TIDMPCF
RNS Number : 4592Z
PCF Group PLC
25 January 2022
24 January 2022
PCF Group plc
("PCF", the "Company" or the "Group")
Interim Results
Six months to 31 March 2021
PCF Group plc, the AIM-listed specialist bank, today announces
its interim results for the six-months ended 31 March 2021.
The following summary of the consolidated interim financial
statements should be read in conjunction with PCF Group plc's
Annual Report & Financial Statements 2020, notably the emerging
risks and uncertainties outlined in the Risk Overview.
Garry Stran, Interim Chief Executive Officer, commented:
'The Group delivered a statutory profit after tax of GBP1.0
million. The reduction on the prior year (2020: GBP2.0 million)
predominantly reflects higher operating expenses as a result of the
focus on remediation activities and the need to invest in order to
ensure that the business can support automation and future growth.
New business origination was lower in the period and net loans
reduced slightly as a result.
The first six months of the 2021 financial year were challenging
as a result of the general ongoing pandemic related difficulties
facing all businesses and individuals and the specific difficulties
that the Group has experienced.
The suspension of trading in the Group's shares on 19 May 2021
followed the identification of accounting errors and misstatements
as well as a failure to properly report certain exposures under the
Prudential Regulation Authority's Large Exposure reporting
framework between December 2018 and June 2019 as set out in the
Group's announcement on 28 June 2021. I am pleased to announce that
the suspension is expected to be lifted today, allowing trading in
the Group's shares to recommence.
Once again, I thank all my colleagues for their commitment and
support during this difficult period. It's through their efforts
and diligence that we have been able to continue to operate in an
effective manner and I am confident we will return to our strategy
of controlled and prudent growth, having learned the lessons from
this period, as soon as possible.
Whilst the necessary actions have been taken to remediate our
core Finance processes, which culminated in an update to the
Group's FPPP (Financial Position and Prospects Procedures)
memorandum, further work will continue to enhance our processes and
develop the foundations to support the future strategy of the Group
which will be centred around an enhanced, more robust risk
management framework and underpinned by higher levels of automation
and self-service.
I look forward to sharing more updates in the future about the
status of these activities and the progress towards delivering our
strategic priorities.'
Business Highlights:
* Net loans and advances reduced slightly to GBP425.8 million
(September 2020: GBP427.3 million).
* Total new business originations were 20% lower at GBP122.9
million (2020: GBP153.3 million).
* Focus remains on writing high quality business, with 93%
(2020: 80%) of originations in our top four credit grades.(1)
* Customer savings balances of GBP338.3 million (September
2020: GBP341.8 million) with over 8,050 customers (September
2020: over 7,950).
* Portfolio forbearance has reduced signi cantly since the
introduction of lockdowns in the United Kingdom ('UK').
At March 2021, less than 4% of the portfolio was in forbearance
(September 2020: 9%).
(1) (Top four credit grades refer to internal credit grades 1 to
4. Refer to the Risk Management Report in the PCF Group Annual
Report & Financial Statements 2020 for further details.)
Financial Highlights:
* Net operating income increased by 4% to GBP14.7 million
(2020: GBP14.2 million).
* Net interest margin decreased slightly to 6.7% (2020: 6.8%).
* Cost to income ratio increased to 66.3% (2020: 49.2%).(2)
* Credit impairment charge of GBP3.8 million (2020: GBP4.7
million) largely driven by a change to the provision estimates
for defaulted receivables.
* Impairment charge as a percentage of average gross loans
was 1.7% (2020: 2.5%).
* Statutory pro t after tax of GBP1.0 million (2020: GBP2.0
million), with the reduction driven by higher expenses.
* Post-tax return on equity of 3.6% (2020: 6.8%).
* Earnings per share of 0.4p (2020: 0.8p).
* Total Capital Ratio of 16.7% (September 2020: 16.8%).
* Leverage ratio of 11.5% (September 2020: 11.5%).(3)
* Liquidity Coverage Ratio of 488% (September 2020: 673%).
(2) (Cost to income ratio excludes impairment of goodwill and
impairment losses on financial assets.)
(3) (Leverage ratio - transition definition of Tier 1
capital.)
Interim Chief Executive Officer's statement for the six months
ended 31 March 2021
I begin by acknowledging the uncertainty and concern that the
delayed publication of our financial results has caused for our
stakeholders, and thanking you all for your patience and
understanding during this challenging time.
As announced in our Annual Report & Financial Statements
2020, accounting errors and misstatements were identified, which
resulted in trading in the Group's shares being suspended on 19 May
2021. In response to these events, the Group is progressing with a
number of restorative actions. These actions are focused on
significant improvements to culture, governance and controls, and
technology.
Culture, governance and controls, and technology
During the period, PCF was delighted to welcome Caroline
Richardson to the executive team as Chief Financial Officer.
Caroline brings with her a wealth of experience and has been
instrumental in implementing our strengthened control
environment.
As part of the Group's wider assessment of culture and
governance, an extensive culture improvement programme has been
launched within the Bank where everybody understands their personal
responsibility for risk. The programme will also ensure colleagues
feel comfortable to speak up and challenge if they have
concerns.
One of the key areas of focus for the Group is continuing our
investment in IT systems and infrastructure to develop a
technologically advanced, digital, and modern operating platform
where we can leverage economies of scale and move towards our
ultimate goal of a zero marginal cost operating model.
Economic environment and COVID-19
The first half of the 2021 financial year has been significantly
impacted by the ongoing social and economic effects of COVID-19. We
have continued to support customers and colleagues and remained
focused on the strength of our balance sheet.
Throughout the various lockdowns and restrictions we continued
to receive requests for COVID-19 related payment deferrals and
other requests for assistance. We have accommodated customers'
requests wherever possible, and whilst we continued to receive
these requests the percentage of customers benefitting from these
plans has reduced significantly since the initial earlier stage of
the COVID-19 pandemic.
Business and financial performance
New business origination in the period was lower at GBP122.9
million (2020: GBP153.3 million). Origination levels were impacted
by the pandemic, particularly in the Business Finance Division
where demand remained low as sole traders and small businesses
deferred investment decisions and continued to make use of the
Government's support schemes.
Origination increased in the Consumer Finance Division, as
demand for used vehicles remained robust although we adopted a
cautious approach to origination levels given the unusual dynamics
witnessed in respect of the pricing of used vehicles as a result of
the shortage of supply of new vehicles. The Group's continued
diversification into Bridging Finance has been successful, with
significantly higher originations in the first half of the 2021
financial year.
The quality of new business increased with 93% of lending
written in our top four credit grades. This compares favourably
with 80% in the first half of 2020 .
Net operating income increased 4% to GBP14.7 million in the
period largely driven by a 12% increase in net interest income
which reflects a broadly stable margin of 6.7% (2020: 6.8%) on a
higher average balance sheet.
Operating expenses, excluding impairment of goodwill and credit
impairment charges, increased to GBP9.8 million (2020: GBP7.0
million) as we continued to scale to support remediation and
capability enhancements to our operating and governance models.
The Group's cost to income ratio increased to 66.3% (2020:
49.2%), with the higher expenses more than offsetting the increased
net operating income.
The credit impairment charge of GBP3.8 million (2020: GBP4.7
million) includes an additional GBP3.2 million provision increase
for defaulted receivables (receivables that were either seriously
in arrears or where the asset which acted as security for the
receivable had been sold and a balance of the receivable remained
outstanding), resulting from revisions to recovery expectations
against those exposures. Besides this, the incremental credit
impairment charge in the first half of 2021 was lower than in 2020,
reflecting the broadly flat gross loan book in the six months to
March 2021.
The Group generated a profit after tax of GBP1.0 million (2020:
GBP2.0 million) which represents a return on equity of 3.6% (2020:
6.8%) and an earnings per share of 0.4 pence (2020: 0.8 pence).
Capital, funding and liquidity management
The Group remains extremely focused on ensuring it maintains
sufficient levels of capital and liquidity. At 31 March 2021, the
Group had a total capital ratio of 16.7% (September 2020: 16.8%)
and a liquidity coverage ratio of 488% (September 2020: 673%).
The Group's diversified funding model comprises both retail
deposits, wholesale funding and drawings from the Bank of England's
Term Funding Schemes. At 31 March 2021, we held GBP338.3 million in
deposits and had drawings of GBP59.6 million against the Term
Funding Schemes. This is in addition to the GBP7.2 million of Tier
2 capital from the facility that we have with British Business
Investments Limited.
Changes to the Board
As announced on 23 December 2021, the Group's Chairman Tim
Franklin has notified the Board that he will retire as director and
Chairman, effective no later than 31 January 2022. Marian Martin
has also resigned as a director. Tim and Marian were both valued
members of the Board.
As Chairman, Tim oversaw significant change in the business
during his tenure and in recent months provided calm and considered
leadership against what was an extremely challenging backdrop. His
contribution to the Group has been significant and I thank him for
his contributions and wish him the very best for the future.
We announced on 10 January 2022 that following a thorough search
process, Simon Moore and Mark Sismey-Durrant were appointed as
non-executive directors to the Board with effect from 9 January
2022.
Subject to regulatory approvals, Simon Moore will take up the
role of the Chair of the Board and Board Nominations Committee and
Mark Sismey-Durrant will take up the role of Senior Independent
Director and interim Chair of the Board Risk Committee. Both bring
a wealth of executive and non- executive experience, including
within financial services, and we are extremely pleased to be
welcoming them to PCF.
Financial targets
Published financial targets were withdrawn in June 2020 in
response to the uncertainty caused by COVID-19. We are determined
to return to providing targets and we now believe the most suitable
time to reintroduce these will be with, or shortly after, the
publication of our Annual Report & Financial Statements 2021.
At this stage, our new auditor Macintyre Hudson will have completed
their first annual audit and we will have more certainty in respect
of performance for the first six months of the 2022 financial year;
given this we anticipate being in a position to share details of
our full year forecast for the 2022 financial year and how we
expect profitability and the size of the balance sheet to develop
over the duration of our planning horizon.
Outlook
Financial performance of the Group in the period was impacted by
the ongoing economic and social effects of the pandemic, the
initial costs associated with the commencement of remediation
activity and our IT investment.
Furthermore, in the second half of the 2021 financial year the
Group continued with the remediation and enhancement activities
discussed herein. We will manage new business volumes to ensure the
Group remains well capitalised throughout but before we return to
normalised origination levels it is anticipated that there will be
a temporary reduction in the overall size of the Group's loan book.
Although these factors will continue to have a negative impact on
capital generation and profitability in the near-term, it is
absolutely necessary that we invest and manage the business
appropriately for the future success of the Group.
The Board is confident that this investment coupled with the
improvements in culture, governance and controls, and technology
will allow the Group to overcome the current challenges and prepare
the business to execute against its growth strategy which will be
underpinned by a data-driven and digitalised approach to lending
and loan origination. I will share more details of our future plans
in the Annual Report & Financial Statements 2021.
GG Stran
Interim Chief Executive Officer
24 January 2022
CONSOLIDATED INCOME STATEMENT
Half-year to
----------------------------
31 March 31 March
2021 2020(4)
(unaudited) (unaudited)
Note GBP'000 GBP'000
Interest income calculated using the effective interest method 6 21,680 20,364
Interest expense calculated using the effective interest method 7 (7,517) (7,717)
------------- -------------
Net interest income 14,163 12,647
Fees and commission income(4) 8 1,307 2,430
Fees and commission expense 8 (928) (813)
------------- -------------
Net fees and commission income 8 379 1,617
------------- -------------
Net profit / (loss) on financial instruments classified at fair value through
profit or loss 207 (25)
------------- -------------
Net operating income 14,749 14,239
------------- -------------
Personnel expenses (5,731) (4,331)
Depreciation of office equipment, motor vehicles
and right-of-use assets (575) (122)
Amortisation of intangible assets (319) (268)
Impairment loss on software (14) -
Other operating expenses (3,135) (2,280)
Impairment losses on financial assets(4) 9 (3,755) (4,686)
Total operating expenses (13,529) (11,687)
------------- -------------
Profit before tax 1,220 2,552
Income tax 10 (255) (509)
------------- -------------
Profit after tax 965 2,043
Earnings per 5p ordinary share - basic and diluted 17 0.4p 0.8p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Half-year to
-----------------------------
31 March 31 March
2021 2020
(unaudited) (unaudited)
GBP'000 GBP'000
Profit after taxation 965 2,043
Other comprehensive income that will be reclassified to the Income statement
Fair value loss on FVOCI financial instruments (62) (460)
Deferred tax 12 -
Total items that will be reclassified to the Income statement (50) (460)
-------------- -------------
Total comprehensive income net of tax 915 1,583
-------------- -------------
CONSOLIDATED BALANCE SHEET
At
----------------------------
31 March 30 September
2021 2020
Notes (unaudited) (audited)
GBP'000 GBP'000
Assets
Cash and balances at central banks 25,858 24,936
Debt instruments at FVOCI 2,594 9,095
Derivative financial instruments 18 -
Loans and advances to customers 11 425,795 427,297
Office equipment, motor vehicles and 2,652 3,144
right-of-use assets
vehicles
Goodwill and other intangible assets 13 4,346 4,327
Deferred tax assets 1,822 1,810
Current tax assets 1,341 -
Other assets 3,349 2,051
Total assets 467,775 472,660
Liabilities
Due to customers 338,336 341,784
Due to banks 59,615 62,620
Derivative financial instruments - 80
Lease liabilities 1,332 1,604
Current tax liabilities - 125
Other liabilities 6,358 5,446
Subordinated liabilities 15 7,224 7,126
------------- -------------
Total liabilities 412,865 418,785
Equity
Issued capital 16 12,550 12,512
Share premium 16 17,679 17,625
Other reserves 3 53
Own shares (147) (147)
Retained earnings 24,825 23,832
------------- -------------
Total equity 54,910 53,875
------------- -------------
Total equity and liabilities 467,775 472,660
------------- -------------
The interim financial statements were approved and authorised
for issue by the Board on 24 January 2022.
On behalf of the Board
GG Stran C Richardson
Director Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the Group
------------------------------------------------------------------------------------------------
Non-distributable Distributable
-------------------------------------------- --------------------------------------------------
Issued Capital Share Premium Own Shares Other Reserves Retained Earnings Total Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------------- ----------- --------------- ------------------ -------------
Balance at 1
October 2020 12,512 17,625 (147) 53 23,832 53,875
Profit for the
period 965 965
Issuance of new
shares/scrip
dividend 38 54 - - - 92
Fair value
gain/(loss) on
FVOCI
financial
instruments - - - (50) - (50)
Share-based
payments - - - - 28 28
Cash dividends - - - - - -
Balance at 31 March
2021 12,550 17,679 (147) 3 24,825 54,910
--------------- -------------- ----------- --------------- ------------------ -------------
Attributable to equity holders of the Group
------------------------------------------------------------------------------------------------
Non-distributable Distributable
-------------------------------------------- --------------------------------------------------
Issued Capital Share Premium Own Shares Other Reserves Retained Earnings Total Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------------- ----------- --------------- ------------------ -------------
Balance at 1
October 2019 12,510 17,619 (355) 7 28,974 58,755
Profit for the
period - - - - 2,043 2,043
Issuance of new - - - - - -
shares/scrip
dividend
Fair value
gain/(loss) on
FVOCI
financial
instruments - - - (460) - (460)
Share-based
payments - - - - (79) (79)
Cash dividends - - - - - -
Balance at 31 March
2020 12,510 17,619 (355) (453) 30,938 60,259
--------------- -------------- ----------- --------------- ------------------ -------------
Attributable to equity holders of the Group
------------------------------------------------------------------------------------------------
Non-distributable Distributable
-------------------------------------------- --------------------------------------------------
Issued Capital Share Premium Own Shares Other Reserves Retained Earnings Total Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------------- ----------- --------------- ------------------ -------------
Balance at 1 April
2020 12,510 17,619 (355) (453) 30,938 60,259
Loss for the period - - - - (6,301) (6,301)
Issuance of new
shares/scrip
dividend 2 6 - - (8) -
Reclassification to
cash - - 208 - - 208
Fair value
gain/(loss) on
FVOCI
financial
instruments - - - 506 - 506
Share-based
payments - - - - 196 196
Cash dividends - - - - (993) (993)
Balance at 30
September 2020 12,512 17,625 (147) 53 23,832 53,875
--------------- -------------- ----------- --------------- ------------------ -------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Half-year to
-----------------------------
31 March 31 March
2021 2020(4,5)
(unaudited) (unaudited)
GBP'000 GBP'000
Operating activities
Profit before tax 1,220 2,552
Other non-cash items included in profit before tax
Depreciation of Office equipment, motor vehicle and right-of-use assets 575 122
Loss on sale of motor vehicles 2 -
Amortisation of other intangible assets 319 268
Interest on lease liabilities 21 -
Accrued finance costs 15 -
Impairment loss on software 14 -
Share-based payments 28 (79)
Impairment losses on financial assets(4) 3,755 4,686
Income tax (paid) / due (1,733) (1,788)
Adjustment for change in operating assets
Net change in loans and advances(4) (2,253) (67,039)
Net change in other assets (1,298) 1,641
Change in operating liabilities
Net change in derivative financial instruments (98) (7)
Net change in amounts due to customers (3,448) 72,783
Net change in other liabilities 912 4,621
------------- -------------
Net cash flows from / (used in) operating activities (1,969) 17,760
------------- -------------
Investing activities
Net sale / (purchase) of debt instruments at FVOCI(5) 6,451 (950)
Purchase of office equipment, motor vehicles (85) (2,711)
Purchase of intangible assets (352) (295)
------------- -------------
Net cash flows from / (used in) investing activities 6,014 (3,956)
------------- -------------
Financing activities
Proceeds from share issue during the period 92 -
Proceeds from subordinated borrowings 98 5,000
Repayment of capital element of leases (293) -
Net proceeds from borrowings (3,020) (13,929)
Net cash flows used in financing activities (3,123) (8,929)
------------- -------------
Net increase in cash and cash equivalents 922 4,875
Cash and cash equivalents brought forward 24,936 7,371
------------- -------------
Cash and cash equivalents carried forward 25,858 12,246
------------- -------------
NOTES TO THE INTERIM REPORT
1. Basis of preparation
The consolidated interim financial statements for the half-year
to 31 March 2021 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 2020 (hereinafter referred to as the 'Annual Report
& Financial Statements 2020') 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 did
not express an opinion on the financial statements of PCF Group plc
(disclaimer of opinion) 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 2020. In particular this going concern
statement should be read in conjunction with the Emerging risks and
uncertainties section of the Strategic Report which sets out those
risks and mitigations.
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities at 30 September 2020 are set out
in the Annual Report & Financial Statements 2020 and updated in
the consolidated interim financial statements for the half-year to
31 March 2021.
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for at least the next twelve months.
Accordingly, they continue to adopt the going concern basis in
preparing these consolidated interim financial statements.
The directors have assessed the appropriateness of the going
concern assumption taking into account all matters set out in the
Strategic Report section of the Annual Report & Financial
Statements 2020 and a detailed review of the Group's medium-term
plan which includes increased remediation costs alongside a
consideration of capital, funding and liquidity requirements. This
consideration also included other business and emerging risks.
The Group made a GBP(4.8) million statutory loss before tax for
the year ended 30 September 2020 and a GBP1.2 million profit before
tax for the half-year to 31 March 2021. The Board has approved a
medium-term plan in which the Group returns to profitability, but
this is dependent on building scale to support an increased cost
base. Remediation costs are expected to be incurred for at least
the next twelve months. The growth in the medium-term plan requires
capital to be raised. However, given the delay to the Annual Report
& Financial Statements 2020, the disclaimer of auditor opinion
and the temporary suspension of trading in the Group's shares,
there are risks associated with our ability to raise capital and
fund the planned future balance sheet growth.
Group performance, and the return to profitability in the
medium-term plan, is underpinned by a number of key inputs and
assumptions which cover:
* The raising of external capital.
* The funding of new business through retail deposits and
other wholesale funding.
* New business origination levels.
* Net interest margin on new business originations.
* The expected date of completion of the Group's remediation
activities and the impact on the Group's expenses.
* The level of impairment losses on financial assets.
* Capital requirements, both from a regulatory and internal
management perspective.
* Dividends, which have been assumed at zero in the medium-term
plan.
This indicates that the Group's ability to operate as a going
concern is subject to material uncertainties. As with any
medium-term planning process, there is a risk that these
assumptions do not materialise. As part of the review of the
medium-term plan, the Board was presented with a severe but
plausible downside scenario in which the Group is unable to raise
external capital, and a number of sensitivities to the medium-term
plan in which the Group's net interest margin, impairment losses
and business volumes were subject to materially adverse
performance. Even under the severe but plausible scenario it was
demonstrated that the Group would continue to operate and meet
current regulatory requirements for at least the next twelve
months, albeit at the expense of balance sheet growth.
The Board has concluded based on the items below that the going
concern basis of accounting was deemed appropriate:
* Planned performance, including a medium-term plan which
returns the Group to profitability.
* The assessment of downside risk to the medium-term plan.
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 2021 are consistent with those disclosed in
the Annual Report & Financial Statements 2020.
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
are those relating to impairment losses on financial assets,
effective interest rate and goodwill impairment. These significant
accounting judgements, estimates and assumptions are referenced in
note 1.7 of the Annual Report & Financial Statements 2020.
Estimation uncertainty has been affected by the COVID-19 pandemic.
Management's consideration of this source of uncertainty is
outlined in the relevant sections of the Annual Report &
Financial Statements 2020.
Information used for significant estimates
The COVID-19 pandemic has continued to cause significant
economic and social disruption. Key financial estimates are based
on a range of anticipated future economic conditions described by
internally developed scenarios. Measurement of expected credit
losses, effective interest rate and goodwill are highly sensitive
to reasonably possible changes in those anticipated conditions.
Other reasonably possible assumptions about the future include a
prolonged financial effect of the COVID-19 pandemic on the economy
of the UK and other countries. 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 2020.
3. Standards issued but not yet effective
Minor amendments to IFRSs effective for the Group from 1 October
2020 have been issued by the International Accounting Standards
Board (IASB). These amendments are expected to have no or an
immaterial impact on the Group's financial statements.
4. Amendments to prior year comparatives
4.1 Fee income on credit impaired accounts
Amendments to the previously reported 2020 disclosures have been
made relating to the treatment of other account charges and income
on termination, in respect of defaulted agreements.
Amounts in the profit and loss account have been reclassified
with the recognition of other fees and commissions of GBP1.5
million and a corresponding increase in impairment losses on
financial assets for the same amount. Amounts on the balance sheet
have been reclassified with a reduction in loans and advances to
customers of GBP1.2 million and a corresponding reduction in
allowance for impairment losses for the expected non-recoverable
amount of fees outstanding as at the reporting period charged and
capitalised on credit impaired accounts. These adjustments have no
impact on the previously reported profit before or after tax, or on
the net assets of the Group for the half-year to, and at, 31 March
2020.
4.2 Cash flows arising on debt instruments at FVOCI
Amendments to the previously reported 2020 Consolidated
statement of cash flows have been made relating to the treatment of
unrealised losses on debt instruments at FVOCI.
Amounts in the cash flow statement within Other non-cash items
included in profit / (loss) before tax relating to the net change
in FVOCI financial instruments of GBP(460,000) have been
reclassified to Investing activities as net purchase of debt
instruments at FVOCI. These adjustments have no impact on the
previously reported Cash and cash equivalents of the Group at 31
March 2020.
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.
Segmental allocations were revised for the year ended 30
September 2020. Comparatives for the half-year to, and at, 31 March
2020 have been re-presented in accordance with IFRS 8, paragraph
29.
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
2021
Interest income calculated
using the effective interest
method 9,863 7,599 729 3,489 - 21,680
Interest expense calculated
using the effective interest
method (3,693) (2,995) (112) (717) - (7,517)
Net interest income 6,170 4,604 617 2,772 - 14,163
Fees and commission income (131) 942 372 124 - 1,307
Fees and commission expense (557) (348) (15) (8) - (928)
Net fees and commission
(expense)/income (688) 594 357 116 - 379
Net profit / (loss) on
financial instruments
classified at fair value
through profit or loss 87 79 9 32 - 207
Net operating income 5,569 5,277 983 2,920 - 14,749
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 (417) (3,083) (282) 27 - (3,755)
Total operating expenses (3,848) (6,454) (2,003) (1,224) - (13,529)
Segment profit/(loss)
before tax 1,721 (1,177) (1,020) 1,696 - 1,220
Income tax credit / (charge) (360) 246 213 (354) - (255)
Profit/(loss) after tax 1,361 (931) (807) 1,342 - 965
At 31 March 2021
Total Assets 195,888 178,199 22,208 70,333 1,147 467,775
Total Liabilities 173,652 157,973 18,890 62,350 - 412,865
At 30 September 2020
Total Assets 181,209 197,855 27,063 65,386 1,147 472,660
Total Liabilities 160,759 175,694 23,671 58,661 - 418,785
Segment Information (continued)
(Re-presentation) 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
2020
Interest income calculated
using the effective interest
method 8,284 10,227 918 935 - 20,364
Interest expense calculated
using the effective interest
method (3,128) (4,158) (262) (169) - (7,717)
Net interest income 5,156 6,069 656 766 - 12,647
Fees and commission income(4) 447 1,430 553 (0) - 2,430
Fees and commission expense (472) (327) (11) (3) - (813)
Net fees and commission
(expense)/income (25) 1,103 542 (3) - 1,617
Net profit / (loss) on
financial instruments
classified at fair value
through profit or loss (9) (13) (1) (2) - (25)
Net operating income 5,122 7,159 1,197 761 - 14,239
Personnel expenses (1,314) (1,786) (874) (357) - (4,331)
Depreciation of office
equipment, motor vehicles
and right-of-use assets (37) (52) (26) (7) - (122)
Amortisation of intangible
assets (98) (136) (16) (18) - (268)
Other operating expenses (1,111) (908) (142) (119) - (2,280)
Impairment losses on
financial assets(4) (1,298) (3,179) (201) (8) - (4,686)
Total operating expenses (3,858) (6,061) (1,259) (509) - (11,687)
Segment profit/(loss)
before tax 1,264 1,098 (62) 252 - 2,552
Income tax credit / (charge) (300) (171) 12 (50) - (509)
Profit/(loss) after tax 964 927 (50) 202 - 2,043
6. Interest income calculated using the effective interest method
Half-year to
---------------------------------
31 March 31 March
2021 2020
(unaudited) (unaudited)
GBP'000 GBP'000
------------- -------------
Cash and short-term funds 1 42
Loans and advances to customers 21,599 20,195
Financial instruments - FVOCI 80 127
21221,125
------------- -------------
Total interest and similar income 21,680 20,364
------------- -------------
7. Interest expense calculated using the effective interest method
Half-year to
-----------------------------------
31 March 31 March
2021 2020(6)
(unaudited) (unaudited)
GBP'000 GBP'000
-------------- --------------
Paid and accrued to banks 426 576
Paid and accrued to customers 3,016 3,349
Credit-related fees and commission 4,055 3,792
Interest expense on lease liabilities 20 -
Total interest and similar expense 7,517 7,717
-------------- --------------
8. Net fees and commission income
Half-year to
----------------------------
31 March 31 March
2021 2020(4)
(unaudited) (unaudited)
GBP'000 GBP'000
Fees and commission income
Secondary lease income 178 60
Other fees not forming part of EIR(4) 716 1,728
Other fees and commission 413 642
------------- -------------
1,307 2,430
------------- -------------
Fees and commission expenses
Debt recovery and valuation fees (129) (383)
Credit assessment costs (799) (430)
------------- -------------
(928) (813)
------------- -------------
Net fees and commission income 379 1,617
------------- -------------
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 were as follows.
Consumer Finance Business Azule Bridging Total
Finance Finance Finance
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Half-year to 31
March 2021 (unaudited)
Impairment charge
for the six months
on loans and advances
to customers 417 3,083 282 (27) 3,755
----------------- --------- --------- --------- -----------
Half-year to 31
March 2020 (unaudited)
Impairment charge
for the six months
on loans and advances
to customers(4) 1,298 3,179 201 8 4,686
----------------- --------- --------- --------- -----------
10. Income tax
The income tax rate is 21% (31 March 2020: 20%), representing
the best estimate of the annual effective tax rate applied to
operating profit before tax for the six months period ended 31
March 2021.
11. Loans and advances to customers
At
-------------------------------------------
31 March 30 September 2020
2021 (audited)
(unaudited) GBP'000
GBP'000
------------- ------------------
Consumer lending - gross 186,172 171,854
Business lending - gross 175,346 190,462
Azule lending - gross 19,300 23,001
Bridging lending - gross 64,987 60,612
445,169 445,929
------------- ------------------
445,805 445,929
Allowance for impairment losses (20,010) (18,632)
------------- ------------------
Total Loans and advances to customers 425,795 427,297
------------- ------------------
A reconciliation of the allowance for impairment losses for
loans and advances, by class, is as follows:
Consumer Business Azule Finance Bridging
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 for the period
(note 9) 417 3,083 282 (27) 3,755
(Recoveries) / write-offs (658) (1,578) (141) - (2,377)
--------- --------- -------------- --------- -------------
At 31 March 2021 6,680 11,824 1,053 453 20,010
--------- --------- -------------- --------- -------------
Made up of
Individual impairment 40 1,582 263 - 1,885
Collective model
provisions including
overlays and PMAs 6,640 10,242 790 453 18,125
--------- --------- -------------- --------- -------------
Total impairment 6,680 11,824 1,053 453 20,010
--------- --------- -------------- --------- -------------
Consumer Business Azule Finance Bridging
Finance Finance Finance Total
(Unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2019(4) 2,571 4,142 121 6 6,840
Charge for the period
(note 9)(4) 1,298 3,179 201 8 4,686
(Recoveries) / write-offs(4) (381) (933) 92 - (1,222)
--------- --------- -------------- --------- -----------
At 31 March 2020 3,488 6,388 414 14 10,304
--------- --------- -------------- --------- -----------
Made up of
Individual impairment 1,136 1,563 360 14 3,073
Collective model
provisions including
overlays and PMAs(4) 2,352 4,825 54 - 7,231
--------- --------- -------------- --------- -----------
Total impairment(4) 3,488 6,388 414 14 10,304
--------- --------- -------------- --------- -----------
Consumer Business Azule Finance Bridging
Finance Finance Finance Total
(Unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2020 3,488 6,388 414 14 10,304
Charge for the period 3,632 5,228 419 466 9,745
(Recoveries) / write-offs (199) (1,297) 79 - (1,417)
--------- --------- -------------- --------- -------------
At 30 September 2020 6,921 10,319 912 480 18,632
--------- --------- -------------- --------- -------------
(audited)
At 30 September 2020
Made up of
Individual impairment 776 1,642 767 180 3,365
Collective model
provisions including
overlays and PMAs 6,145 8,677 145 300 15,267
--------- --------- -------------- --------- -------------
Total impairment 6,921 10,319 912 480 18,632
--------- --------- -------------- --------- -------------
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 interest equity 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
PCF Credit Limited UK Leasing & hire purchase 100* 100*
Azule Limited UK Leasing & hire purchase 100* 100*
Azule Finance
Limited Ireland Leasing & hire purchase 100* 100*
Azule Finance
GMBH Germany Leasing & hire 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.
Azule Limited, which owns 100% of Azule Finance Limited and
Azule Finance GMBH was acquired by PCF Bank Limited on 5 November
2018.
13. Goodwill and other intangibles assets
Goodwill relates partly to the Group's Consumer Finance Division
which arises from the acquisition of a subsidiary company, TMV
Finance Limited ('TMV'), in November 2000, and the remainder from
the acquisition of Azule Limited ('Azule') on 5 November 2018.
In performing the bi-annual impairment test, the Group assesses
the economic performance of acquisitions, the future of the
business acquired and their useful economic lives. The assessment
ensures that growth and profitability are at least the same value
as the amount that was paid in excess of the fair value of the
assets and liabilities acquired. To assess this, the Board approved
forecast (adjusted by the Board's current view of the impact of
COVID-19 on the Group) has been used and discounted back to present
value.
Both of the cash generating units ('CGUs') acquired are expected
to continue to perform, but forecasting is only over the next 5
years. There is, therefore, requirement to capture expected growth
and cash flows beyond these dates. To complete this there is a
terminal valuation that is required to be performed to assess
whether goodwill has been impaired or not. Terminal value often
comprises a large percentage of the total assessed value.
The recoverable amount of the TMV and Azule CGU's at 31 March
2021 has been determined based on a value-in-use calculation using
cash flow projections from financial budgets approved by the Board
covering a five year period, and a terminal valuation based on the
previous year's adjusted forecast. The projected cash flows have
been updated to reflect the increased business over this current
year which is aligned with recent demand and future expected growth
in its products and services. The pre-tax discount rate applied to
cash flow projections is 12.97% per annum over a five-year period
and, for the period beyond, a terminal growth rate of 1% is used,
being the expected long-term average growth rate for the Group
within the economies in which it operates. It has been concluded
that the values in use for TMV and Azule exceed their carrying
value in use and the goodwill at 31 March 2021 remains appropriate
for the carrying value for the TMV and Azule acquisitions.
The key assumptions used in the value in use calculations and
the sensitivity to changes in assumptions are set out in the Annual
Report & Financial Statements 2020 note 17.
Goodwill
At
----------------------------
31 March 30 September
2021 2020
(unaudited) (audited)
GBP'000 GBP'000
TMV Finance Limited acquisition 397 397
Azule Limited acquisition 750 750
------------- -------------
1,147 1,147
------------- -------------
Half-year to
---------------------------------------------
31 March 31 March 30 September
2020
(unaudited)
GBP'000
2021 2020
(unaudited) (unaudited)
GBP'000 GBP'000
Cost and net book value
Opening balance 1,147 2,897 2,897
Write-offs - - (1,750)
------------- ------------- ---------------
Closing balance 1,147 2,897 1,147
------------- ------------- ---------------
Other intangible assets
The Group's other intangible assets consist solely of computer
software and capitalised expenses incurred in the project regarding
the Company's application to become a bank.
Half-year to
--------------------------------------------------
31 March 31 March 30 September
2021 (unaudited) 2020 2020
GBP'000 (unaudited) (unaudited)
GBP'000 GBP'000
Cost
Opening balance 6,800 6,149 6,444
Additions during the period 290 295 192
Write off - impairment loss
on software (45) - (88)
Software in development 62 - 252
------------------- ------------- --------------
Closing balance 7,107 6,444 6,800
------------------- ------------- --------------
Accumulated depreciation
Opening balance 3,620 3,105 3,373
Amortisation during the period 319 268 284
Write off - impairment loss
on software (31) - (37)
Closing balance 3,908 3,373 3,620
------------------- ------------- --------------
Net book value 3,199 3,071 3,180
------------------- ------------- --------------
At
-------------------------
31 March September
2021 2020
(unaudited) (audited)
GBP'000 GBP'000
Net book value of combined goodwill and
other intangible assets 4,346 4,327
------------ -----------
14. Financial instruments
14.1 Valuation techniques
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 2021 (unaudited)
Cash and balances at central
banks 25,858 - - 25,858
Loans and advances to customers 425,795 - - 425,795
Debt instruments at FVOCI - - 2,594 2,594
Derivative financial instruments - 18 - 18
Other assets 2,251 - - 2,251
---------- -------- -------- --------
Total financial assets 453,904 18 2,594 456,516
---------- -------- -------- --------
Due to banks 59,615 - - 59,615
Due to customers 338,336 - - 338,336
Subordinated liabilities 7,224 - - 7,224
Other liabilities 3,149 - - 3,149
---------- -------- -------- --------
Total financial liabilities 408,324 - - 408,324
---------- -------- -------- --------
Amortised
Cost FVTPL FVOCI Total
GBP'000 GBP'000 GBP'000 GBP'000
At 30 September 2020 (audited)
Cash and balances at central
banks 24,936 - - 24,936
Loans and advances to customers 427,297 - - 427,297
Debt instruments at FVOCI - - 9,095 9,095
Other Assets 1,264 - - 1,264
---------- -------- --------
Total financial assets 453,497 - 9,095 462,592
---------- -------- --------
Due to banks 62,620 - - 62,620
Due to customers 341,784 - - 341,784
Derivative financial instruments - 80 - 80
Subordinated liabilities 7,126 - - 7,126
Other liabilities 3,979 - - 3,979
Total financial liabilities 415,509 80 - 415,589
---------- -------- -------- --------
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 are 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 Fair value
value Level Level Level
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Financial instruments held
at amortised cost
At 31 March 2021 (unaudited)
Cash and balances at central
banks 25,858 25,858 - - 25,858
Loans and advances to customers 425,795 - - 425,795 479,810
--------- -------- -------- -------- -----------
451,653 25,858 - 425,795 505,668
--------- -------- -------- -------- -----------
Due to banks(7) 59,615 59,615 - - 59,615
Subordinated liabilities 7,224 - - 7,224 8,346
Due to customers(7) 338,336 - - 338,336 338,336
405,175 59,615 - 345,560 406,297
--------- -------- -------- -------- -----------
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 2020 (audited)
Cash and balances at central
banks 24,936 24,936 - - 24,936
Loans and advances to customers 427,297 - 427,297 485,880
--------- -------- -------- -------- --------
452,233 24,936 - 427,297 510,816
--------- -------- -------- -------- --------
Due to banks(7) 62,620 62,620 - - 62,620
Subordinated liabilities 7,126 - - 7,126 8,289
Due to customers(7) 341,784 - - 341,784 341,784
411,530 62,620 - 348,910 412,693
--------- -------- -------- -------- --------
The following table shows an analysis of financial instruments
recorded at FVOCI by level of the fair value hierarchy:
Fair
Level Level Level Value
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Financial instruments at fair value
though
other comprehensive income ('FVOCI')
At 31 March 2021 (unaudited)
Quoted debt instruments 2,594 - - 2,594
-------- -------- -------- --------
At 30 September 2020 (audited)
Quoted debt instruments 9,095 - - 9,095
-------- -------- -------- --------
The following table shows an analysis of financial instruments
recorded at FVTPL by level of the fair value hierarchy:
Level 1 Level 2 Level 3 Fair value Notional
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Derivative financial instruments
31 March 2021 (unaudited)
Derivative Financial assets - 18 - 18 2,500
--------- -------- -------- ----------- ---------
Derivative Financial liabilities - - - - -
--------- -------- -------- ----------- ---------
30 September 2020 (audited)
Derivative Financial assets - - - - -
--- --- --- -------
Derivative Financial liabilities - 80 - 80 15,770
--- --- --- -------
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 2021 (unaudited)
Gross carrying amounts Stage 1 Stage 2 Stage 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
Performing
High grade 318,058 31,368 942 350,368
Standard grade 32,508 4,367 - 36,875
Sub-standard grade 25,181 5,222 - 30,403
Non-performing
Individually impaired - 1,056 2,251 3,307
Collectively impaired - 6,623 18,229 24,852
--------- --------- --------- ---------
Total 375,747 48,636 21,422 445,805
--------- --------- --------- ---------
Allowance for impairment
loss (2,715) (3,947) (13,348) (20,010)
--------- --------- --------- ---------
Net total 373,032 44,689 8,074 425,795
--------- --------- --------- ---------
Undrawn commitments 4,125 - - 4,125
--------- --------- --------- ---------
At 30 September 2020 (audited)
Gross carrying amounts Stage 1 Stage 2 Stage 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
Performing
High grade 276,241 60,360 896 337,497
Standard grade 40,436 7,110 - 47,546
Sub-standard grade 33,034 7,273 - 40,307
Non-performing
Individually impaired - 643 2,458 3,101
Collectively impaired - 1,285 16,193 17,478
--------- --------- --------- ---------
Total 349,711 76,671 19,547 445,929
--------- --------- --------- ---------
Allowance for impairment
loss (3,179) (3,300) (12,153) (18,632)
--------- --------- --------- ---------
Net total 346,532 73,371 7,394 427,297
--------- --------- --------- ---------
Undrawn commitments 17,270 - - 17,270
--------- --------- --------- ---------
An analysis of changes in the gross carrying amount and the
corresponding expected credit losses ('ECLs') is, as follows:
Gross carrying amounts Stage 1 Stage Stage Total
GBP'000 2 3 GBP'000
GBP'000 GBP'000
--------- --------- --------- ---------
(unaudited)
At 1 October 2020 349,711 76,671 19,547 445,929
New assets originated
or purchased 99,759 992 - 100,751
Assets de-recognised
or matured (17,660) (75,334) (5,504) (98,498)
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 - - (2,377) (2,377)
--------- --------- --------- ---------
At 31 March 2021 375,747 48,636 21,422 445,805
--------- --------- --------- ---------
ECL allowance Stage 1 Stage Stage Total
GBP'000 2 3 GBP'000
GBP'000 GBP'000
--------- --------- --------- ---------
(unaudited)
At 1 October 2020 3,179 3,300 12,153 18,632
New assets originated
or purchased 393 17 410
Assets de-recognised
or matured, and remeasurements 1,784 (1,116) 2,677 3,345
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 - - (2,377) (2,377)
--------- --------- --------- ---------
At 31 March 2021 2,715 3,947 13,348 20,010
--------- --------- --------- ---------
Gross carrying amounts Stage 1 Stage Stage Total
GBP'000 2 3 GBP'000
GBP'000 GBP'000
--------- --------- --------- ---------
(unaudited)
At 1 October 2019(4) 307,294 22,424 15,625 345,343
New assets originated
or purchased 138,923 - - 138,923
Assets de-recognised
or matured(4) (68,025) (2,242) (1,223) (71,490)
Transfers to Stage 1 1,615 (1,615) - -
Transfers to Stage 2 (23,857) 23,857 - -
Transfers to Stage 3 (1,885) (3,579) 5,464 -
Amounts written off - - (1,616) (1,616)
--------- --------- --------- ---------
At 31 March 2020(4) 354,065 38,845 18,250 411,160
--------- --------- --------- ---------
ECL allowance Stage 1 Stage Stage Total
GBP'000 2 3 GBP'000
GBP'000 GBP'000
--------- --------- --------- ---------
(unaudited)
At 1 October 2019(4) 1,576 1,458 3,806 6,840
New assets originated
or purchased 763 - - 763
Assets de-recognised
or matured, and remeasurements(4) 1,911 803 1,209 3,923
Transfers to Stage 1 19 (19) - -
Transfers to Stage 2 (1,360) 1,360 - -
Transfers to Stage 3 (509) (1,067) 1,576 -
ECL transfers - - - -
Amounts written off(4) - - (1,222) (1,222)
--------- --------- --------- ---------
At 31 March 2020(4) 2,400 2,535 5,369 10,304
--------- --------- --------- ---------
Gross carrying amounts Stage 1 Stage 2 Stage 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
(unaudited)
At 1 April 2020 354,065 38,845 18,250 411,160
New assets originated
or purchased 80,870 - - 80,870
Assets de-recognised
or matured (18,794) (17,647) (8,637) (45,078)
Transfers to Stage 1 2,651 (2,650) (1) -
Transfers to Stage 2 (61,584) 61,584 - -
Transfers to Stage 3 (7,497) (3,461) 10,958 -
Amounts written off - - (1,023) (1,023)
--------- --------- --------- ---------
At 30 September 2020 349,711 76,671 19,547 445,929
--------- --------- --------- ---------
ECL allowance Stage 1 Stage 2 Stage 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
(unaudited)
At 1 April 2020 2,400 2,535 5,369 10,304
New assets originated
or purchased 1,513 - - 1,513
Assets de-recognised
or matured, and remeasurements (1,345) (780) 4,757 2,632
Impact on ECL of transfers (158) 1,714 4,044 5,600
Transfers to Stage 1 205 (205) - -
Transfers to Stage 2 477 (477) - -
Transfers to Stage 3 87 513 (600) -
Amounts written off - - (1,417) (1,417)
--------- --------- --------- ---------
At 30 September 2020 3,179 3,300 12,153 18,632
--------- --------- --------- ---------
Forborne and modified loans
The following tables provide a summary of the Group's forborne assets.
At 31 March
2021 Gross carrying amount of forborne
(unaudited) 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
Due from banks - - - - - -
Loans and
advances to
customers
CFD 186,172 2,151 1,181 178 3,510 1.89%
BFD 175,346 4,468 5,376 424 10,268 5.86%
Azule 19,300 2,444 114 304 2,862 14.83%
Bridging 64,987 - - - - 0.00%
Total loans and
advances to
customers 445,805 9,063 6,671 906 16,640 3.73%
=============== ============== ============== ================ =============== ============
At 30
September 2020 Gross carrying amount of forborne
(audited) 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
Due from banks - - - - - -
Loans and
advances to
customers
CFD 171,854 4,512 1,664 68 6,244 3.63%
BFD 190,462 11,290 13,634 197 25,121 13.19%
Azule 23,001 6,662 2,223 166 9,051 39.35%
Bridging 60,612 - - - - 0.00%
Total loans and
advances to
customers 445,929 22,464 17,521 431 40,416 9.06%
=============== ============== ============== ================ =============== ============
At 31 March 2021 (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
Due from banks - - - - - - -
Loans and advances to customers
CFD 4 20 34 73 - 63 194
BFD 19 45 90 528 - 176 858
Azule 146 8 22 64 - 174 414
Bridging - - - - - - -
Total loans and advances to
customers 169 73 146 665 - 413 1,466
=========== =========== =========== =========== =========== =========== ======
At 30 September 2020 (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
Due from banks - - - - - - -
Loans and advances to customers
CFD 62 14 117 - 16 - 209
BFD 151 66 392 407 - 47 1,063
Azule 278 22 103 - - 36 439
Bridging - - - - - - -
Total loans and advances to
customers 491 102 612 407 16 83 1,711
=========== =========== =========== =========== =========== =========== ======
15. Subordinated liabilities
At
-------------------------------
31 March 30 September
2021 2020
(unaudited) (audited)
GBP'000 GBP'000
Subordinated liabilities 7,224 7,126
7,224 7,126
------------- -------------
GBP7.0 million subordinated notes issued by PCF Bank Limited
At 31 March 2021, PCF Bank Limited had a GBP15.0 million
subordinated note facility from British Business Investments
Limited (30 September 2020: 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 and at 31 March 2021
GBP7.0 million of notes had been issued (30 September 2020: GBP7.0
million).
16. Issued capital and reserves
31 March 30 September 31 March 30 September
2021 2020 2021 2020
(unaudited) (audited) (unaudited) (audited)
'000 units '000 units GBP'000 GBP'000
Ordinary share issued
and fully paid
Opening balance at
1 October 250,240 250,197 12,512 12,510
Issuance of new shares
during the period 750 - 38 -
Dividend reinvestment - 43 - 2
Closing balance 250,990 250,240 12,550 12,512
------------- ------------- ------------- -------------
31 March 30 September
2021 2020
(unaudited) (audited)
GBP'000 GBP'000
Share premium
Opening balance at 1 October 17,625 17,619
Issuance of new shares during the period 54 6
--------------- ---------------
Closing balance 17,679 17,625
--------------- ---------------
Change in
share capital
at 5p per Change in
No. of Issue share share premium
Date of Issue shares Price GBP'000 GBP'000
9 April 2020 Dividend reinvestment 43,499 5.0p 2 6
--------------- ---------------
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
2021 2020
(unaudited) (unaudited)
GBP'000 GBP'000
------------ ------------
Net Company profit attributable to ordinary
shareholders adjusted for the effect of
dilution 965 2,043
------------ ------------
At
--------------------------
31 March 31 March
2021 2020
(unaudited) (unaudited)
'000 units '000 units
------------ ------------
Basic and diluted weighted average number
of shares 250,335 250,197
------------ ------------
Basic and diluted earnings per 5p ordinary
share 0.4p 0.8p
18. Commitments, contingent liabilities, and contingent
assets
At 31 March 2021, the Group had undrawn commitments to lend to
customers of GBP4.13 million (30 September 2020: GBP17.27
million).
The Group's subsidiary, PCF Bank Limited, 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
2020. 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 2021, assessed to have a greater than remote likelihood of
economic outflow, is GBPnil (30 September 2020: GBP135,000).
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.
19. Related parties
The non-executive directors held a total of GBP105,471 in
savings accounts in the Group at 31 March 2021 (30 September 2020:
GBP167,932).
Key management personnel of the Group are the Board
Directors.
20. Non adjusting events after the balance sheet date
COVID-19
As the COVID-19 pandemic evolves, the UK Government is
implementing additional measures to address the resulting public
health issues and the economic impact. The Group continues to
monitor the COVID-19 pandemic situation and will take further
action as necessary in response to economic disruption. There may
be further adverse effects on revenue and impairments depending on
severity and duration of the additional measures.
Brexit
Along with COVID-19 economic impacts, there remains the
continued uncertainty of the implications for the UK economy by
reason of leaving the EU. Although a trade deal was agreed on 24
December 2020, the Group continues to monitor Brexit and the
potential economic impact on credit risk.
Sale of credit impaired loans
On 30 September 2021, the Group sold GBP12.4 million of gross
credit impaired loans (GBP1.7 million net of ECL impairments) for
GBP2.8 million, realising a profit on disposal of GBP1.1
million.
GBP30.0 million revolving credit facility granted to PCF Bank by
Leumi ABL Limited
This facility, when drawn as a loan, has a variable rate linked
to overnight LIBOR plus a margin and a maturity date of up to five
years. The facility is secured by a charge over specified loans and
receivables and the guarantee of the Company. At 31 March 2021 this
facility was undrawn (30 September 2020: GBPnil) and the facility
was terminated on 21 December 2021.
(4) Comparatives for: the recoverable amount of fees charged
within the Income statement on credit impaired accounts have been
re-presented from Impairment losses on financial assets to Fees and
commission income; and the recoverable amount of accrued fees
charged on credit impaired accounts have been re-presented from
Allowance for Impairment losses to Loans and advances to customers.
These re-presentations were adopted to make the Income Statement,
segmental analysis, net fee and commission income note, and Loans
and advances to customers disclosure notes more relevant following
a review of the disclosures and accounting policies applied (please
see note 4).
(5) Comparatives for the net change in FVOCI financial
instruments included in Other non-cash-items have been re-presented
to Net sale/(purchase) of debt instruments at FVOCI within
Investing activities to make the consolidated statement of cash
flows more relevant following a review of the disclosure and
accounting policies applied (please see note 4).
(6) Comparatives for credit related fees and commission have
been re-presented from Paid and accrued to customers to make the
Total interest and similar expense note more relevant following a
review of the disclosure.
(7) Carrying value is assessed to approximate fair value.
- end -
For further information, please visit https://pcf.bank/ or
contact:
PCF Group (via Tavistock Communications) Tel: +44 (0) 20
Garry Stran, Interim Chief Executive 7920 3150
Officer
Caroline Richardson, Chief Financial
Officer
Tavistock Communications Tel: +44 (0) 20
Simon Hudson / Tim Pearson 7920 3150
Peel Hunt (Nominated Advisor and Joint Tel: +44 (0) 20
Broker) 7418 8900
Andrew Buchanan / Rishi Shah /
Sam Milford
Shore Capital (Joint Broker) Tel: +44 (0) 20
Henry Willcocks / Guy Wiehahn 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 provides finance to the broadcast and media industry; and
-- Property bridging finance which provides loans to companies
and sole traders investing in residential and commercial
property.
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END
IR PPUQPGUPPUUA
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