TIDMPCF
RNS Number : 7489Q
PCF Group PLC
30 June 2022
30 June 2022
PCF Group plc
("PCF", the "Company" or the "Group")
Interim Results
Six months to 31 March 2022
The following summary of the consolidated interim financial
statements should be read in conjunction with PCF Group plc's
Annual Report & Financial Statements 2021, notably the emerging
risks and uncertainties outlined in the Risk Overview.
Garry Stran, Chief Executive Officer, commented:
'During the period under review, the Group focused management
and financial resource on the remediation of our control and
governance framework, as a result of the well documented challenges
the Group has faced. These results reflect the challenges, which
the Group has now largely addressed. Management's energies and
focus can now return to creating and running an efficient and
digitalised business, to drive a return to profitability and the
creation of enhanced shareholder value over the medium term.'
Business highlights:
-- Net loans and advances reduced to GBP321 million (September 2021: GBP364 million).
-- Total new business originations were 40% lower at GBP62
million (2021: GBP104 million), of which GBP22 million were
originated in the month of March 2022. These origination numbers
exclude Azule brokered lending of GBP15 million (2021: GBP19
million), which is not included on our balance sheet, but generates
commission income in our profit and loss statement.
-- The focus remained on writing high quality business, with 87%
(2021: 93%) of originations in our top four credit grades. There
was a strategic change at the end of this interim period, with our
risk appetite returning to pre-COVID levels, as the impact of
COVID-19 receded. This is intended to ensure a more appropriate
balance of risk in our new loan originations in order to increase
yield.
-- Customer savings balances reduced to GBP291 million
(September 2021: GBP327 million) with circa 7,600 customers
(September 2021: circa 8,100) mirroring the reduction in the
lending book.
Financial highlights:
-- Statutory loss before tax of GBP7.5 million (2021: Statutory
profit before tax of GBP1.4 million)(1) , with the reduction being
driven by lower net interest income due to reduced loans and
advances and compressed margin, and higher operating expenses, due
to remediation and investment spend.
-- Adjusted loss before tax(2) of GBP4.6 million (2021: Adjusted
profit before tax of GBP1.9 million)(1) .
-- Net operating income decreased by 26% to GBP10.7 million (2021: GBP14.5 million)(1) .
-- Net interest margin(2) decreased to 5.9% (2021: 6.7%)(1) .
-- Staff and operating expenses increased to GBP15.8 million
(2021: GBP8.9 million) driven partly by remediation costs including
dedicated staff, professional advisers and third parties of GBP2.9
million (2021: GBP0.5 million), and further investment in staff, to
ensure that the operating platform is suitable to recommence
growth.
-- Cost to income ratio(2) increased to 156% (2021: 67%)(1) .
-- Credit impairment charge of GBP1.5 million (2021: GBP3.4
million)(1) with the reduction primarily driven by lower loans and
advances, and the non-recurrence of a provision increase on
defaulted receivables in the prior period.
-- Impairment charge as a percentage of average gross loans(2)
was 0.8% (2021: 1.5%)(1) , reflecting the higher credit quality of
the portfolio.
-- Statutory return on average equity(2) of (33.1)% (2021: 4.3%).
-- Loss per share of (3.0) pence (2021: Earnings per share of 0.4 pence)(1) .
-- Total Capital Ratio of 17.0% (September 2021: 17.5%).
-- Leverage ratio of 11.9% (September 2021: 11.1%).
-- Liquidity Coverage Ratio of 609% (September 2021: 904%).
(1) The prior period balances have been restated or re-presented
for the financial year. Refer to note 4 for further details.
(2) Refer to section non-IFRS performance measures on page 6 for
further details of the definition of this non-IFRS performance
measure.
(3) Ratios are disclosed on a transition arrangement basis.
Refer to page 39 for regulatory capital and leverage ratios
presented on a fully loaded basis
Other Matters
On the 7 June 2022, the Company announced that following the
Company's possible offer announcement on 31 May 2022, PCF had been
contacted by a party in relation to considering a possible
combination under which PCF would acquire the other company.
Following discussions, the party and the Company have agreed not to
progress the proposal and therefore have terminated
discussions.
At 10am today, PCF Bank will be holding a question-and-answer
session for investors via the Investor Meet Company platform. The
session is open to all existing and potential shareholders.
Questions can be submitted pre-event via your Investor Meet Company
dashboard up until 9am the day before the meeting or at any time
during the event.
Investors can sign up to Investor Meet Company and register for
the event using the below link:
https://www.investormeetcompany.com/pcf-group-plc/register-investor
Chief Executive Officer's statement for the six months ended 31
March 2022
Overview
Unusually this statement for the interim period comes shortly
after the publication of our Annual Report & Financial
Statements 2021, as we return to a normalised reporting schedule
following a period of uncertainty and challenge for the business
and our colleagues. The efforts and willingness of colleagues to go
'above and beyond' in respect of their dedication to bringing the
reporting back on track, following a significant hiatus, is greatly
appreciated, and I would like to take this opportunity to thank all
of those involved.
The Group's performance in the period inevitably reflects the
control and governance challenges we faced, resulting in an
increased cost base, driven by significant expenses to remediate
legacy issues, and the essential transformation of our systems and
functions to prepare for growth. As the remediation activity nears
its conclusion we will be able to give more focus to our goal of
becoming a data-driven business to enable faster, cheaper, and more
consistent decision making and analysis across our business.
Investment in technology, in particular data and automation,
remains at the heart of our transformation programme, together with
our continued work on cultural change.
Capital management has also been a key focus, with the continued
prudent management of the loan book adding to pressure on our
income line. With hindsight, the switch to higher credit quality
lending appears well-founded, during a period of heightened
economic and geopolitical unrest. I look forward to growing the
lending book once we have stronger confidence in the external
environment, and our improved internal controls, subject to our
desired capital position.
As a result of the publication of our Annual Report &
Financial Statements for the financial year 2021 our shares resumed
trading on the 31 May 2022.
The geopolitical uncertainty and dynamic inflationary and
interest rate environment of recent months has added to the
challenges we face, but these are being managed at both the
operational and strategic levels.
Culture, governance and controls, and technology
Following significant senior hires to the Board and Executive
team over the last twelve months, the Group has continued to
progress in embedding our strengthened culture and governance
structure.
The cultural improvement programme ensures our colleagues feel
comfortable and empowered to speak up and challenge decisions
should they have concerns. I am confident that all colleagues would
now proactively raise awareness of, and take personal
responsibility for managing risk, speaking up and doing the right
thing. Our new purpose, mission and values reflect the importance
of this within PCF Group.
Following a rework of the Group's Risk Management Framework
(RMF) and control environment, we have continued to hire colleagues
to fill key second line of defence roles, and enhance the Group's
stress-testing and credit analytics capabilities. The Group's new
RMF was approved by the Board in March 2022.
A key area of focus for the Group is for our operational areas
to become totally data-driven to ensure speed and consistency of
service, decision making, and pricing across our product range. The
Group has continued its investment in IT systems, infrastructure
and skilled people to continue our journey towards a
technologically advanced, digital, and modern operating platform.
We plan to leverage economies of scale and move towards our
ultimate goal of a zero marginal cost operating model once these
systems, supported by our new approach to data-driven decisioning
are fully implemented.
Remediation update and transformation focus
Since the start of the remediation programme in 2021, the Group
has successfully achieved a number of significant milestones. Our
statutory financial reporting is now up to date, with the
publication of the Annual Report & Financial Statements for
2020 and 2021, along with the interim reports.
A comprehensive Financial Position and Prospects Procedures
(FPPP) review and resulting report was commissioned, and we have
progressed well with the control improvements required. A new RMF
is currently being embedded across the organisation, and the
Financial Control Framework (FCF) has made good progress. These
improvements in building a more robust control framework have all
been underpinned by the strengthened culture and governance
structure.
Following the completion of our remediation programme, we will
continue to transform our functions with an aspiration to attain
market leading capability within three years.
The transformation programme is focused on automation, improving
the customer and partner experience, and ensuring that our control
framework is fit for purpose. We will do this through executing
against the following five objectives:
-- Automation of our business service platform and self-service capability.
-- Increased automation of our Financial Reporting, and data-led
budgeting and scenario planning.
-- Embedding the Risk Management Framework across the Group.
-- The creation and leveraging of an improved data warehouse to
drive intelligent decisions, at speed, through an automated and
self-service led delivery platform.
-- The continued development of our people and culture with a
specific focus on empowerment and risk management.
Events since 31 March 2022
The suspension of our shares was removed on 31 May 2022, upon
the publication of the Annual Report & Financial Statements
2021. The suspension from trading on Alternative Investment Market
(AIM) had been in place from 1 April 2022 due to the delay in the
publication of the Annual Report & Financial Statements
2021.
To manage capital constraints, and the corresponding implication
for our loan originations, we have decided to accelerate an element
of our capital raising, by requesting a further investment in the
Company from our majority shareholder Somers Limited of circa GBP4
million. We received the first tranche of GBP2.7 million on 7 June
2022, with the second tranche expected in early July.
At the same time we are investigating our strategic
opportunities. To this end, as announced on 31 May 2022, the Group
is in early stage discussions with Castle Trust Capital plc, in
relation to a possible offer for the entire issued, and to be
issued, shares of the Company. These discussions are continuing to
progress.
On the trading side, we have continued to prudently manage our
loan book. Our gross loans and advances have stabilised in recent
months and we expect this trend to continue for the remainder of
this financial year.
Business and financial performance
At a headline level the Group generated a statutory loss before
tax of GBP7.5 million (2021: Statutory profit before tax of GBP1.4
million).
Staff and operating expenses increased to GBP15.8 million (2021:
GBP8.9 million) driven partly by remediation costs including
dedicated staff, professional advisers and third parties of GBP2.9
million (2021: GBP0.5 million). We increased investment in our
people, and third party professional services, driving significant
enhancements to our control functions and processes, and ensuring
that the operating platform is suitable to recommence growth.
Net operating income decreased by GBP3.8 million to GBP10.7
million in the period (2021: GBP14.5 million), largely driven by
lower net interest income, as the loan book decreased and margin
reduced. Net interest margin reduced to 5.9% in the period (2021:
6.7%) as lending attracting higher yields redeemed and was replaced
with lower yielding new assets, with the business continuing to
focus on originating loans in our top four credit grades.
The average loan book in the first half of the financial year
was GBP342 million (2021: GBP426 million). This was as a result of
the prudent capital management over the last twelve months, but has
reduced income.
The credit impairment charge reduced by GBP1.9 million to GBP1.5
million (2021: GBP3.4 million) reflecting the reduced lending book,
and the non-recurrence of a provision increase on defaulted
receivables in the prior period.
On an adjusted basis the loss before tax for the period is
GBP4.6 million (2021: Adjusted profit before tax of GBP1.9
million).
New business origination in the period was lower at GBP62
million (2021: GBP104 million). Origination levels were managed
prudently to ensure the Group maintained an appropriate level of
capital, within regulatory requirements. The second quarter
originations were GBP43 million versus a first quarter of GBP19
million. The business generated originations of GBP22 million in
March 2022 alone, at an attractive yield. This was the third best
month in our history, and demonstrates that our core competencies
remain intact.
The Group's cost to income ratio increased to 156% (2021: 67%),
with the combination of higher expenses from remediation and
investment, and lower net operating income from the reduced balance
sheet and lower margins.
The Group generated a statutory loss after tax of GBP7.5 million
(2021: Statutory profit after tax of GBP1.1 million) which
represents a statutory return on average equity of (33.1)% (2021:
4.3%) and a loss per share of (3.0) pence (2021: Earnings per share
of 0.4 pence).
Capital, funding and liquidity management
The Group remains extremely focused on ensuring it maintains
sufficient levels of capital and liquidity. At 31 March 2022, the
Group had a total capital ratio of 17.0% (September 2021: 17.5%)
and a liquidity coverage ratio of 609% (September 2021: 904%).
The Group's diversified funding model comprises retail deposits,
wholesale funding and drawings from the Bank of England's Term
Funding Schemes. At 31 March 2022, the Group held GBP291 million in
deposits and had drawings of GBP60 million against the Term Funding
Schemes. This is in addition to the GBP7 million of Tier 2 capital
from the facility that we have with British Business Investments
Limited.
Changes to the Board
Our new Chair, Simon Moore, and Senior Independent Director,
Mark Sismey-Durrant, were appointed to the Board on 9 January 2022.
Both have a wealth of experience in the banking sector, which will
prove invaluable to the Board and the wider Group.
In addition the search for an experienced Chair of Board Risk
Committee has been completed and the appropriate regulatory
permissions are being sought for the successful candidate.
Outlook
Financial performance of the Group in the period has been
impacted by the increased expenses due to ongoing remediation and
investment in transformation activities. As the remediation
programme reaches maturity in 2023 financial year, the Group's
expense base will start to reduce, although transformation related
expenses will remain in the short term.
New business origination volumes are expected to be higher in
the second half of the 2022 financial year, although we continue to
prudently manage our lending. Net loans and advances have
stabilised at the end of this reporting period and we anticipate
continued stability in the second half of the financial year. The
increased levels of originations in March 2022 gives me confidence
for the future growth prospects of the Group.
Our move to a more balanced and appropriate blend of risk in our
originations will benefit margin in future periods and in due
course lead to an increase in revenues.
As we fund the majority of our loan originations through retail
deposits, we are exposed to the rising interest rate environment.
As a result we have been proactively managing our fixed term and
notice rates to compete in a challenging market. This could lead to
margin compression, as interest expense increases over time, unless
market conditions are such that the increased cost of funding can
be passed onto borrowers, or the business accepts a different risk
profile of lending assets.
The Group is also actively exploring strategic opportunities to
increase certainty for shareholders and to maximise shareholder
value.
The Board is confident that the prudent management of capital,
and improvements in culture, governance and controls, has laid
solid foundations for future growth. Following the significant
focus on satisfying our statutory financial reporting in recent
times, we can now turn our attention to the future. I am positive
that we now have the right people and controls in place to enable
the Group to achieve its true potential, whether that be as a
stand-alone business or through one of the strategic opportunities
that we are exploring.
G G Stran
Chief Executive Officer
29 June 2022
Financial Review
None-IFRS performance measures
The Group's management believes that the non-IFRS performance
measures included in this Interim Report provide valuable
information to the readers of the financial statements, as they
enable the reader to identify a more consistent basis for comparing
the businesses' performance between financial periods, and provide
more detail concerning the elements of performance which the
managers of these businesses are most directly able to influence,
or are relevant for an assessment of the Group. They also reflect
an important aspect of the way in which operating targets are
defined and performance is monitored by management. However, any
non-IFRS performance measures in this document are not a substitute
for IFRS measures and readers should consider the IFRS measures as
well.
Non-IFRS performance measures glossary
Net interest margin
Definition: net interest income (annualised) divided by average
customer assets (loans and advances to customers). The components
of the calculation are summarised below.
2022 2021*
-----------------------------------------
Average Average
Net interest customer Net interest Net interest customer Net interest
income(1) assets(2) margin income(1) assets(3) margin
GBP'000 GBP'000 % GBP'000 GBP'000 %
----------- ------------- ------------- ----------- -------------
10,032 342,251 5.9% 14,310 426,326 6.7%
----------- ------------- ------------- ----------- -------------
Cost: Income ratio
Definition: Total operating expenses (excluding credit
impairment charge) divided by Net operating income
2022 2021*
-----------------------------------------
Operating Net operating Cost: income Operating Net operating Cost: income
expenses income ratio expenses income ratio
GBP'000 GBP'000 % GBP'000 GBP'000 %
-------------- ------------- ---------- -------------- -------------
16,704 10,697 156.2% 9,774 14,547 67.2%
-------------- ------------- ---------- -------------- -------------
Statutory return on average equity
Definition: Statutory profit/(loss) after tax (annualised)
divided by average equity
2022 2021*
----------------------------------------
Statutory Statutory
Statutory return on Statutory return on
loss after Average average profit after Average average
tax(1) equity(2) equity tax(1) equity(3) equity
GBP'000 GBP'000 % GBP'000 GBP'000 %
----------- ----------- -------------- ----------- -----------
(7,457) 45,127 (33.1)% 1,112 52,412 4.3%
----------- ----------- -------------- ----------- -----------
(1) Annualised on a daycount basis. E.g. for Net interest income
of GBP10,032,000, this is annualised by dividing by 182 (days) and
multiplying by 365 (days), equalling GBP20,119,000.
(2) (Average of balances from 31 March 2022 and 30 September
2021)
(3) (Average of balances from 31 March 2021 and 30 September
2020)
(*) (The prior period balances have been restated or
re-presented for the financial year. Refer to Note 4 for further
details)
Adjusted profit/(loss) before tax
Definition: This represents management's view of underlying
performance. See table below for items excluded from statutory
profit/(loss) to arrive at "Adjusted profit/(loss) before tax". No
"Adjusted profit/(loss)" measure was disclosed in the Interim
Report 2021.
Adjustments 2022 2021
GBP'000 GBP'000
-------- --------
Add back: remediation related expenses 2,881 531
-------- --------
Total 2,881 531
-------- --------
2022 2021*
----------------------------------------------
Statutory Adjusted Statutory Adjusted
loss before loss before profit before profit before
tax Adjustments tax tax Adjustments tax
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------- --------------- ------------ ---------------
(7,457) 2,881 (4,576) 1,367 531 1,898
------------ ------------- --------------- ------------ ---------------
Impairment charge as a % of average gross loans
Definition: Credit impairment charge (annualised) divided by
average gross loans
2022 2021*
---------------------------------------------
Impairment Impairment
charge as charge as
Impairment Average % of average Impairment Average % of average
charge(1) gross loans(2) gross loans charge(1) gross loans(3) gross loans
GBP'000 GBP'000 % GBP'000 GBP'000 %
---------------- -------------- ----------- ---------------- --------------
1,450 353,959 0.8% 3,406 445,647 1.5%
---------------- -------------- ----------- ---------------- --------------
Adjusted return on average equity
Definition: Adjusted profit/(loss) after tax (equivalent to
adjusted loss before tax above, with adjustments tax effected and
annualised) divided by average equity
2022 2021*
---------------------------------------------
Adjusted Adjusted Adjusted Adjusted
loss after Average return on profit after Average return on
tax(1) equity(2) average equity tax(1) equity(3) average equity
GBP'000 GBP'000 % GBP'000 GBP'000 %
----------- ---------------- -------------- ----------- ----------------
(4,576) 45,127 (20.3)% 1,542 52,412 5.9%
----------- ---------------- -------------- ----------- ----------------
(1) Annualised on a daycount basis. E.g. for Net interest income
of GBP10,032,000, this is annualised by dividing by 182 (days) and
multiplying by 365 (days), equalling GBP20,119,000.
(2) (Average of balances from 31 March 2022 and 30 September
2021)
(3) (Average of balances from 31 March 2021 and 30 September
2020)
(*) (The prior period balances have been restated or
re-presented for the financial year. Refer to Note 4 for further
details)
Consolidated Income Statement
Half-year to
------------------------------
31 March 31 March
2022 2021*
(unaudited) (unaudited)
Note GBP'000 GBP'000
Interest income calculated using
the effective interest method 6 15,891 21,827
Interest expense calculated using
the effective interest method 7 (5,859) (7,517)
-------------- --------------
Net interest income 10,032 14,310
Fees and commission income 8 860 958
Fees and commission expense 8 (570) (928)
-------------- --------------
Net fees and commission income 8 290 30
-------------- --------------
Net profit on financial instruments
classified at fair value through
profit or loss 375 207
-------------- --------------
Net operating income 10,697 14,547
-------------- --------------
Personnel expenses (9,454) (5,731)
Depreciation of office equipment,
motor vehicles
and right-of-use assets (578) (575)
Amortisation of intangible assets (354) (319)
Impairment loss on software - (14)
Other operating expenses (6,318) (3,135)
Impairment losses on financial assets 9 (1,450) (3,406)
Total operating expenses (18,154) (13,180)
-------------- --------------
(Loss) / Profit before tax (7,457) 1,367
Income tax 10 - (255)
-------------- --------------
(Loss) / Profit after tax (7,457) 1,112
Earnings per 5p ordinary share -
basic and diluted 17 (3.0)p 0.4p
(*The prior period balances have been restated or re-presented
for the financial year. Refer to note 4 for further details.)
Consolidated Statement of Comprehensive Income
Half-year to
-------------------------------
31 March 31 March
2022 2021*
(unaudited) (unaudited)
GBP'000 GBP'000
(Loss) / Profit after tax (7,457) 1,112
Other comprehensive income that will
be reclassified to the Income statement
Fair value gain/(loss) on FVOCI financial
instruments 14 (62)
Deferred tax - -
Total items that will be reclassified
to the Income statement 14 (62)
--------------- --------------
Total comprehensive income net of tax (7,443) 1,050
--------------- --------------
(*The prior period balances have been restated or re-presented
for the financial year. Refer to note 4 for further details.)
Consolidated Balance Sheet
At
31 March 30 September
2022 2021
Notes (unaudited) (audited)
GBP'000 GBP'000
Assets
Cash and balances at central banks 64,196 56,126
Debt instruments at FVOCI 12,132 16,155
Derivative financial instruments 568 209
Loans and advances to customers 11 320,509 363,992
Office equipment, motor vehicles
and right-of-use assets 1,934 2,350
Goodwill and other intangible
assets 13 2,870 3,075
Current tax assets 1,728 1,675
Other assets 2,273 5,169
Total assets 406,210 448,751
Liabilities
Due to customers 290,712 327,166
Due to banks 59,666 59,630
Lease liabilities 859 1,037
Other liabilities 6,457 4,929
Subordinated liabilities 15 7,125 7,127
-------------- --------------
Total liabilities 364,819 399,889
Equity
Issued capital 16 12,550 12,550
Share premium 16 17,679 17,679
Other reserves 23 9
Own shares (147) (147)
Retained earnings 11,286 18,771
-------------- --------------
Total equity 41,391 48,862
-------------- --------------
Total equity and liabilities 406,210 448,751
-------------- --------------
The interim financial statements were approved and authorised
for issue by the Board on 29 June 2022.
On behalf of the Board
G G Stran C Richardson
Director Director
-------------
Consolidated Statement of Changes in Equity
Attributable to equity holders of the
Group
------------------------------------------------------------
Non-distributable Distributable
---------------------------- ------------------------------
Issued Share Own Other Retained Total
Capital Premium Shares Reserves Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------- --------- --------
(unaudited)
Balance at 1 October
2021 12,550 17,679 (147) 9 18,771 48,862
Loss for the period (7,457) (7,457)
air value gain/(loss)
on FVOCI
financial instruments - - - 14 - 14
Share-based payments - - - - (28) (28)
Balance at 31 March
2022 12,550 17,679 (147) 23 11,286 41,391
------- ------- ------ --- -------- --------
Attributable to equity holders of the
Group
------------------------------------------------------------
Non-distributable Distributable
---------------------------- ------------------------------
Issued Share Own Other Retained Total
Capital Premium Shares Reserves Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------- --------- --------
(unaudited)
Balance at 1 October
2020 12,512 17,625 (147) 53 23,832 53,875
Correction of prior
period error - - - 7 (2,055) (2,048)
------- ------- ------ ----- -------- --------
At 1 October 2020
(Restated)* 12,512 17,625 (147) 60 21,777 51,827
Profit for the period - - - - 1,112 1,112
Issuance of new shares/scrip
dividend 38 54 - - - 92
Fair value gain/(loss)
on FVOCI
financial instruments* - - - (62) - (62)
Share-based payments - - - - 28 28
Balance at 31 March
2021 12,550 17,679 (147) (2) 22,917 52,997
------- ------- ------ ----- -------- --------
Attributable to equity holders of the
Group
------------------------------------------------------------
Non-distributable Distributable
---------------------------- ------------------------------
Issued Share Own Other Retained Total
Capital Premium Shares Reserves Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------- --------- --------
(audited)
Balance at 1 April
2021 12,550 17,679 (147) (2) 22,917 52,997
Loss for the period (4,173) (4,173)
Reclassification to
cash - - - 11 - 11
Fair value gain/(loss) - -
on FVOCI -
financial instruments - -
Share-based payments - - - - 27 27
Balance at 30 September
2021 12,550 17,679 (147) 9 18,771 48,862
------- ------- ------ ---- -------- --------
(*The prior period balances have been restated or re-presented
for the financial year. Refer to note 4 for further details.)
Statement of Cash Flows
31 March 31 March
2022 2021*
(unaudited) (unaudited)
GBP'000 GBP'000
Operating activities
(Loss) / Profit before tax (7,457) 1,367
Other non-cash items included in (loss)
/ profit before tax
Depreciation of office equipment, motor
vehicle and right-of-use assets 578 575
Loss on sale of motor vehicles 16 2
Amortisation of other intangible assets 354 319
Interest on lease liabilities 14 21
Accrued finance costs 125 15
Impairment loss on software - 14
Share-based payments (28) 28
Impairment losses on financial assets 1,450 3,406
Income tax paid (53) (1,721)
Adjustment for change in operating assets
and liabilities
Net change in loans and advances 42,033 (2,051)
Net change in other assets 2,896 (1,298)
Net change in derivative financial instruments (359) (98)
Net change in amounts due to customers (36,454) (3,448)
Net change in other liabilities 1,528 912
----------- --------------
Net cash flows from / (used in) operating
activities 4,643 (1,957)
----------- --------------
Investing activities
Net sale of debt instruments at FVOCI 4,037 6,439
Purchase of office equipment and motor
vehicles (56) (85)
Purchase of intangible assets (149) (352)
----------- --------------
Net cash flows from investing activities 3,832 6,002
----------- --------------
Financing activities
Proceeds from share issue during the period - 92
Net coupons paid on subordinated borrowings (2) 98
Repayment of capital element of leases (314) (293)
Net repayments of other borrowings (89) (3,020)
Net cash flows used in financing activities (405) (3,123)
----------- --------------
Net increase in cash and cash equivalents 8,070 922
Cash and cash equivalents brought forward 56,126 24,936
----------- --------------
Cash and cash equivalents carried forward 64,196 25,858
----------- --------------
(*The prior period balances have been restated or re-presented
for the financial year. Refer to note 4 for further details.)
Notes to the Interim Financial Statements
1. Basis of preparation
The consolidated interim financial statements for the half-year
to 31 March 2022 have been prepared in accordance with the UK
adopted IAS 34 'Interim Financial Reporting'. They should be read
in conjunction with PCF Group plc Annual Report & Financial
Statements 2021 (hereinafter referred to as the 'Annual Report
& Financial Statements 2021') which were prepared in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and delivered to the
Registrar of Companies. The auditor's report for those accounts
contained a qualified opinion on the opening balance sheet at 1
October 2020 relating to Expected Credit Losses and contained a
statement under 498(2) and (3) of the Companies Act 2006.
The consolidated interim financial statements have not been
audited or subject to review by the Group's auditor.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report section of the Annual Report
& Financial Statements 2021. In particular, this Going concern
statement should be read in conjunction with the Emerging Risks and
Uncertainties section of that Strategic Report which sets out those
risks and mitigations.
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are set out in these consolidated
interim financial statements for the six months ended 31 March
2022.
In undertaking a going concern review the directors have
reviewed a base and alternative short-term financial plan to
September 2023, which present a different set of strategic and
operating assumptions over that timeframe. In both cases,
profitability is dependent on capital being raised. However, there
are various uncertainties related to capital raising which are
noted in the Emerging risks and uncertainties section of the
Strategic Report in the Annual Report & Financial Statements
2021, and the associated capital raising risks may be further
exacerbated by the current geopolitical situation.
To manage capital constraints, and the corresponding implication
for our loan originations, we have decided to accelerate an element
of our capital raising, by requesting further investment in the
Company from our majority shareholder Somers Limited of circa GBP4
million with GBP2.7 million having being received on 7 June 2022
and a further GBP1.5 million expected in early July. At the same
time we are also investigating other strategic opportunities as
outlined in the Chair's statement within the Annual Report &
Financial Statements 2021.
Should the Group not be successful in achieving its capital
raising, or any other strategic opportunities, there is no
certainty that it could continue to originate new lending given its
projection that over the Review Period, regulatory capital ratios
are forecast to fall below regulatory capital minimum requirements.
Should new lending be suspended this would reduce income and the
prospect of the Group being able to generate profits which would
further impact on its ability to generate capital organically.
In conclusion the raising or organic generation of capital is
not guaranteed, nor is the completion of other strategic
opportunities and therefore the Directors have concluded that the
current lack of certainty, and the associated risks represent a
material uncertainty which casts a significant doubt on the Group's
ability to continue as a going concern. The Board has a reasonable
expectation that it will be able to affect a capital raise or
implement strategic opportunities and therefore holds a reasonable
expectation that the Group will have adequate resources, notably
adequate regulatory capital, to continue its operations for the
period to 30 June 2023 being at least the next twelve months from
the date of approval of these consolidated interim financial
statements. On this basis the Directors continue to adopt the going
concern basis in preparing these accounts.
2. Accounting policies
The accounting policies adopted by the Group in the preparation
of these consolidated interim financial statements and those which
the Group currently expects to adopt in the Annual Report &
Financial Statements 2022 are consistent with those disclosed in
the Annual Report & Financial Statements 2021.
Significant accounting judgements, estimates and assumptions
The judgements and assumptions that are considered to be the
most important to the portrayal of the Group's financial condition
at 31 March 2022 are those relating to impairment losses on
financial assets and effective interest rate. These significant
accounting judgements, estimates and assumptions are referenced in
note 1.6 of the Annual Report & Financial Statements 2021.
Management's consideration of this source of uncertainty is
outlined in the relevant sections of the Annual Report &
Financial Statements 2021.
Information used for significant estimates
Key financial estimates are based on a range of anticipated
future economic conditions described by internally developed
scenarios. Measurement of expected credit losses and effective
interest rate are highly sensitive to reasonably possible changes
in those anticipated conditions. Changes in judgements and
assumptions could result in a material adjustment to those
estimates in the next reporting periods. Refer to the Emerging
risks and uncertainties section in the Annual Report &
Financial Statements 2021.
3. Standards issued but not yet effective
Minor amendments to IFRSs effective for the Group from 1 October
2021 have been issued by the International Accounting Standards
Board. These amendments are expected to have no or an immaterial
impact on the Group's financial statements.
4. Amendments to prior year comparatives
The Group's financial statements for prior years have been
restated in these financial statements to reflect the prior period
misstatements including errors and classification changes as
detailed below:
Consolidated income statement extract as at 31 March 2021
Unaudited Correction Unaudited
of error
31 March Representa-tion 31 March
2021 (as 2021 (restated
originally balance)
presented)
GBP'000 GBP'000 GBP'000 GBP'000
Interest income calculated
using the effective interest
method 21,680 147 - 21,827
Interest expense calculated
using the effective interest
method (7,517) - - (7,517)
------------ ----------- ---------------- ------------------
Net interest income 14,163 147 - 14,310
------------ ----------- ---------------- ------------------
Fees and commission income 1,307 (349) 958
Fees and commission expense (928) - - (928)
------------ ----------- ---------------- ------------------
Net fees and commission income 379 - (349) 30
------------ ----------- ---------------- ------------------
Net profit on financial instruments
classified at fair value through
profit or loss 207 - - 207
---------------- ------------------
Net operating income 14,749 147 (349) 14,547
------------ ----------- ---------------- ------------------
Personnel expenses (5,731) - - (5,731)
Depreciation of office equipment,
motor vehicles and right-of-use
assets (575) - - (575)
Amortisation of intangible
assets (319) - - (319)
Impairment loss on software (14) - - (14)
Other operating expenses (3,135) - - (3,135)
Impairment losses on financial
assets (3,755) - 349 (3,406)
---------------- ------------------
Total operating expenses (13,529) - 349 (13,180)
Profit before tax 1,220 147 - 1,367
Income tax charge (255) - - (255)
Profit after tax 965 147 - 1,112
------------ ----------- ---------------- ------------------
Consolidated Statement of financial position extract as at 30
September 2020
Audited Correction Representations Audited
30 September of error 30 September
2020 (as originally 2020 (restated
presented) balance)
Assets GBP'000 GBP'000 GBP'000 GBP'000
Cash and balances at central
banks 24,936 - - 24,936
Debt instruments at FVOCI 9,095 - - 9,095
Loans and advances 427,297 (294) - 427,003
Office equipment, motor
vehicles
and right-of-use assets 3,144 - - 3,144
Goodwill and other intangible
assets 4,327 - - 4,327
Deferred tax assets 1,810 (1,810) - -
Other assets 2,051 - - 2,051
Total assets 472,660 (2,104) - 470,556
---------------------- ------------- ------------------ -----------------
Liabilities
Due to banks 62,620 - - 62,620
Due to customers 341,784 - 262 342,046
Subordinated liabilities 7,126 - - 7,126
Derivative financial instruments 80 - - 80
Lease liabilities 1,604 - - 1,604
Current tax liabilities 125 (56) - 69
Other liabilities 5,446 - (262) 5,184
Total liabilities 418,785 (56) - 418,729
---------------------- ------------- ------------------ -----------------
Equity
Issued capital 12,512 - - 12,512
Share premium 17,625 - - 17,625
Own shares (147) - - (147)
Other reserves 53 7 - 60
Retained earnings 23,832 (2,055) - 21,777
---------------------- -------------
Total equity 53,875 (2,048) - 51,827
---------------------- ------------- ------------------ -----------------
Total liabilities and equity 472,660 (2,104) - 470,556
---------------------- ------------- ------------------ -----------------
Consolidated Statement of financial position extract as at 31
March 2021
Unaudited Audited Correction Unaudited
of error
31 March Opening 31 March
2021 (as balance adjustment 2021 (restated
originally for September balance)
presented) 2020
GBP'000 GBP'000 GBP'000 GBP'000
Asset
Cash and balances at central
banks 25,858 - 25,858
Debt instruments at FVOCI 2,594 - 2,594
Loans and advances to
customers 425,795 (294) 147 425,648
Office equipment, motor
vehicles
and right-of-use assets 2,652 - - 2,652
Goodwill and other intangible
assets 4,346 - - 4,346
Deferred tax assets 1,822 (1,810) (12) -
Current tax assets 1,341 56 - 1,397
Other assets 3,349 - - 3,349
Derivative financial instrument 18 - - 18
Total assets 467,775 (2,048) 135 465,862
------------ -------------------- ----------- ----------------
Liabilities
Due to banks 59,615 - - 59,615
Due to customers 338,336 - - 338,336
Other borrowed funds 7,224 - - 7,224
Lease liabilities 1,332 - - 1,332
Other liabilities 6,358 - - 6,358
------------ -------------------- ----------- ----------------
Total liabilities 412,865 - - 412,865
------------ -------------------- ----------- ----------------
Equity
Issued capital 12,550 - - 12,550
Share premium 17,679 - - 17,679
Own shares (147) - - (147)
Other reserves 3 7 (12) (2)
Retained earnings 24,825 (2,055) 147 22,917
Total equity 54,910 (2,048) 135 52,997
------------ -------------------- ----------- ----------------
Total liabilities and
equity 467,775 (2,048) 135 465,862
------------ -------------------- ----------- ----------------
Consolidated statement of cashflows extracts as at 31 March
2021
Unaudited Correction Unaudited
of error
31 March 31 March
2021 (as 2021 (restated
originally balance)
presented)
GBP'000 GBP'000 GBP'000
Operating activities 1,220 147 1,367
Profit before tax
Other non-cash items included in (loss) / profit
before tax
Depreciation of Office equipment,
motor vehicle and right-of-use assets 575 - 575
Loss on sale of motor vehicles 2 - 2
Amortisation of other intangible assets 319 - 319
Interest on lease liabilities 21 - 21
Accrued finance costs 15 - 15
Impairment loss on software 14 - 14
Share-based payments 28 - 28
Impairment losses on financial assets 3,755 (349) 3,406
Income tax paid (1,733) 12 (1,721)
Adjustment for change in operating assets and
liabilities
Net change in loans and advances (2,253) 202 (2,051)
Net change in other assets (1,298) - (1,298)
Net change in derivative financial
instruments (98) - (98)
Net change in amounts due to customers (3,448) - (3,448)
Net change in other liabilities 912 - 912
Net cash flows from / (used in) operating
activities (1,969) 12 (1,957)
Investing activities
Net sale of debt instruments at FVOCI 6,451 (12) 6,439
Purchase of office equipment, motor
vehicles (85) - (85)
Purchase of intangible assets (352) - (352)
Net cash flows from investing activities 6,014 (12) 6,002
Financing activities
Proceeds from share issue during the
period 92 - 92
Coupons paid on subordinated borrowings 98 - 98
Repayment of capital element of leases (293) - (293)
Net proceeds from / (repayments of)
other borrowings (3,020) - (3,020)
Net cash flows used in financing
activities (3,123) - (3,123)
Net increase in cash and cash equivalents 922 - 922
Cash and cash equivalents brought
forward 24,936 - 24,936
Cash and cash equivalents carried
forward 25,858 - 25,858
Restatement and representation explanation
There have been adjustments to prior year financial results in
respect of restatements and representations which are set our
below.
-- The 2020 profit, and hence the 1 October 2020 opening
retained earnings have been restated for a historical accounting
error in relation to timing of recognition of Interest income
calculated using the effective interest method. This related to the
calculation of the Effective Interest Rate on a legacy system
acquired with the purchase of Azule Limited in 2018. The error
impacted the 2020 profit and loss account with overstated income of
GBP0.3 million (pre-tax) and loans and advances understated by the
same amount. After tax the net impact on shareholders' funds is a
reduction of GBP0.2 million. The impact of this error is to reduce
the interest income recognised in 2020 and increase the interest
income recognised in 2021. There is no net impact on retained
earnings as at 30 September 2021. The error was identified as part
of the improvement in financial controls including a deep dive of
balances of this legacy system on which no new trades have been
booked since May 2021, and which is therefore in runoff.
-- Deferred Tax asset: Given the disclosure of a material
uncertainty in relation to going concern in both the Annual Report
and Financial Statements in 2020 and 2021, deferred tax assets in
respect of future taxable profits were derecognised in the 2021
Annual Report & Financial Statements. Accordingly, management
have judged it appropriate to also derecognise the deferred tax
asset of GBP1.8 million previously recognised in the 2020 Annual
Report & Financial Statements and the Interim Report 2021 for
the six months ended 31 March 2021 and therefore comparatives have
been restated accordingly.
Re-presentation:
-- Costs and accumulated depreciation amount for intangible
assets, Note 13, have been re-presented according to those
intangible assets that were 'in-use' or 'under development' at 31
March 2021 to be consistent with the current year disclosure.
-- Amounts in the Income statement for Impairment losses have
been reclassified with the reversal of Impairment losses of GBP0.3
million and a corresponding adjustment in Fees and commission
income for the same amount.
5. Segment information
The Group operates in the principal areas of Consumer Finance
for motor vehicles and Business Finance for vehicles, plant and
equipment, specialist funding in the broadcast and media industry
and Bridging Finance.
For management purposes, the Group has been organised into four
operating segments based on products and services: Consumer
Finance; Business Finance; Azule Finance; and Bridging Finance.
The following table presents income and profit and certain asset
and liability information for the Group's operating segments. All
of the operating segments are materially based in the UK. Non-UK
based operations are not considered material to the Group and
therefore no additional geographical information is disclosed.
Segment Information
Consumer Business Azule Bridging Adjustment Total
Finance Finance Finance Finance at Group Segments
Level
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Half-year to 31 March
2022
Interest income calculated
using the effective
interest method 7,319 5,796 558 2,218 - 15,891
Interest expense calculated
using the effective
interest method (3,094) (2,183) (110) (472) - (5,859)
Net interest income 4,225 3,613 448 1,746 - 10,032
Fees and commission
income 45 78 490 247 - 860
Fees and commission
expense (333) (209) (23) (5) - (570)
Net fees and commission
(expense)/income (288) (131) 467 242 - 290
Net profit on financial
instruments classified
at fair value through
profit or loss 170 135 18 52 - 375
Net operating income 4,107 3,617 933 2,040 - 10,697
Personnel expenses (3,930) (3,212) (858) (1,454) - (9,454)
Depreciation of office
equipment, motor vehicles
and right-of-use assets (220) (175) (115) (68) - (578)
Amortisation of intangible
assets (161) (127) (17) (49) - (354)
Other operating expenses (1,743) (2,023) (1,695) (857) - (6,318)
Impairment losses on
financial assets (290) (843) (264) (53) - (1,450)
Total operating expenses (6,344) (6,380) (2,949) (2,481) - (18,154)
Segment loss before
tax (2,237) (2,763) (2,016) (441) - (7,457)
Income tax credit - - - - - -
Loss after tax (2,237) (2,763) (2,016) (441) - (7,457)
At 31 March 2022
Total assets 183,166 145,769 20,800 56,475 - 406,210
Total liabilities 164,724 131,093 18,213 50,789 - 364,819
Consumer Business Azule Bridging Adjustment Total
Finance Finance Finance Finance at Group Segments
Level
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Half-year to 31 March
2021*
Interest income calculated
using the effective
interest method 9,863 7,599 876 3,489 - 21,827
Interest expense calculated
using the effective
interest method (3,693) (2,995) (112) (717) - (7,517)
Net interest income 6,170 4,604 764 2,772 - 14,310
Fees and commission
income 60 402 372 124 - 958
Fees and commission
expense (557) (348) (15) (8) - (928)
Net fees and commission
(expense)/income (497) 54 357 116 - 30
Net profit on financial
instruments classified
at fair value through
profit or loss 87 79 9 32 - 207
Net operating income 5,760 4,737 1,130 2,920 - 14,547
Personnel expenses (2,070) (1,924) (775) (962) - (5,731)
Depreciation of office
equipment, motor vehicles
and right-of-use assets (202) (184) (116) (73) - (575)
Amortisation of intangible
assets (135) (122) (14) (48) - (319)
Impairment loss on
software (6) (5) (1) (2) - (14)
Other operating expenses (1,018) (1,136) (815) (166) - (3,135)
Impairment losses on
financial assets (608) (2,543) (282) (27) - (3,406)
Total operating expenses (4,039) (5,914) (2,003) (1,224) - (13,180)
Segment profit/(loss)
before tax 1,721 (1,177) (873) 1,696 - 1,367
Income tax credit /
(charge) (321) 219 163 (316) - (255)
Profit/(loss) after
tax 1,400 (958) (710) 1,380 - 1,112
At 31 March 2021
Total assets 195,219 177,593 21,809 70,094 1,147 465,862
Total liabilities 173,687 158,005 18,810 62,363 - 412,865
(*The prior period balances have been restated or re-presented
for the financial year. Refer to note 4 for further details.)
6. Interest income calculated using the effective interest method
Half-year to
-----------------------------------
31 March 31 March
2022 2021*
(unaudited) (unaudited)
GBP'000 GBP'000
-------------- --------------
Cash and short-term funds 96 1
Loans and advances to customers 14,427 19,871
Finance lease interest 1,325 1,875
Financial instruments - FVOCI 43 80
Total interest and similar income 15,891 21,827
-------------- --------------
(*The prior period balances have been restated or re-presented
for the financial year. Refer to note 4 for further details.)
7. Interest expense calculated using the effective interest method
Half-year to
----------------------------------
31 March 31 March
2022 2021
(unaudited) (unaudited)
GBP'000 GBP'000
-------------- --------------
Paid and accrued to banks 436 426
Paid and accrued to customers 2,458 3,016
Credit-related fees and commission 2,731 3,682
Interest expense from finance
lease 221 373
Interest expense on lease liabilities 13 20
Total interest and similar expense 5,859 7,517
-------------- --------------
8. Net fees and commission income
Half-year to
----------------------------
31 March 31 March
2022 2021*
(unaudited) (unaudited)
GBP'000 GBP'000
Fees and commission income
Secondary lease income 283 178
Other fees not forming part of EIR 577 367
Other fees and commission - 413
------------- -------------
860 958
------------- -------------
Fees and commission expense
Debt recovery and valuation fees (49) (129)
Credit assessment costs (521) (799)
------------- -------------
(570) (928)
------------- -------------
Net fees and commission income 290 30
------------- -------------
(*The prior period balances have been restated or re-presented
for the financial year. Refer to note 4 for further details.)
9. Impairment losses on financial assets
Impairment losses on financial assets relates to impairment
losses on loans and advances to customers. The charge during the
six month periods was as follows.
Consumer Business Azule Bridging Total
Finance Finance Finance Finance
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Half-year to 31
March 2022 (unaudited)
Impairment charge
for the period on
loans and advances
to customers 140 1,225 253 53 1,671
Net write-off 236 334 11 - 581
Net termination
gains (86) (716) - - (802)
Total Impairment
charge 290 843 264 53 1,450
Half-year to 31
March 2021* (unaudited)
Impairment charge
for the six months
on loans and advances
to customers 608 2,543 282 (27) 3,406
--------- --------- --------- --------- -----------
Total impairment
charge 608 2,543 282 (27) 3,406
--------- --------- --------- --------- -----------
(*The prior period balances have been restated or re-presented
for the financial year. Refer to note 4 for further details.)
10. Income tax
The income tax rate is nil % (31 March 2021: 19%), representing
the best estimate of the annual effective tax rate applied to
operating profit before tax for the six months period ended 31
March 2022.
11. Loans and advances to customers
At
------------------------------------------
30 September
31 March 2021
2022 (audited)
(unaudited) GBP'000
GBP'000
-------------- ----------------
Consumer lending - gross 148,134 166,866
Business lending - gross 121,582 138,550
Azule lending - gross 16,748 15,465
Bridging lending - gross 45,091 55,481
331,555 376,362
-------------- ----------------
331,555 376,362
Allowance for impairment losses (11,046) (12,370)
-------------- ----------------
Total Loans and advances to
customers 320,509 363,992
-------------- ----------------
A reconciliation of the allowance for impairment losses for
loans and advances, by class, is as follows:
Consumer Business Azule Bridging
Finance Finance Finance Finance Total
(Unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2021 3,225 7,690 1,182 273 12,370
Charge for the period
(note 9) 861 504 252 3 1,620
Release on write
off (921) (2,023) - - (2,944)
Release against sold - - - - -
loans
--------- --------- --------- --------- -------------
At 31 March 2022 3,165 6,171 1,434 276 11,046
--------- --------- --------- --------- -------------
Made up of
Individual impairment 1,449 2,159 406 241 4,255
Collective model
provisions including
overlays and PMAs 1,716 4,012 1,028 35 6,791
--------- --------- --------- --------- -------------
Total impairment 3,165 6,171 1,434 276 11,046
--------- --------- --------- --------- -------------
Consumer Business Azule Bridging
Finance Finance Finance Finance Total
(Unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2020 6,921 10,319 912 480 18,632
Charge/(release)
for the period (note
9) 608 2,543 282 (27) 3,406
(Recoveries) / write-offs (555) (1,332) (141) - (2,028)
--------- --------- --------- --------- -------------
At 31 March 2021 6,974 11,530 1,053 453 20,010
--------- --------- --------- --------- -------------
Made up of
Individual impairment 40 1,582 263 - 1,885
Collective model
provisions including
overlays and PMAs 6,934 9,948 790 453 18,125
--------- --------- --------- --------- -------------
Total impairment 6,974 11,530 1,053 453 20,010
--------- --------- --------- --------- -------------
Consumer Business Azule Bridging
Finance Finance Finance Finance Total
(Audited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2021 6,974 11,530 1,053 453 20,010
Charge / (release)
for the period 137 2,027 219 (180) 2,203
Release on write-offs (860) (1,421) (24) - (2,305)
Release against
sold loans (3,026) (4,446) (66) - (7,538)
--------- --------- ----------- ----------- -------------
At 30 September
2021 3,225 7,690 1,182 273 12,370
--------- --------- ----------- ----------- -------------
(audited)
At 30 September
2021
Made up of
Individual impairment 1,798 4,166 567 273 6,804
Collective model
provisions including
overlays and PMAs 1,427 `3,524 615 - 5,566
--------- --------- ----------- ----------- -------------
Total impairment 3,225 7,690 1,182 273 12,370
--------- --------- ----------- ----------- -------------
12. Investment in subsidiary undertakings
The consolidated financial statements include the financial
statements of the Company and its subsidiary undertakings. The
Company does not have any joint ventures or associates.
Subsidiaries of the Company were as follows:
Percentage Percentage
of of
equity equity
interest interest
31 March 30 September
Name of company Incorporated Nature of business 2021 2020
Banking, hire purchase,
PCF Bank Limited UK leasing & bridging 100 100
Leasing & hire
PCF Credit Limited UK purchase 100* 100*
Leasing & hire
Azule Limited UK purchase 100* 100*
Azule Finance Leasing & hire
Limited Ireland purchase 100* 100*
Azule Finance Leasing & hire
GmbH Germany purchase 100* 100*
*Held by a subsidiary of the Company
The registered office of all subsidiaries incorporated in the
United Kingdom is Pinners Hall, 105-108 Old Broad Street, London
EC2N 1ER.
The registered office of Azule Finance Limited is Suite 104, 4/5
Burton Hall Road, Sandyford, Dublin 18.
The registered office of Azule Finance GmbH is Kirchtruderinger
Straße 17, 81829 München, Germany.
All companies have an accounting reference date of 30 September
except for Azule Finance GMBH which is 31 December.
13. Goodwill and Other Intangibles assets
The Group's Intangible assets consist solely of computer
software and capitalised expenses incurred in the project regarding
the Company's application to become a bank.
Group Software
--------------------------------------------
Under development Total
In use intangibles Goodwill Total
(Unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 October 2021 7,227 98 7,325 - 7,325
Additions during
the year - 149 149 - 149
Transfers - - - - -
Disposals - - - - -
Impairment - - - - -
--------- ------------------ ------------- ----------- --------
At 31 March 2022 7,227 247 7,474 - 7,474
--------- ------------------ ------------- ----------- --------
Accumulated depreciation
At 1 October 2021 4,250 - 4,250 4,250
Amortisation during
the year 354 - 354 354
Write off - impairment - - - -
loss on software
Write off - - - -
--------- ------------------ ------------- ----------- --------
At 30 March 2022 4,604 - 4,604 4,604
--------- ------------------ ------------- ----------- --------
Net book value
at 31 March 2022 2,623 247 2,870 2,870
--------- ------------------ ------------- ----------- --------
Group Software
--------------------------------------------
Under development Total
In use intangibles Goodwill Total
(Unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 October 2020 6,548 252 6,800 1,147 7,947
Additions during the
period 290 62 352 - 352
Transfers - - - - -
Disposals - - - - -
Impairment (45) (45) - (45)
--------- ------------------ ------------- ----------- --------
At 31 March 2021 6,793 314 7,107 1,147 8,254
--------- ------------------ ------------- ----------- --------
Accumulated depreciation
At 1 October 2020 3,620 - 3,620 - 3,620
Amortisation during
the period 319 - 319 - 319
Write off -impairment
loss on software (31) - (31) - (31)
At 30 March 2021 3,908 - 3,908 - 3,908
--------- ------------------ ------------- ----------- --------
Net book value at
31 March 2021 2,885 314 3,199 1,147 4,346
--------- ------------------ ------------- ----------- --------
Group Software
--------------------------------------------
Under development Total
In use intangibles Goodwill Total
(Audited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2021 6,793 314 7,107 1,147 8,254
Additions during
the period (65) 302 237 237
Transfers 494 (494) - -
Disposals (33) (24) (57) (57)
Impairment 38 - 38 (1,147) (1,109)
--------- ------------------ ------------- ----------- ----------
At 30 September
2021 7,227 98 7325 - 7,325
--------- ------------------ ------------- ----------- ----------
Accumulated depreciation
At 1 April 2021 3,908 - 3,908 - 3,908
Amortisation during
the period 319 - 319 - 319
Write off -impairment
loss on software 14 - 14 - 14
Write off 9 - 9 - 9
--------- ------------------ ------------- ----------- --------
At 30 September
2021 4,250 - 4,250 - 4,250
--------- ------------------ ------------- ----------- --------
Net book value
at 30 September
2021 2,977 98 3,075 - 3,075
--------- ------------------ ------------- ----------- --------
14. Financial instruments
14.1 Assets and liabilities by classification, measurement and
fair value hierarchy
The following table summarises the classification of the
carrying amounts of the Group's financial assets and
liabilities:
Amortised
Cost FVTPL FVOCI Total
GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2022 (unaudited)
Cash and balances at central
banks 64,196 - - 64,196
Loans and advances to customers 320,509 - - 320,509
Debt instruments at FVOCI - - 12,132 12,132
Derivative financial instruments - 568 - 568
Other assets (adjusted for
prepayments) 1,197 - - 1,197
---------- -------- -------- --------
Total financial assets 385,902 568 12,132 398,602
---------- -------- -------- --------
Due to banks 59,666 - - 59,666
Due to customers 290,712 - - 290,712
Subordinated liabilities 7,125 - - 7,125
Other liabilities (adjusted
for accruals) 3,952 - - 3,952
---------- -------- -------- --------
Total financial liabilities 361,455 - - 361,455
---------- -------- -------- --------
Amortised
Cost FVTPL FVOCI Total
GBP'000 GBP'000 GBP'000 GBP'000
At 30 September 2021 (audited)
Cash and balances at central
banks 56,126 - - 56,126
Loans and advances to customers 363,992 - - 363,992
Debt instruments at FVOCI - - 16,155 16,155
Derivative financial instruments - 209 - 209
Other assets (adjusted for
prepayments) 4,120 - - 4,120
---------- -------- --------
Total financial assets 424,238 209 16,155 440,602
---------- -------- --------
Due to banks 59,630 - - 59,630
Due to customers 327,166 - - 327,166
Subordinated liabilities 7,127 - - 7,127
Other liabilities (adjusted
for accruals) 1,981 - - 1,981
Total financial liabilities 395,904 - - 395,904
---------- -------- -------- ----------
The Group holds certain financial assets at fair value grouped
into Levels 1 to 3 of the fair value hierarchy, as explained
below.
Level 1 - The most reliable fair values of financial instruments
are quoted market prices in an actively traded market. The Group's
Level 1 portfolio mainly comprises gilts, fixed rate bonds and
floating rate notes for which traded prices are readily
available.
Level 2 - These are valuation techniques for which all
significant inputs are taken from observable market data. These
include valuation models used to calculate the present value of
expected future cash flows and may be employed when no active
market exists, and quoted prices are available for similar
instruments in active markets.
Level 3 - These involves valuation techniques for which one or
more significant inputs are not based on observable market data.
Valuation techniques include net present value by way of discounted
cash flow models. Assumptions and market observable inputs used in
valuation techniques include risk-free and benchmark interest
rates, similar market products, foreign currency exchange rates and
equity index prices. Critical judgement is applied by management in
utilising unobservable inputs including expected price volatilities
and prepayment rates, based on industry practice or historical
observation. The objective of valuation techniques is to arrive at
a fair value determination that reflects the price of the financial
instrument at the reporting date that would have been determined by
market participants acting at arm's length.
The following table shows an analysis of financial instruments
recorded at amortised cost by level of the fair value
hierarchy.
Carrying
value Level Level Level Fair value
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial instruments held
at amortised cost
At 31 March 2022 (unaudited)
Cash and balances at central
banks 64,196 64,196 - - 64,196
Loans and advances to customers 320,509 - - 320,509 366,707
--------- -------- -------- -------- -------------
384,705 64,196 - 320,509 430,903
--------- -------- -------- -------- -------------
Due to banks(*) 59,666 59,666 - - 59,666
Subordinated liabilities 7,125 - - 7,125 8,107
Due to customers(*) 290,712 - - 290,712 290,712
357,503 59,666 - 297,837 358,485
--------- -------- -------- -------- -------------
Carrying Fair
Value Level Level Level Value
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial instruments held
at amortised cost
At 30 September 2021 (audited)
Cash and balances at central
banks 56,126 56,126 - - 56,126
Loans and advances to customers 363,992 - - 363,992 420,378
--------- -------- -------- -------- --------
420,118 56,126 - 363,992 476,504
--------- -------- -------- -------- --------
Due to banks(*) 59,630 59,630 - - 59,630
Subordinated liabilities 7,127 - - 7,127 8,346
Due to customers(*) 327,166 - - 327,166 327,166
393,923 59,630 - 334,293 395,142
--------- -------- -------- -------- --------
*For due to Banks and Due to Customers, carrying value is
assessed to approximate fair value.
The following table shows an analysis of financial instruments
recorded at FVOCI by level of the fair value hierarchy:
Fair
Carrying Level Level Level Value
Value 1 2 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial instruments at fair
value though
other comprehensive income (FVOCI)
At 31 March 2022 (unaudited)
Quoted debt instruments 12,132 12,132 - - 12,132
----------- -------- -------- -------- --------
At 30 September 2021 (audited)
Quoted debt instruments 16,155 16,155 - - 16,155
----------- -------- -------- -------- --------
The following table shows an analysis of financial instruments
recorded at FVTPL by level of the fair value hierarchy:
Level Level Level Fair Notional
1 2 3 value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial instruments at
fair value though profit
or loss (FVTPL)
31 March 2022 (unaudited)
Derivative Financial assets - 568 - 568 17,600
--------- -------- -------- -------- ---------
Derivative Financial liabilities - - - - -
--------- -------- -------- -------- ---------
30 September 2021 (audited)
Derivative Financial assets - 209 - 209 16,000
--- ---- ---- -------
Derivative Financial liabilities - - - - -
--- ---- ---- -------
14.2 Impairment allowance for loans and advances to
customers
The table below shows the credit quality and the maximum
exposure to credit risk based on the Bank's internal credit rating
system and stage classification. The amounts presented are gross of
impairment allowances.
At 31 March 2022 (unaudited)
Gross carrying amounts Stage Stage Stage Total
1 2 3 GBP'000
GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
Performing
High grade 257,608 20,967 4,141 282,716
Standard grade 18,035 3,747 1,616 23,398
Sub-standard grade 15,237 3,642 913 19,792
Non-performing
Individually impaired - 1,109 2,254 3,363
Collectively impaired - 11 2,275 2,286
--------- --------- --------- ---------
Total 290,880 29,476 11,199 331,555
--------- --------- --------- ---------
Allowance for impairment
loss (2,734) (2,260) (6,052) (11,046)
--------- --------- --------- ---------
Net total 288,146 27,216 5,147 320,509
--------- --------- --------- ---------
Undrawn commitments 10,329 - - 10,329
--------- --------- --------- ---------
At 30 September 2021 (audited)
Gross carrying amounts Stage Stage Stage Total
1 2 3 GBP'000
GBP'000 GBP'000 GBP'000
---------- ---------- ---------- -----------
Performing
High grade 288,497 17,724 958 307,179
Standard grade 24,504 2,576 - 27,080
Sub-standard grade 22,028 2,729 - 24,757
Non-performing
Individually impaired - 1,889 9,961 11,850
Collectively impaired - 2,775 2,721 5,496
---------- ---------- ---------- -----------
Total 335,029 27,693 13,640 376,362
---------- ---------- ---------- -----------
Allowance for impairment
loss (3,407) (3,005) (5,958) (12,370)
---------- ---------- ---------- -----------
Net total 331,622 24,688 7,682 363,992
---------- ---------- ---------- -----------
Undrawn commitments 8,958 - - 8,958
---------- ---------- ---------- -----------
An analysis of changes in the gross carrying amount and the
corresponding expected credit losses ('ECLs') is, as follows:
Gross carrying amounts Stage Stage Stage Total
1 2 3 GBP'000
GBP'000 GBP'000 GBP'000
--------- ----------- --------- ---------
At 1 October 2021 (audited) 335,029 27,693 13,640 376,362
New assets originated
or purchased 63,002 392 (54) 63,340
Assets derecognised
or matured (90,877) (10,731) (2,985) (104,593)
Transfers to Stage 1 28,809 (28,633) (176) -
Transfers to Stage 2 (43,132) 50,846 (7,714) -
Transfers to Stage 3 (1,946) (9,184) 11,130 -
Amounts written off (5) (907) (2,642) (3,554)
--------- ----------- --------- ---------
At 31 March 2022 290,880 29,476 11,199 331,555
--------- ----------- --------- ---------
ECL allowance Stage Stage Stage Total
1 2 3 GBP'000
GBP'000 GBP'000 GBP'000
At 1 October 2021 (audited) 3,407 3,005 5,958 12,370
New assets originated
or purchased 350 3 4 357
Assets derecognised
or matured, and remeasurements 658 477 128 1,263
Transfers to Stage 1 982 (976) (6) -
Transfers to Stage 2 (2,224) 5,044 (2,820) -
Transfers to Stage 3 (439) (4,424) 4,863 -
Amounts written off - (869) (2,075) (2,944)
At 31 March 2022 2,734 2,260 6,052 11,046
Gross carrying amounts Stage 1 Stage Stage Total
GBP'000 2 3 GBP'000
GBP'000 GBP'000
At 1 October 2020*
(audited) 349,417 76,671 19,547 445,635
New assets originated
or purchased 99,759 992 - 100,751
Assets derecognised
or matured (17,862) (75,334) (5,504) (98,700)
Transfers to Stage
1 565 (553) (12) -
Transfers to Stage
2 (49,146) 49,517 (371) -
Transfers to Stage
3 (7,482) (2,657) 10,139 -
Amounts written off - - (2,028) (2,028)
At 31 March 2021 375,251 48,636 21,771 445,658
ECL allowance Stage Stage Stage Total
1 2 3 GBP'000
GBP'000 GBP'000 GBP'000
At 1 October 2020 (audited) 3,179 3,300 12,153 18,632
New assets originated
or purchased 393 17 - 410
Assets derecognised
or matured, and remeasurements 1,435 (1,116) 2,677 2,996
Transfers to Stage 1 11 (11) - -
Transfers to Stage 2 (1,974) 2,078 (104) -
Transfers to Stage 3 (678) (321) 999 -
Amounts written off - - (2,028) (2,028)
At 31 March 2021 2,366 3,947 13,697 20,010
(*The prior period balances have been restated or re-presented
for the financial year. Refer to note 4 for further details.)
Gross carrying amounts Stage 1 Stage Stage Total
GBP'000 2 3 GBP'000
GBP'000 GBP'000
(unaudited)
At 1 April 2021 375,251 48,636 21,771 445,658
New assets originated
or purchased 59,734 1,074 205 61,013
Assets de-recognised
or matured (164,961) 47,461 4,198 (113,302)
Transfers to Stage 1 72,161 (72,172) 11 -
Transfers to Stage 2 (13,481) 13,794 (313) -
Transfers to Stage 3 6,755 (10,858) 4,103 -
Amounts written off (430) (242) (3,977) (4,649)
Debt Sale - - (12,358) (12,358)
At 30 September 2021 334,680 27,693 13,640 376,362
ECL allowance Stage Stage Stage Total
1 2 3 GBP'000
GBP'000 GBP'000 GBP'000
At 1 April 2021 (unaudited) 2,366 3,947 13,697 20,010
New assets originated
or purchased 299 (5) 52 346
Assets derecognised
or matured, and remeasurements 987 3,977 (3,107) 1,857
Transfers to Stage 1 1,354 (1,329) (25) -
Transfers to Stage 2 (1,250) 1,301 (51) -
Transfers to Stage 3 (346) (4,845) 5,191 -
Amounts written off (3) (41) (2,261) (2,305)
Debt Sale - - (7,538) (7,538)
At 30 September 2021 3,407 3,005 6,307 12,370
14.3 Impairment allowance for loans and advances by divisions
Gross carrying amount
31 March 2022 Stage Stage 2 Stage Total
(unaudited) 1 GBP'000 3 GBP'000
GBP'000 GBP'000
Not Past <30 days >=30 days Total
Due
Loans and Advances
CFD 137,121 3,766 343 3,431 7,540 3,473 148,134
BFD 106,809 4,779 482 3,171 8,432 6,341 121,582
Azule 13,452 1,772 30 502 2,304 992 16,748
Bridging 33,498 1,326 309 9,565 11,200 393 45,091
Total 290,880 11,643 1,164 16,669 29,476 11,199 331,555
30 September Stage Stage 2 Stage Total
2021 (audited) 1 GBP'000 3 GBP'000
GBP'000 GBP'000
Not Past <30 days >=30 days Total
Due
Loans and Advances
CFD 156,140 3,491 464 3,411 7,366 3,360 166,866
BFD 113,345 12,507 310 4,548 17,365 7,840 138,550
Azule 12,321 627 - 1,035 1,662 1,482 15,465
Bridging 53,223 - - 1,300 1,300 958 55,481
Total 335,029 16,625 774 10,294 27,693 13,640 376,362
Impairment provisions
31 March 2022 Stage Stage 2 Stage Total
(unaudited) 1 3
Not Past <30 days >=30 days Total
Due
Impairment Provision
CFD 693 220 33 384 637 1,835 3,165
BFD 1,838 507 48 633 1,188 3,145 6,171
Azule 184 240 3 177 420 830 1,434
Bridging 19 2 - 13 15 242 276
Total 2,734 969 84 1,207 2,260 6,052 11,046
30 September 2021 Stage Stage 2 Stage Total
(audited) 1 3
Not Past <30 >=30 Total
Due days days
Impairment Provision
CFD 972 230 38 377 645 1,608 3,225
BFD 1,905 1,076 88 860 2,024 3,761 7,690
Azule 263 95 - 235 330 589 1,182
Bridging 267 - - 6 6 - 273
Total 3,407 1,401 126 1,478 3,005 5,958 12,370
Coverage ratio
31 March 2022 Stage Stage 2 Stage Total
(unaudited) 1 3
Not Past <30 days >=30 days Total
Due
Coverage Ratio
CFD 0.51% 5.84% 9.62% 11.19% 8.45% 52.84% 2.14%
BFD 1.72% 10.61% 9.96% 19.96% 14.09% 49.60% 5.07%
Azule 1.37% 13.54% 10.00% 35.26% 18.23% 83.67% 8.56%
Bridging 0.06% 0.15% 0.00% 0.14% 0.13% 61.58% 0.61%
Total 0.94% 8.32% 7.22% 7.24% 7.67% 54.04% 3.33%
30 September Stage Stage 2 Stage Total
2021 (audited) 1 3
Not Past <30 days >=30 days Total
Due
Coverage Ratio
CFD 0.6% 6.6% 8.2% 11.1% 8.8% 47.9% 1.9%
BFD 1.7% 8.6% 28.4% 18.9% 11.7% 48.0% 5.6%
Azule 2.1% 15.2% - 22.7% 19.9% 39.7% 7.6%
Bridging 0.5% - - 0.5% 0.5% 0.0% 0.5%
Total 1.0% 8.4% 16.3% 14.4% 10.9% 43.7% 3.3%
14.4 Stage 3 decomposition
Stage 3
Gross Carrying ECL Coverage
31 March 2022 (unaudited) (GBP'000) (GBP'000) (%)
No longer credit-impaired
but in cure period that
precedes transfer to stage
2 750 605 81%
Credit-impaired not in
cure period 10,449 5,447 52%
11,199 6,052
Stage 3
Gross Carrying ECL Coverage
30 September 2021 (audited) (GBP'000) (GBP'000) (%)
No longer credit-impaired
but in cure period that
precedes transfer to
stage 2 342 83 24%
Credit-impaired not in
cure period 13,298 5,875 44%
13,640 5,958
14.5 Analysis of loans by product types
Gross carrying amount
Stage
Stage 1 Stage 2 3 Total
31 March 2022 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
Bridging 33,498 11,200 393 45,091
Finance lease 19,499 2,060 1,453 23,012
Hire purchase / conditional
sale 237,852 15,707 9,354 262,913
Loans 31 509 (1) 539
290,880 29,476 11,199 331,555
Stage
Stage 1 Stage 2 3 Total
30 September 2021
(audited) GBP'000 GBP'000 GBP'000 GBP'000
Bridging 53,223 1,300 958 55,481
Finance lease 22,190 3,085 1,709 26,984
Hire purchase / conditional
sale 259,195 23,307 10,820 293,322
Loans 421 1 153 575
335,029 27,693 13,640 376,362
Impairment provisions
Stage
Stage 1 Stage 2 3 Total
31 March 2022 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
Bridging 19 15 242 276
Finance lease 333 361 1,016 1,710
Hire purchase / conditional
sale 2,381 1,809 4,794 8,984
Loans 1 75 - 76
2,734 2,260 6,052 11,046
Stage
Stage 1 Stage 2 3 Total
30 September 2021
(audited) GBP'000 GBP'000 GBP'000 GBP'000
Bridging 267 6 - 273
Finance lease 440 465 809 1,714
Hire purchase / conditional
sale 2,693 2,534 5,041 10,268
Loans 7 - 108 115
3,407 3,005 5,958 12,370
Forborne and modified loans
The following tables provide a summary of the Group's forborne assets.
At 31 March 2022
(unaudited) Gross carrying amount of forborne loans
Stage 1 Stage 2 Stage 3
- Performing - Performing Non-performing
Gross Carrying forborne forborne forborne Total forborne Forbearance
In GBP 000s Amount loans loans loans loans ratio
Loans and advances to
customers
CFD 148,134 671 1,115 1,204 2,990 2.02%
BFD 121,582 1,652 1,584 1,189 4,425 3.64%
Azule 16,748 324 561 378 1,263 7.54%
Bridging 45,091 - - - - 0.00%
Total loans and
advances to
customers 331,555 2,647 3,260 2,771 8,678 2.62%
At 30 September 2021
(audited) Gross carrying amount of forborne loans
Stage 1 Stage 2 Stage 3
- Performing - Performing Non-performing
Gross Carrying forborne forborne forborne Total forborne Forbearance
In GBP 000s Amount loans loans loans loans ratio
Loans and advances to
customers
CFD 166,866 40 230 69 339 0.20%
BFD 138,550 146 1,618 621 2,385 1.72%
Azule 15,465 - 232 - 232 1.50%
Bridging 55,481 - - - - 0.00%
Total loans and
advances to
customers 376,362 186 2,080 690 2,956 0.79%
At 31 March 2022 (unaudited) ECLs on forborne loans
Stage 1 Stage 1 Stage 2 Stage 2 Stage 3 Stage 3
In GBP 000s Individual Collective Individual Collective Individual Collective Total
Loans and advances to customers
CFD - 89 42 157 412 60 760
BFD - 152 93 250 500 50 1,045
Azule - 45 75 14 250 93 477
Bridging - - - - - - -
Total loans and advances to
customers - 286 210 421 1,162 203 2,282
At 30 September 2021 (audited) ECLs on forborne loans
Stage 1 Stage 1 Stage 2 Stage 2 Stage 3 Stage 3
In GBP 000s Individual Collective Individual Collective Individual Collective Total
Loans and advances to customers
CFD - - 20 8 19 - 47
BFD - 2 163 127 217 - 509
Azule - - 11 33 - - 44
Bridging - - - - - - -
Total loans and advances to
customers - 2 194 168 236 - 600
15. Subordinated liabilities
At
31 March 30 September
2022 2021
(unaudited) (audited)
GBP'000 GBP'000
Subordinated liabilities 7,125 7,127
7,125 7,127
GBP7.0 million subordinated notes issued by PCF Bank Limited
At 31 March 2022, PCF Bank Limited had a GBP15.0 million
subordinated note facility from British Business Investments
Limited (30 September 2021: GBP15.0 million). The notes may be
issued once per quarter in tranches of between GBP1.0 million and
GBP5.0 million, and each tranche has a fixed coupon of 8% per
annum, a final maturity ten years from the date of issue and is
callable by the issuer five years from the date of issue. These
notes meet the conditions for Tier 2 capital. During the period
ended 31 March 2022 no new notes were issued and at 31 March 2022
GBP7.0 million of notes remained issued (30 September 2021: GBP7.0
million)
16. Issued capital and reserves
31 March 30 September 31 March 30 September
2022 2021 2022 2021
(unaudited) (audited) (unaudited) (audited)
'000 units '000 units GBP'000 GBP'000
Ordinary share issued
and fully paid
Opening balance at
1 October 250,990 250,240 12,550 12,512
Issuance of new shares
during the period - 750 - 38
Dividend reinvestment - - - -
Closing balance 250,990 250,990 12,550 12,550
Called-up share capital comprises 250,990,000 (2021:
250,990,000) ordinary shares of 5p each. Ordinary shares of 5 pence
each ranking pari passu per share as a class to any return of
capital, and all ordinary dividends with one vote per share
31 March 30 September
2022 2021
(unaudited) (audited)
GBP'000 GBP'000
Share premium
Opening balance 17,679 17,625
Issuance of new shares during the period - 54
Closing balance 17,679 17,679
Group
Other reserves
31 March 30 September
2022 2021
GBP'000 GBP'000
Fair value gain / (loss) for financial
instruments Fair Value Through Other
Comprehensive Income (FVOCI)
Fair value movements in debt instruments
at FVOCI 23 9
23 9
Own shares (Employee Share Option Plans)
Own shares represent 768,377 (2021: 768,377) ordinary shares
held by the Company's Employees Benefits Trust 2003 (EBT) to meet
obligations under the Company's Share Option Plans. The shares are
stated at cost and their market value at 31 March 2022 was
GBP65,158 (30 September 2021: GBP184,410).
31 March 30 September
Group 2022 2021
GBP'000 GBP'000
Own shares
Opening balance (147) (147)
Closing balance (147) (147)
17. Earnings per share
Basic earnings per share ('EPS') is calculated by dividing the
net profit for the period attributable to ordinary equity holders
of the Company by the weighted average number of ordinary shares
outstanding during the period.
The following table shows the income and share data used in the
basic and diluted EPS calculations:
At
31 March 31 March
2022 2021*
(unaudited) (unaudited)
GBP'000 GBP'000
Net Company (loss) / profit attributable
to ordinary shareholders adjusted for the
effect of dilution (7,457) 1,112
At
31 March 31 March
2022 2021
(unaudited) (unaudited)
'000 units '000 units
Basic and diluted weighted average number
of shares 250,990 250,335
Basic and diluted earnings per 5p ordinary
share (3.0)p 0.4p
(*The prior period balances have been restated or re-presented
for the financial year. Refer to note 4 for further details.)
18. Share based payments
As at 31 March 2022, the company has two share option plans:
-- Senior executive equity-settled share option plans
-- Company equity-settled share option plans
Further details can be found in Note 9 of the Annual Report
& Financial Statements 2021.
Senior executive equity-settled share option plans
Six months Weighted Weighted
to: Average Year to: Average
31 March Exercise 30 September Exercise
2022 Price 2021 Price
(unaudited) (unaudited) (Audited) (Audited)
Group '000 units (pence) '000 units (pence)
Outstanding at the beginning
of the period/year 3,972 33 3,972 33
Granted during the period/year - - - -
Exercised during the period/year - - - -
Expired during the/period/year (334) (35) - -
Outstanding at the end
of the period/year 3,638 33 3,972 33
Exercisable at the end - - - -
of the period/year
No options were granted during the period ended 31 March 2022
(30 September 2021: Nil).
The fair value was measured at the grant date using the
Black-Scholes model.
Company equity-settled share option plans
Six months Weighted Weighted
to: Average Year to: Average
31 March Exercise 30 September Exercise
2022 Price 2021 Price
(unaudited) (unaudited) (Audited) (Audited)
Company '000 units (pence) '000 units (pence)
Outstanding at the beginning
of the period/year 1,945 27 2,715 15
Granted during the period/year - -
Exercised during the period/year - - (750) (12)
Expired during the /period/year - - (20) (26)
Outstanding at the end
of the period/year 1,945 27 1,945 27
Exercisable at the end
of the period/year 1,945 27 1,945 27
No options were granted during the period ended 31 March 2022
(30 September 2021: Nil).
The fair value was measured at the grant date using the
Black-Scholes model.
19. Commitments, contingent liabilities, and contingent
assets
At 31 March 2022, the Group had undrawn commitments to lend to
customers of GBP10.3 million (30 September 2021: GBP9.0
million).
The Group's subsidiary, PCF Bank Limited (the Bank), operates in
a regulatory and legal environment that, by nature, has a
heightened element of litigation risk inherent in its operations.
The Group and the Bank have formal controls and policies for
managing legal claims. Based on professional legal advice, the
Group provides and/or discloses amounts in accordance with its
accounting policies described in note 1 of the Annual Report &
Financial Statements 2021. From time to time the Group and the Bank
receive legal claims relating to its business activities. The total
value of claims at 31 March 2022, assessed to have a greater than
remote likelihood of economic outflow, is GBPnil (30 September
2021: GBPnil).
The Group has begun to seek recovery of remuneration-related
payments and other consequential losses suffered in relation to the
events that led to the delay of the Annual Report & Financial
Statements 2020 and the shares being suspended from trading on AIM.
The amount of any recoveries cannot currently be quantified.
20. Related parties
The non-executive directors held a total of GBP85,800 in savings
accounts in the Group at 31 March 2022 (30 September 2021:
GBP106,272).
In addition, there were other material related party
transactions related to management fee recharges of GBP0.3 million
and GBP14.4 million to PCF Credit Limited and PCF Bank Limited
respectively by PCF Group plc for the period ended 31 March 2022
(2021: GBP0.4 million and GBP18.9 million respectively)
Key management personnel of the Group are the Board
Directors.
21. Non adjusting events after the balance sheet date
COVID-19 pandemic and geopolitical uncertainty
Since the end of 2021 there have been no subsequent lockdowns as
a result of COVID-19 and now in May 2022 all restrictions have been
lifted.
COVID-19 direct financial support measures have unwound, the
impact on credit arrears and losses have been limited, with the
majority of customers who had requested COVID-19 related payment
deferrals having returned to full servicing of their loans.
Requests for assistance continued to fall as we moved through 2021,
and due to a change of process adopted to manage customer
forbearance, arrears have continued to trend back to levels
reported pre pandemic. The Group continues to monitor this.
The pandemic has had an unprecedented impact on the world
economy, more recently exacerbated by the war in Ukraine. The
Group's business is principally focused on UK based businesses and
customers and the Group does not have any direct exposure to Russia
or any sanctioned persons or entities . As the global economy
emerges from the pandemic with the inevitable upturn in economic
activity, demand for energy has increased at a time of uncertain
supply, with a consequential marked increase in energy costs,
leading to levels of inflation not seen in the UK for over thirty
years. This has led the Bank of England to increase interest rates
from record lows to the highest level seen in the last ten years,
with Oxford Economics forecasting that the Monetary Policy
Committee of the Bank of England will increase the Bank Rate to 2%
by the end of 2022.
Although PCF loans are generally fixed rate, the impact on
households and businesses of rising food prices, energy costs,
interest rates and general inflation may be reflected in
affordability pressure. We are closely monitoring the potential
impact of this on loan repayments.
While there is uncertainty in these macroeconomic risks,
headwinds may restrict market prospects for the Group and increase
the risk of loan impairments, higher prices and inflation
expectations, and a disappointing recovery in labour market
participation, which in turn could lead to a downturn in domestic
demand.
Announcement of 31 May 2022
The Group announced that it had decided to accelerate an element
of its capital raising, by requesting a further investment from its
majority shareholder Somers Limited of circa GBP4 million (*) over
the next two months; at the same time, the Group announced it was
in early-stage discussions with Castle Trust Capital plc in
relation to a possible all share offer for the entire issued and to
be issued shares of the Company.
*An open offer to allow all shareholders to participate is
expected to follow in due course.
Issuance of new shares 7 June 2022
On 7 June 2022 Somers Limited signed an agreement relating to
the issue to it of 54,880,000 new ordinary shares of the Company at
a subscription price of 5 pence per share, which raised gross
proceeds of GBP2,744,000.
22. Management of capital risk
Risk Weighted Assets
The Group does not operate a trading book and has no Market Risk
Pillar 1 capital requirement. Its RWAs are therefore driven
predominantly by consumer and business Credit risk with a component
of additional Operational risk. With relatively little swap
activity and most liquidity held as cash with the Bank of England,
Counterparty Credit risk is limited.
31 30 September
Risk Weighted Asset exposure March 2021
2022 (audited)
(unaudited) GBP'000
GBP'000
Central Government & central banks - -
Institutions 879 511
Corporates 7,800 8,122
Retail 168,819 189,202
Other items 54,835 75,447
Total credit risk 232,333 273,282
Operational risk 47,812 47,812
Credit valuation adjustment 353 109
Total Risk Weighted Assets 280,498 321,203
Risk based capital
A Pillar 2 capital requirement reflects wider risks within the
Group's ICAAP assessment and any capital add-ons arising from the
supervisory review of those assessments. In addition, a PRA buffer
may be applied to reflect both the outcome of stress testing, and
where the PRA views that controls need to be strengthened.
In line with CRD IV, UK firms are required to meet a combined
buffer requirement, which is in addition to the Pillar 1 and Pillar
2A capital requirements. The combined buffer includes the Capital
Conservation Buffer (CCB) and the Countercyclical buffer (CCyB) and
must be met with CET1 capital. As at 31 March 2022 CCB was 2.5% (30
September 2021: 2.5%) and CCyB was 0% (30 September 2021: 0%). The
combined buffer requirements relating to global systemically
important institutions and the systemic risk buffer do not apply to
the Group.
The following table shows a reconciliation between statutory
equity and total regulatory capital after deductions on a
transition arrangement basis:
31 30
March 2022 September
2021
(unaudited) (audited)
GBP'000 GBP'000
Equity
Issued capital 12,550 12,550
Share premium 17,679 17,679
Other reserves recognised for CET 1 capital 23 9
Investment in own shares (147) (147)
Retained earnings 11,286 18,771
Total equity 41,391 48,862
Adjustments to Regulatory Capital
Goodwill and intangible assets (2,870) (3,075)
Adjustment for Prudent valuation (13) (16)
IFRS 9 transitional adjustment 2,656 4,340
Total deductions (228) 1,249
Total CET 1 Capital 41,164 50,111
Other Capital
Additional Tier 1 Capital - -
Subordinated Debt Tier 2 Capital 6,310 6,136
Total Regulatory Capital 47,474 56,247
Under the UK's Leverage Framework (PS 21/21), PCF is below the
thresholds for retail deposits or non-UK exposures for the Group to
be classified as an 'LREQ' firm and therefore is not in scope of a
formal leverage ratio requirement under UK CRR. However, in line
with regulatory expectations, the Group continues to monitor its
leverage ratio as though the minimum requirement of 3.25% plus
buffers is applicable.
The following table shows the key metrics on a transitional
arrangement and fully loaded basis for regulatory capital and
leverage ratio.
31 March 30 September
2022 2021
(unaudited) (audited)
GBP'000 GBP'000
Available own funds (GBP'000)
Common Equity Tier 1 (CET 1) capital 41,164 50,111
Common Equity Tier 1 (CET 1) capital as
if IFRS 9 or analogous ECLs transitional
arrangements are not applied 38,508 45,771
Tier 1 capital 41,164 50,111
Tier 1 Capital as if IFRS 9 or analogous
ECLs transitional arrangements are not applied 38,508 45,771
Total capital 47,474 56,247
Total capital as if IFRS 9 or analogous
ECLs transitional arrangements are not applied 45,080 52,272
Risk-weighted exposure (GBP'000)
Total risk-weighted assets 278,893 321,203
Total risk-weighted assets as if IFRS 9
or analogous ECL transitional arrangement
are not applied 276,237 316,863
Capital ratios (as a percentage of risk-weighted
exposure amount)
Common Equity Tier 1 ratio (%) 14.8% 15.6%
Common Equity Tier 1 ratio (%) as if IFRS
9 or analogous ECL transitional arrangements
are not applied 13.9% 14.4%
Tier 1 capital ratio (%) 14.8% 15.6%
Tier 1 ratio (%) as if IFRS 9 or analogous
ECLs transitional arrangements are not applied 13.9% 14.4%
Total capital ratio (%) 17.0% 17.5%
Total capital ratio (%) as if IFRS 9 or
analogous ECLs transitional arrangements
are not applied 16.3% 16.5%
Leverage ratio*
Total exposure measure 345,709 450,976
Leverage ratio (%) 11.9% 11.1%
Leverage ratio (%) as if IFRS 9 or analogous
ECLs transitional arrangement are not applied 11.2% 10.2%
* The 31 March 2022 leverage exposure measure excludes central
bank claims.
The Group is deemed to qualify as a small and non-complex
institutions as defined in CRR Article 4(1)(145). In accordance
with CRR Article 433b, for Pillar 3 purposes, small and non-complex
institutions that are listed shall disclose on a semi-annual basis
the key metrics referred to in Article 447.
31 March 30 September
2022 2021
(unaudited) (audited)
GBP'000 GBP'000
Available own funds (amounts)
Common Equity Tier 1 (CET1) capital 41,164 50,111
Tier 1 capital 41,164 50,111
Total capital 47,474 56,247
Risk-weighted exposure amounts
Total risk-weighted exposure amount 278,893 321,203
Capital ratios (as a percentage of risk-weighted exposure amount)
Common Equity Tier 1 ratio (%) 14.8% 15.6%
Tier 1 ratio (%) 14.8% 15.6%
Total capital ratio (%) 17.0% 17.5%
Additional own funds requirements based on SREP (as a percentage
of risk-weighted exposure amount)
Additional CET1 SREP requirements (%) 0.56% 0.56%
Additional AT1 SREP requirements (%) 0.44% 0.44%
Additional T2 SREP requirements (%) 0.25% 0.25%
Total SREP own funds requirements (%) 9% 9%
Combined buffer requirement (as a percentage of risk-weighted
exposure amount)
Capital conservation buffer (%) 2.5% 2.5%
Institution specific countercyclical capital
buffer (%) 0% 0%
Combined buffer requirement (%) 2.5% 2.5%
Overall capital requirements (%) 11.5% 11.5%
CET1 available after meeting the total SREP
own funds requirements (%) 5.8% 6.6%
Leverage ratio*
Total exposure measure 345,709 450,976
Leverage ratio (%) 11.9% 11.1%
Liquidity Coverage Ratio
Total high-quality liquid assets (Weighted
value -average) 60,956 53,886
Cash outflows - Total weighted value 18,605 16,645
Cash inflows - Total weighted value 9,595 11,683
Total net cash outflows (adjusted value) 10,010 5,962
Liquidity coverage ratio (%) 609% 904%
Net Stable Funding Ratio
Total available stable funding 384,369 428,865
Total required stable funding 235,889 269,642
NSFR ratio (%) 163% 159%
* The 31 March 2022 leverage exposure measure excludes central
bank claims.
Liquidity and funding risk
Liquidity and funding risk is the risk that the Group is unable
to fund new business originations or meet cash flow or collateral
obligations as they fall due, without access to viable alternatives
and without adversely affecting its deposit franchise, daily
operations or financial health. The Group maintains a diversified
funding strategy, with close relationships to its wholesale
counterparties and is an active participant in the retail deposit
taking market. This is supported with prudent levels of
high-quality liquid assets, in excess of that needed to withstand a
severe but plausible stress.
At all times, the Group maintains sufficient high quality liquid
resources to ensure that there is no significant risk from being
unable to meet its liabilities as they fall due during a severe but
plausible stress. The Group maintains a diversified funding
strategy with close relationships with its banking counterparties
and by being an active participant in the retail deposit taking
market, seeking to align the tenor of its funding to the average
effective life of its loan portfolio. The current ability of the
Group to access wholesale debt facilities is discussed further in
the Emerging risks and uncertainties section of the Strategic
Report of the Annual Report & Financial Statements 2021.
The Group assesses its liquidity position through both an
internal set of measures which assess adherence to the Overall
Liquidity Adequacy Rule ('OLAR') and through the regulatory defined
Liquidity Contingency Ratio (LCR). The Group maintains the entirety
of its Liquid Asset Buffer in the form of high-quality liquid
assets . The amount of these has been significantly in excess of
the 100% LCR minimum requirement through the period. Within both
the LCR and OLAR assessments, the Group sets an intra-day limit to
ensure that sufficient funds are held over and above daily
requirements to account for volatility in intra-day cash flows.
In order to ensure that levels and concentrations of funding do
not lead to future liquidity risks, the Group monitors the
stability of its funding exposures through a regulatory defined Net
Stable Funding Ratio ('NSFR'), which is maintained well in excess
of the 100% regulatory limit.
31 30 September
Measure March 2021
2022 (audited)
(unaudited)
LCR % 609% 904%
NSFR % 163% 159%
Liquidity Resources
The Group maintains a portfolio of highly marketable and diverse
assets that may be liquidated quickly in the event of an unforeseen
interruption in cash flow, the liquidity of which is regularly
tested. The Group also has central bank facilities and lines of
credit that it can access to meet liquidity needs. In accordance
with the Group's policy, the liquidity position is assessed under a
variety of scenarios, giving due consideration to stress factors
relating to both the market in general and specifically to the
Group.
31 March 30 September
Liquidity resources 2022 2021
(unaudited) (audited)
GBP'000 GBP'000
Cash and balances with the Bank of England 60,955 53,886
UK Government securities and other qualifying
securities 12,132 16,155
Sub-total High Quality Liquid Assets 73,087 70,041
Cash at Bank 3,241 2,240
Contingent central bank facilities - 13,658
Total 76,328 85,939
Given the potential for liquidity threats following the events
of 2020 and 2021 and the increase in encumbrance due to greater
TFSME funding, the Group took the decision to hold additional
liquidity in the form of cash reserves with the Bank of England,
rather than to preposition additional collateral to support
contingent access to central bank facilities in the event of a
stress.
Analysis of encumbered and unencumbered assets
Below is the analysis of the Group's encumbered and unencumbered
assets that would be available to obtain additional funding as
collateral. For this purpose, encumbered assets are assets which
have been pledged as collateral (e.g. which are required to be
separately disclosed under IFRS 7). Unencumbered assets are the
remaining assets that the Group owns.
31 March 2022 Carrying Amount Carrying Amount Total
of encumbered of unencumbered
assets assets
Group GBP'000 GBP'000 GBP'000
Debt financial instruments
at FVOCI 9,563 2,569 12,132
Hire purchase / conditional
sale 67,000 186,929 253,929
Loans - 463 463
Finance lease 13,262 8,040 21,302
Bridging - 44,815 44,815
Total 89,825 242,816 332,641
30 September 2021 Carrying Amount Carrying Amount Total
of encumbered of unencumbered
assets assets
Group GBP'000 GBP'000 GBP'000
Debt financial instruments
at FVOCI 13,807 2,348 16,155
Hire purchase / conditional
sale 60,005 223,049 283,054
Loans - 460 460
Finance lease 12,851 12,419 25,270
Bridging - 55,208 55,208
Total 86,663 293,484 380,147
Analysis of maximum exposure to credit risk
The table below presents the Group's maximum exposure to credit
risk, before taking account of any collateral and credit risk
mitigation, arising from its on-balance sheet financial
instruments. For off- balance sheet instruments, the maximum
exposure to credit risk represents the contractual nominal
amounts
31 March 30 September
2022 2021
(unaudited) (audited)
GBP'000 GBP'000
On Balance Sheet
Cash and balances at central banks
Cash and demand deposits 64,196 56,126
Loans and advances to customers (net)
Consumer lending 144,969 163,641
Business lending 115,411 130,860
Azule lending 15,314 14,283
Bridging finance 44,815 55,208
Due from related companies -
Debt instruments at FVOCI 12,132 16,155
Derivative Financial Asset 568 209
Other assets 1,197 4,120
398,602 440,602
Off-Balance Sheet
Undrawn facilities 10,329 8,958
PCF Group (via Tavistock Communications) Tel: +44 (0)
Garry Stran, Chief Executive Officer 20 7920 3150
Caroline Richardson, Chief Financial
Officer
Tavistock Communications Tel: +44 (0)
Simon Hudson / Tim Pearson 20 7920 3150
Peel Hunt (Nominated Advisor and Tel: +44 (0)
Joint Broker) 20 7418 8900
Andrew Buchanan / Rishi Shah / Oliver
Jackson
Shore Capital (Joint Broker) Tel: +44 (0)
Henry Willcocks / Guy Wiehahn 20 7408 4080
About PCF Group plc ( www.pcf.bank )
Established in 1994, PCF Group plc is the AIM-quoted parent of
the specialist bank, PCF Bank Limited. Since commencing operations
as a bank in 2017. The Group continues to focus on portfolio
quality and lending to the prime segments of its existing markets.
The Group will continue to identify opportunities to diversify its
lending products and asset classes by setting up new organic
operations or through acquisition.
PCF Bank currently offers retail savings products for
individuals and then deploys those funds through its four lending
divisions:
-- Business asset finance which provides finance for vehicles, plant and equipment to SMEs;
-- Consumer motor finance which provides finance for motor vehicles to consumers;
-- Azule which brokers finance to the broadcast and media industry; and
-- Property bridging finance which provides loans to companies
and sole traders investing in residential and commercial
property.
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