss (250) - (12) - (262)
Derecognition loss - - - -
Impairments (26,704) (2,781) 1,595 - (27,890)
Administration expenses (50,493) (5,065) (7,300) (3,040) (65,898)
------------------------ ------------ ----------- --------- --------- ---------
Operating profit/(loss) 7,196 (531) 835 (3,040) 4,460
Finance cost (14,925) (257) (2,000) (11,869) (29,051)
------------------------ ------------ ----------- --------- --------- ---------
Loss before tax (7,729) (788) (1,165) (14,909) (24,591)
Taxation (102) 123 - (21) -
------------------------ ------------ ----------- --------- --------- ---------
Loss after tax (7,831) (665) (1,165) (14,930) (24,591)
------------------------ ------------ ----------- --------- --------- ---------
Normalised loss per
share (7.87)p
Dividend per share 0.00p
------------------------ ------------ ----------- --------- --------- ---------
Branch-based Guarantor Central
Year ended 31 Dec lending Home credit loans costs Group
2021 Normalised(1) GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ------------ ----------- --------- --------- ---------
Revenue 79,940 38,401 13,046 - 131,387
Other operating income 384 587 1 11 983
Modification loss (1,383) - (1,478) - (2,861)
Derecognition loss - - - -
Impairments (18,994) (6,230) 1,061 - (24,163)
Administration expenses (46,294) (34,962) (10,695) (4,096) (96,047)
------------------------ ------------ ----------- --------- --------- ---------
Operating profit/(loss) 13,653 (2,204) 1,935 (4,085) 9,299
Finance cost (14,491) (1,102) (4,350) (6,036) (25,979)
------------------------ ------------ ----------- --------- --------- ---------
Loss before tax (838) (3,306) (2,415) (10,121) (16,680)
Taxation 48 158 299 (580) (75)
------------------------ ------------ ----------- --------- --------- ---------
Loss after tax (790) (3,148) (2,116) (10,701) (16,755)
------------------------ ------------ ----------- --------- --------- ---------
Normalised loss per
share (5.36)p
Dividend per share 0.00p
------------------------ ------------ ----------- --------- --------- ---------
(1) See glossary of alternative performance measures and key
performance indicators in the Appendix.
Net loan book 31 December 31 December
2022 2021
GBPm GBPm
---------------------- ------------ ------------
Branch-based lending 167.0 157.2
Guarantor loans 10.1 26.8
Home credit(2) - 24.0
---------------------- ------------ ------------
Total 177.1 208.0
---------------------- ------------ ------------
(2) Home credit division placed into administration on 15 March
2022 and therefore derecognised from the Group.
Online presentation on 28 April 2023
There will be webcast presentation of the results at 09:30 on 28
April 2023 given by Jono Gillespie, Group Chief Executive. To
access the webcast, please register here or via the Group's website
or dial in using the number below . A copy of the slides presented
will also be available on the Group's website,
http://www.nsfgroupplc.com later today.
For more information:
Non-Standard Finance plc
Jono Gillespie Group Chief Executive
Sarah Day Group Company Secretary and Chief +44 (0) 20 3869
ESG Officer 9020
H/Advisors Maitland
Neil Bennett +44 (0) 20 7379
Finlay Donaldson 5151
Group Chief Executive's Report
Summary
The past year presented several challenges for the Group as we
sought to resolve a number of outstanding regulatory issues, dealt
with the impact of rising inflation and an uncertain UK economic
environment on our operations whilst also managing the impact on
our balance sheet which remains in a net liabilities position.
Following the reviews which started with the FCA's multi-firm
review into the guarantor loan business in March 2020, it also
became clear that Loans at Home, the Group's home credit business
(trading out of the legal entity S.D.Taylor Limited), was no longer
viable and so it went into administration on 15 March 2022. Whilst
deeply saddened and disappointed with this outcome, it was clear
that administration was the only option available to preserve value
for creditors. As the operations and activities of Loans at Home
were separate from the rest of the Group, the Board of NSF confirms
that, having received certain waivers from the Group's secured
lenders, the administration of Loans at Home has had minimal impact
on the rest of the Group's business.
In addition, the Group has been in the process of developing an
appropriate redress scheme for Guarantor Lending customers since
August 2020 and more latterly development of the Scheme since June
2022 to address redress claims in relation to its historical
unaffordable lending. As noted in the 2022 half year announcement,
although the independent review of the branch-based lending
division carried out in 2021 identified no systemic issues
requiring redress, as this division and the guarantor loans
division (now in collect-out) trade out of the same legal entity
(Everyday Lending Limited), the Scheme encompasses potential claims
from both divisions in order to ensure equitable treatment of
customers. The practice statement letter for the scheme was
published on 17 March 2023 and the Board considers that there is a
reasonable prospect of the Scheme being successfully sanctioned by
the Court.
Due to the developments described above, the Group is seeking to
progress the Proposed Recapitalisation or Alternative Transaction
in readiness, should the Court sanction the Scheme. As the Group's
loan to value ratio during the year was higher than the level
allowed under its loan to value covenant, the Group has received
the requisite waivers and extensions to avoid a covenant breach so
that it can progress with the Scheme and, if successfully
sanctioned by the Court, the Proposed Recapitalisation. The Group's
secured lenders continue to provide temporary waivers and have
expressed their support for the business. As such, they have agreed
to enter into the Alternative Transaction in the event that the
Scheme is successfully sanctioned, but that the Conditions, to the
Proposed Recapitalisation are not satisfied, such that the
branch-based lending business would be preserved as a going
concern, but which, if implemented, would result in no recovery for
the Group's current shareholders and the Company (ultimate parent
company) may enter into an insolvency process . Both the Proposed
Recapitalisation and the Alternative Transaction include both
significant debt write offs and extensions to the term of the
Group's existing debt facilities to support the business going
forward.
The Group's strong market position, in combination with a number
of both external and internal profit drivers, means that the Board
is confident that, subject to the timely completion of the Proposed
Recapitalisation or Alternative Transaction (which themselves are
subject to the sanctioning of the Scheme and the Conditions), the
prospects for branch-based lending remain positive, driven by a
planned recovery of ground lost over the past two years that should
result in a marked improvement in the Group's financial
performance. Further details regarding our future plans can be
found in the 2022 financial review below.
Whilst there remain a number of material uncertainties which may
cast significant doubt on the ability of both the Group and Company
to continue as a going concern and remain viable, it remains the
Directors' reasonable expectation that, if the Scheme and the
subsequent Proposed Recapitalisation go ahead, the Group and
Company will have raised sufficient capital in the timeframe
required and will continue to operate and meet their respective
liabilities as they fall due for the next 12 months and beyond. The
Board has therefore concluded that, whilst a material uncertainty
remains, the business is viable and remains a going concern.
If successful, the Proposed Recapitalisation or Alternative
Transaction will reduce high levels of gearing, fund the partial
payment of redress claims and underpin the future growth of the
Group's branch-based lending business. In addition, whilst there
would be no need for access to further debt funding beyond the
extension of the term of the Group's existing debt facilities in
the short term, given the significant cash balance that would then
be at the Group's disposal, it is hoped that in due course, the
Group would be better placed to broaden its sources of debt
funding.
Without the successful completion of the Scheme and the Proposed
Recapitalisation (or the Alternative Transaction in the event the
Conditions, to the Proposed Recapitalisation are not satisfied,
which, if implemented, would result in no recovery for the Group's
current shareholders and the Company (ultimate parent company) may
enter into an insolvency process ), the balance sheet remains
deeply insolvent. In the event that the Scheme is not sanctioned by
the court, or in the event that both the Proposed Recapitalisation
and the Alternative Transaction fail, there would be a very
significant likelihood of a Group-wide insolvency (most likely
administration), resulting in no return for current shareholders
and a significantly reduced return for secured lenders. However,
the Directors continue to believe there is a reasonable prospect of
resolving this position through the Scheme, which was recently
launched on 17 March 2023, and the Proposed Recapitalisation with
the Group's largest shareholder and secured lender support, which
remains subject to the Conditions, or, in case of the Alternative
Transaction, the support of the secured lenders (noting, as above,
that the Alternative Transaction may result the Company (ultimate
parent company) entering into an insolvency process).
2022 full year results
Since emerging from the effects of the pandemic, a new set of
economic challenges has presented itself, particularly the
inflationary environment causing a cost-of-living crisis. However,
these circumstances have proven to be supportive for the need for
non-standard finance and created a liquidity gap for those not
served by traditional lenders.
The Group reported an increased normalised loss before tax of
GBP24.6m (2021: normalised loss before tax of GBP16.7m). Once
again, the full year results were impacted by a number of
non-operating items as well as the home credit division being
placed into administration and derecognised from the Group on 15
March 2022. The guarantor loans division collect out continues to
progress well whilst the b ranch-based lending business continues
to deliver good financial performance driven by higher revenues and
loan book growth. Group revenues decreased 25% from GBP131.4m to
GBP98.3m due to the aforementioned derecognition of the home credit
division in Q1 and collect out of guarantor loans, however this was
partly offset by the higher revenue at branch-based lending which
increased 6% to GBP84.5m (2021: GBP79.9m) as a result of higher
revenue yields, with yields having reduced during 2020 and 2021
following an increase in the number of customers utilising
forbearance measures during the pandemic. Impairments at
branch-based lending were higher in the current period at GBP26.7m
(2021: GBP19.0m) due to 2021 benefitting from lower lending
volumes, however despite this, collections performance remained
strong throughout 2022. Administrative expenses for the Group were
lower by 31% at GBP65.9m (2021: GBP96.0m) as 2021 included a full
year of the home credit division. Excluding this, the Group saw
savings in expenses at its guarantor loans division with a decrease
of 32% to GBP7.3m (2021: GBP10.7m) as the division continues to
wind down and savings in staff costs, professional fees and
complaints costs are realised . The branch-based lending division
however saw increased spend on employee costs following investment
in expanding the operational headcount to drive the growth in new
lending resulting in administrative expenses increasing by 9%. The
Group also remains in a net liability position, due to the net
losses over the past few years, the derecognition of the home
credit division and the continued non-recognition of deferred tax
assets. The Group is progressing with plans to resolve its
regulatory issues via the Scheme and support from the Group's
secured lenders and largest shareholder (subject to the
Conditions), means the Board continue to believe that there is a
reasonable prospect of resolving the current position subject to
the implementation of the Scheme and the Proposed Recapitalisation
(or the Alternative Transaction) .
A summary of the other key performance indicators for each of
our businesses for 2022 is shown below:
Key performance indicators(1) Branch-based Guarantor
Year ended 31 Dec 22 lending loans(3)
---------------------------------- ------------ ---------
Loan book growth 6.2% (62.1)%
Revenue yield 52.3% 38.3%
Risk adjusted margin 35.8% 47.7%
Impairments/revenue 31.6% (24.4)%
Impairments/average net loan book 16.5% (9.3)%
Cost: income ratio 59.8% 111.4%
Operating profit margin 8.5% 12.8%
Return on assets 4.5% 4.9%
---------------------------------- ------------ ---------
Key performance indicators(1) Branch-based Guarantor
Year ended 31 Dec 21 lending Home credit(2) loans(3)
---------------------------------- ------------ -------------- ---------
Loan book growth (8.3)% (10.8)% (55.2)%
Revenue yield 48.8% 157.2% 32.1%
Risk adjusted margin 37.2% 131.7% 34.7%
Impairments/revenue 23.8% 16.2% (8.1)%
Impairments/average net loan book 11.6% 25.5% (2.6)%
Cost: income ratio 57.9% 91.0 % 82.0%
Operating profit margin 17.1% ( 5.7 )% 14.8%
Return on assets 8.3% ( 9.0 )% 4.8%
---------------------------------- ------------ -------------- ---------
1 See glossary of alternative performance measures and key
performance indicators in the Appendix.
2 The home credit division went into administration on 15 March
2022.
3 The Guarantor Loans Division was placed into managed run-off
on 30 June 2021 and did not issue any new loans in 2021 and
2022.
The reduction in the net loan book from the collect out of the
guarantor loans division and administration and subsequent
derecognition of the home credit division was the main driver
behind the 25% reduction in normalised and reported revenue to
GBP98.3m (2021: GBP131.4m). Higher interest rates in 2022 also
contributed to 12% higher finance costs in the year. This meant
that the Group produced a normalised loss per share of 7.87p (2021:
normalised loss per share of 5.36p).
The Group's 2022 and 2021 reported, or statutory results were
both affected by exceptional items, a summary of which is shown in
the table below. The 2022 results saw greater impact from the
derecognition and impairments related to the home credit division
and the provision for customer redress and scheme costs.
Year ended 31 December 2022 2021
Exceptional items GBP000 GBP000
------------------------------------------------------- --------- ---------
Advisory fees - (1,580)
Write down of balance sheet relating to home credit
division - (8,542)
Loss on derecognition of the home credit division (5,647) -
Impairment of intercompany receivable with home credit (13,714)
division -
Scheme of arrangement customer redress and costs (12,407) (2,207)
Restructuring costs - (601)
------------------------------------------------------- --------- ---------
Total (31,768) (12,930)
------------------------------------------------------- --------- ---------
The Group reported a statutory loss before interest and tax of
GBP27.3m (2021: loss before interest and tax of GBP3.6m) and a
statutory loss before tax of GBP56.4m (2021: GBP29.6m).
A summary of the performance of each division in 2022 is given
below with further details in the 2022 financial review.
Branch-based lending
While the impact of the pandemic on lending volumes meant that
the net loan book declined in both 2020 and 2021, the positive
recovery in lending volumes has resulted in the net loan book
returning to growth in 2022 and it ended the year up 6% at
GBP167.0m (2021: GBP157.2m). We continually look to enhance our
lending processes, including the assessment of creditworthiness and
the refinement of credit scorecards and strategies. Whilst acutely
aware of the cost-of-living crisis, the collections performance of
the business remains ahead of expectation with customer payment
levels particularly strong, whilst early settlements continue below
pre-pandemic levels. Delinquency performance has returned to
historically normal levels. The nature of IFRS 9 accounting meant
that lower lending volume in the prior years also helped to reduce
impairment charges however, as lending volumes have continued to
recover throughout 2022, impairment rates are gradually seeing a
corresponding reversal of the recent low levels, though remain
below expectations. The result of this was the division reported a
normalised operating profit of GBP7.2m (2021: GBP13.7m). The impact
of higher finance costs and exceptional costs relating to the
Scheme meant the division reported a statutory loss before tax of
GBP20.1m (2021: loss before tax of GBP0.8m).
The Board continues to believe that the branch-based lending
division has potential for future growth once the Group has
resolved its outstanding regulatory issues and completed the
planned Proposed Recapitalisation or Alternative Transaction
(noting, as above, that the Alternative Transaction may result in
the Company (ultimate parent company) entering into an insolvency
process).
Although the independent review of the Group's branch-based
lending business carried out in 2021 identified no systemic issues
requiring redress, since this business and the guarantor loans
division trade out of the same legal entity (ELL), the Scheme will
encompass potential claims from both businesses to ensure equitable
treatment of customers. As a result, provisioning for the scheme
redress and operational costs have now been included within the
branch-based lending reporting.
As outlined below, due to the need to launch the Scheme which
encompasses both branch-based lending and guarantor loan customers,
to ensure equitable treatment of customers within the same legal
entity, an added exceptional charge for Scheme costs and customer
redress of GBP12.4m has been recorded in the 2022 accounts.
Home credit
The Group's home credit division, which traded as Loans at Home
('LAH') out of S.D.Taylor Limited, was placed into administration
on 15 March 2022. In the first two and a half months of the year
the division performed ahead of budget although it delivered a
negative contribution with a normalised operating loss of GBP0.5m
(2021: normalised operating loss GBP2.2m).
In the current period, exceptional items of GBP5.6m in relation
to losses on derecognition of the home credit division were
recognised as well as an additional GBP13.7m (2021: GBPnil) of
impairments of related receivable balances held with the division
in order to reflect the fact that these may not be recovered
directly by the Group. Whilst the Group will not recover the
balances held directly with LAH following the conclusion of the
administration, as LAH remains a guarantor of the Group's financing
facilities, proceeds from the administration will be paid directly
to its secured lenders, thereby reducing the external debt balance
held by the Group at that point. During H2 2022 GBP10m of such
proceeds were paid from the LAH administration and a further GBP3m
in February 2023.
Guarantor loans
The Group's guarantor loans division was placed into a managed
run-off on 30 June 2021. Since then, the Group has continued to
collect out its loan book balance with the result that the division
delivered a positive contribution to normalised operating profits
in the year.
The loan book, net of provisions, has now fallen to GBP10.1
million (2021: GBP26.8m) and the Group continues to focus on
collecting out the remaining book. The ELL Directors, supported by
the Group Directors, decided to pursue the Scheme to address the
Group's redress liabilities. As noted in the 2022 Half Year
announcement, although the independent review of the branch based
lending division carried out in 2021 identified no systemic issues
requiring redress, as this division and the guarantor loans
division (now in collect-out) trade out of the same legal entity
(ELL), the Scheme encompasses potential claims from both divisions
in order to ensure equitable treatment of customers.
The FCA's current views in relation to the Scheme are set out in
its letter of 25 April 2023. The FCA has stated that it does not,
at this stage, anticipate that it will oppose the Scheme from being
sanctioned should the requisite majorities of Scheme Creditors vote
in favour of the Scheme. The FCA has confirmed that it does,
however, fully reserve its position in respect of the Scheme and
its right to object to the Scheme in due course, if the FCA
considers it appropriate to do so
Liquidity, funding and going concern
As at 31 December 2022 the Group had cash at the bank of
GBP32.8m (2021: GBP114.6m) and gross borrowings of GBP255.0m (2021:
GBP330.0m). As at 31 March 2023, cash balances were GBP15.8m and
gross borrowings reduced to GBP252m.
The Group's active loan facility comprises a GBP285m term loan
facility that matures in August 2023 ('Existing Facilities'), which
at the year end had been partially repaid, with GBP255m remaining
drawn down at 31 December 2022. Having received appropriate waivers
from its secured lenders ensuring that the administration of Loans
at Home would have minimal impact on the rest of the Group, the
Board and its advisers have discussed and reached agreement on the
extension of the existing facilities and the terms under which
interest is paid, dependent upon the successful sanctioning of the
Scheme.
The Group's multi-year GBP200m securitisation facility, which
was undrawn at the start of the year, was closed during the course
of the year as it was unlikely to have been available for use,
owing to the associated covenant requirements embedded in the
facility agreement.
As noted in the 2022 Half Year Results, the Group's subsidiary
S.D. Taylor Limited (Loans at Home) was placed into administration
on 15 March 2022. As the operations and activities of Loans at Home
were separate from the rest of the Group, having received certain
waivers from the Group's secured lenders, the administration of
Loans at Home has had minimal impact on the existing funding
arrangements of the Group.
For the quarters ended 31 March 2022, 30 June 2022, 30 September
2022 and 31 December 2022, the Group's loan to value (LTV) ratio
was higher than the level permitted under its LTV covenant. The
Group has agreed extensions with its secured lenders such that the
LTV covenant will not be formally tested, and no covenant breach or
event of default will arise, until the Group provides its
compliance certificates for the aforementioned quarter dates. The
date on which the Group is required to supply these compliance
certificates has been extended until 17 May 2023, with a mechanism
for this date to be extended further with lender support.
The Group is now pursuing the Scheme in order to provide
certainty as to the amount that will be paid to customers with
valid redress claims, which, as explained above, is one of the
Conditions to the Group's largest shareholder and secured lenders
being willing to participate in the Proposed Recapitalisation (or
the Alternative Transaction). Although the independent review of
the Group's branch-based lending division carried out in 2021
identified no systemic issues requiring redress, as this division
and the guarantor loans division (now in collect-out) trade out of
the same legal entity (Everyday Lending Limited), the Scheme
encompasses potential claims from both divisions in order to ensure
equitable treatment of customers. On 17 March 2023, the Group sent
out a practice statement letter to its creditors and a first court
hearing is scheduled for 28 April 2023.
The Group and Company can reasonably expect to raise sufficient
new capital to enable them to continue to operate and meet their
respective liabilities as they fall due for the next 12 months. The
Board has therefore adopted the going concern basis of accounting.
The Board's position is, in part, informed by the fact that the
Group's largest shareholder and secured lenders remain supportive
of the Proposed Recapitalisation subject to the Conditions, while
the Group also has contractual commitments from its secured lenders
to support the Alternative Transaction (noting, as above, that the
Alternative Transaction may result in the Company (ultimate parent
company) entering into an insolvency process and, that although the
Group has contractual commitments from its secured lenders to
support the Alternative Transaction, there is a risk that it will
not be possible to implement either the Proposed Recapitalisation
nor the Alternative Transaction. In these circumstances, if neither
the Proposed Recapitalisation or the Alternative Transaction has
been implemented by 31 December 2023, it will not be possible to
pay the Scheme fund into a nominated trust account and the Scheme
will fail ).
In adopting the going concern assumption in preparing the
financial statements, the Directors have considered the activities
of its principal subsidiaries, as well as the Group's principal
risks and uncertainties as set out in the Governance Report and
Viability Statement within the Group's 2022 Annual Report.
The assumption of support from the Group's largest shareholder
and secured lenders for the Proposed Recapitalisation and the
extension of existing financing facilities and the satisfactory
conclusion of regulatory and redress matters within or close to the
assumptions made in the Group's base case, each as outlined above
and in the Conditions, form a significant judgement of the
Directors in the context of approving the Group's going concern
status (see note 1 to the financial statements).
The Board will continue to monitor the Company and the Group's
financial position (including access to liquidity and balance sheet
solvency) carefully as a better understanding of the impact of
these various factors are developed. The Board recognises the
importance of the success of the Scheme and the Proposed
Recapitalisation to mitigate the uncertainties noted above and to
support the future growth prospects of the Group. If the Scheme was
not to be sanctioned or if the Group was otherwise unable to
implement the Proposed Recapitalisation (or the Alternative
Transaction in the event the Conditions, to the Proposed
Recapitalisation are not satisfied) following the successful
sanctioning of the Scheme, there would be a material risk of the
Group entering insolvency.
Regulation
Concluding all the Group's outstanding regulatory issues has
been a key priority over the past 24 months. As previously
outlined, whilst the conclusion from the two independent reviews
carried out at the request of the FCA was that there was no
requirement for systemic customer redress in branch-based lending,
the Directors of the Group's home credit business, Loans at Home
(trading out of the legal entity S.D. Taylor Limited), reluctantly
concluded that it was no longer viable and so the business was put
into administration on 15 March 2022. As the operations and
activities of Loans at Home are separate from the rest of the Group
and following the receipt of certain waivers from the Group's
secured lenders. The administration of Loans at Home has had
minimal impact on the rest of the Group's business. As a result,
the Group is fully committed to the growth of its branch-based
lending business.
Scheme
The Group has decided to pursue the Scheme and, as noted in the
half year 2022 announcement, although the independent review of the
Group-based lending division carried out in 2021 identified no
systemic issues requiring redress, as this division and the
guarantor loans division (now in collect-out) trade out of the same
legal entity (ELL), the Scheme encompasses potential claims from
both divisions in order to ensure equitable treatment of
customers.
As set out in the Practice Statement Letter as published on 17
March 2023, the Scheme will compromise:
-- subject to certain limited exceptions, the redress claims
(i.e. claims in relation to any activity which occurred on or
before 31 March 2021 in connection with a loan provided by Everyday
Loans, George Banco or Trust Two; and
-- case fees owed to the Financial Ombudsman Service arising
from complaints referred to the FOS on or after 17 March 2023 in
relation to any activity which occurred on or before 31 March 2021
in connection with a loan provided by Everyday Loans, George Banco
or Trust Two (the "FOS Fees").
Under the current expected timetable, the Court convening
hearing will be held on 28 April 2023 and the Court sanction
hearing on 22 June 2023, with the creditors' meeting where the
scheme creditors will vote on the Scheme being held virtually
between these dates.
The FCA's current views in relation to the Scheme are set out in
its letter of 25 April 2023. The FCA has stated that it does not,
at this stage, anticipate that it will oppose the Scheme from being
sanctioned should the requisite majorities of Scheme Creditors vote
in favour of the Scheme. The FCA has confirmed that it does,
however, fully reserve its position in respect of the Scheme and
its right to object to the Scheme in due course, if the FCA
considers it appropriate to do so.
The Proposed Recapitalisation and Alternative Transaction
The Scheme is a key component of the Proposed Recapitalisation,
which will ensure the future of the Group and the Everyday Loans
business. The Group's intention is for the Proposed
Recapitalisation to be implemented shortly following Court sanction
of the Scheme.
The Proposed Recapitalisation will involve:
-- NSF raising gross proceeds of approximately GBP95 million
through a public equity raise, part of which will be applied
towards the cost of the equity raise and part of which will be used
to fund the Scheme Fund and cover the costs of the Scheme, with the
remainder being invested in the Everyday Loans business;
-- the Group's secured lenders releasing a portion of their
secured debt in exchange for shares in NSF;
-- the extension of the maturity date under the Group's secured
debt facilities from August 2023 to June 2027; and
-- the Company and its advisers exploring the cancellation of
NSF's listing on the Main Market of the London Stock Exchange plc
and its admission of its enlarged share capital to trading on
AIM.
The Proposed Recapitalisation has the support in principle of
NSF's largest shareholder and the Group's secured lenders, subject
to the Conditions.
NSF expects the equity raise to include both a placing with new
and existing institutional investors as well as an open offer
component, whereby existing shareholders will be provided with an
opportunity to participate in the capital raise. The structure,
detailed terms and viability of the equity raise are expected to be
confirmed in Q2 2023 following consultation with major shareholders
and potential investors.
Although the Proposed Recapitalisation will ensure the future of
the Group and the Everyday Loans business, it will materially
dilute the interests of the Company's existing equity holders, most
likely to negligible value, unless they choose to participate in
the equity raise.
Completion of the Proposed Recapitalisation is subject to the
Conditions. Assuming all the Conditions are satisfied, NSF expects
the Proposed Recapitalisation to complete at the end of Q2 2023 or
the start of Q3 2023.
The Group has also agreed with its secured lenders to implement
the Alternative Transaction if the Scheme is sanctioned but the
Conditions to the Proposed Recapitalisation are not satisfied. The
Alternative Transaction would involve a transfer of the ownership
of the Group's business to the secured lenders (pursuant to a share
pledge enforcement) in exchange for the release of a portion of
their secured debt and the provision of a new lending facility.
Part of the proceeds from this new lending facility would be used
to fund the Scheme Fund and cover the costs of this Scheme. Under
the Alternative Transaction, there would be no recovery for the
Company's shareholders and the Company (ultimate parent company)
may enter into an insolvency process.
However, if the Scheme is not sanctioned by the Court, or the
Scheme is sanctioned but the Proposed Recapitalisation and the
Alternative Transaction both fail, then the Group would remain
insolvent and the most likely outcome would be a Group-wide
insolvency (most likely administration), resulting in no return for
the Company's shareholders, a significantly reduced return for
secured lenders and minimal or no cash recovery for customers with
valid redress claims. In the event that the Scheme is sanctioned
and the Alternative Transaction takes place (due to the failure of
the Proposed Recapitalisation), there would be no recovery for the
Company's shareholders.
Complaint handling
Whilst the overall number of complaints received by the Group
reduced in 2022, this was largely due to the closure of Loans at
Home which had, until that point, been on an upwards trend of
complaint volumes. The remaining two divisions saw contrasting
trends where branch-based lending increased by 14% and guarantor
loans fell by 23%. The majority of complaints came from three CMCs
in branch-based lending, all of which sent more complaints than the
previous year, and one CMC in guarantor loans. FOS decisions fell
significantly across these two divisions after FOS aimed to clear
their outstanding backlog in the early part of the year.
Consumer Duty
One of the most significant regulatory initiatives in recent
years was the introduction of the new consumer duty which aims to
raise the standard for how firms should be treating consumers. The
new principle, rules and guidance were issued in July 2022 with an
expectation to implement within 12 months. Following on from the
issued guidance, the business has created a gap analysis, a
detailed action plan and an implementation plan to fulfil the
requirements ahead of the July 2023 deadline. ELL Directors sit on
a steering group to oversee the project, whilst an experienced
project manager has been employed to drive the project forward and
report back to the steering group. Six separate work streams
consisting of senior management have been, and are currently
working on, ensuring all actions are satisfactorily completed
within the expected timeframes. Much of the work done over the past
few years has put the branch-based lending in an excellent position
ahead of the new regulations. However, the project remains a
priority and the business is confident that all elements of the
consumer duty will be met.
Further details on the consumer duty and the other pertinent
regulatory developments during 2022 and into 2023 are available on
the Group's website: www.nsfgroupplc.com .
Current trading and outlook, no final dividend
Whilst the fallout from the pandemic, Brexit and more recently
the Ukrainian crisis means that macroeconomic uncertainty remains
high, recent trading in branch-based lending and the collect out of
guarantor loans has been slightly ahead of management's
expectations. Lending volumes in the first quarter of 2023 were a
little better than expected and collections and impairment
performance have been much better with the result that the Group's
overall early performance for the year to date has been
promising.
Given the financial position of the Company and the fact that as
at 31 December 2022 the Company did not have any distributable
reserves, no final dividend has been declared. Assuming the Court
sanctioning of the Scheme and the subsequent Proposed
Recapitalisation is successful, the Company intends to create
additional distributable reserves so that, when and if appropriate,
the Board can consider the payment of cash dividends to
shareholders at some point in the future.
The outlook for the Group is such that, without the successful
completion of the Scheme and the Proposed Recapitalisation (or the
Alternative Transaction in the event the Conditions to the Proposed
Recapitalisation) are not satisfied), the balance sheet remains
deeply insolvent. If the Scheme is not sanctioned by the Court, or
the Scheme is sanctioned but the Proposed Recapitalisation and the
Alternative Transaction both fail, then the Group would remain
insolvent and the most likely outcome would be a Group-wide
insolvency (most likely administration), resulting in no return for
the current shareholders, a significantly reduced return for
secured lenders and minimal or no cash recovery for customers with
valid redress claims. In the event that the Scheme is sanctioned
and the Alternative Transaction takes place (due to the failure of
the Proposed Recapitalisation), there would be no recovery for the
Company's shareholders and the Company (ultimate parent company)
may enter into an insolvency process.
The Directors continue to believe there is a reasonable prospect
of resolving this position through the Scheme and the Proposed
Recapitalisation with the support in principle of the Group's
largest shareholder and secured lenders, which support remains
subject to the Conditions, or, in case of the Alternative
Transaction, the support of the secured lenders .
Assuming the Proposed Recapitalisation or Alternative
Transaction is completed as planned, our focus in 2023 is to
re-energise the business following the enormous structural changes
over the past few years and the regulatory changes to the industry
more generally. As outlined in the 2022 financial review, this
recovery will be dependent on us restoring the momentum in our
branch-based lending business through a combination of investment
in staffing, technology and process-driven productivity
improvements and a steady recovery in demand for non-standard
consumer credit.
Given the Group's pre-eminent position in branch-based lending,
the Board continues to believe that, subject to funding, the
current business environment represents a significant opportunity
for NSF. In the past, when UK consumers have faced periods of
macroeconomic difficulty and stress, the non-standard consumer
lending sector saw a marked increase in demand as the number of
consumers that were unable to access mainstream credit increased.
At the same time, we have seen a significant reduction in the
supply of regulated non-standard consumer credit that may provide
an additional opportunity for the Group to gain market share as we
continue to serve the very large numbers of UK consumers that are
unable or unwilling to access regulated mainstream credit.
Annual General Meeting
The AGM of the Company is scheduled to take place on 23 June
2023. A separate notice of meeting will be being sent to
shareholders nearer the time of the meeting and will be available
from the Group's website: www.nsfgroupplc.com .
Jono Gillespie
Group Chief Executive
28 April 2023
2022 Financial Review
Group results
Since emerging from the effects of the pandemic, a new set of
economic challenges has presented itself, particularly the
inflationary environment causing a cost-of-living crisis. However,
these circumstances have proven to be supportive for the need for
non-standard finance and created a liquidity gap for those not
served by traditional lenders.
The Group reported an increased normalised loss before tax of
GBP24.6m (2021: normalised loss before tax of GBP16.7m). Once again
the full year results were impacted by a number of non-operating
items as well as the home credit division being placed into
administration and derecognised from the Group on 15 March 2022.
The guarantor loans division collect out continues to progress well
whilst the b ranch-based lending business continues to deliver good
financial performance driven by higher revenues and loan book
growth. Group revenues decreased 25% from GBP131.4m to GBP98.3m due
to the aforementioned derecognition of the home credit division in
Q1 and collect out of guarantor loans, however this was partly
offset by the higher revenue at branch-based lending which
increased 6% to GBP84.5m (2021: GBP79.9m) as a result of higher
revenue yields, with yields having reduced during 2020 and 2021
following an increase in the number of customers utilising
forbearance measures during the pandemic. Impairments at
branch-based lending were higher in the current period at GBP26.7m
(2021: GBP19.0m) due to 2021 benefitting from lower lending
volumes, however despite this, collections performance remained
strong throughout 2022. Administrative expenses for the Group were
lower by 31% at GBP65.9m (2021: GBP96.0m) as 2021 included a full
year of the home credit division. Excluding this, the Group saw
savings in expenses at its guarantor loans division with a decrease
of 32% to GBP7.3m (2021: GBP10.7m) as the division continues to
wind down and savings in staff costs, professional fees and
complaints costs are realised . The branch-based lending division
however saw increased spend on employee costs following investment
in expanding the operational headcount to drive the growth in new
lending resulting in administrative expenses increasing by 9%.
There were GBP31.8m of exceptional items (2021: GBP12.9m)
comprised of GBP5.7m in relation to the derecognition of the home
credit division following the business being placed into
administration on 15 March 2022, a GBP13.7m charge in relation to
impairment of intercompany receivable balances following the
administration of the home credit division, and an additional
GBP12.4m of costs and redress provisions in relation to the Scheme.
2021 exceptional costs comprised GBP2.2m of additional customer
redress, GBP1.6m of advisory fees, GBP8.5m relating to the
write-down of assets and the recognition of liabilities in the home
credit division triggered by the business going into administration
on 15 March 2022 and GBP0.6m of restructuring costs.
Cash balances decreased to GBP32.8m (2021: GBP114.6m) following
the full repayment of the RCF and part repayments of the term loan
made during the year. The high interest environment however
adversely impacted net finance costs and the total charge in the
period was GBP29.1m (2021: GBP26.0m).
The net effect was that the Group reported a statutory loss
before tax of GBP56.4m (2021: loss of GBP29.6m) and with no tax
charge/credits recognised in the year, the reported loss after tax
was GBP56.4m (2021: loss of GBP29.7m). The resulting reported loss
per share was 18.0p (2021: loss per share of 9.5p).
The Group also remains in a net liability position, due to the
net losses over the past few years, the derecognition of the home
credit division and the continued non-recognition of deferred tax
assets. The Group is continuing is progressing with plans to
resolve its regulatory issues via the Scheme and support in
principle from the Group's secured lenders and largest shareholder
means the Board continue to believe that the balance sheet
situation will be remedied subject to a successful completion of
the Scheme and Proposed Recapitalisation (or the Alternative
Transaction in the event the Conditions, to the Proposed
Recapitalisation are not satisfied) noting, as above, that the
Alternative Transaction may result in the Company (ultimate parent
company) entering into an insolvency process .
Normalised figures are before exceptional items.
2022
2022 Exceptional 2022
Normalised(1) items Reported
Year ended 31 December GBP000 GBP000 GBP000
------------------------------------ -------------- ------------ ---------
Revenue 98,337 - 98,337
Other operating income 173 - 173
Modification loss (262) - (262)
Impairments (27,890) - (27,890)
Administration expenses (65,898) - (65,898)
------------------------------------ -------------- ------------ ---------
Operating profit / (loss) 4,460 - 4,460
Exceptional items - (31,768) (31,768)
------------------------------------ -------------- ------------ ---------
Profit / (Loss) before interest and
tax 4,460 (31,768) (27,308)
Finance cost (29,051) - (29,051)
------------------------------------ -------------- ------------ ---------
Loss before tax (24,591) (31,768) (56,359)
Taxation - - -
------------------------------------ -------------- ------------ ---------
Loss after tax (24,591) (31,768) (56,359)
------------------------------------ -------------- ------------ ---------
Loss per share (7.86) (18.04)
Dividend per share 0.00p 0.00p
------------------------------------ -------------- ------------ ---------
2021
2021 2021
Exceptional
Normalised(1) items Reported
Year ended 31 December GBP000 GBP000 GBP000
------------------------------------ -------------- ------------ ---------
Revenue 131,387 - 131,387
Other operating income 983 - 983
Modification loss (2,861) - (2,861)
Impairments (24,163) - (24,163)
Exceptional provision for customer
redress - (2,207) (2,207)
Administration expenses (96,047) - (96,047)
------------------------------------ -------------- ------------ ---------
Operating profit / (loss) 9,299 (2,207) 7,092
( 10,723
Other exceptional items - (10,723) )
------------------------------------ -------------- ------------ ---------
Profit / (Loss) before interest and
tax 9,299 (12,930) (3,631)
Finance cost (25,979) - (25,979)
------------------------------------ -------------- ------------ ---------
Loss before tax (16,680) (12,930) (29,610)
Taxation (75) - (75)
------------------------------------ -------------- ------------ ---------
Loss after tax (16,755) (12,930) (29,685)
------------------------------------ -------------- ------------ ---------
Loss per share (5.36)p (9.50)p
Dividend per share 0.00p 0.00p
------------------------------------ -------------- ------------ ---------
1 See glossary of alternative performance measures and key
performance indicators in the Appendix.
Normalised divisional results
The table below provides an analysis of the 'normalised' results
for the Group for the 12-month period to 31 December 2022.
Management believes that by removing the impact of exceptional
items, the normalised results provide a clearer view of the
underlying performance of the Group
Branch-based Guarantor Central
Year ended 31 Dec lending Home credit loans costs Group
2022 Normalised(1) GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ------------ ----------- --------- --------- ---------
Revenue 84,470 7,315 6,552 - 98,337
Other operating income 173 - - - 173
Modification loss (250) - (12) - (262)
Derecognition loss - - - -
Impairments (26,704) (2,781) 1,595 - (27,890)
Administration expenses (50,493) (5,065) (7,300) (3,040) (65,898)
------------------------ ------------ ----------- --------- --------- ---------
Operating profit/(loss) 7,196 (531) 835 (3,040) 4,460
Finance cost (14,925) (257) (2,000) (11,869) (29,051)
------------------------ ------------ ----------- --------- --------- ---------
Loss before tax (7,729) (788) (1,165) (14,909) (24,591)
Taxation (102) 123 - (21) -
------------------------ ------------ ----------- --------- --------- ---------
Loss after tax (7,831) (665) (1,165) (14,930) (24,591)
------------------------ ------------ ----------- --------- --------- ---------
Normalised loss per
share (7.87)p
Dividend per share 0.00p
------------------------ ------------ ----------- --------- --------- ---------
Branch-based Guarantor Central
Year ended 31 Dec lending Home credit loans costs Group
2021 Normalised(1) GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ------------ ----------- --------- --------- ---------
Revenue 79,940 38,401 13,046 - 131,387
Other operating income 384 587 1 11 983
Modification loss (1,383) - (1,478) - (2,861)
Derecognition loss - - - -
Impairments (18,994) (6,230) 1,061 - (24,163)
Administration expenses (46,294) (34,962) (10,695) (4,096) (96,047)
------------------------ ------------ ----------- --------- --------- ---------
Operating profit/(loss) 13,653 (2,204) 1,935 (4,085) 9,299
Finance cost (14,491) (1,102) (4,350) (6,036) (25,979)
------------------------ ------------ ----------- --------- --------- ---------
Loss before tax (838) (3,306) (2,415) (10,121) (16,680)
Taxation 48 158 299 (580) (75)
------------------------ ------------ ----------- --------- --------- ---------
Loss after tax (790) (3,148) (2,116) (10,701) (16,755)
------------------------ ------------ ----------- --------- --------- ---------
Normalised loss per
share (5.36)p
Dividend per share 0.00p
------------------------ ------------ ----------- --------- --------- ---------
(1) See glossary of alternative performance measures and key
performance indicators in the Appendix.
Net loan book 31 December 31 December
2022 2021
GBPm GBPm
---------------------- ------------ ------------
Branch-based lending 167.0 157.2
Guarantor loans 10.1 26.8
Home credit(2) - 24.0
---------------------- ------------ ------------
Total 177.1 208.0
---------------------- ------------ ------------
(2) Home credit division placed into administration on 15 March
2022 and therefore derecognised from the Group.
Impairment provisioning - coverage ratios
Consistent with prior year, the below shows coverage ratios
excluding adjustments for modification and derecognition gains and
losses in order to allow more direct comparability with sector
companies:
31 December 2022 31 December 2021 Change
Branch-based lending 17.6% 19.0% -1.4%
Home credit N/A 46.7% N/A
Guarantor loans 38.3% 33.2% 5.1%
----------------- ---------------- -------
Group 19.1% 25.5% -6.4%
---------------------- ----------------- ---------------- -------
Coverage ratios at branch based lending improved whilst
worsening at guarantor loans due to the reducing size of the loan
book as the division remains in collect-out. The Group coverage
ratio fell 6.4% as a result of the home credit division no longer
being part of the Group.
Divisional review
Branch-based lending
Financial results
Year ended 31 December 2022 2022 2022
Normalised(3) Exceptional items Reported
GBP'000 GBP'000 GBP'000
--------------------------------------- -------------- ------------------ ----------
Revenue 84,470 - 84,470
Other operating income 173 - 173
Modification gain/(loss) (250) - (250)
Impairments (26,704) - (26,704)
Admin expenses (50,493) - (50,493)
-------------- ------------------ ----------
Operating profit 7,196 - 7,196
Exceptional items - (12,407) (12,407)
-------------- ------------------ ----------
Profit/(loss) before interest and tax 7,196 (12,407) (5,211)
Finance costs (14,925) - (14,925)
-------------- ------------------ ----------
Loss before tax (7,729) (12,407) (20,136)
Taxation (102) - (102)
-------------- ------------------ ----------
Loss after tax (7,831) (12,407) (20,238)
============== ================== ==========
Year ended 31 December 2021 2021 2021
Exceptional
Normalised(3) items Reported
GBP'000 GBP'000 GBP'000
----------------------------- ------------------------- ------------------------------------- ---------------------
Revenue 79,940 - 79,940
Other operating income 384 - 384
Modification gain/(loss) (1,383) - (1,383)
Impairments (18,994) - (18,994)
Admin expenses (46,294) - (46,294)
------------------------- ------------------------------------- ---------------------
Operating profit 13,653 - 13,653
Exceptional items - - -
------------------------- ------------------------------------- ---------------------
Profit/(loss) before
interest
and tax 13,653 - 13,653
Finance costs (14,491) - (14,491)
------------------------- ------------------------------------- ---------------------
Loss before tax (838) - (838)
Taxation 48 - 48
------------------------- ------------------------------------- ---------------------
Loss after tax (790) - (790)
------------------------- ------------------------------------- ---------------------
The business saw a 20% increase in the volume of qualifying
'applications to branch' ('ATBs') during 2022 versus the full year
2021. This drove an increase in the total number of loans booked,
with new money lent to customers increasing 19% in comparison to
2021. While the impact of the pandemic on lending volumes meant
that the net loan book declined in both 2020 and 2021, the positive
recovery in lending volumes has resulted in the net loan book
returning to growth in 2022 and it ended the year up 6% at
GBP167.0m (2021: GBP157.2m). The number of active customers has
seen a small increase to 66,500 at December 2022 (December 2021:
66,000).
We continually look to enhance our lending processes, including
the assessment of creditworthiness and the refinement of credit
scorecards and strategies. Whilst acutely aware of the
cost-of-living crisis, the collections performance of the business
remains ahead of expectation with customer payment levels
particularly strong, whilst early settlements continue below
pre-pandemic levels. Delinquency performance has returned to
historically normal levels. The nature of IFRS 9 accounting meant
that lower lending volume in the prior years also helped to reduce
impairment charges however, as lending volumes have continued to
recover throughout 2022, impairment rates are gradually seeing a
corresponding reversal of the recent low levels, though remain
below expectations.
Key Performance Indicators(3) 2022 2021
Number of branches 77 75
Period end customer numbers (000) 66.5 66.0
Period end loan book (GBPm) 167.0 157.2
Average loan book (GBPm) 161.5 163.7
12 Month Rolling:
Revenue yield 52.3% 48.8%
Risk adjusted margin 35.8% 37.2%
Impairments/revenue 31.6% 23.8%
Impairments (including modifications)/revenue 31.9% 25.5%
Impairment/average loan book 16.5% 11.6%
Cost to income ratio 59.8% 57.9%
Operating profit margin 8.5% 17.1%
Return on asset 4.5% 8.3%
----------------------------------------------- ---------------- ----------------
(3) (See glossary of alternative performance measures and key
performance indicators in the Appendix.)
Revenues increased 6% to GBP84.5m (2021: GBP79.9m) despite lower
average receivables due to a higher revenue yield. Yields reduced
during 2020 and 2021 following an increase in the number of
customers utilising forbearance measures during the pandemic.
Modification losses were lower at GBP0.3m (2021: GBP1.4m) with the
prior year seeing an increased level of deferred and rescheduled
loans as the business utilised forbearance measures as a result of
the pandemic. Impairments were higher in the current period at
GBP26.7m (2021: GBP19.0m) with corresponding increases in the
impairment ratios, due to 2021 benefitting from lower lending
volumes (whereby the nature of IFRS 9 means lower lending helps
reduce impairment charges). Despite the higher impairment costs,
collections performance remained strong throughout 2022, supported
by continued tight underwriting with a rigorous creditworthiness
assessment and strengthening of the credit scorecards and
strategies.
Increased spend on employee costs following investment in
expanding the operational headcount to drive the growth in new
lending and the filling of support staff vacancies has resulted in
administrative expenses increasing by 9% to GBP50.5m (2021:
GBP46.3m). The net impact of all of these factors was that
normalised operating profit fell to GBP7.2m (2021: GBP13.7m).
As detailed above, the Group has now launched the Scheme to
address its redress liabilities, which will provide certainty as to
the amount that will be paid to customers with valid redress claims
. Although the independent review of the Group's branch-based
lending business carried out in 2021 identified no systemic issues
requiring redress, since this business and the guarantor loans
division trade out of the same legal entity, the Scheme encompasses
potential claims from both businesses in order to ensure equitable
treatment of customers. The exceptional charge in the year of
GBP12.4m relates to costs and redress associated with the
Scheme.
Finance costs increased by 3% to GBP14.9m (2021: GBP14.5m)
funding growth in the loan book. As a result of the reasons noted
above, the business produced a normalised pre-tax loss of GBP7.7m
(2021: loss before tax of GBP0.8m).
In branch-based lending, the key performance drivers that
underpin the operational and financial performance of the business
include network capacity, lead volume and quality, network
productivity and impairment management. A summary of how these
factors were affected during 2022 is summarised below:
Network capacity - Qualifying application levels have grown
steadily through 2021 and 2022 and the recruitment of in-branch
employees has increased alongside this to take advantage of the
return to growth. In-branch full time employee numbers have
increased from 341 at December 2021 to 377 at the end of December
2022 with plans to increase further throughout 2023. The branches
that were originally planned to be opened in late 2020 but were
deferred by the pandemic were successfully opened in 2022,
splitting larger branches in the North West and North East
conurbations to take advantage of the growth opportunities in these
areas. This increases the total number of branch locations to 77.
Two further branches are planned to open in the second half of
2023.
Lead volumes - The number of qualified new borrower applications
increased by 19% in 2022 compared to 2021 levels. Due to a more
cautious approach to lending post-pandemic, new borrower conversion
rates dipped slightly to 6.1% (2021: 6.5%) whilst new borrower
loans written increased by 13%. We credit scored 2.5 million new
borrower applications in 2022 (2021: 1.7 million) of which 485,055
(2021: 403,800) applications passed our screening criteria to
qualify as applications to branch (ATBs).
Productivity and quality - The total number of loans issued in
2022 reached 38,781 (2021:37,150) a 4% increase over the prior
year. The focus on better quality customers led to new cash lent
increasing 19% to GBP121m compared to GBP102m in 2021. We continue
to invest in the enhancement of our technology. A new integrated
telephony solution was implemented in the current year, this
alongside continued strengthening of our creditworthiness process
and open banking improvements will drive efficiencies in our
lending processes whilst continuing to deliver good customer
outcomes and improved customer journeys.
Delinquency management -Increasing costs of living were a key
concern for our customers across the year. A continual review
process ensured that our underwriting remained appropriate from
both credit risk and affordability perspectives and we maintained a
high quality of new lending. Pro-active communication and
monitoring of forbearance tools ensured that existing customers
continued to have the support they need. This was further enhanced
by the introduction of a central collections team, utilising
available capacity from within the Guarantor Loans business as that
loan book runs down. As a result, collections performance was
consistently ahead of expectations throughout the year, and by year
end the proportion of the loan book that was up-to-date and not
rescheduled or deferred had recovered to the pre-Covid levels of
early 2020.
Plans for 2023
We remain focused on our commitment to servicing the needs of
those consumers that may have been excluded from mainstream
lenders, using our face-to-face lending model. We continue to
evolve our credit risk assessment processes in order to maintain
the highest standards of responsible lending, ensuring that we
continue to deliver good customer outcomes for all our customers.
The ability to grow the business efficiently and enhancing the
customer journey are key areas of focus in 2023. Investment in
in-branch recruitment, a focus on streamlining back-office tasks
and embracing technology opportunities such as 'Open Banking' will
reduce waiting times for customers through a smoother application
process.
We continue to expect that the demand for our products and
services will increase given the current macroeconomic environment
as well as from some of the structural changes in the market
regarding both potential customer population and companies
operating in the market. As a result, and whilst we remain vigilant
given the rapidly changing environment, based on our performance
to-date and the steps already taken, we continue to focus on
operational efficiency and loan book growth through 2023 and
beyond. Future growth plans will require the Group to complete the
Scheme and the Proposed Recapitalisation or Alternative
Transaction, but once achieved, the business will be well placed to
realise that vision.
Home credit
Following the conclusions of the review into home credit, the
Directors of S.D. Taylor Limited ('Loans at Home') concluded that
the Loans at Home business was no longer viable and so the business
was placed into administration on 15 March 2022. Whilst deeply
saddened and disappointed with this news, the Boards of both Loans
at Home and NSF were clear that administration was the only option
available in order to preserve value for creditors. As the
operations and activities of Loans at Home were separate from the
rest of the Group, having received certain waivers from the Group's
secured lenders, the administration of Loans at Home has had
minimal impact on the rest of the Group's business.
The results of the home credit division for the period ended 14
March 2022 are shown below:
Financial results
The home credit division contributed a normalised operating loss
of GBP0.5m to the Group (2021: normalised operating loss of
GBP2.2m). An exceptional charge of GBP5.6m was recognised in 2022
in relation the derecognition of the remaining net assets of the
division existing at the date of administration.
Period to 14 March 2022 2022 2022
Normalised(4) Exceptional items Reported
GBP'000 GBP'000 GBP'000
------------------------------ -------------- ------------------ ---------
Revenue 7,315 - 7,315
Other income - - -
Impairments (2,781) - (2,781)
Admin expenses (5,065) - (5,065)
-------------- ------------------ ---------
Operating loss (531) - (531)
Exceptional items - (5,647) (5,647)
-------------- ------------------ ---------
Loss before interest and tax (531) (5,647) (6,178)
Finance cost (257) - (257)
-------------- ------------------ ---------
Loss before tax (788) (5,647) (6,435)
Taxation 123 - 123
-------------- ------------------ ---------
Operating loss (665) (5,647) (6,312)
2021 2021 2021
Exceptional
Normalised(4) items Reported
Year ended 31 December GBP000 GBP000 GBP000
----------------------------- -------------- ------------ ---------
Revenue 38,401 - 38,401
Other income 587 - 587
Impairments (6,230) - (6,230)
Administration expenses (34,962) - (34,962)
-------------- ------------ ---------
Operating loss (2,204) - (2,204)
( 8,542
Exceptional items - ) (8,542)
----------------------------- -------------- ------------ ---------
(10, 746
Loss before interest and tax (2,204) (8,542) )
Finance cost (1,102) - (1,102)
----------------------------- -------------- ------------ ---------
Loss before tax (3,306) (8,542) (11,848)
Taxation 158 - 158
----------------------------- -------------- ------------ ---------
Loss after tax (3,148) (8,542) (11,690)
----------------------------- -------------- ------------ ---------
(4) (See glossary of alternative performance measures and key
performance indicators in the Appendix.)
Guarantor loans
The Group's guarantor loans division was placed into a managed
run-off in June 2021 and so continues not to issue any new loans.
Therefore the financial performance of the business has been driven
by collections from the outstanding loan book.
Financial results
The reduction in the net loan book meant that revenue declined
by 49% to GBP6.6m (2021: GBP13.0m). Collections performance during
2022 has remained strong, leading to impairments of GBP(1.6)m
(2021: GBP(1.1m). Administration costs fell by 32% to GBP7.3m
(2021: GBP10.7m) as the division continues to wind down and savings
in staff costs, professional fees and complaints costs are
realised. The division achieved a normalised operating profit of
GBP0.8m (2021: GBP1.9m) whilst strong cashflow has contributed to
lower finance costs that reduced the normalised loss before tax to
GBP1.2m (2021: loss before tax of GBP2.4m).
Year ended 31 December 2022 2022 2022
Exceptional
Normalised(5) items Reported
GBP'000 GBP'000 GBP'000
------------------------------- -------------- ------------ ---------
Revenue 6,552 - 6,552
Other income - - -
Modification gain/(loss) (12) - (12)
Impairments 1,595 - 1,595
Admin expenses (7,300) - (7,300)
-------------- ------------ ---------
Operating profit/(loss) 835 - 835
Exceptional items - - -
Profit/(loss) before interest
and tax 835 - 835
Finance costs (2,000) - (2,000)
-------------- ------------ ---------
Loss before tax (1,165) - (1,165)
Taxation - - -
-------------- ------------ ---------
Loss after tax (1,165) - (1,165)
============== ============ =========
Year ended 31 December 2021 2021 2021
Exceptional
Normalised(5) items Reported
GBP'000 GBP'000 GBP'000
----------------------------------- ---------------------------- ------------ --------------------
Revenue 13,046 - 13,046
Other income 1 - 1
Modification gain/(loss) (1,478) - (1,478)
Impairments 1,061 - 1,061
Exceptional provisions - (2,207) (2,207)
Admin expenses (10,695) - (10,695)
---------------------------- ------------ --------------------
Operating profit/(loss) 1,935 (2,207) (272)
Exceptional items - (601) (601)
Profit/(loss) before interest and
tax 1,935 (2,808) (873)
Finance costs (4,350) - (4,350)
---------------------------- ------------ --------------------
Loss before tax (2,415) (2,808) (5,223)
Taxation 299 - 299
---------------------------- ------------ --------------------
Loss after tax (2,116) (2,808) (4,924)
============================ ============ ====================
Key Performance Indicators(5) 2022 2021
Period end customer numbers (000) 6.8 14.5
Period end loan book (GBPm) 10.1 26.8
Average loan book (GBPm) 17.1 40.6
12 Month Rolling:
Revenue yield 38.3% 32.1%
Risk adjusted margin 47.7% 34.7%
Impairment/revenue (24.4)% (8.1)%
Impairment (including modifications)/revenue (24.2)% 3.2%
Impairment/average loan book (9.3)% (2.6)%
Cost to income ratio 111.4% 82.0%
Operating profit margin 12.8% 14.8%
Return on asset 4.9% 4.8%
---------------------------------------------- -------- -------
(5) (See glossary of alternative performance measures and key
performance indicators in the Appendix.)
Plans for 2023
The collect-out of the outstanding loan book is progressing well
and as planned.
Central costs
Year ended 31 December 2022 2022 2022
Normalised(6) Exceptional Reported
items
GBP000 GBP000 GBP000
-------------------------- --------------- ------------- ----------
Revenue - - -
Other income - - -
Admin expenses (3,040) - (3,040)
--------------- ------------- ----------
Operating loss (3,040) - (3,040)
Exceptional items - (13,714) (13,714)
Loss before interest and
tax (3,040) (13,714) (16,754)
Finance costs (11,869) - (11,869)
--------------- ------------- ----------
Loss before tax (14,909) (13,714) (28,623)
Taxation (21) - (21)
--------------- ------------- ----------
Loss after tax (14,930) (13,714) (28,644)
=============== ============= ==========
2021
2021 Exceptional 2021
Normalised(6) items Reported
Year ended 31 December GBP000 GBP000 GBP000
----------------------------- -------------- ------------ ---------
Revenue - - -
Other income 11 - 11
Administration expenses (4,096) - (4,096)
----------------------------- -------------- ------------ ---------
Operating loss (4,085) - (4,085)
Exceptional items - (1,580) (1,580)
----------------------------- -------------- ------------ ---------
Loss before interest and tax (4,085) (1,580) (5,665)
Finance cost (6,036) - (6,036)
----------------------------- -------------- ------------ ---------
Loss before tax (10,121) (1,580) (11,701)
Taxation (580) - (580)
----------------------------- -------------- ------------ ---------
Loss after tax (10,701) (1,580) (12,281)
----------------------------- -------------- ------------ ---------
(6) (See glossary of alternative performance measures and key
performance indicators in the Appendix.)
Normalised administrative expenses fell by 26% to GBP3.0m (2021:
GBP4.1m) driven principally by lower staff, rent and professional
fees. Finance fees increased due to surplus cash held at Group
level alongside higher interest rates.
An exceptional charge of GBP13.7m relates to impairments
recognised on intercompany receivable balances held with the home
credit division. Prior year exceptional costs comprised GBP1.6m of
advisory fees.
Balance sheet
As at 31 December 2022, the Group had increased its cash
balances to GBP32.8m (2021: GBP114.6m) and gross debt reduced to
GBP255m (2021: GBP330m). The Group's balance sheet remained in a
negative net tangible assets position. A summary of the Group's
balance sheet at December 2022 is shown below:
2022 2021
Year ended 31 December GBP000 GBP000
------------------------------------------- --------- ---------
Loan book 177,104 207,984
Cash 32,783 114,577
Trade receivables and other assets 1,363 4,003
Property, plant and equipment, intangibles
and right of use assets 12,719 14,574
Payables and provisions (59,055) (44,018)
Lease liability (7,460) (9,545)
Debt (255,000) (328,762)
------------------------------------------- --------- ---------
Net (liabilities)/assets (97,546) (41,187)
The clear priority for the Group is to complete the Proposed
Recapitalisation that, if successful, is expected to, amongst other
things, fund the Scheme, strengthen the Group's balance sheet and
restore it to a positive net assets position. However, the
Directors note that a material uncertainty exists regarding the
success of the Scheme and execution of the Proposed
Recapitalisation (or the Alternative Transaction, noting, as above,
that the Alternative Transaction may result in the Company
(ultimate parent company) entering into an insolvency process )
which casts significant doubt on both the Group's and the Company's
ability to continue as a going concern.
Principal risks
The principal risks facing the Group are:
-- Going concern, solvency and liquidity - the Directors note
that material uncertainties exist regarding the: (i) success of the
Scheme, including positive creditor votes and the court sanction of
the Scheme within the timeframes required; (ii) the ability of the
Group to raise sufficient capital in the timeframes required (iii)
the agreement of extensions to the testing dates and other forms of
waivers from secured lenders in relation to potential future
covenant breaches and implementation of the Scheme prior to
completion of the Proposed Recapitalisation (or the Alternative
Transaction); (iv) the contractual commitments from secured lenders
to extend the term of existing debt facilities and to write off a
portion of their debt as well as agree other changes to the
facilities (including the covenant levels); and (v) the impact of
macroeconomic uncertainties and other unforeseen factors on the
financial performance of the Group. The range of assumptions and
the likelihood of them all proving correct creates material
uncertainty and therefore the impact on liquidity and solvency
under both the base case and downside scenarios may cast
significant doubt on both the Group's and individual division's
ability to continue as a going concern. The Director's note that
although the Group has contractual commitments from its secured
lenders to support the Alternative Transaction, there is a risk
that it will not be possible to implement either the Proposed
Recapitalisation or the Alternative Transaction. In these
circumstances, if neither the Proposed Recapitalisation nor the
Alternative Transaction has been implemented by 31 December 2023,
it will not be possible to pay the Scheme fund into a nominated
trust account and the Scheme will fail. Refer to the going concern
statement in note 1 of the financial statements for further detail
on the base and downside case;
-- Regulation - the Group faces significant operational and
financial risk through changes to regulations, changes to the
interpretation of regulations or a failure to comply with existing
rules and regulations, some of which have crystallised in the year.
Due to the need to bring this uncertainty to a resolution, the
Group has launched the Scheme to address the redress claims which
will provide certainty as to the amount that will be paid to
customers with valid redress claims . As outlined above, the review
into branch-based lending concluded that there was no need for
systemic customer redress, although claims in relation to the
branch-based lending business have been included in the Scheme. The
conclusion of the home credit review resulted in the administration
of the business as it was concluded that the business model was no
longer viable and that an administration was the only option
available to preserve value for creditors.
-- Conduct - risk of poor outcomes for our customers or other
key stakeholders as a result of the Group's actions;
-- Credit - risk of loss through poor underwriting or a
diminution in the credit quality of the Group's customers;
-- Business strategy - risk that the Group's strategy fails to
deliver the outcomes expected;
-- Business risks:
o operational - the Group's activities are large and complex and
so there are many areas of operational risk that include technology
failure, fraud, staff management and recruitment risks,
underperformance of key staff, the risk of human error, taxation,
increasing numbers of customer complaints, health and safety as
well as disaster recovery and business continuity risks;
o reputational - a failure to manage one or more of the Group's
principal risks may damage the reputation of the Group or any of
its subsidiaries which in turn may materially impact the future
operational and/or financial performance of the Group;
o cyber - increased connectivity in the workplace coupled with
the increasing importance of data and data analytics in operating
and managing consumer finance businesses means that this risk has
been identified separately from operational risk;
o aftermath of pandemic - a large pandemic such as COVID-19,
coupled with the possibility of the return of restrictions on
face-to-face contact by HM Government, may cause significant
disruption to the Group's operations and severely impact the supply
and level of demand for the Group's products. As a result, any
sustained period where such measures are in place could result in
the Group suffering significant financial loss; and
o cost of living crisis - the significant pressure of the cost
of living at the current time increases the risk of delinquency for
some customers, whilst also presenting an opportunity for the
business in terms of those potential customers who may previously
have been served by the prime financial services sector.
Emerging risks that may impact the future performance of the
Group include the anticipated increase in the cost of living,
climate change and technology where we plan to become more agile
and independent with greater control over our ability to augment
and improve our lending proposition. Further details are included
on page 27 of the 2022 Annual Report.
On behalf of the Board of Directors
Jono Gillespie
Group Chief Executive
28 April 2023
Consolidated statement of comprehensive income
for the year ended 31 December 2022
Before Year ended
exceptional Exceptional 31 Dec
items items(3) 2022
Note GBP000 GBP000 GBP000
-------------------------------------- ---- ------------ ----------- ----------
Revenue(1) 3 98,337 - 98,337
Other operating income 173 - 173
Modification loss 10 (262) - (262)
Impairment of financial assets(2) (27,890) - (27,890)
Administrative expenses (65,898) - (65,898)
-------------------------------------- ---- ------------ ----------- ----------
Operating profit/(loss) 4 4,460 - 4,460
Exceptional items 6 - (31,768) (31,768)
-------------------------------------- ---- ------------ ----------- ----------
Profit/(loss) on ordinary activities
before interest and tax 4,460 (31,768) (27,308)
Finance costs (29,051) - (29,051)
-------------------------------------- ---- ------------ ----------- ----------
Loss on ordinary activities before
tax (24,591) (31,768) (56,359)
Tax on loss on ordinary activities 7 - - -
-------------------------------------- ---- ------------ ----------- ----------
Loss for the year (24,591) (31,768) (56,359)
-------------------------------------- ---- ------------ ----------- ----------
( 56,359
Total comprehensive loss for the year )
-------------------------------------- ---- ------------ ----------- ----------
1 Revenue comprises interest income calculated using the EIR method.
2 Impairments comprise expected credit losses on amounts
receivable from customers. Refer to note 10 in the notes to the
financial statements for further detail.
3 Refer to the appendix for detail of alternative performance
measures used ('APMs'). Refer to note 6 in the notes to the
financial statements for further detail.
Loss attributable to:
( 56,359
* Owners of the Parent )
-
* Non-controlling interests
--------------------------------- ---- --------------
Loss per share
Year
ended
31 Dec
2022
Note Pence
--------------------------------- ---- --------------
Basic and diluted 8 (18.04)
--------------------------------- ---- --------------
There are no recognised gains or losses other than disclosed
above and there have been no discontinued activities in the
year.
Consolidated statement of comprehensive income
For the year ended 31 December 2021
Before Year ended
exceptional Exceptional 31 Dec
items items(3) 2021
Note GBP000 GBP000 GBP000
-------------------------------------------- ----------------------- ------------ ----------- ---------------
Revenue(1) 3 131,387 - 131,387
Other operating income 983 - 983
Modification loss 10 (2,861) - (2,861)
Impairment of financial assets(2) (24,163) - (24,163)
Exceptional provision for customer
redress 6 - (2,207) (2,207)
Administrative expenses (96,047) - (96,047)
-------------------------------------------- ----------------------- ------------ ----------- ---------------
Operating profit/(loss) 4 9,299 (2,207) 7,092
Other exceptional items 6 - (10,723) (10,723)
-------------------------------------------- ----------------------- ------------ ----------- ---------------
Profit/(loss) on ordinary activities
before interest and tax 9,299 (12,930) (3,631)
Finance costs (25,979) - (25,979)
-------------------------------------------- ----------------------- ------------ ----------- ---------------
Profit/(loss) on ordinary activities
before tax (16,680) (12,930) (29,610)
Tax on profit/(loss) on ordinary activities 7 (75) - (75)
-------------------------------------------- ----------------------- ------------ ----------- ---------------
Profit/(loss) for the year (16,755) (12,930) (29,685)
-------------------------------------------- ----------------------- ------------ ----------- ---------------
Total comprehensive loss for the year (29,685)
-------------------------------------------- ----------------------- ------------ ----------- ---------------
1 Revenue comprises interest income calculated using the EIR method,
refer to note 1 in the notes to the financial statements for further
detail.
2 Impairments comprise expected credit losses on amounts receivable
from customers. Refer to notes 1 and 18 in the notes to the financial
statements for further detail.
3 Refer to the appendix for detail of alternative performance measures.
Refer to note 7 in the notes to the financial statements for further
detail.
Loss attributable to:
* Owners of the Parent (29,685)
-
* Non-controlling interests
-------------------------------------------- ----------------------- ------------ ----------- ---------------
Loss per share
Year ended
31 Dec
2021
Note Pence
-------------------------------------------- ----------------------- ------------ ----------- ---------------
Basic and diluted 8 (9.50)
-------------------------------------------- ----------------------- ------------ ----------- ---------------
Consolidated statement of financial position
as at 31 December 2022
31 Dec 31 Dec
2022 2021
Note GBP000 GBP000
---------------------------------- ---- --------- ----------
ASSETS
Non-current assets
Intangible assets 2,886 2,772
Deferred tax asset 11 - -
Right-of-use asset 6,834 7,877
Property, plant and equipment 2,999 3,925
Amounts receivable from customers 10 101,969 98,836
---------------------------------- ---- --------- ----------
114,688 113,410
Current assets
Amounts receivable from customers 10 75,135 109,148
Trade and other receivables 1,363 2,526
Corporation tax asset - 1,477
Cash and cash equivalents 32,783 114,577
---------------------------------- ---- --------- ----------
109,281 227,728
---------------------------------- ---- --------- ----------
Total assets 223,969 341,138
---------------------------------- ---- --------- ----------
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 12 28,365 18,375
Provisions 24 30,690 25,643
Lease liability 1,765 2,129
Loans and borrowings 255,000 -
---------------------------------- ---- --------- ----------
Total current liabilities 315,820 46,147
---------------------------------- ---- --------- ----------
Non-current liabilities
Lease liability 5,695 7,416
Loans and borrowings - 328,762
---------------------------------- ---- --------- ----------
Total non-current liabilities 5,695 336,178
---------------------------------- ---- --------- ----------
Equity
Share capital 15 15,621 15,621
Share premium 16 180,019 180,019
Other reserves 255 255
Retained loss (293,441) (237,082)
---------------------------------- ---- --------- ----------
Total equity (97,546) (41,187)
---------------------------------- ---- --------- ----------
Total equity and liabilities 223,969 341,138
---------------------------------- ---- --------- ----------
These financial statements were approved by the Board of
Directors on 28 April 2023
Signed on behalf of the Board of Directors.
Jono Gillespie
Group Chief Executive
Consolidated statement of changes in equity
for the year ended 31 December 2022
Non-
Share Share Other Retained controlling
capital premium reserves loss interest Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- --------------- -------- -------- --------- ---------- ------------ ----------
At 31 December 2020 15,621 180,019 551 (207,727) - (11,536)
-------------------------------- --------------- -------- -------- --------- ---------- ------------ ----------
Total comprehensive loss
for the year - - - (29,685) - (29,685)
Transactions with owners,
recorded directly in equity:
Dividends paid 9 - - - - - -
Credit to equity for
equity-settled
share-based payments - - 34 - - 34
Transfer of share-based payments
on vesting
of share awards - - (330) 330 - -
-------------------------------- --------------- -------- -------- --------- ---------- ------------ ----------
At 31 December 2021 15,621 180,019 255 (237,082) - (41,187)
-------------------------------- --------------- -------- -------- --------- ---------- ------------ ----------
Total comprehensive loss
for the year - - - (56,359) - (56,359)
Transactions with owners,
recorded directly in equity:
Dividends paid 9 - - - - - -
( 293,441
At 31 December 2022 15,621 180,019 255 ) - (97,546)
-------------------------------- --------------- -------- -------- --------- ---------- ------------ ----------
Consolidated statement of cash flows
for the year ended 31 December 2022
Year
ended Year ended
31 Dec 31 Dec
2022 2021
Note GBP000 GBP000
----------------------------------------------------- ---- -------- ----------
Net cash from/(used in) operating activities 17 17,916 57,762
Cash flows from/(used in) investing activities
Purchase of property, plant and equipment (315) (261)
Purchase of software intangibles (1,092) (2,514)
Proceeds from sale of property, plant and equipment 4 17
Reduction in cash resulting from derecognition
of home credit division in administration (7,062) -
----------------------------------------------------- ---- -------- ----------
Net cash from/(used in) investing activities (8,465) (2,758)
----------------------------------------------------- ---- -------- ----------
Cash flows from/(used in) financing activities
Finance cost (24,549) (15,832)
Repayment of principal portion of lease liabilities (1,696) (2,551)
Repayment of loans and borrowings (65,000) -
Dividends paid 9 - -
----------------------------------------------------- ---- -------- ----------
Net cash from/(used in) financing activities (91,245) (18,383)
----------------------------------------------------- ---- -------- ----------
Net increase/(decrease) in cash and cash equivalents (81,794) 36,621
Cash and cash equivalents at beginning of year 114,577 77,956
----------------------------------------------------- ---- -------- ----------
Cash and cash equivalents at end of year 32,783 114,577
----------------------------------------------------- ---- -------- ----------
Notes to the financial statements
1. Basis of preparation
Basis of preparation
The financial information set out in the announcement does not
constitute the Company's statutory accounts for the years ended 31
December 2022 or 2021.
The financial information for the year ended 31 December 2021 is
derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. The auditors reported on
those accounts: their report was unqualified and did not contain a
statement under s498(2) or (3) of the Companies Act 2006, but did
include a section highlighting a material uncertainty that may cast
significant doubt on the Group and Company's ability to continue as
a going concern.
The statutory financial statements for the year ended 31
December 2022 will be filed with the Registrar of Companies
following the General Meeting to be held on 23 June 2023. The
report of the auditor was unqualified and did not contain a
statement under s498(2) or (3) of the Companies Act 2006, but did
include a section highlighting a material uncertainty that may cast
significant doubt on the Group and Company's ability to continue as
a going concern.
The financial statements have been prepared under the historical
cost convention, except for the revaluation of certain financial
instruments that are measured at revalued amounts or fair values at
the end of each reporting period, as explained in the accounting
policies below. In estimating the fair value of an asset or a
liability, the Group takes into account the characteristics of the
asset or liability if market participants would take those
characteristics into account when pricing the asset or liability at
the measurement date. Fair value for measurement and/or disclosure
purposes in these consolidated financial statements is determined
on such a basis, except for share -- based payment transactions
that are within the scope of IFRS 2, leasing transactions that are
within the scope of IFRS 16 Leases, and measurements that have some
similarities to fair value but are not fair value, such as value in
use ('VIU') in IAS 36 Impairment of Assets.
On 15 March 2022, the Company's indirect subsidiary S.D Taylor
Limited (trading as 'Loans at Home' and forming the home credit
division of the Group) was placed into administration. As a result,
the financial statements of the home credit division for the prior
year ended 31 December 2021 were prepared on a basis other than
going concern. This required carrying value of the assets to be at
the amounts they were expected to realise and the liabilities
included any amounts for onerous contracts as a result of the
administration. In all other respects the financial statements have
been prepared in accordance with the accounting framework.
As Non-Standard Finance plc retained control of the division up
to the date of administration, the financial statements of S.D.
Taylor have been consolidated and are reported in the Group
financial statements for the current year up to 14 March 2022 and
the prior year for the full year. The financial statements of the
Group have been prepared on a going concern basis with the
exception of the home credit division which was prepared on
non-going concern basis (as described above).
This announcement has been agreed with the Company's auditor for
release.
Basis of consolidation
The Group financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) prepared to 31 December 2022. Control is
achieved where the Company is exposed to, or has the rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
In assessing control, the Group takes into consideration the
existence and effect of potential voting rights that currently are
exercisable or convertible.
The results of any subsidiaries acquired during the year are
included in the consolidated statement of comprehensive income from
the effective date of acquisition.
As noted above, the Group's home credit division (S.D. Taylor
Limited) was placed into administration on 15 March 2022. Up to the
date of administration, Non-Standard Finance plc retained control
of the division and as such, in line with IAS 10, its results have
been consolidated to 14 March 2022 for the purposes of these
financial statements. The appointment of an administrator on 15
March 2022 represents a loss of control by Non-Standard Finance
plc, and as such, the home credit division has been derecognised
from this date and the effect of this reflected in the current year
ended 31 December 2022 financial statements.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
All intra-Group transactions and balances and any unrealised
gains and losses arising from intra-Group transactions are
eliminated in preparing the consolidated financial statements.
The Company has taken advantage of the exemption under section
408 of the Companies Act 2006 from publishing its individual
statement of comprehensive income and related notes.
Going concern
As noted in the 2022 Half Year Results, the Group's subsidiary
S.D. Taylor Limited (which traded as Loans at Home) was placed into
administration on 15 March 2022. As the operations and activities
of Loans at Home were separate from the rest of the Group, having
received certain waivers from the Group's secured lenders, the
administration of Loans at Home has had minimal impact on the
existing funding arrangements of the Group.
For the quarters ended 31 March 2022, 30 June 2022, 30 September
and 31 December 2022, the Group's loan to value (LTV) ratio was
higher than the level permitted under its LTV covenant. The Group
has agreed extensions with its lenders such that the LTV covenant
will not be formally tested, and no covenant breach or event of
default will arise, until the Group provides its compliance
certificates for the aforementioned quarter dates. The date on
which the Group is required to supply these compliance certificates
has been extended until 17 May 2023, with a mechanism for this date
to be extended further with lender support.
The Group is pursuing a scheme of arrangement (the "Scheme") in
order to resolve its outstanding regulatory issues, so as to allow
it to proceed with its planned restructuring and recapitalisation (
the "Proposed Recapitalisation"). The Proposed Recapitalisation has
the support in principle of the Company's largest shareholder and
the Group's secured lenders, subject to agreement on the terms and
other conditions described below and, in the case of the Company's
largest shareholder, further diligence on and its assessment of the
Group's revised business plan and financial projections.
Completion of the Proposed Recapitalisation is subject to the
agreement of terms between lenders and the Company's largest
shareholder, and a number of conditions, including Court sanction
of the Scheme, shareholder approval, the take-up of shares under
the equity raise and execution of definitive documents. Assuming
all the above outlined conditions are satisfied (the "Conditions"),
the Group expects the Proposed Recapitalisation to complete at the
end of Q2 2023 or the start of Q3 2023. The Group has also agreed
with its secured lenders to implement an alternative transaction if
the Scheme is sanctioned but the Conditions , to the Proposed
Recapitalisation are not satisfied (the "Alternative
Transaction").
Although the independent review of the Group's branch-based
lending division carried out in 2021 identified no systemic issues
requiring redress, as this division and the guarantor loans
division (now in collect-out) trade out of the same legal entity
(Everyday Lending Limited), the Scheme encompasses potential claims
from both divisions in order to ensure equitable treatment of
customers. On 17 March 2023, the Group sent out a practice
statement letter to its creditors and a first court hearing is
scheduled for 28 April 2023.
In light of the above, the Group has produced two possible
scenarios as part of its going concern assessment:
(i) the base case scenario assumes:
a. the Scheme is successful;
b. the Scheme is sanctioned by the court by the end of June 2023;
c. a substantial equity injection is received in late Q2 or
early Q3 2023 (the Proposed Recapitalisation);
d. the Group has obtained extensions to the testing dates and/or
other forms of waivers from its secured lenders for potential
covenant breaches to enable it to proceed with the Proposed
Recapitalisation;
e. the extension of the term of the Group's debt facilities and
write-off of a portion of the debt on terms acceptable to
investors;
f. the Group is able to raise a revolving credit facility at a
level acceptable to its lenders and potential investors; and
g. should the Proposed Recapitalisation be unsuccessful, the
Alternative Transaction is implemented which would preserve the
branch-based lending business and a going concern, but which, if
implemented, would result in no recovery for the Company's current
shareholders and the Company may enter into an insolvency process
.
(ii) the downside scenario assumes:
a. the Scheme is unsuccessful;
b. the Group is unable to complete the Proposed Recapitalisation
(or the Alternative Transaction), whilst no acceptable alternative
to the base case that is capable of implementation is agreed
between the Group and its secured lenders, resulting in the secured
lenders enforcing their security and the Group going into an
insolvency process;
c. the Group is not granted extensions to the testing dates
and/or other forms of waivers from its secured lenders of covenant
breaches and the Group's secured lenders become entitled to enforce
their security, resulting in the Group entering an insolvency
process; and
d. as a result of the Group entering into an insolvency process,
no return for current shareholders and a significantly reduced
return for secured lenders.
The above downside assumptions are not mutually exclusive. The
Group's ability to complete the Proposed Recapitalisation or the
Alternative Transaction is entirely dependent on the success of the
Scheme.
The base case scenario is entirely dependent upon the base case
assumptions listed above proving true. In addition, it is dependent
on factors such as the impact of the cost-of-living crisis and
other macroeconomic uncertainties on performance as well as any
further changes in the environment not varying materially from that
assumed in the base case.
The Directors continue to maintain a regular dialogue with key
stakeholders including the Company's largest shareholder and
Group's secured lenders regarding the above matters.
The Directors acknowledge the considerable challenges presented
by the uncertainty around the:
-- success of the Scheme;
-- the ability of the Group to raise sufficient capital in the timeframes required;
-- the agreement of extensions to the testing dates and other
forms of waivers from secured lenders in relation to potential
future covenant breaches and the implementation of the Scheme and
the Proposed Recapitalisation (or the Alternative Transaction)
;
-- the agreement from secured lenders to extend the term of
existing debt facilities and to write off a portion of their debt
as well as agree other changes to the facilities (including the
covenant levels); and
-- the impact of macroeconomic uncertainties and other
unforeseen factors on the financial performance of the Group.
In making their overall assessment on going concern, the
Directors considered both the balance sheet solvency and the
liquidity position of the Group and Company. In connection with the
former, the Proposed Recapitalisation would create a positive net
asset position. In connection with the latter the Directors have
taken into consideration the impact of the Proposed
Recapitalisation on the existing cash balances which would then be
available to the business. This combination would provide
sufficient liquidity throughout the going concern period. Whilst
essential for the future of the Group and Company, the Proposed
Recapitalisation would materially dilute the interest of current
shareholders, most likely to negligible value unless they chose to
participate in the Proposed Recapitalisation. However, the Proposed
Recapitalisation is dependent on the Conditions, including the
sanctioning of the Scheme by the Court, and this dependency creates
a material uncertainty.
The secured lenders continue to provide short-term waivers of
the Group's loan to value covenant, ensuring the Group has the
liquidity to pursue the Scheme and the Proposed Recapitalisation
(or the Alternative Transaction in the event the Conditions, to the
Proposed Recapitalisation are not satisfied, which, if implemented,
would result in no recovery for the Group's current shareholders),
however the Directors recognise that, in the absence of the secured
lenders granting the necessary extensions to the testing dates or
other forms of waivers in respect of potential future covenant
breaches, cash balances may not be available to the Group or
Company. With regard to the balance sheet solvency of the Group,
the Directors noted that under the base case scenario, assuming the
Group is able to raise sufficient equity within the timeframes
required, the Group returns to a net asset position post Proposed
Recapitalisation and remains there for the going concern
period.
As noted above, the Group has agreed the Alternative Transaction
in the event that the Scheme is sanctioned but the Proposed
Recapitalisation is unsuccessful, which would preserve the
branch-based lending business as a going concern. However, there is
no certainty that the Alternative Transaction would necessarily be
successful and, in this scenario, there would be no recovery for
the Company's current shareholders and the Company may enter into
an insolvency process. Should the going concern assumption not be
appropriate, the assets of the Company would have to be reduced to
their market value which is expected to be GBPnil and require the
recognition of contractual commitments which would become onerous
in relation to the lease liability held at the Company totalling
GBP62k as at 31 December 2022.
Despite the material uncertainties associated with the forecast
assumptions, the Directors note that the Group's largest
shareholder and secured lenders are supportive in principle, of the
Proposed Recapitalisation, subject to agreement on the terms and
the satisfaction of certain conditions, including further diligence
on and its assessment of the Group's revised business plan and
financial projections as outlined in the Conditions noted
earlier.
The Directors believe that if the actual outcomes do not differ
materially from the assumptions outlined in the base case, the
Group can reasonably expect to continue to operate and meet its
respective liabilities as they fall due for at least the next 12
months. In regards to the Company, the Directors believe that under
the base case which assumes a successful Proposed Recapitalisation,
the Company can reasonably expect to continue to operate and meet
its respective liabilities as they fall due for at least the next
12 months. However, should the Alternative Transaction be
implemented, there would be no recovery for the Company's current
shareholders and the Company may enter into an insolvency process.
Accounting standards require that financial statements are prepared
on a going concern basis unless the Directors either intend to
liquidate the entity or to cease trading or have no realistic
alternative but to do so. The Directors therefore believes it
remains appropriate to prepare the financial statements on a going
concern basis whilst recognising the material uncertainties that
remain. The Directors acknowledge that, whilst a scheme of
arrangement is complex, time consuming and not guaranteed to be
successful, they believe that there is a reasonable chance of
success . The Directors' position is, in part, informed by the
favourable performance to date against plan, support the Group has
received from its secured lenders to date, including a contractual
commitment to the Alternative Transaction, in the event the
Proposed Recapitalisation fails, and the fact that the Company's
largest shareholder remains supportive in principle of the Proposed
Recapitalisation subject to the Conditions. The Director's notes
that although the Group has contractual commitments from its
secured lenders to support the Alternative Transaction, there is a
risk that it will not be possible to implement either the Proposed
Recapitalisation or the Alternative Transaction. In these
circumstances, if neither the Proposed Recapitalisation nor the
Alternative Transaction has been implemented by 31 December 2023,
it will not be possible to pay the Scheme fund into a nominated
trust account and the Scheme will fail .
As previously mentioned, the Directors recognise there are a
high number of assumptions and variables in the modelling of the
base case which are not directly within the Group's control and
have therefore concluded that a material uncertainty exists which
may cast significant doubt over the Group and Company's ability to
continue as a going concern and therefore, that the Group and
Company may be unable to realise their assets and discharge their
liabilities in the normal course of business.
Should the going concern assumption not be appropriate, the
assets of the Group would have to be reduced to their market values
and the liabilities would have to include any amounts for onerous
contracts and in addition, is likely to result in an increase in
the amount of the redress provision.
The Directors will continue to monitor the Group and Company's
financial position (including access to liquidity and balance sheet
solvency) carefully as a better understanding of the impact of
these various factors is developed. The Directors recognise the
importance of the success of the Scheme and the Proposed
Recapitalisation to mitigate the uncertainties noted above and to
support the future growth prospects of the Group. The Directors
will also continue to monitor the Group and Company's risk
management and internal control systems.
Significant judgement
The below factors form a significant judgement of the Directors
in the context of approving the Group and Company's going concern
status:
-- the assumption of a successful completion of the Scheme,
-- support in principle from the Group's largest shareholder for
the Proposed Recapitalisation,
-- lender support for waivers and the Proposed Recapitalisation,
-- the extension of existing financing facilities and partial
write-off of debt as part of the Proposed Recapitalisation,
-- the continued performance of the Group and that the outcomes
are not materially different to those assumptions envisaged under
the base case, and
-- should the Proposed Recapitalisation be unsuccessful, lender
support for the Alternative Transaction which would preserve the
branch-based lending business and a going concern, but which, if
implemented, would result in no recovery for the Company's current
shareholders and the Company may enter into an insolvency
process.
2. Changes in accounting policies and disclosures
New and amended standards and interpretations for the financial
year ending 31 December 2022
There are no other new IFRSs or International Financial
Reporting Interpretations that are effective for the first time for
the year ended 31 December 2022 which have a material impact on the
Group. The Group has not applied the following new and revised
IFRSs that have been issued but are not yet effective (effective 1
January 2023): Amendments to IAS 1, Presentation of financial
statements on classification of liabilities; IFRS 17, Insurance
contracts; Amendments to IAS 8, Definition of accounting estimates;
Amendments to IAS 12, Deferred tax relating to assets and
liabilities from a single transaction, and IFRS Practice statement
2, disclosure of accounting policy
Management will continue to assess the impact of new and amended
standards and interpretations on an ongoing basis.
3. Revenue
Revenue is recognised by applying the EIR to the carrying value
of a loan. The EIR is the rate that exactly discounts estimated
future cash payments or receipts through the expected life of the
financial asset or financial liability to the gross carrying amount
of a financial asset or to the amortised cost of a financial
liability.
Year ended Year ended
31 Dec 31 Dec
2022 2021
GBP000 GBP000
---------------- ---------- ----------
Interest income 98,337 131,387
Total revenue 98,337 131,387
---------------- ---------- ----------
4. Operating profit/(loss) for the year is stated after
charging/(crediting):
Year ended Year ended
31 Dec 31 Dec
2022 2021
GBP000 GBP000
------------------------------------------------------- ---------- ----------
Depreciation of property, plant and equipment 1,215 2,175
Depreciation of right-of-use asset 1,462 2,878
Amortisation and impairment of intangible assets 978 7,910
Staff costs excluding agent commission(1) 33,093 42,690
Rentals under operating leases 460 728
Profit/(loss) on sale of property, plant and equipment (1) 454
------------------------------------------------------- ---------- ----------
1 Agent commission for the period ended 14 March 2022 was
GBP1.5m (year ended 31 December 2021: GBP9.5m). Refer to note 1 for
accounting policy.
5. Segment information
Management has determined the operating segments by considering
the financial and operational information that is reported
internally to the chief operating decision-maker, the Board of
Directors, by management. For management purposes, the Group is
currently organised into four operating segments: branch-based
lending (Everyday Loans); guarantor loans (TrustTwo and George
Banco); home credit (Loans at Home); and central (head office
activities). The Group's divisions are all located in the United
Kingdom and all revenue is attributable to customers in the United
Kingdom.
Branch-based Home Guarantor 2022
lending Credit(4) loans(1) Central Total
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ------------ ---------- --------- -------- --------
Year ended 31 December 2022
Interest income 84,470 7,315 6,552 - 98,337
Other income 173 - - - 173
------------------------------- ------------ ---------- --------- -------- --------
Total revenue 84,643 7,315 6,552 - 98,510
------------------------------- ------------ ---------- --------- -------- --------
Operating profit/(loss) before
exceptionals 7,196 (531) 835 (3,040) 4,460
Exceptional items(2) (12,407) (5,647) - (13,714) (31,768)
Finance cost (14,925) (257) (2,000) (11,869) (29,051)
------------------------------- ------------ ---------- --------- -------- --------
Loss before taxation (20,136) (6,435) (1,165) (28,623) (56,359)
Taxation (102) 123 - (21) -
------------------------------- ------------ ---------- --------- -------- --------
Loss for the year (20,238) (6,312) (1,165) (28,644) (56,359)
------------------------------- ------------ ---------- --------- -------- --------
Branch-based Home Guarantor Consolidation 2022
lending credit loans(1) Central adjustments(3) Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ------------ ------- --------- --------- --------------- ---------
Total assets 185,129 - 10,147 197,994 (169,301) 223,969
Total liabilities (226,088) - - (274,061) 178,634 (321,515)
----------------------------- ------------ ------- --------- --------- --------------- ---------
Net assets/(liabilities) (40,959) - 10,147 (76,067) 9,333 (97,546)
----------------------------- ------------ ------- --------- --------- --------------- ---------
Capital expenditure 1,876 - - 73 - 1,949
Depreciation of plant,
property and equipment 1,214 - - 1 - 1,215
Depreciation of right-of-use
asset 1,451 - - 11 - 1,462
A mortisation and impairment
of intangible assets 957 - - 22 - 979
----------------------------- ------------ ------- --------- --------- --------------- ---------
1 The Guarantor Loans Division includes George Banco and TrustTwo. TrustTwo is supported by the infrastructure of Everyday Loans but its results are reported to the Board separately and has therefore been disclosed within the Guarantor Loans Division above.
2 Refer to note 6 for further details.
3 Consolidation adjustments include the elimination of intra-Group balances.
4 The home credit division was placed into administration on 15
March 2022; therefore its results reflect the period up to 14 March
2022.
Branch-based Guarantor 2021
lending Home credit loans Central Total
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ------------ ----------- --------- -------- --------
Year ended 31 December 2021
Interest income 79,940 38,401 13,046 - 131,387
Fair value unwind on acquired - - - - -
loan portfolio
----------------------------------- ------------ ----------- --------- -------- --------
Total revenue 79,940 38,401 13,046 - 131,387
----------------------------------- ------------ ----------- --------- -------- --------
Exceptional provision for customer
redress - - (2,207) - (2,207)
----------------------------------- ------------ ----------- --------- -------- --------
Operating profit/(loss) before
amortisation 13,653 (2,204) (272) (4,085) 7,092
Amortisation of intangible assets - - - - -
----------------------------------- ------------ ----------- --------- -------- --------
Operating profit/(loss) before
exceptional items 13,653 (2,204) (272) (4,085) 7,092
Other exceptional items - (8,542) (601) (1,580) (10,723)
Finance cost (14,491) (1,102) (4,350) (6,036) (25,979)
----------------------------------- ------------ ----------- --------- -------- --------
Loss before taxation (838) (11,848) (5,223) (11,701) (29,610)
Taxation 48 158 299 (580) (75)
----------------------------------- ------------ ----------- --------- -------- --------
Loss for the year (790) (11,690) (4,924) (12,281) (29,685)
----------------------------------- ------------ ----------- --------- -------- --------
Consolidation
Branch-based Home Guarantor Adjustments 2021
lending credit loans Central restated Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ------------ --------- --------- ---------- ------------- ----------
Total assets 188,068 26,929 26,763 286,258 (186,880) 341,138
Total liabilities (220,927) (20,777) - (325,421) 184,800 (382,325)
----------------------------- ------------ --------- --------- ---------- ------------- ----------
Net assets (32,859) 6,152 26,763 (39,163) (2,080) (41,187)
----------------------------- ------------ --------- --------- ---------- ------------- ----------
Capital expenditure 2,191 1,662 - 129 - 3,982
Depreciation of plant,
property and equipment 1,585 578 - 12 - 2,175
Depreciation of right-of-use
asset 1,338 1,420 - 120 - 2,878
Amortisation and impairment
of
intangible assets 797 7,091 - 23 - 7,910
----------------------------- ------------ --------- --------- ---------- ------------- ----------
The results of each segment have been prepared using accounting
policies consistent with those of the Group as a whole.
6. Exceptional items
During the year ended 31 December 2022, the Group incurred
exceptional costs totalling GBP31.8m (2021: GBP12.9m).
Exceptional items during the current year comprised: GBP5.65m in
relation to the derecognition of the home credit division (S.D.
Taylor Limited) which was placed into administration on 15 March
2022; GBP13.71m impairments recognised on related intercompany
receivable balances held with the division; and GBP12.41m of costs
and redress in relation to the Scheme.
Exceptional items during the prior year comprised: GBP1.6m
advisory fees incurred (equity related fees are treated as
non-deductible for tax purposes), GBP2.2m additional interest costs
accrued in relation to the guarantor loans redress program; GBP0.6m
relating to the guarantor loans redundancies arising as a result of
the Group's announcement on 30 June 2021 to place the division into
managed run-off; and GBP8.5m in relation to the write-down of
assets and the recognition of liabilities in the home credit
division as a result of the business being placed into
administration on 15 March 2022 and its financial statements no
longer being prepared on a going concern basis.
7. Taxation
For the year ended 31 December 2022, the Group has continued not
to recognise a deferred tax asset on its current year losses.
Deferred tax assets not recognised in current and prior year losses
as at 31 December 2022 totalled GBP30.1m (2021: GBP21.8m
unrecognised deferred tax asset).
Year
ended Year ended
31 Dec 31 Dec
2022 2021
GBP000 GBP000
---------------------------------------- -------- ----------
Current tax charge
Current tax - -
Prior period adjustment to current tax - 75
---------------------------------------- -------- ----------
Total current tax charge - 75
Deferred tax charge(1) - -
Prior period adjustment to deferred tax - -
---------------------------------------- -------- ----------
Total tax (credit)/charge - 75
---------------------------------------- -------- ----------
1 Unrecognised deferred tax assets arising from tax losses in
the current year were GBP6.3m (2021: GBP5.0m).
The difference between the total tax expense shown above and the
amount calculated by applying the standard rate of UK corporation
tax to the profit before tax is as follows:
Year
ended Year ended
31 Dec 31 Dec
2022 2021
GBP000 GBP000
---------------------------------------------------- -------- ----------
Loss before taxation (56,359) (29,610)
Tax on loss on ordinary activities at standard rate
of UK corporation tax of 19% (2021: 19%): (10,708) (5,626)
Effects of:
---------------------------------------------------- -------- ----------
Fixed asset differences 62 114
Non-deductible expenses 4,329 456
Share-based payments - 7
Prior year adjustments - 75
Deferred tax assets not recognised on current year
losses 6,317 5,049
---------------------------------------------------- -------- ----------
Total tax (credit)/charge - 75
---------------------------------------------------- -------- ----------
Certain exceptional items and costs related to the derecognition
of the home credit division and related impairments as well as
Scheme costs have been treated as non-deductible for tax
purposes.
The Finance Bill 2021 had its third reading on 24 May 2021 and
is now considered substantively enacted. This will have a
consequential effect on the Group's future tax charge and means
that the 25% main rate of corporation tax and marginal relief will
be relevant for any asset sales or timing differences expected to
reverse on or after 1 April 2023.
8. Loss per share
Year ended
31 Dec Year ended
2022 31 Dec 2021
---------------------------------------------------- ----------- ------------
Retained loss attributable to Ordinary Shareholders
(GBP000) (56,359) (29,685)
Weighted average number of Ordinary Shares at
year ended 31 December 312,437,422 312,437,422
Basic and diluted loss per share (pence) (18.04)p (9.50)p
---------------------------------------------------- ----------- ------------
The loss per share was calculated on the basis of net loss
attributable to Ordinary Shareholders divided by the weighted
average number of Ordinary Shares in issue. The basic and diluted
loss per share is the same, as the exercise of any share options
would reduce the loss per share and is anti-dilutive. At 31
December 2022, nil shares were held as options and nil shares were
held in treasury (2021: nil).
Year
ended Year ended
31 Dec 31 Dec
2022 2021
000s 000s
----------------------------------------------------- --------- ----------
Weighted average number of potential Ordinary Shares
that are not currently dilutive - 339
----------------------------------------------------- --------- ----------
The weighted average number of potential Ordinary Shares that
are not currently dilutive includes the Ordinary Shares that the
Company may potentially issue relating to its share option schemes
and share awards under the Group's long-term incentive plans and
SAYE schemes. The amount is based upon the average number of shares
over the year that would have been issued if 31 December 2022 was
the end of the contingency period. There were no active LTIP or
SAYE schemes during the year ended 31 December 2022.
9. Dividends
As a result of the significant reported losses over the past
three years, the Company does not have any distributable reserves
and is therefore not in a position to declare a final dividend.
Assuming that the Proposed Recapitalisation is successfully
completed, the Board is committed to completing a process, subject
to shareholder and Court approval, to create sufficient
distributable reserves so that the Company is able to resume the
payment of cash dividends to shareholders as soon as it is
appropriate to do so.
As reported in the Interim Results to 30 June 2022, the Group
did not declare a half-year dividend during the first half of 2022
(2021: nil).
10. Amounts receivable from customers
2022 2021
GBP000 GBP000
---------------------------------- -------- --------
Gross carrying amount 212,153 265,021
Loan loss provision (35,049) (57,037)
---------------------------------- -------- --------
Amounts receivable from customers 177,104 207,984
---------------------------------- -------- --------
The movement on the loan loss provision for the period relates
to the provision at the branch-based lending, guarantor loans and
home credit divisions for the year.
Included within the gross carrying amount above are unamortised
broker commissions, see table below:
2022 2021
GBP000 GBP00
------------------------------------- ------- ------
Unamortised broker commissions 7,348 6,653
------------------------------------- ------- ------
Total unamortised broker commissions 7,348 6,653
------------------------------------- ------- ------
The fair value of amounts receivable from customers are:
2022 2021
GBP000 GBP00
------------------------------------------------ ------- -------
Branch-based lending(1) 222,856 208,440
Home credit(2) - 36,368
Guarantor loans(1) 12,316 31,366
------------------------------------------------ ------- -------
Fair value of amounts receivable from customers 235,172 276,174
------------------------------------------------ ------- -------
1 Includes amounts receivable from customers which have been
provided for as part of the scheme of arrangement for further
detail.
2 The home credit division was placed into administration on 15
March 2022 and derecognised from the Group.
Fair value has been derived by discounting expected future cash
flows (net of collection costs) at the credit risk adjusted
discount rate at the balance sheet date. Under IFRS 13 Fair Value
Measurement, receivables are classed as Level 3 which defines fair
value measurements as those derived from valuation techniques that
include inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
2022 2021
Maturity of amounts receivable from customers: GBP000 GBP00
----------------------------------------------- ------- -------
Due within one year 75,135 109,148
Due in more than one year 101,969 98,836
----------------------------------------------- ------- -------
Amounts receivable from customers 177,104 207,984
----------------------------------------------- ------- -------
Analysis of receivables from customers
Stage Stage Stage
1 2 3 Total
31 December 2022 GBP000 GBP000 GBP000 GBP000
----------------------- -------- --------- -------- ---------
Branch-based lending 159,594 27,878 8,658 196,130
Guarantor loans - 13,510 2,513 16,023
----------------------- -------- --------- -------- ---------
Gross carrying amount 159,594 41,388 11,171 212,153
----------------------- -------- --------- -------- ---------
Branch-based lending (9,332) (12,476) (7,365) (29,173)
Guarantor loans - (3,803) (2,073) (5,876)
----------------------- -------- --------- -------- ---------
Loan loss provision (9,332) (16,279) (9,438) (35,049)
----------------------- -------- --------- -------- ---------
Branch-based lending 150,262 15,402 1,293 166,957
Guarantor loans - 9,707 440 10,147
----------------------- -------- --------- -------- ---------
Net amounts receivable 150,262 25,109 1,733 177,104
----------------------- -------- --------- -------- ---------
Stage Stage Stage
1 2 3 Total
31 December 2021 GBP000 GBP000 GBP000 GBP000
----------------------- -------- --------- --------- ---------
Branch-based lending 141,979 33,723 7,138 182,840
Home credit - 32,162 12,975 45,137
Guarantor loans - 30,768 6,276 37,044
----------------------- -------- --------- --------- ---------
Gross carrying amount 141,979 96,653 26,389 265,021
----------------------- -------- --------- --------- ---------
Branch-based lending (6,831) (13,347) (5,481) (25,659)
Home credit - (9,186) (11,911) (21,097)
Guarantor loans - (5,965) (4,316) (10,281)
----------------------- -------- --------- --------- ---------
Loan loss provision (6,831) (28,498) (21,708) (57,037)
----------------------- -------- --------- --------- ---------
Branch-based lending 135,148 20,376 1,657 157,181
Home credit - 22,976 1,064 24,040
Guarantor loans - 24,803 1,960 26,763
----------------------- -------- --------- --------- ---------
Net amounts receivable 135,148 68,155 4,681 207,984
----------------------- -------- --------- --------- ---------
11. Deferred tax asset/(liability)
GBP000
------------------------------------------ ------
At 31 December 2021 -
------------------------------------------ ------
Prior period adjustment to deferred tax -
Reversal of prior year deferred tax assets -
------------------------------------------ ------
At 31 December 2022 -
------------------------------------------ ------
Consistent with prior years, the Group has not recognised a
deferred tax asset during the financial year on its losses due to
the uncertainty in the regulatory and macroeconomic environment.
The Group reviews the carrying amount of deferred tax assets at
each balance sheet date and reduces it to the extent that it is no
longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
The deferred tax asset is attributable to temporary timing
differences and carried forward losses arising in respect of:
2022 2021
GBP000 GBP000
-------------------------------------- -------- --------
Accelerated tax depreciation 334 271
Carried forward losses 26,747 18,214
Restatement of loan loss spreading (22) (30)
Other short-term timing differences - 317
Unpaid employer pension contributions 73 100
FRS 102 adoption (2) (3)
IFRS 16 transitional adjustment 12 15
IFRS 9 transitional adjustment 2,457 2,949
Unutilised provisions 413 -
Unpaid employee remuneration 87 -
Unpaid donations 2 4
Unrecognised tax losses (30,101) (21,837)
-------------------------------------- -------- --------
Net deferred tax asset - -
-------------------------------------- -------- --------
The Finance Bill 2021 had its third reading on 24 May 2021 and
is now considered substantively enacted. This will have a
consequential effect on the Group's future tax charge and means
that the 25% main rate of corporation tax and marginal relief will
be relevant for any asset sales or timing differences expected to
reverse on or after 1 April 2023.
12. Trade and other payables and provisions
2022 2021
GBP000 GBP000
----------------------------- ------- -------
Trade creditors and payables 10,941 955
Other creditors 1,992 3,932
Current tax liability - -
Accruals and deferred income 15,432 13,488
----------------------------- ------- -------
28,365 18,375
----------------------------- ------- -------
Provisions - Group
Plevin Onerous contracts Complaints Dilapidations Scheme provision Restructuring Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ------- ----------------- ---------- ------------- ---------------- ------------- -------
Balance at 31
December 2020 49 - 5,129 1,322 15,313 - 21,813
Charge during the
year - 282 4,936 15 2,251 601 8,085
Utilised (49) - (3,432) (68) (636) (70) (4,255)
--------------------- ------- ----------------- ---------- ------------- ---------------- ------------- -------
Balance at 31
December 2021 - 282 6,633 1,269 16,928 531 25,643
--------------------- ------- ----------------- ---------- ------------- ---------------- ------------- -------
Derecognition of home
credit division(1) - (282) (3,636) (230) - - (4,148)
Charge during the
year - - - 390 9,502 - 9,892
Utilised - - (232) - - (465) (697)
Balance at 31
December 2022 - - 2,765 1,429 26,430 66 30,690
--------------------- ------- ----------------- ---------- ------------- ---------------- ------------- -------
(1) The Group's home credit division was placed into
administration on 15 March 2022.
Provisions are recognised for present obligations arising as a
consequence of past events where it is more likely than not that a
transfer of economic benefit will be necessary to settle the
obligation, which can reliably be estimated.
The Group is pursuing the Scheme in order to resolve the
outstanding regulatory issues and compromise its redress
liabilities. Although the independent review of the Group's
branch-based lending division carried out in 2021 identified no
systemic issues requiring redress, as this division and the
guarantor loans division (now in collect-out) trade out of the same
legal entity (Everyday Lending Limited), the Scheme encompasses
potential claims from both divisions in order to ensure equitable
treatment of customers. The publication of the Practice Statement
Letter on 17 March 2023 provides details regarding the Scheme. The
Group has included a provision of GBP26.4m as at 31 December 2022
based on the amount it expects to be available for redress
creditors and costs associated with the Scheme. If the Scheme is
successful, it would compromise redress liabilities for loan
activity prior to 31 March 2021, however it is possible that claims
relating to post 31 March 2021 loan activity could increase in the
future due to unforeseen circumstances and/or if FOS were to change
its policy with respect to how such claims are adjudicated. The
Group has recognised a provision for business as usual (BAU)
complaints received at year end of GBP2.8m as at 31 December 2022
(2021: GBP6.6m). This is in relation to potential outflows to
customers related to past non-compliance with regulations relating
to affordability assessments. Judgement is applied to determine the
quantum of such provisions, including making assumptions regarding
the extent to which the complaints already received may be upheld,
average redress payments and related administrative costs.
The home credit division was placed into administration on 15
March 2022 and therefore is no longer part of the Group as at 31
December 2022.
13. Contingent liabilities
A contingent liability is a possible obligation depending on
whether some uncertain future event occurs. During the normal
course of business, the Group is subject to regulatory reviews and
challenges. All material matters arising from such reviews and
challenges are assessed, with the assistance of external
professional advisors where appropriate, to determine the
likelihood of the Group incurring a liability as a result. In those
instances, including future thematic reviews performed by the
regulator in response to recent challenges noted in the industry,
where it is concluded that it is more likely than not that a
payment will be made, a provision is established based on
management's best estimate of the amount required to meet such
liability at the relevant balance sheet date.
The Group is pursuing the Scheme which if successful, would
compromise redress liabilities for loan activity prior to 31 March
2021. It is possible that claims relating to post 31 March 2021
loan activity could increase in the future due to unforeseen
circumstances and/or if FOS were to change its policy with respect
to how such claims are adjudicated. Should the final outcome of
these complaints differ materially from management's current
estimates, the cost of resolving such complaints could be higher
than expected. It is however not possible to estimate any such
increase reliably.
14. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation. The Company
received dividend income of GBPnil from its subsidiary undertakings
during the year (2021: GBPnil). The Company receives charges from
and makes charges to these related parties in relation to shared
costs, staff costs and other costs incurred on their behalf.
Intra-Group transactions between the Company and the fully
consolidated subsidiaries or between fully consolidated
subsidiaries are eliminated on consolidation.
The Loan Smart charity was closed on 11 July 2022. During the
year, the Company donated GBPnil to Loan Smart (2021:
GBP15,000).
Information about the remuneration of individual Directors is
provided in the Annual Report and Accounts.
Toby Westcott who is a Nominee Director of the Company receives
no direct remuneration from the Company. However, Alchemy Special
Opportunities LLP were remunerated for the services of Toby
Westcott through a services agreement. This figure equates to a
GBP75k fee plus VAT per annum. Total fees paid in relation to these
services totalled GBP75k (plus VAT) for the year ended 31 December
2022 (2021: GBP75k+VAT).
15. Share capital
All shares in issue are Ordinary 'A' Shares consisting of
GBP0.05 per share. All 312,437,422 shares are fully paid up.
The Company's share capital is denominated in Sterling. The
Ordinary Shares rank in full for all dividends or other
distributions, made or paid on the Ordinary Share capital of the
Company.
During the year, the Company cancelled nil shares (2021: nil
shares) and issued nil shares (2021: nil shares).
Share movements
Number
---------------------------- -----------
Balance at 31 December 2021 312,437,422
Cancellation of shares -
Issue of shares -
---------------------------- -----------
Balance at 31 December 2022 312,437,422
---------------------------- -----------
Non-Standard Finance plc sponsors the Non-Standard Finance plc
2019 Employee Benefit Trust ('EBT') which is a discretionary trust
established on 21 October 2019 for the benefit of the employees of
the Group. The Company has appointed Estera Trust (Jersey) Limited
to act as trustee of the EBT. The trustee has waived the right to
receive dividends on the shares it holds. As at 31 December 2022,
the EBT held nil (2021: nil) shares in the Company with a cost of
GBPnil (2021: GBPnil) and a market value of GBPnil (2021:
GBPnil).
16. Share premium
The share premium account is used to record the aggregate amount
or value of premiums paid when the Company's shares are issued at a
premium.
Total
GBP000
---------------------------- -------
Balance at 31 December 2021 180,019
Capital reduction -
Issue of shares -
---------------------------- -------
Balance at 31 December 2022 180,019
---------------------------- -------
17. Net cash generated/(used) in operating activities
Year ended Year ended
31 Dec 31 Dec
2022 2021
GBP000 GBP000
------------------------------------------------------------ ---------- ----------
Operating loss (27,308) (3,631)
Taxation refund/(paid) 1,353 -
Interest portion of the repayment of lease liabilities (816) (983)
Depreciation 2,677 3,833
Share-based payment charge - 34
Amortisation of intangible assets 979 2,727
Derecognition and impairments related to administration
of home credit division 19,361 -
Exceptional charge for write-down of assets and recognition
of liabilities of home credit division - 8,542
Profit/(loss) on disposal of property, plant and equipment 123 1,022
Decrease/(increase) in amounts receivable from customers 13,374 48,522
Decrease/(increase) in receivables 332 (446)
(Decrease)/increase in payables and provisions 7,841 (1,858)
------------------------------------------------------------ ---------- ----------
Cash generated/(used) in operating activities 17,916 57,762
------------------------------------------------------------ ---------- ----------
18. Subsequent Events
The Everyday Lending Limited Directors, supported by the Group
Directors, decided to pursue a scheme of arrangement to address the
Group's redress liabilities and a practice statement letter for the
scheme was published on 17 March 2023 (refer to note 24 for amounts
provided for as part of this).
On 7 February 2023, the S.D. Taylor administrators repaid a
further GBP3m to the Group's secured lenders, thereby reducing the
Group's gross loans and borrowings to GBP252m.
APPIX
Glossary of alternative performance measures and key performance
indicators
The Group has developed a series of alternative performance
measures that it uses to monitor the financial and operating
performance of each of its business divisions and the Group as a
whole. These measures seek to adjust reported metrics for the
impact of non-cash and other accounting charges (including
modification loss) that make it more difficult to see the true
underlying performance of the business. These APMs are not defined
or specified under the requirements of International Financial
Reporting Standards, however we believe these APMs provide readers
with important additional information on our business. To support
this, we have included a reconciliation of the APMs we use, how
they are calculated and why we use them on the following pages.
Alternative performance
measure Definition
----------------------- --------------------------------------------------------
Net debt Gross borrowings less cash at bank
Normalised figures are before fair value adjustments,
amortisation of acquired intangibles and exceptional
Normalised revenue items (refer to note 7).
--------------------------------------------------------
Normalised operating
profit
--------------------------------------------------------
Normalised profit
before tax
Normalised earnings
per share
----------------------- --------------------------------------------------------
Key performance
indicator
----------------------- --------------------------------------------------------
Impairments/revenue Impairments as a percentage of normalised revenues
----------------------- --------------------------------------------------------
Impairments (including Impairments (including modification and derecognition
modifications)/revenue losses) as a percentage of normalised revenues
----------------------- --------------------------------------------------------
Impairments/average Impairments as a percentage of 12-month average
loan book net loan book, excluding fair value adjustments
----------------------- --------------------------------------------------------
Net loan book Net loan book before fair value adjustments but
after deducting any impairment due
----------------------- --------------------------------------------------------
Net loan book growth Annual growth in the net loan book
----------------------- --------------------------------------------------------
Operating profit Normalised operating profit as a percentage of
margin normalised revenues
----------------------- --------------------------------------------------------
Cost:income ratio Normalised administrative expenses as a percentage
of normalised revenue
----------------------- --------------------------------------------------------
Return on asset Normalised operating profit as a percentage of
average loan book excluding fair value adjustments
----------------------- --------------------------------------------------------
Revenue yield Normalised revenue as a percentage of average
loan book excluding fair value adjustments
----------------------- --------------------------------------------------------
Risk adjusted margin Normalised revenue less impairments as a percentage
of average loan book excluding fair value adjustments
----------------------- --------------------------------------------------------
Alternative performance measures reconciliation
1. Net debt
31 Dec 2022 31 Dec 2021
GBP000 GBP000
---------------------------- ----------- -----------
Borrowings 255,000 330,000
Cash at bank and in hand(1) (31,732) (114,544)
---------------------------- ----------- -----------
223,268 215,456
---------------------------- ----------- -----------
1 Cash at bank and in hand excludes cash held by the Parent
Company that sits outside of the security group.
This is deemed useful to show total borrowings if cash available
at year end was used to repay borrowing facilities.
2. Normalised and reported revenue
Branch-based
lending Guarantor loans
------------------------ ---------------- -----------------
31 Dec 31 Dec 31 Dec 31 Dec
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
------------------------ ------- ------- -------- -------
Normalised and reported
revenue 84,470 79,940 6,552 13,046
3. Normalised operating profit/(loss)
Branch-based
lending Guarantor loans
--------------------------------- ---------------- -----------------
31 Dec 31 Dec 31 Dec 31 Dec
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
--------------------------------- ------- ------- -------- -------
Reported operating profit/(loss) 7,196 13,653 835 ( 272)
Add back fair value adjustments
and amortization of acquired
intangibles - - - -
Add back exceptional items - - - 2,207
Normalised operating
profit/(loss) 7,196 13,653 835 1,935
--------------------------------- ------- ------- -------- -------
Fair value adjustments and amortisations have been excluded due
to them being non-business-as-usual transactions. They result from
the Group making acquisitions and do not reflect the underlying
performance of the business. Removing this item is deemed to give a
fairer representation of revenue within the relevant financial
year.
4. Normalised profit/(loss) before tax
31 Dec 2022 31 Dec 2021
GBP000 GBP000
--------------------------------------------------- ----------- -----------
Reported loss before tax (56,359) (29, 610 )
Add back fair value adjustments - -
Add back amortisation and write-off of intangibles - -
Add back exceptional items 31,768 12,930
--------------------------------------------------- ----------- -----------
Normalised (loss)/profit before tax (24,591) (16,680)
--------------------------------------------------- ----------- -----------
Exceptional items have been excluded due to them being
non-business-as-usual transactions. They are one-off and are not as
a result of underlying business-as-usual transactions (refer to
note 7 for further detail) and therefore do not reflect the
underlying performance of the business. Hence, removing these items
is deemed to give a fairer representation of the underlying profit
performance within the financial year.
5. Normalised profit/(loss) for the year
Group
--------------------------------------------- ------------------------
31 Dec 2022 31 Dec 2021
GBP000 GBP000
--------------------------------------------- ----------- -----------
(29, 685
Reported loss for the year (56,359) )
Add back exceptional items 31,768 12,930
Adjustment for tax relating to above items - -
--------------------------------------------- ----------- -----------
( 16,755
Normalised profit/(loss) for the year (24,591) )
--------------------------------------------- ----------- -----------
Weighted average shares 312,437,422 312,437,422
--------------------------------------------- ----------- -----------
Normalised earnings/(loss) per share (pence) (7.87)p (5.36)p
--------------------------------------------- ----------- -----------
Exceptional items have been excluded due to them being
non-business-as-usual transactions. They are one-off and are not as
a result of underlying business-as-usual transactions (refer to
note 7 for further detail) and therefore do not reflect the
underlying performance of the business. Hence, removing these items
is deemed to give a fairer representation of the underlying
earnings/(loss) per share within the financial year.
6. Impairment as a percentage of revenue
Branch-based
lending Guarantor loans
--------------------------- ------------------ ------------------------
31 Dec 31 Dec 31 Dec 31 Dec
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
--------------------------- -------- -------- ------- ---------------
Normalised revenue 84,470 79,940 6,552 13,046
Impairment (26,704) (18,994) 1,595 1,061
--------------------------- -------- -------- ------- ---------------
Impairment as a percentage
revenue 31.6% 23.8% (24.4)% (8.1)%
--------------------------- -------- -------- ------- ---------------
Branch-based
lending Guarantor loans
----------------------------- ------------------ ------------------------
31 Dec 31 Dec 31 Dec 31 Dec
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
----------------------------- -------- -------- ------- ---------------
Normalised revenue 84,470 79,940 6,552 13,046
Impairment and modifications (26,954) (20,337) 1,583 (417)
----------------------------- -------- -------- ------- ---------------
Impairment and modifications
as a percentage revenue 31.9% 25.5% (24.2)% 3.2%
----------------------------- -------- -------- ------- ---------------
Impairment as a percentage revenue is a key measure for the
Group in monitoring risk within the business.
7. Impairment as a percentage loan book
Branch-based
lending Guarantor loans
--------------------------- ------------------ -----------------
31 Dec 31 Dec 31 Dec 31 Dec
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
--------------------------- -------- -------- -------- -------
26,
Opening net loan book 157,181 171,460 763 59,794
Closing net loan book 166,957 157,181 10,147 26, 763
Average net loan book 161,460 163,724 17,095 40,609
Impairment (26,704) (18,994) 1,595 1,061
--------------------------- -------- -------- -------- -------
Impairment as a percentage
loan book 16.5% 11.6% (9.3)% (2.6%)
--------------------------- -------- -------- -------- -------
Impairment as a percentage loan book allows review of impairment
level movements year on year.
8. Net loan book growth
Branch-based
lending Guarantor loans
---------------------- ---------------- -----------------
31 Dec 31 Dec 31 Dec 31 Dec
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
---------------------- ------- ------- -------- -------
26,
Opening net loan book 157,181 171,460 763 59,794
Closing net loan book 166,957 157,181 10,147 26, 763
---------------------- ------- ------- -------- -------
Net loan book growth 6.2% (8.3%) (62.1)% (55.2%)
---------------------- ------- ------- -------- -------
9. Return on asset
Branch-based
lending Guarantor loans
---------------------------- ---------------- -----------------
31 Dec 31 Dec 31 Dec 31 Dec
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
---------------------------- ------- ------- -------- -------
Normalised operating profit 7,196 13,653 835 1,935
Average net loan book 161,460 163,724 17,095 40,609
---------------------------- ------- ------- -------- -------
Return on asset 4.5% 8.3% 4.9% 4.8%
---------------------------- ------- ------- -------- -------
The return on asset measure is used internally to review the
return on the Group's primary key assets.
10. Revenue yield
Branch-based
lending Guarantor loans
------------------------- ---------------- -----------------
31 Dec 31 Dec 31 Dec 31 Dec
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
------------------------- ------- ------- -------- -------
Normalised revenue 84,470 79,940 6,522 13,046
Average net loan book 161,460 163,724 17,095 40,609
------------------------- ------- ------- -------- -------
Revenue yield percentage 52.3% 48.8% 38.3% 32.1%
------------------------- ------- ------- -------- -------
Revenue yield percentage is deemed useful in assessing the gross
return on the Group's loan book.
11. Risk adjusted margin
Branch-based
lending Guarantor loans
------------------------- ------------------ -----------------
31 Dec 31 Dec 31 Dec 31 Dec
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
------------------------- -------- -------- -------- -------
Normalised revenue 84,470 79,940 6,552 13,046
Impairments (26,704) (18,994) 1,595 1,061
Normalised risk adjusted
revenue 57,766 60,946 8,147 14,107
Average net loan book 161,460 163,724 17,095 40,609
------------------------- -------- -------- -------- -------
Risk adjusted margin
percentage 35.8% 37.2% 47.7% 34.7%
------------------------- -------- -------- -------- -------
The Group defines normalised risk adjusted revenue as normalised
revenue less impairments. Risk adjusted revenue is not a
measurement of performance under IFRSs, and you should not consider
risk adjusted revenue as an alternative to profit before tax as a
measure of the Group's operating performance, as a measure of the
Group's ability to meet its cash needs or as any other measure of
performance under IFRSs. The risk adjusted margin measure is used
internally to review an adjusted return on the Group's primary key
assets.
12. Operating profit margin
Branch-based
lending Guarantor loans
------------------------ ---------------- -----------------
31 Dec 31 Dec 31 Dec 31 Dec
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
------------------------ ------- ------- -------- -------
Normalised operating
profit 7,196 13,653 835 1,935
Normalised revenue 84,470 79,940 6,552 13,046
------------------------ ------- ------- -------- -------
Operating profit margin
percentage 8.5% 17.1% 12.8% 14.8%
------------------------ ------- ------- -------- -------
13. Cost to income ratio
Branch-based
lending Guarantor loans
------------------------ ------------------ -----------------
31 Dec 31 Dec 31 Dec 31 Dec
2022 2021 2022 2021
GBP000 GBP000 GBP00 GBP000
------------------------ -------- -------- ------- --------
Normalised revenue 84,470 79,940 6,552 13,046
Administration expense (50,493) (46,294) (7,300) (10,695)
------------------------ -------- -------- ------- --------
Operating profit margin
percentage 59.8% 57.9% 111.4% 82.0%
------------------------ -------- -------- ------- --------
This measure allows review of cost management.
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END
FR UWRVROOUSURR
(END) Dow Jones Newswires
April 28, 2023 03:21 ET (07:21 GMT)
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