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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

IR WPURWQUPPUAU

(END) Dow Jones Newswires

June 30, 2022 02:00 ET (06:00 GMT)

Pcf (LSE:PCF)
Gráfica de Acción Histórica
De Jul 2022 a Ago 2022 Haga Click aquí para más Gráficas Pcf.
Pcf (LSE:PCF)
Gráfica de Acción Histórica
De Ago 2021 a Ago 2022 Haga Click aquí para más Gráficas Pcf.