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Vector Capital PLC (VCAP)

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Monday 12 April, 2021

Vector Capital PLC

Final Results

RNS Number : 0579V
Vector Capital PLC
12 April 2021
 

This announcement contains inside information for the purposes of Regulation 11 of the Market Abuse (amendment) (EU Exit) Regulations 2019/310.

 

12 April 2021    

 

Vector Capital plc

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

 

Full year results for the year ended 31 December 2020

 

Strong Results with Robust Foundation to Scale

 

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 2020.

 

Highlights

 

Loan book growth of 8.3% to £36.4m (FY19: £33.6m)

PBT growth up 19.3% to £2.3m (FY19: £2.0m)

EPS increase of 19% to 5.58p (FY19: 4.69p)

Revenue growth of 19.4% to £4.3m (FY19: £3.6m)

PAT up 18.8% to £1.9m (FY19: £1.6m)

Proposed final dividend for the year of 1.43p per share

 

Agam Jain, CEO of Vector Capital, commented: "We have delivered an excellent performance in the year under review and achieved strong growth across our key performance indicators, despite the challenges presented by the COVID-19 pandemic.  Revenue and profit before tax were up by 19.4% and 19.3% respectively, and our loan book grew by 8.3% to £36.4m reflecting SME demand for small, flexible loans.  The AIM IPO at the end of last year provided access to further capital to increase our lending potential and to meet this demand. 

 

"We are trading positively and have seen strong growth within our loan pipeline in the first quarter of the new financial year. The business is resilient, and our proposed dividend and progressive dividend policy reflects our confidence for the future as we establish ourselves as the go to lender of choice in our market segment."

 

Subject to the approval of shareholders at the Company's annual general meeting ("AGM"), the Directors are proposing a final dividend of 1.43p per share. The dividend timetable will be announced at the time of posting of the AGM notice.

 

Enquiries

 

Vector Capital plc

Agam Jain
 

c/o TB Cardew

Allenby Capital Limited

James Reeve/George Payne (Corporate Finance)
Tony Quirke (Sales and Corporate Broking)

 

  + 44 (0) 20 3328 5656

www.allenbycapital.com

 

TB Cardew

Shan Shan Willenbrock
Charlotte Anderson 

 

+ 44 (0)7775 848537

+ 44 (0)20 7930 0777

[email protected]

 

 

 

About Vector Capital:

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

 

CHAIRMAN'S STATEMENT

 

As Chairman I'm pleased to present Vector Capital's maiden results as a public company, for the year ended 31 December 2020. These results show a significant step forward in the development of the business, consistent with the Board's strategy to build the Group's loan book and create a strong and sustainable presence as a provider of secured loans to the SME sector. Our customers are mainly small property developers in England and Wales who buy properties to develop or refurbish and re-sell.

 

The Company achieved admission to the AIM market right at the end of the 2020, on 29th December, but the IPO planning process goes back to the summer of 2018 when I first met and was impressed by the executive team. The Company undertook careful preparation in the lead up to the IPO to ensure the right talent, processes and infrastructure were in place. This attention to detail and strategic approach proved extremely valuable as Vector Capital transitioned from a private business to becoming a publicly listed company during a COVID -19 impacted 2020. We raised £3.1m at Admission and this new equity has provided the Group with the opportunity to increase our lending capacity and raise our profile in the marketplace.

 

The Group delivered excellent results in this transitional year. Revenue grew by 19.4% and profit before tax increased by 19.3%, combined with an 8.3% rise in the value of the loan book. This performance is a testament to the quality and experience of the executive team, the resilience and excellence of the underlying operational systems and the strength of the core business model which are key attributes that first attracted me to join the board.

 

Our strategic objective is to build on the Group's strong business foundations and its positive performance by growing the loan book using a combination of our own resources and the flexible facilities provided by our wholesale lenders. Whilst we are trading positively, we are mindful of the attendant risk and uncertainty arising from the economic and financial implications of the COVID-19 pandemic and the outlook for the UK property market. We will factor in these risks and uncertainties as we progress our strategy in the coming months, building on our team's considerable experience.  Stakeholder engagement is important to us and we will report on progress in a timely and open manner.

 

The development of the Group's underlying business model, the emergence of the Company on to the AIM market and the results for the year, were only possible because we have a strong and focussed team led by our CEO and founder, Agam Jain. I would like to express my thanks to this excellent team, together with the remaining members of our experienced board and our business partners.

 

Thanks are also due to our supportive external advisers and of course our new shareholders, with whom we look forward to a long and rewarding relationship. Vector Capital is resilient and reflecting our confidence for the future, the Board is proposing a final dividend for the year of 1.43 pence per share, which is consistent with our stated progressive dividend policy.

 

I am confident that as a team we have the skills, experience and opportunities to make considerable progress through 2021 and beyond.

 

Robin Stevens

Chairman

9 April 2021

 

 

 

CEO REVIEW

 

The Company delivered an excellent performance in the period under review. Revenues grew by 19.4% to £4.3m (2019: £3.6m), profit before tax increased by 19.3% to £2.3m (2019: £2.0m) and we delivered an 8.3% growth in the Loan book at £36.4m at the period end (2019: £33.6m). We are pleased to propose a final dividend for the year of 1.43p per share post year end, following a maiden interim dividend of £400,000 paid in October 2020, before the admission to AIM. This impressive growth was achieved during a very challenging economic climate as result of the pandemic and prolonged lock-downs. The year concluded with our successful £3.1m placing and admission to trading on AIM in December 2020.

 

The onset of the pandemic in March 2020 has created the most challenging environment for businesses and communities around the world. As with many other lenders, we took prudent action and temporarily ceased new lending for three months from April and supported our customers who needed it most by providing them with interest payment holidays. All of these borrowers have since recommenced interest payments. In June, we decided to re-commence new lending and immediately experienced strong demand with increased levels of new business origination and a growing pipeline.

 

Our effective credit and risk management controls ensured that, despite the economic challenges and uncertainties of 2020, it was only necessary to provide for £43k of bad debt for the year (2019: £nil).

 

It is a testament to our software infrastructure and our operational team that we were able to operate at 100% efficiency whilst working remotely. The investment made in previous years on our software platform demonstrated its value. Our day-to-day operations are virtually paperless and all our processes are managed online. Personal interaction is an essential part of the Vector Capital business model and we were able to maintain this via use of the various online meeting platforms. Our brokers were able to continue to submit their proposals via our portal and our team could respond online and process applications seamlessly. 

 

Trading Overview

We were only able to achieve our excellent financial performance because of the commitment, training and motivation of our operational team. The team have excelled in their interactions with our brokers, borrowers and other business partners. The feedback from our brokers is that we are responsive, fast, flexible and reliable despite the difficult circumstances under which we had to operate in for most of the year.  Our wholesale bankers were also very supportive of our operations and increased our facilities by £5m to £25m.

 

Our success is notable when you consider that Vector operates in a highly competitive and crowded market with many players that have much larger capital resources.

 

The AIM admission at the end of last year, which raised £3.1m, provided access to further capital to increase our lending potential as well as enhancing our profile in the market.

 

Outlook

We have seen strong growth in our pipeline in the first quarter and we view the current year with confidence as we quickly establish ourselves as the go to lender of choice in our market segment.

 

With the expected relaxing of the restrictions imposed by the UK government due to the COVID-19 pandemic we are confident that the property market will continue to provide investment opportunities for our customers and thus maintain demand for our service.

 

The prospects for the Group are very positive, we are continually working towards growing the business and we believe that the AIM admission provides the ideal platform for growth of our lending capabilities to meet the demand we are seeing. 

 

 

Agam Jain

Chief Executive Officer

9 April 2021

 

 

Vector Capital Plc

 

Consolidated Statement of Profit or Loss

for the Year Ended 31 December 2020

 

 

 

2020

2019

 

Notes

£'000

£'000

CONTINUING OPERATIONS

 

 

 

Revenue

 

4,325

3,593

Cost of sales

 

(321)

(484)

GROSS PROFIT

 

4,004

3,109

Other income

4

29

-

Administrative expenses

 

(668)

(350)

OPERATING PROFIT

 

3,365

2,759

Finance costs

 

(1,018)

(792)

PROFIT BEFORE INCOME TAX

6

2,347

1,967

Income tax

7

(445)

(374)

PROFIT FOR THE YEAR

 

1,902

1,593

Profit attributable to:

 

 

 

Shareholders

 

1,902

1,593

Earnings per share expressed

in pence per share:

10

 

 

Basic

 

5.58

4.69

Diluted

 

5.58

4.69

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

for the Year Ended 31 December 2020

 

 

 

2020

2019

 

Notes

£'000

£'000

PROFIT FOR THE YEAR

 

1,902

1,593

OTHER COMPREHENSIVE INCOME

 

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

 

1,902

1,593

Total comprehensive income attributable to:

 

 

 

Owners of the parent

 

1,902

1,593

 

 

The notes form part of these financial statements

 

Vector Capital Plc (Registered number: 12140968)

 

Consolidated Statement of Financial Position

31 December 2020

 

 

 

2020

2019

 

Notes

£'000

£'000

ASSETS

 

 

 

NON-CURRENT ASSETS

 

 

 

Property, plant and equipment

11

4

-

Trade and other receivables

13

-

1,400

TOTAL NON-CURRENT ASSETS

 

4

1,400

CURRENT ASSETS

 

 

 

Trade and other receivables

13

36.963

32.850

Cash and cash equivalents

14

2.569

337

TOTAL CURRENT ASSETS

 

39.532

33,187

TOTAL ASSETS

 

39,536

34,587

Trade and other payables

15

18,030

17,126

Tax payable

 

205

374

TOTAL LIABILITIES

 

18,235

17,500

NET ASSETS

 

21,301

17,087

SHAREHOLDERS' EQUITY

 

 

 

Called up share capital

16

210

170

Share premium

17

19,502

16,830

Group reorganisation reserve

17

188

188

Retained earnings

17

1,401

(101)

TOTAL EQUITY

 

21,301

17,087

 

The financial statements were approved by the Board of Directors on 9 April 2021. and were signed on its behalf by:

 

 

..........................................................

J Pugsley - Director

 

The notes form part of these financial statements

 

Vector Capital Plc (Registered number: 12140968)

 

Company Statement of Financial Position

31 December 2020

 

 

 

2020

2019

 

Notes

£'000

£'000

ASSETS

 

 

 

NON-CURRENT ASSETS

 

 

 

Property, plant and equipment

11

4

-

Investments

12

17,000

17,000

TOTAL NON-CURRENT ASSETS

 

17,004

17,000

CURRENT ASSETS

 

 

 

Trade and other receivables

13

5,174

800

Cash and cash equivalents

14

1,899

66

TOTAL CURRENT ASSETS

 

7,073

866

TOTAL ASSETS

 

24,077

17,866

Trade and other payables

15

3,155

866

TOTAL LIABILITIES

 

3,155

866

NET ASSETS

 

20,922

17,000

SHAREHOLDERS' EQUITY

 

 

 

Called up share capital

16

210

170

Share premium

17

19,502

16,830

Retained earnings

17

1,210

-

TOTAL EQUITY

 

20,922

17,000

 

As permitted by Section 408 of the Companies Act 2006, the income statement of the parent company is not presented as part of these financial statements.  The parent company's profit for the financial year was £1,609,732 (2019 - £699,054).

 

The financial statements were approved by the Board of Directors on 9 April 2021 and were signed on its behalf by:

 

 

 

..........................................................

J Pugsley - Director

 

 

The notes form part of these financial statements

 

Vector Capital Plc

 

Consolidated Statement of Changes in Equity

for the Year Ended 31 December 2020

 

 

Called up share capital

Retained earnings

Share premium

Group reorganisation reserve

Total equity

 

£'000

£'000

£'000

£'000

£'000

Balance at 1 January 2019

170

(995)

16,830

188

16,193

Changes in equity

 

 

 

 

 

Dividends

-

(699)

-

-

(699)

Total comprehensive income

-

1,593

-

-

1,593

Balance at 31 December 2019

170

(101)

16,830

188

17,087

Changes in equity

 

 

 

 

 

Issue of share capital

40

-

2,672

-

2,712

Dividends

-

(400)

-

-

(400)

Total comprehensive income

-

1,902

-

-

1,902

Balance at 31 December 2020

210

1,401

19,502

188

21,301

 

 

Vector Capital Plc

 

Company Statement of Changes in Equity

for the Year Ended 31 December 2020

 

 

Called up share capital

Retained earnings

Share premium

Total equity

 

£'000

£'000

£'000

£'000

Changes in equity

 

 

 

 

Issue of share capital

170

-

16,830

17,000

Dividends

-

(699)

-

(699)

Total comprehensive income

-

699

-

699

Balance at 31 December 2019

170

-

16,830

17,000

Changes in equity

 

 

 

 

Issue of share capital

40

-

2,672

2,712

Dividends

-

(400)

-

(400)

Total comprehensive income

-

1,610

-

1,610

Balance at 31 December 2020

210

1,210

19,502

20,922

 

 

Vector Capital Plc

 

Consolidated Statement of Cash Flows

for the Year Ended 31 December 2020

 

 

 

2020

2019

 

Notes

£'000

£'000

Cash flows from operating activities

 

 

 

Cash generated from operations

1

(913)

(236)

Interest paid

 

(1,018)

(792)

Tax paid

 

(614)

(236)

Net cash from operating activities

 

(2,545)

(1,264)

Cash flows from investing activities

 

 

 

Purchase of tangible fixed assets

 

(5)

-

Net cash from investing activities

 

(5)

-

Cash flows from financing activities

 

 

 

Intercompany loans

 

2,473

2,200

Amount introduced by directors

 

-

3

Amount withdrawn by directors

 

(3)

-

Issue of new shares

 

2,712

-

Equity dividends paid

 

(400)

(699)

Net cash from financing activities

 

4,782

1,504

Increase in cash and cash equivalents

 

2,232

240

Cash and cash equivalents at beginning of year

2

337

97

Cash and cash equivalents at end of year

2

2,569

337

 

 

Vector Capital Plc

 

Company Statement of Cash Flows

for the Year Ended 31 December 2020

 

 

 

2020

2019

 

Notes

£'000

£'000

Cash flows from operating activities

 

 

 

Cash generated from operations

1

(383)

(225)

Interest paid

 

(5)

-

Tax paid

 

 

 

Net cash from operating activities

 

(388)

(225)

Cash flows from investing activities

 

 

 

Purchase of tangible fixed assets

 

(5)

-

Dividends received

 

2,100

950

Net cash from investing activities

 

2,095

950

Cash flows from financing activities

 

 

 

Intercompany loans

 

(2,184)

38

Amount introduced by directors

 

-

2

Amount withdrawn by directors

 

(2)

-

Issue of new shares

 

2,712

-

Equity dividends paid

 

(400)

(699)

Net cash from financing activities

 

126

(659)

Increase in cash and cash equivalents

 

1.833

66

Cash and cash equivalents at beginning of year

2

66

-

Cash and cash equivalents at end of year

2

1.899

66

 

 

Vector Capital Plc

 

Notes to the Statements of Cash Flows

for the Year Ended 31 December 2020

 

1.

RECONCILIATION OF PROFIT BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS

 

Group

 

2020

2019

 

£'000

£'000

Profit before income tax

2,347

1,966

Depreciation charges

1

-

Finance costs

1,018

793

 

3,366

2,759

Increase in trade and other receivables

(2,713)

(12,975)

(Decrease)/increase in trade and other payables

(1,566)

9,980

Cash absorbed in operations

(913)

(236)

 

Company

 

2020

2019

 

£'000

£'000

Profit before income tax

1,610

699

Depreciation charges

1

-

Finance costs

5

-

Dividend income

(2,100)

(950)

 

(484)

(251)

Increase in trade and other receivables

(28)

 

Increase in trade and other payables

129

26

Cash absorbed in operations

(383)

(225)

 

 

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

 

31.12.20

1.1.20

31.12.20

1.1.20

 

£'000

£'000

£'000

£'000

Year ended 31 December 2020

 

 

 

 

Cash and cash equivalents

2,569

337

1,899

66

Year ended 31 December 2019

 

 

 

 

Cash and cash equivalents

337

97

66

-

 

 

Vector Capital Plc

 

Notes to the Consolidated Financial Statements

for the Year Ended 31 December 2020

 

1.  STATUTORY INFORMATION

 

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

 

2.  ACCOUNTING POLICIES

 

Basis of preparation

The consolidated financial statements of the Group have been prepared using the historical cost convention, on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") and IFRS Interpretations Committee ("IFRIC") Interpretations as adopted by the European Union 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 parent 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 135(c) to 135(e) of IAS 36 Impairments of Assets;

• the requirements of IFRS 7 Financial Instruments: Disclosures;

• 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)

 

IAS1

Presentation of Financial Statements

Amendments regarding the definition of material

1 January 2020

IAS8

Accounting Policies, Changes in Accounting Estimates and Errors

Amendments regarding the definition of material

1 January 2020

IFRS9, IAS39 and IFRS7

Interest Rate Benchmark Reform

Amendments regarding measurement and classification

1 January 2020

      

 

New standards and interpretations not yet adopted

Unless material the Group do not adopt new accounting standards and interpretations which have been published and that are not mandatory for 31 December 2020 reporting periods.

 

No new standards or interpretations issued by the International Accounting Standards Board ('IASB') or the IFRS Interpretations Committee ('IFRIC') 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

IFRS9, IAS39 and IFRS7

Interest Rate Benchmark Reform Phase 2

Amendments regarding measurement and classification

1 January 2021

 

 

Going concern

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

 

The Group's wholesale borrowing facilities totalling £25m are due for renewal in July and October 2021, 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 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

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.

 

Government grants

The Company recognises government support grants as other income, accrued for the period of eligibility.  Government grants relate to the Job Retention Scheme which is designed to safeguard employment due to pressures imposed by the Covid-19 pandemic. 

 

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 on an accrual basis using the actual interest rate as stipulated within the terms of the contractual agreement.

- 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 statement of profit or loss 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 profit or loss 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 profit or loss) 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 profit or loss, 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 (ie. 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 profit or loss.

 

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 profit or loss. 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 profit or loss 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 profit or loss 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 (ie 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 profit or loss. 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 profit and loss 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 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 £36,373,856 (2019: £33,627,171) represented 44% (2019: 58%) of the 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.  OTHER INCOME

 

 

2020

2019

 

£'000

£'000

Grant income:  Coronavirus job retention scheme

29

-

 

29

-

 

5.  EMPLOYEES AND DIRECTORS

 

 

2020

2019

 

£'000

£'000

Wages and salaries

294

80

Social security costs

28

6

Other pension costs

2

1

 

324

87

 

 

The average number of employees during the year was as follows:

 

2020

2019

 

No.

No.

Administrative

7

5

 

 

2020

2019

 

£'000

£'000

Directors' remuneration

181

50

 

6.  PROFIT BEFORE INCOME TAX

 

The profit before income tax is stated after charging:

 

2020

2019

 

£'000

£'000

Broker's commission

321

484

Depreciation - owned assets

1

-

Auditors' remuneration

 

 

Audit of Group

31

30

Non-audit services

19

-

 

50

30

Bad debts

43

-

 

7.  INCOME TAX

 

Analysis of tax expense

 

2020

2019

 

£'000

£'000

Current tax:

 

 

Corporation tax

445

374

Total tax expense in consolidated statement of profit or loss

445

374

 

Factors affecting the tax expense

The tax assessed for the year is lower than (2019 - same as) the standard rate of corporation tax in the UK. The difference is explained below:

 

2020

2019

 

£'000

£'000

Profit before income tax

2,347

1,966

Profit multiplied by the standard rate of corporation tax in the UK of 19% (2019 - 19%)

446

374

Effects of:

 

 

Accelerated capital allowances 

(1)

 

Tax expense

445

374

 

 

8.  PROFIT OF PARENT COMPANY

 

As permitted by Section 408 of the Companies Act 2006, the income statement of the parent company is not presented as part of these financial statements.  The parent company's profit for the financial year was £1,609,732 (2019 - £699,054).

 

 

9.  DIVIDENDS

 

 

2020

2019

 

£'000

£'000

Ordinary shares of £0.01 each

 

 

Final

-

699

Interim

400

-

 

400

699

 

The interim dividend was paid on 27 October 2020. 

 

10.  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.

 

 

2020

 

 

Earnings £'000

Weighted average number of shares

Per-share amount pence

Basic EPS

 

 

 

Earnings attributable to ordinary shareholders

1,902

34,066,007

5.58

Effect of dilutive securities

-

-

-

Diluted EPS

 

 

 

Adjusted earnings

1,902

34,066,007

5.58

 

 

 

2019

 

 

Earnings £'000

Weighted average number of shares

Per-share amount pence

Basic EPS

 

 

 

Earnings attributable to ordinary shareholders

1,593

34,000,000

4.69

Effect of dilutive securities

-

-

-

Diluted EPS

 

 

 

Adjusted earnings

1,593

34,000,000

4.69

 

The weighted average assumes the sub-division of shares per Note 16 were in place from 1 January 2019.   

 

11.  PROPERTY, PLANT AND EQUIPMENT

 

Group

 

 

 

 

Fixtures and fittings

Computer equipment

Totals

 

£'000

£'000

£'000

COST

 

 

 

Additions

1

4

5

At 31 December 2020

1

4

5

DEPRECIATION

 

 

 

Charge for year

-

1

1

At 31 December 2020

-

1

1

NET BOOK VALUE

 

 

 

At 31 December 2020

1

3

4

 

Company

 

 

 

 

Fixtures and fittings

Computer equipment

Totals

 

£'000

£'000

£'000

COST

 

 

 

Additions

1

4

5

At 31 December 2020

1

4

5

DEPRECIATION

 

 

 

Charge for year

-

1

1

At 31 December 2020

-

1

1

NET BOOK VALUE

 

 

 

At 31 December 2020

1

3

4

 

 

12.  INVESTMENTS

 

Company

 

Shares in Group Undertakings

 

£'000

COST

 

At 1 January 2020 and 31 December 2020

17,000

NET BOOK VALUE

 

At 31 December 2020

17,000

At 31 December 2019

17,000

 

Shares in Group Undertakings comprises;

 


Name of entity

 

Country of incorporation

Ownership held
 

Principal activities

 

2020

2019

 

 

Vector Business Finance Ltd

 

 

England and Wales

 

100%

 

100%

Commercial lending


Vector Asset Finance Ltd

 


England and Wales


100%


100%

Commercial lending

 

13.  TRADE AND OTHER RECEIVABLES

 

 

Group

Company

 

2020

2019

2020

2019

 

 

£'000

£'000

£'000

£'000

 

Current:

 

 

 

 

 

Trade debtors

36,374

32,227

-

-

 

Amounts owed by Group undertakings

-

-

5,146

800

 

Prepayments and accrued income

589

623

28

-

 

 

36,963

32,850

5,174

800

 

Non-current:

 

 

 

 

 

Trade debtors

-

1,400

-

-

 

Aggregate amounts

36,963

34,250

5,174

800

 

 

 

 

 

 

 

Trade receivables are stated after provisions for impairment of £Nil (2019; £Nil).

 

73% of trade receivables were held by third party secure funding (2019, 82%).

 

Trade and other receivables are stated at amortised cost.

 

 

14.  CASH AND CASH EQUIVALENTS

 

 

Group

Company

 

2020

2019

2020

2019

 

£'000

£'000

£'000

£'000

Bank deposit account

2,569

337

1,899

66

 

 

15.  TRADE AND OTHER PAYABLES

 

 

Group

Company

 

2020

2019

2020

2019

 

£'000

£'000

£'000

£'000

Current:

 

 

 

 

Trade creditors

18

-

18

-

Amounts owed to Group undertakings

3,000

526

3,000

838

Social security and other taxes

9

9

9

9

Other creditors

14,814

16,507

-

-

Accruals and deferred income

189

81

128

17

Directors' current accounts

-

3

-

2

 

18,030

17,126

3,155

866

 

Trade and other payables are stated at amortised cost.

 

The following secured debts are included within creditors:

 

 

Group

Company

 

£'000

£'000

Other creditors under 1 year

14,812

-

 

Other creditors includes 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.

 

Agam Jain has also provided a personal guarantee to Shawbrook Bank, with a maximum aggregate liability of £100k (2019: £100k) due from Vector Business Finance Limited to Shawbrook Bank.

 

16.  CALLED UP SHARE CAPITAL

 

Allotted, issued and fully paid:

 

Number:

Class:

Nominal value:

2020 £'000

2019 £'000

42,052,895

Ordinary

£0.005

210

170

 

On 13 December 2020 17,000,000 Ordinary shares of £0.01 were sub-divided into 34,000,000 Ordinary Shares of £0.005

 

On 29 December 2020 8,052,895 Ordinary £0.005 shares were allotted for cash. 

 

17.  RESERVES

 

Group

 

Retained earnings

Share premium

Group reorganisation reserve

Totals

 

£'000

£'000

£'000

£'000

At 1 January 2020

(101)

16,830

188

16,917

Profit for the year

1,902

-

-

1,902

Dividends

(400)

-

-

(400)

Cash share issue

-

2,672

-

2,672

At 31 December 2020

1,401

19,502

188

21,091

 

Company

 

Retained earnings

Share premium

Totals

 

£'000

£'000

£'000

At 1 January 2020

-

16,830

16,830

Profit for the year

1,610

 

1,610

Dividends

(400)

 

(400)

Cash share issue

-

2,672

2,672

At 31 December 2020

1,210

19,502

20,712

 

18.  ULTIMATE PARENT COMPANY

 

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

 

19.  RELATED PARTY DISCLOSURES

 

All figures quoted in £'000s 

 

Vector Business Finance Ltd - wholly owned subsidiary

- Monies paid from subsidiary £220 (2019; £100)

- Funds paid to subsidiary £530 (2019; £nil)

- Transfer of assets to subsidiary £1,634 (2019; £nil)

- Transfer of assets to subsidiary £1,634 (2019; £nil)

- Dividends voted from subsidiary £1,450 (2019; £650)

- Balance owed to the company at year end £3,944 (2019; £550)

 

Vector Asset Finance Ltd - wholly owned subsidiary

- Monies paid from subsidiary £1,575 (2019; £50)

- Funds paid to subsidiary £2,000 (2019; £nil)

- Transfer of assets from subsidiary £123 (2019; £nil)

- Dividends voted from subsidiary £650 (2019; £300)

- Balance owed to the company at year end £1,202 (2019; £250)

 

Vector Holdings Ltd - ultimate parent company

- The Group owed £3,000 to the parent company (2019; £527)

- Interest is payable at a rate of 5% per annum, there is no requirement to make capital repayments.

- Dividends totalling £400 were paid to the parent company (2019; £699)

-Vector Holdings Ltd has provided a guarantee to Aldemore 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 £194 (2019: £50).

 

Agam Jain - director

The director has provided a personal guarantee to Shawbrook Bank, with a maximum aggregate liability of £100 (2019: £100) due from Vector Business Finance Limited to Shawbrook Bank.

 

Ross Andrews - director

During the year the Group paid commission of £31 to Guild Financial Services Ltd, a company controlled by Ross Andrews (2019: £17 was paid in fees for professional services rendered).

 

Jonathan Pugsley - director

During the year, Allazo Ltd, a company controlled by Jonathan Pugsley, charged accountancy fees of £28 (2019: £5) to the Group.

 

20.  ULTIMATE CONTROLLING PARTY

 

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

 

 

 

 

 

 

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