Results for the year ended 31 December 2022

RNS Number : 5034W

Vector Capital PLC

18 April 2023

 

18 April 2023

Vector Capital plc

("Vector Capital", the "Company" or the "Group")

Full year results for the year ended 31 December 2022

Vector Capital plc (AIM: VCAP), a commercial lending group that offers secured loans primarily to businesses located in the United Kingdom, is pleased to announce its final results for the year ended 31 December 2022.

Highlights

·	The Group shows continued growth despite uncertain economic conditions
·	Loan book growth of 14.9% to £53.2m (FY21: £46.6m)
·	Revenue growth of 12.4% to £5.9m (FY21: 5.3m)
·	Consistent profit before tax of £2.8m (FY21: 2.8m)
·	Continued growth in shareholders equity whilst following a consistent and progressive dividend policy recognising the importance to shareholders of the dividend as part of their overall return.
·	Annual growth in Net Asset Value, shown as per share. Net Assets were £25.1m as at 31 December 2022 (£24.0m at 2021 and £21.3m at 2020).
·	Proposed final dividend 1.53 pence per share (FY21: 1.51p)
·	Near terms focus of maintaining the quality of the loan book against the current uncertain market back drop

Agam Jain, CEO of Vector Capital, commented: " I am pleased to present our 2022 results. The Company performed well during the year despite the difficult market conditions.  We were able to grow our loan book by 14.9% to £53.2 million and the Group's positive operational performance has been achieved despite the increase in external borrowing costs on new loans provided by our wholesale funders and co-lenders. The Group has been able to pass on the majority of these increases to customers and in some cases reduce gearing to maintain margins.

We continue to look and explore further options to expand our loan book, maximise shareholder returns and further establish our place in the market segment."

Enquiries

Vector Capital plc	020 8191 7615
Robin Stevens (Chairman)
Agam Jain (CEO)
WH Ireland Limited	020 7220 1666
Hugh Morgan, Chris Hardie, Darshan Patel
IFC Advisory Limited	020 3934 6630
Graham Herring, Florence Chandler, Zach Cohen

Notes to Editors

Vector Capital Plc provides secured, business-to-business loans to SMEs based principally in England and Wales. Loans are typically secured by a first legal charge against real estate. The Group's customers typically borrow for general working capital purposes, bridging ahead of refinancing, land development and property acquisition. The loans provided by the Group are typically for renewable 12-month terms with fixed interest rates.

CHAIRMAN'S STATEMENT

I am pleased to present our 2022 Annual Report and Accounts, which reflect the results of the continued growth in Vector's secured loan book in the UK small and medium-sized enterprises (SMEs) sector.  Vector's customers are generally smaller property developers who buy properties to develop or refurbish and then re-sell or refinance.

The Company performed well in the year in difficult market conditions and was able to grow our loan book by utilising retained profits, increased wholesale bank facilities now standing at £40m as at 31 December 2022 and finance received from co lending arrangements. This financing, reflecting effective gearing on our capital base underpins the Group's strong results for the year, achieving revenue growth of 12.4% to £5.9m, consistent profit before tax of £2.8m, and a 14.9% rise in the value of the loan book from £46.3m to £53.2m. Such growth is of course also attributable to the efforts and abilities of the operational team, the strength of the underlying loan management systems and the robust nature of the Vector business model.

The Group's positive operational performance has been achieved despite the increase in external borrowing costs on new loans provided by our wholesale funders and co-lenders. The Group has been able to pass on the majority of these increases to customers and in some cases reduce gearing to maintain margins.

Despite the Group's own resilience in these challenging economic and financial conditions, certain borrowers have been adversely affected by delays in completions, the supply chain, cost issues and a general softening of values in the residential property market. As a result, the above results include a provision of £0.2m for doubtful debts which may or may not be required. Recovery of all debts will continue to be actively pursued.

We have a determined strategy to continue to increase our loan book within the context of the continuing uncertain and challenging conditions which exist in the UK, achieved by utilising our own resources and the external facilities provided by our wholesale lenders and co lenders. As part of this process, we intend to further increase the loan gearing we are able to achieve on borrowed funds by strategically rebalancing our loan book. This is intended to lower average value advances but is considered a prudent measure by the Board.

We continue to factor in the implications on the property market of uncertain valuations, the return of double digit inflation and higher than normal interest rates and we are fortunate to be able to draw on our team's considerable experience during these challenging times.

As a Board we continue to take very seriously our obligations to act responsibly and ethically in all we do, and to follow the core principles of corporate governance set out in the Quoted Company Alliance code. These principles are maintained in all we do as a public company and we recognise our wider environmental, social and governance responsibilities to shareholders and other stakeholders.

Details of our ESG policies and procedures, aimed principally at responsible lending and encouraging sustainability and avoidance of waste in all we do, are set out on the Company's website, www.vectorcapital.co.uk.

The results for the year are only possible by the efforts of Vector's employees and my fellow Board members, including Gordon Robinson who I'm delighted joined us with his extensive banking experience in February 2022, and considerable thanks are due to them, as well as our business partners and professional advisers.

We are also indebted to our shareholders, with whom we look forward to developing a rewarding relationship as market conditions improve. This relationship is recognised in our proposed final dividend for the year of 1.53 pence per share, represents an increase of 0.02 pence or 1.3% over 2021, in-line with our stated intention to adopt a progressive dividend policy as we acknowledge the importance to shareholders of the dividend as part of their overall return.

I am more confident than ever that we have the skills, strategy and experience to capitalise on the market opportunities that exist in these uncertain times and thereby continue to prosper thorough 2023.

Robin Stevens

Chairman

17 April 2023

CHIEF EXECUTIVE'S STATEMENT

A strong performance in uncertain times

I am pleased to report a healthy set of results achieved in a very uncertain market. The economy faced the challenges of rocketing energy prices due to the Ukraine war, rising costs and long lead times of building materials, political turmoil and repeated Bank of England rate rises. Despite this we are proud to remain one of the select group of AIM quoted companies paying consistent dividends and showing consistent capital growth.

Our loan book was £53.2m at 31 December 2022, up from £46.3m at 31 December 2021. This is a commendable 14.9% year on year growth. The average monthly loan book for the 12 months period was £52m (2021: £40.8m) an increase of 27.4%.

The achieved average interest rate for the year was 11.18% p.a. (2021: 11.84%) and the average loan to value was 57.12% (2021: 53.52%).

Pre-tax profit for the year was £2.8m, similar to that achieved in 2021 of £2.8m. This was achieved despite making a provision of £0.2m for potential doubtful debts, all of which will be actively pursued. 

On the basis of this performance a final dividend for the year of 1.53p per share is proposed (2021: 1.51p).

Diverse market spread

Our loan book is secured by properties in a diverse spread of sectors.

Market segmentation at 31 December2022

	2022	%	2021	%
Residential	£30,351,346	56.81%	£24,580,323	53.07%
Commercial	£11,643,949	21.79%	£12,773,180	27.58%
Land & Development	£4,881,424	9.14%	£5,429,273	11.72%
Mixed	£4,707,648	8.81%	£2,997,977	6.47%
2nd charge	£1,545,273	2.89%	£532,023	1.15%
Other	£300,000	0.56%
	£53,429,641	100.00%	£46,312,775	100.00%

Our direction of travel is towards smaller residential loans for the foreseeable future where we can utilise a higher proportion of our wholesale debt funding and thereby grow the loan book more quickly with our existing capital base.

We are also issuing selected loans against second charge where the equity value in the property is substantial.

Funding

We achieved increases in our wholesale bank funding lines during the year to £40m (up from £35m in 2021).  Our wholesale bank providers remain prepared to entertain a further increase in facilities as and when we require.

Our first drawdown on co-funding from a Swiss investment fund started in December 2022 and we expect these facilities to be utilised further during 2023.

Our liquidity remains healthy, and we have good capacity to fund selected new loan opportunities meeting our criteria. 

Our Team

Gordon Robinson was appointed as a Non-Executive Director in February 2022. Gordon has over 30 years of senior banking experience and has added valuable sector expertise to the board.

Apart from this appointment, our head count has remained the same and the current operational team is well positioned to handle the projected activity for 2023.

Outlook

Data provided by members of the Association of Short-Term Lenders, shows that UK bridging completions were just over £1.4bn in Q3, 2022, representing an increase of 15.9% on the June 2022 quarter. This is the latest data at the time of writing. However, Q4 is likely to show temporary stalling as lenders take stock of the macro-economic circumstances now prevailing. 

Going forward into 2023, we along with other lenders will continue to exercise caution in our underwriting and stress testing. This means our focus during Q1 and Q2 of 2023 has been and will remain more on caution and safety instead of aggressive growth. Our borrowers will have to deal with higher monthly payments due to the multiple rate rises and are likely to find it more challenging to exit via sale or through re-finance with the high street banks. Once the market has settled, however we would hope to return to a higher growth trajectory from Q3 onwards.

Agam Jain

Chief Executive Officer

17 April 2023

CONSOLIDATED INCOME STATEMENT

		2022	2021
	Notes	£'000	£'000
CONTINUING OPERATIONS
Revenue		5,928	5,275
Cost of sales		(429)	(502)
GROSS PROFIT		5,499	4,773
Administrative expenses		(911)	(703)
OPERATING PROFIT		4,588	4,070
Finance costs		(1,782)	(1,245)
Finance income		3	2
PROFIT BEFORE INCOME TAX	5	2,809	2,827
Income tax	6	(534)	(538)
PROFIT FOR THE YEAR		2,275	2,289
Profit attributable to:
Owners of the parent		2,275	2,289
Earnings per share expressed in pence per share:	9
Basic		5.03	5.24
Diluted		5.03	5.24

The notes form part of these financial statements.

CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME

		2022	2021
		£'000	£'000
PROFIT FOR THE YEAR		2,275	2,289
Other comprehensive income		-	-
TOTAL COMPREHENSIVE INCOME FOR THE YEAR		2,275	2,289
Total comprehensive income attributable to:
Owners of the parent		2,275	2,289

The notes form part of these financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		2022	2021
	Notes	£'000	£'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment	10	1	3
		1	3
CURRENT ASSETS
Trade and other receivables	12	53,997	46,565
Cash and cash equivalents	13	688	1,527
		54,685	48,092
TOTAL ASSETS		54,686	48,095
SHAREHOLDERS' EQUITY
Called up share capital	15	226	226
Share premium		20,876	20,876
Group reorganisation reserve		188	188
Retained earnings		3,798	2,659
TOTAL EQUITY		25,088	23,949
LIABILITIES
CURRENT LIABILITIES
Trade and other payables	14	25,800	23,858
Tax payable		240	288
		26,040	24,146
NON-CURRENT LIABILITIES
Trade and other payables	14	3,558	-
TOTAL LIABILITIES		29,598	24,146
TOTAL EQUITY AND LIABILITIES		54,686	48,095

The notes form part of these financial statements.

COMPANY STATEMENT OF FINANCIAL POSITION

		2022	2021
	Notes	£'000	£'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment	10	1	3
Investments	11	17,000	17,000
		17,001	17,003
CURRENT ASSETS
Trade and other receivables	12	8,832	8,467
Cash and cash equivalents	13	117	121
		8,949	8,588
TOTAL ASSETS		25,950	25,591
SHAREHOLDERS' EQUITY
Called up share capital	15	226	226
Share premium		20,876	20,876
Retained earnings		1,700	1,454
TOTAL EQUITY		22,802	22,556
LIABILITIES
CURRENT LIABILITIES
Trade and other payables	14	148	3,035
		148	3,035
NON-CURRENT LIABILITIES
Trade and other payables	14	3,000	-
TOTAL LIABILITIES		3,148	3,035
TOTAL EQUITY AND LIABILITIES		25,950	25,591

As permitted by Section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of these financial statements.  The Company's profit for the financial year was £1,381,301 (2021 - £1,275,687).

The financial statements were approved by the Board of Directors on [date] and were signed on its behalf by:

J Pugsley - Director

The notes form part of these financial statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Called up share capital	Retained earnings	Share premium	Group reorganisation reserve	Total equity
	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2021	210	1,401	19,502	188	21,301
CHANGES IN EQUITY
Issue of share capital	16	-	1,374	-	1,390
Dividends	-	(1,031)	-	-	(1,031)
Total comprehensive income	-	2,289	-	-	2,289
BALANCE AT 31 DECEMBER 2021	226	2,659	20,876	188	23,949
CHANGES IN EQUITY
Dividends	-	(1,136)	-	-	(1,136)
Total comprehensive income	-	2,275	-	-	2,275
BALANCE AT 31 DECEMBER 2022	226	3,798	20,876	188	25,088

Notes:

•	Share premium relates to the consideration paid for ordinary share capital in excess of the nominal value of the ordinary share capital.
•	The group reorganisation reserve relates to adjustments to the retained earnings of the group upon consolidation of the financial statements.

COMPANY STATEMENT OF CHANGES IN EQUITY

		Called up share capital	Retained earnings	Share premium	Total equity
		£'000	£'000	£'000	£'000
Balance at 1 January 2021		210	1,210	19,502	20,922
CHANGES IN EQUITY
Issue of share capital		16	-	1,374	1,390
Dividends		-	(1,031)	-	(1,031)
Total comprehensive income		-	1,275	-	1,275
BALANCE AT 31 DECEMBER 2021		226	1,454	20,876	22,556
CHANGES IN EQUITY
Dividends		-	(1,136)	-	(1,136)
Total comprehensive income		-	1,382	-	1,382
BALANCE AT 31 DECEMBER 2022		226	1,700	20,876	22,802

Notes:

•	Share premium relates to the consideration paid for ordinary share capital in excess of the nominal value of the ordinary share capital.

CONSOLIDATED STATEMENT OF CASH FLOWS

		2022	2021
	Notes	£'000	£'000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations	1	2,656	247
Interest paid		(1,782)	(1,195)
Tax paid		(581)	(455)
NET CASH FROM OPERATING ACTIVITIES		293	(1,403)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received		3	2
NET CASH FROM INVESTING ACTIVITIES		3	2
CASH FLOWS FROM FINANCING ACTIVITIES
Amounts introduced by directors		1
Share issue		-	16
Share premium		-	1,374
Equity dividends paid		(1,136)	(1,031)
NET CASH FROM FINANCING ACTIVITIES		(1,135)	359
Decrease in cash and cash equivalents		(839)	(1,042)
Cash and cash equivalents at beginning of year	2	1,527	2,569
CASH AND CASH EQUIVALENTS AT END OF YEAR	2	688	1,527

COMPANY STATEMENT OF CASH FLOWS

		2022	2021
	Notes	£'000	£'000
Cash flows from operating activities
Cash generated from operations	1	(559)	(727)
Interest paid		(150)	(150)
Net cash from operating activities		(709)	(877)
Cash flows from investing activities
Dividends received		2,200	2,050
Net cash from investing activities		2,200	2,050
Cash flows from financing activities
Intercompany loans		(360)	(3,310)
Amount introduced by directors		1	-
Share issue		-	16
Share premium		-	1,373
Equity dividends paid		(1,136)	(1,031)
Net cash from financing activities		(1,495)	(2,952)
Decrease in cash and cash equivalents		(4)	(1,779)
Cash and cash equivalents at beginning of year	2	121	1,899
Cash and cash equivalents at end of year	2	117	121

NOTES TO THE STATEMENTS OF CASH FLOWS

1.  RECONCILIATION OF PROFIT BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS

GROUP

		2022	2021
		£'000	£'000
Profit before income tax		2,809	2,827
Depreciation charges		1	1
Finance costs		1,782	1,195
Finance income		(3)	(2)
		4,589	4,021
Increase in trade and other receivables		(7,432)	(9,602)
Increase in trade and other payables		5,499	5,828
Cash generated from operations		2,656	247

COMPANY

		2022	2021
		£'000	£'000
Profit before income tax		1,382	1,275
Depreciation charges		1	1
Finance costs		150	150
Dividend income		(2,200)	(2,050)
		(667)	(624)
(Increase)/decrease in trade and other receivables		(4)	17
Increase/(decrease) in trade and other payables		112	(120)
Cash absorbed by operations		(559)	(727)

2.  CASH AND CASH EQUIVALENTS

The amounts disclosed on the Statements of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts:

	GROUP		COMPANY
Year ended 31 December 2022
	31.12.22	01.01.22	31.12.22	01.01.22
	£'000	£'000	£'000	£'000
Cash and cash equivalents	688	1,527	117	121
Year ended 31 December 2021
	31.12.21	01.01.21	31.12.21	01.01.21
	£'000	£'000	£'000	£'000
Cash and cash equivalents	1,527	2,569	121	1,899

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.  STATUTORY INFORMATION

Vector Capital Plc is a public limited company, registered in England and Wales. The Company's registered number and registered office address can be found on the General Information page.

2.  ACCOUNTING POLICIES

Basis of preparation

The consolidated financial statements of the Group have been prepared using both the historical cost convention and fair value measurement basis, on a going concern basis and in accordance with UK-adopted international accounting standards and the Companies Act 2006 applicable to companies reporting under IFRS, using accounting policies which are set out below and which have been consistently applied to all years presented, unless otherwise stated.

The financial statements of the Company have been prepared in accordance with Financial Reporting Standard 101 "Reduced Disclosure Framework" ('FRS 101') and the requirements of the Companies Act 2006. The Company will continue to prepare its financial statements in accordance with FRS 101 on an ongoing basis until such time as it notifies shareholders of any change to its chosen accounting framework.

In accordance with FRS 101, the Company has taken advantage of the following exemptions:

·	Requirements of IAS 24, 'Related Party Disclosures' to disclose related party transactions entered into between two or more members of a group;
·	the requirements of paragraphs 134(d) to 134(f) and 135I to 135(e) of IAS 36 Impairments of Assets;
·	the requirements of IFRS 7 Financial Instruments: Disclosures in relation to the significance of financial instruments along with the nature and extent of risks arising from those financial instruments;
·	the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D and 111 of IAS 1 Presentation of Financial Statements;
·	the requirements of paragraphs 134 to 136 of IAS 1 Presentation of Financial Statements;
·	the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

New and amended standards adopted by the Group

There are a number of new and revised IFRSs that have been issued but are not yet effective that the Company has decided not to adopt early.

The most significant new standards and interpretations adopted are as follows:

Ref	Title		Summary	Application date of standards (periods commencing)
IFRS 3	Conceptual Framework for Financial Reporting (Amendments to IFRS 3)			1 January 2022
IAS 37	IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Amendment - Onerous Contracts - Cost of Fulfilling a Contract)	Specifying which costs an entity includes in determining the cost of fulfilling a contract for the purposes of assessing whether the contract is onerous.		1 January 2022
IAS 16	IAS 16 Property, Plant and Equipment (Amendment - Proceeds before Intended Use)	Prohibits a company deducting amounts received from selling items produced while the company is preparing assets for its intended use from the cost of PPE.		1 January 2022

New standards and interpretations not yet adopted

Unless material the Group does not adopt new accounting standards and interpretations which have been published and that are not mandatory for 31 December 2022 reporting periods.

No new standards or interpretations issued by the International Accounting Standards Board ('I'SB') or the IFRS Interpretations Committee ('IF'IC') as adopted by the UK Endorsement Board have led to any material changes in the Company's accounting policies or disclosures during each reporting period.

The most significant new standards and interpretations to be adopted in the future are as follows:

Ref	Title	Summary	Application date of standards (periods commencing)
IAS1	Presentation of Financial Statements	Amendments regarding the classification of liabilities	1 January 2023
		Amendments to defer effective date of the January 2020 amendments	1 January 2023
IFRS 17	Insurance contract	Internationally consistent approach to the accounting for insurance contracts.	1 January 2023
IAS 8	Definition of Accounting Estimates	Defines accounting estimates and clarifies that the effects of a change in an input or measurement technique are changes in accounting estimates.	1 January 2023
IAS 12	Deferred Tax relating to Assets and liabilities arising from a Single Transaction (Amendments to IAS 12)	Additional criterion for the initial recognition exemption under IAS 12.15, whereby the exemption does not apply to the initial recognition of an asset or liability which at the time of the transaction, gives rise to equal taxable and deductible temporary differences.	1 January 2023

Going concern

The financial statements are prepared on a going concern basis as the Directors are satisfied that the Group's forecasts and projections, taking into account potential changes in trading patterns, indicate that the Group will be able to continue current operations for the foreseeable future.

The Group's wholesale borrowing facilities totalling £40m are due for renewal in July and October 2022, on a rolling annual contract, the Group maintain a good working relationship with both providers and are confident the facilities will be renewed.

The Directors have obtained comfort from its majority shareholder, Vector Holdings Limited, that Group loans totalling £3m, will not be recalled within 12 months of the year end. 

In addition, the Directors have obtained comfort from other companies within the wider related party Group that they will provide financial support should the need arise and will not seek repayment of Group loans within 12 months of the date of approval of these financial statements. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.

Basis of consolidation

Subsidiaries are all entities over which the Group has control.  The subsidiaries consolidated in these Group accounts were acquired via group re-organisation and as such merger accounting principles have been applied.  The subsidiaries financial figures are included for their entire financial year rather than from the date the Company took control of them.

The Company acquired its 100% interest in Vector Asset Finance Limited ("VAF") and Vector Business Finance Ltd ("VBF") in 2019 by way of a share for share exchange.  This is a business combination involving entities under common control and the consolidated financial statements are issued in the name of the Group but they are a continuance of those of VAF

and VBF.  Therefore, the assets and liabilities of VAF and VBF have been recognised and measured in these consolidated financial statements at their pre combination carrying values. The retained earnings and other equity balances recognised in these consolidated financial statements are the retained earnings and other equity balances of the Company, VAF and VBF.  The equity structure appearing in these consolidated financial statements (the number and the type of equity instruments issued) reflect the equity structure of the Company including equity instruments issued by the Company to affect the consolidation. The difference between consideration given and net assets of VAF and VBF at the date of acquisition is included in a Group reorganisation reserve.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated during the consolidation process.

The subsidiaries prepare their accounts to 31 December under FRS101, there are no deviations from the accounting standards implemented by the company.  Where necessary accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

Property, plant and equipment

Property, plant and equipment is initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.  Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Fixtures and fittings	-  20% on cost
Computer equipment	-  25% on cost

Taxation

Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the statement of financial position date.

Employee benefit costs

The Group operates a defined contribution pension scheme.  Contributions payable to the Group's pension scheme are charged to the income statement in the period to which they relate.

Significant accounting policies

a) Revenue Recognition

Turnover is measured at the fair value of the consideration received or receivable net of trade discounts. Turnover includes revenue earned from the rendering of service, namely commercial lending in the unregulated secured loan market, the policies adopted are as follows -

-

Interest income is recognised using the effective interest method. The effective interest method calculates the amortised cost of a financial asset and allocates the interest income over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset. When calculating the effective interest rate, all contractual terms of the financial instrument and lifetime expected credit losses are considered.

-

Setup and renewal fees are recognised in accordance with the stage of completion.

Dividend and interest income

Interest income, other than from commercial loans, is recognised using the effective interest method and dividend income is recognised as the company's right to receive payment is established. Each is then shown separately in the income statement and other comprehensive income.

b) Investments

Investment in subsidiaries is initially measured at cost and subsequently each year re-measured at fair value. Gains or losses arising from changes in fair values of investments are included in income statement in the period in which they arise.

c) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and time, call and current balances with banks and similar institutions, which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value. This definition is also used for the statement of cash flows.

d) Financial instruments

Financial assets and financial liabilities are recognised when the company becomes party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value.

Transaction costs that are directly attributable (other than financial assets or liabilities at fair value through the income statement) are added to or deducted from the fair value as appropriate, on initial recognition.

e) Financial assets

 Financial assets are subsequently classified into the following specified categories:

-	financial assets at fair value through the income statement, including held for trading;
-	fair value through other comprehensive income; or
-	amortised cost

The classification depends on the nature and purpose of the financial asset (i.e. the Company's business model for managing the financial assets and the contractual terms of the cash flows) and is determined at the time of initial recognition.

Financial assets are classified as at fair value through other comprehensive income if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. They are measured at amortised cost if they are held within a business mode whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets not held at amortised cost or fair value through other comprehensive income are held at fair value through the income statement.

f) Trade receivables

Trade receivables are amounts due from customers in relation to commercial lending provided as part of the ordinary course of business. If collection is expected in one year or less (as is the normal operating cycle of the business), the receivables are classified as current assets, if not, they are presented as non-current assets.

Loans made by the Group are initially recognised at cost, being the fair value of the consideration received or paid associated with the loan or borrowing. Loans are subsequently measured at amortised cost using the effective interest method where appropriate, less any impairment for loans. The loan will be de-recognised when the Group is no longer eligible for the cash flows from it.

The credit risk of trade receivables is considered low due to the legal charges held by the Group. The Directors regularly review the trade receivables to ensure security held is sufficient to maintain a low level of risk. Where defaults occur, the company uses its legal powers to seize assets held as security and liquidate them in order to recover the debt. Should the security diminish in value and credit risk is re-assessed as higher the Directors will make a provision for bad debts which will represent a charge to the Income statement.

There is no Grouping for credit risk, each trade receivable is reviewed on its own merit.

g)  Financial liabilities

Financial liabilities are contractual obligations to deliver cash or another financial asset.

All financial liabilities are measured at amortised cost, except for financial liabilities at fair value through the income statement. Such liabilities include derivatives, other liabilities held for trading, and liabilities that an entity designates to be measured at fair value through profit or loss (see 'fair value option' below).

All interest-bearing loans and borrowings are classified as financial liabilities at amortised cost.

h)  Fair value option

An entity may, at initial recognition, irrevocably designate a financial asset or liability that would otherwise have to be measured at amortised cost or fair value through other comprehensive income to be measured at fair value through the income statement if doing so would eliminate or significantly reduce a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch') or otherwise results in more relevant information.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an open transaction between free market participants) 

i) De-recognition

De-recognition of financial assets and liabilities is the point at which an asset or liability is removed from the financial statement.

Financial assets are de-recognised when the rights to receive cashflows from the assets have ceased and the Company has transferred substantially all the risk and rewards of ownership of the asset.

Financial liabilities are de-recognised when the obligation is discharged, cancelled or expired.

j)  Impairment

Impairment of financial assets is recognised in stages:

Stage-1 - as soon as a financial instrument is originated or purchased, 12-month expected credit losses are recognised in the income statement and a loss allowance is established. This serves as a proxy for the initial expectations of credit losses. For financial assets, interest revenue is calculated on the gross carrying amount (i.e. without deduction for expected credit losses).

Stage-2 - if the credit risk increases significantly and is not considered low, full lifetime expected credit losses are recognised in the income statement. The calculation of interest revenue is the same as for Stage 1.

Stage-3 - if the credit risk of a financial asset increases to the point that it is considered credit-impaired, interest revenue is calculated based on the amortised cost (ie the gross carrying amount less the loss allowance). Financial assets in this stage will be assessed individually. Lifetime expected credit losses are recognised on these financial assets.

On an ongoing basis the Company reviews and assesses whether a financial asset is impaired.

Expected credit losses are calculated based on the Company review using objective tests of security held, defaults, market conditions and other reasonable information available to the Company at the time of review.  There is no Grouping for credit risk, each trade receivable is reviewed on its own merit.

Losses as a result of the review are recognised in the Income Statement.

k)  Borrowing costs

All borrowing costs are recognised in the Income Statement in the period in which they are incurred.

Critical accounting estimates and judgements

The preparation of financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.  Actual results may differ from these estimates.

Estimates and assumptions are reviewed by the Directors on an ongoing basis.  Revisions or amendments to the accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

The Directors consider that loan impairment provision is the most important to the true reflection of the Company's and the Group's position.

Loan impairment provisions

The Directors monitor debts carefully, the company operates tight controls to ensure bad debts are minimised, including the holding of adequate legal security. Where debts become overdue management assess the collectability of the debt on a case-by-case basis, where doubts exist over the recoverability provisions will be made and charged to the Income statement.

Financial risk management

The Group's risk management is controlled by the board of Directors.  The Board identify, evaluate and mitigates financial risks across the Group.  Financial risks identified and how these risks could affect the Group's future financial performance are listed below;

Market risk - interest rate

The Group holds borrowings from banks at variable rates which are linked to lending provided to customers.  The risk is measured through sensitivity analysis.  The risk is managed via monitoring of base rates when new loans and renewals are issued to maintain a suitable margin above cost.  Since loans are short term the exposure to higher rates is low.

Credit risk

The Group lends to third parties as included in trade debtors, there is a risk of default from a borrower.  Risk is measured by review of security held compared to credit provided.  the risk is management by undertaking thorough valuations of security, obtaining legal charge and stringent onboarding processes.  At the year-end Group trade debtors of £53,229,641 (2021: £46,262,775) represented 57% (2021: 54%) of the aggregate security held.

Liquidity risk

The risk the Company cannot meet its financial responsibilities such as finance and operating expenses.  The risk is measured by way of rolling cash flow forecasts prepared by management, including undrawn borrowing facilities and cash and cash equivalents.  The risk is controlled by the timing and availability of new finance for customers.

Capital risk

The Group's objective when managing capital is to safeguard the Group's ability to continue as a going concern and to be profitable for its shareholders.  The board monitors capital by assessing liquidity, forecasts and demand for lending on an ongoing basis.

3.  OPERATING SEGMENTS

The entire revenue and results of the Group are from a single operating segment.  The Group therefore does not consider requirement to disclose segmental information necessary.

4.  EMPLOYEES AND DIRECTORS

	2022	2021
	£'000	£'000
Wages and salaries	352	320
Social security costs	35	31
Other pension costs	24	24
	411	375
The average number of employees during the year was as follows:
	2022	2021
	No.	No.
Administrative	9	8
Directors' remuneration	2022	2021
	£'000	£'000
Salaries	197	169
Pension contributions	20	20
	217	189

The highest paid director, Agam Jain, was paid remuneration of £120,000 (2021: £120,000) during the year, as disclosed in the Report of the Directors.

5.  PROFIT BEFORE INCOME TAX

The profit before income tax is stated after charging:

	2022	2021
	£'000	£'000
Brokers' commission	429	502
Depreciation - owned assets	1	1
Auditors' remuneration
Audit of Group	40	35
Non-audit services	3	3
	43	38
Bad debts	212	50

6.  INCOME TAX

Analysis of tax expense

	2022	2021
	£'000	£'000
Current tax:  Corporation tax	534	538
Total tax expense in consolidated income statement	534	538

Factors affecting the tax expense

The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:

	2022	2021
	£'000	£'000
Profit before income tax	2,809	2,827
Profit multiplied by the standard rate of corporation tax in the UK of 19% (2021 - 19%)	534	537
Effects of:
Tax on interest paid to individuals (CT61)	-	1
Tax expense	534	538

7.  DIVIDENDS

	2022	2021
	£'000	£'000
Ordinary shares of £0.005 each
Final	683	601
Interim	453	430
	1,136	1,031

The interim dividend for the year of 1.00 pence per share was paid on 30 September 2022.

8.  EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.

Reconciliations are set out below.

	2022
	Earnings £'000	Weighted average number of shares	Per-share amount pence
Basic EPS
Earnings attributable to ordinary shareholders	2,275	45,244,385	5.03
Effect of dilutive securities	-	-	-
Diluted EPS
Adjusted earnings	2,275	45,244,385	5.03
	2021
	Earnings £'000	Weighted average number of shares	Per-share amount pence
Basic EPS
Earnings attributable to ordinary shareholders	2,289	43,687,987	5.24
Effect of dilutive securities	-	-	-
Diluted EPS
Adjusted earnings	2,289	43,687,987	5.24

9.  PROPERTY, PLANT AND EQUIPMENT

Group

	Fixtures and fittings	Computer equipment	Totals
	£'000	£'000	£'000
COST At 1 January 2022 and 31 December 2022	1	4	5
DEPRECIATION
At 1 January 2022	-	2	2
Charge for year	1	1	2
At 31 December 2022	1	3	4
NET BOOK VALUE
At 31 December 2022	-	1	1
At 31 December 2021	1	2	3

Company

	Fixtures and fittings	Computer equipment	Totals
	£'000	£'000	£'000
COST At 1 January 2022 and 31 December 2022	1	4	5
DEPRECIATION
At 1 January 2022	-	2	2
Charge for year	1	1	2
At 31 December 2022	1	3	4
NET BOOK VALUE
At 31 December 2022	-	1	1
At 31 December 2021	1	2	3

10.  INVESTMENTS

Company

	Shares in Group undertakings
	£'000
COST
At 1 January 2022 and 31 December 2022	17,000
NET BOOK VALUE
At 31 December 2022	17,000
At 31 December 2021	17,000

Shares in Group Undertakings comprises;

Name of entity		Country of incorporation	Ownership held		Principal activities
			2022	2021
Vector Business Finance Ltd		England and Wales	100%	100%	Commercial lending
Vector Asset Finance Ltd		England and Wales	100%	100%	Commercial lending

11.  TRADE AND OTHER RECEIVABLES

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Current:
Trade debtors	51,709	46,263
Amounts owed by Group undertakings	-	-	8,816	8,456
Prepayments and accrued income	768	302	16	11
	52,477	46,565	5,832	8,467
Non-Current:
Trade debtors	1,520	-	-	-
	53,997	46,565	8,832	8,467

Trade receivables are stated after provisions for impairment of £212 (2021; £50).

72% of trade receivables were held by third party secure funding (2021, 68%).

Trade receivables due after more than 1 year is not considered material and therefore not reflected on the Balance Sheet.

12.  CASH AND CASH EQUIVALENTS

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Bank account	688	1,527	117	121

13.  TRADE AND OTHER PAYABLES

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Current:
Trade creditors	11	3	2	2
Amounts owed to Group undertakings	-	3,000	-	3,000
Social security and other taxes	12	11	12	11
Other creditors	25,544	20,335	1	-
Accruals and deferred income	233	509	133	22
	25,800	23,858	148	3,035
	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Non-Current:
Amounts owed to Group undertakings	3,000	-	3,000	-
creditors	558	-	-	-
	3,558	-	3,000	-

Trade and other payables are stated at amortised cost. 

Following the renegotiation of the loan from Vector Holdings Limited on 28 December 2022, it is now classified as being due more than one year 

The following secured debts are included within creditors:

	Group	Company
	£'000	£'000
Other creditors under 1 year	25,542	-
Other creditors over 1 year	558	-
	26,100

Other creditors include bank finance which is secured against the associated loans assigned to it by way of block discounting.  These balances have not been classified as banking facilities as the discounting facility is available to drawdown against customer loans issued and have to be secured over the property of the customer. Neither Vector Asset Finance Limited nor Vector Business Finance Limited can use these facilities for working capital requirements.

Vector Holdings Limited has provided a guarantee to Aldermore Bank and Shawbrook Bank covering all monies and liabilities due from Vector Asset Finance Limited and Vector Business Finance Limited.

14.  CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:
Number:	Class:		Nominal	2022	2021
			value:	£'000	£'000
45,244,385	Ordinary		£0.005	226	226
(2021: 45,244,385)

Holders of ordinary shares are entitled to dividends as declared from time to time and are entitled to on vote per share at general meetings of the company.

15.  ULTIMATE PARENT COMPANY

Vector Holdings Limited is regarded by the Directors as being the Company's ultimate parent company.

Mr A Jain, Director, is considered the ultimate controlling party by virtue of his shareholding in Vector Holdings Limited, the ultimate parent company.

16.  RELATED PARTY DISCLOSURES

All figures quoted in £'000s

Vector Holdings Ltd - ultimate parent company

-	The Group owed £3,000 to the parent company (2021; £3,000)
-	Interest is payable at a rate of 5% per annum, there is no requirement to make capital repayments.  On 28 December 2022 the company renewed the loan with the parent company, the rate of interest increased 6.25% per annum to be reflective of the market rates.
-	Dividends totalling £853 were paid to the parent company (2021; £809)
-	Vector Holdings Ltd has provided a guarantee to Aldermore Bank and Shawbrook Bank covering all monies and liabilities due from the Group.

Key Management Personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Directors (whether executive or otherwise).  Key Management Personnel are defined as the Directors, executive and non-executive.  The aggregate remuneration for Key Management Personnel is £268 (2021: £239).

Jonathan Pugsley - Director

During the year, Allazo Ltd, a company controlled by Jonathan Pugsley, charged accountancy fees of £9 (2021: £8) to the Group.

 

END

 

 

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