RNS Number : 1246J
Vector Capital PLC
25 April 2022
 

This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

 

25 April 2022

 

Vector Capital plc

 

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

 

Full year results for the year ended 31 December 2021

 

"Continued Strong Growth with Opportunities 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 2021.

Highlights

·   

Loan book growth of 27.2% to £46.3m (FY20: £36.4m)

·   

Revenue growth of 22.0% to £5.3m (FY20: £4.3m)

·   

PBT growth up 20.4% to £2.8m (FY20: £2.3m)

·   

EPS of 5.24p (FY20: 5.58p)

·   

Proposed final dividend for the year of 1.51p per share (FY20: 1.43p)


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, Including impressive growth of 27.2% in our loan book to £46.3m

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

Subject to the approval of shareholders at the Company's annual general meeting ("AGM"), the Directors are proposing a final dividend of 1.51p per share (2020: 1.43p), reflecting the Boards aim to reward investors with a progressive dividend policy. The dividend timetable will be announced at the time of posting of the AGM notice.

 

For further information please contact:

 

Vector Capital plc                                                                                                                             

Robin Stevens (Chairman)                                                                                                            020 8191 7615

Agam Jain (CEO)

 

WH Ireland Limited                                                                                                                       020 7220 1666

Chris Hardie, Jessica Cave, Megan Liddell

 

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.

 

For more information on Vector visit: www.vectorcapital.co.uk

 

 

 

CHAIRMAN'S STATEMENT

 

 I'm delighted to present our 2021 Annual Report and Accounts, which reflect the results of the continued growth in Vector's loan book, the extension of our network of business introducers and the creation of a strong and growing presence in our chosen market, being the provision of secured loans to the SME sector.  Vector's customers are mainly small property developers operating in England who buy properties to develop or refurbish and then re-sell.

 

Having achieved admission to the AIM market in December 2020, the Company returned to the market in June 2021 to raise a further £1.5m from shareholders which was applied to grow the loan book, together with retained profits, increased wholesale bank facilities of £35m and finance received from co-lending arrangements. This deployment of debt and equity facilities is reflected in the Group's outstanding results for the year, achieving revenue growth of 22.0% to £5.3m, an increase in profits before tax of 20.4% to £2.8m, and a 27.2% rise in the value of the loan book from £36.4m to £46.3m. Such growth is 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.

 

We are keen to build on these strong foundations and to continue to grow the loan book utilising our own resources and the external facilities provided by our wholesale lenders. However, we are also fully aware of the attendant risk and uncertainty arising from the economic and financial implications in the post COVID-19 pandemic era and the outlook for the UK economy where inflation and higher interest rates are going to be with us for the foreseeable future. We continue to factor in these risks and uncertainties as we progress our strategies in the coming months and beyond, building on our team's considerable experience, and we will report on progress on a timely and open basis.

 

As a Board we are also mindful and accepting of our responsibilities 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 will be followed in all we do as a public company. We also recognise our wider environmental, social and governance responsibilities to shareholders and other stakeholders and we have developed, from what we believe to be market best practice, underlying principles and developing procedures to address these important issues. 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 period were only possible due to the efforts of Vector's employees and my fellow Board members and considerable thanks are due to them. I am delighted that post the year end we were able to welcome to the Board Gordon Robinson, a banking professional steeped in relevant operational and business development experience in the lending sector, as our third non-executive Director.

 

We are also indebted to our business partners, our past and current advisers and of course our shareholders, with whom we look forward to a continuing and rewarding relationship. This relationship is in part reflected in our proposed final dividend for the year of 1.51 pence per share, an increase of 0.08 pence (5.59%) over 2020, consistent with our stated intention to adopt a progressive dividend policy.

 

I am confident that we have the skills, strategy and experience to navigate the economic challenges that will surely arise and to capitalise on the market opportunities that exist, and thereby continue our growth through 2022.

 

Robin Stevens

Chairman

22 April 2022

 

 

 

CEO REVIEW

 

A very strong performance and continued growth

I am pleased to report an extremely healthy set of results achieved in a very competitive market. We are proud to be one of the select group of AIM quoted companies paying dividends and showing consistent capital growth.

 

Our Loan book was £46.3m at 31 December 2021 (2020: £36.4m). This represents an impressive 27.2% year on year growth. The average monthly loan book for the 12 months period was £40.8m (2020: £ 34.8m).

 

The average interest rate charged over the year increased to 11.84% p.a. (2020: 11.53%).

 

Pre-tax profit for the year was £2.8m, representing a 20.4% increase over the previous year (2020: £2.3m). 

 

Diverse market spread

Our loan book is primarily secured by 1st charges over a diverse spread of property sectors.

Residential (internal refurbishment, investment, buy to let)

    £24,580,323

53.1%

Commercial (retail, hotel, golf, etc.)

  £12,773,180

27.6%

Land & Development

   £5,429,273

11.7%

Mixed (Residential & Commercial)

   £2,997,977

6.5%

2nd charge

     £532,023

1.1%

 

  £46,312,776

100.0%

 

Note: Market segmentation as at 31 December2021

 

We are also issuing selected loans against 2nd charge residential where the equity in the security is substantial.

 

We have seen growth potential in all segments but we retain a weighting towards residential as that is the preference of our wholesale banking lines.

 

Funding

We returned to the market in June 2021 with a Placing of 3,191,490 new shares at 47 pence each to raise £1.5m gross.

 

We also negotiated significant increases during the year in our 2 banking lines to £35m in aggregate (2020: £25m).  We continue to maintain constructive dialogue with other debt funders.

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

 Outside our property backed wholesale funding our gearing remains negligible and so we have scope to grow using suitable new debt facilities.  We have designed a co-funding instrument and tested it in the market. The initial response has been good, and we will make further iterative refinements going forward.

 

Information Technology

We continue to initiate further improvements to the bespoke software platform which we licence, by continuously reviewing and re-mapping our processes and we are now in the process of implementing the new enhanced version. 

 

Headcount

We did not need to increase headcount during the year but we invested significant effort in staff training which has increased the expertise and productivity of each team member. As a result, we have the capacity to handle increased activity and handle more complex transactions with the same team.

 

Marketing

During the year we have expanded our connection with new business introducers and brokers and at a corporate level we started our YouTube channel. We also maintained a market presence at industry conferences and shows, notably the ASTL (Association of Short-Term Lenders) AGM and the Asian Jewish Business Network event.

 

Outlook

The market has been buoyant with many lenders on a growth path.  In 2021 we saw the value of UK bridging loan books top £5bn (source - ASTL) for the first time as short-term property lending continued to grow. More brokers are recognising the uses of bridging loans for their clients and, increasingly, bridging can be seen as an integral cog in the workings of the wider property market - saving transactions from falling through, enabling investors to buy, convert and refurbish otherwise un-mortgageable property and providing a fast and flexible means of raising capital.

 

No doubt a correction is due at some stage so we will always temper our growth plans with caution and sound underwriting.

 

We are confident of delivering further significant growth in 2022.

 

Agam Jain

Chief Executive Officer

22 April 2022

 

 

 

Consolidated Income Statement

for the Year Ended 31 December 2021

 

  

2021

2020

 

£'000

£'000

CONTINUING OPERATIONS

 

 

Revenue

5,275

4,325

Cost of sales

(502)

(321)

GROSS PROFIT

4,773

4,004

Other income

-

29

Administrative expenses

(703)

(668)

OPERATING PROFIT

4,070

3,365

Finance costs

(1,245)

(1,018)

Finance income

2

-

PROFIT BEFORE INCOME TAX

2,827

2,347

Income tax

(538)

(445)

PROFIT FOR THE YEAR

2,289

1,902

Profit attributable to:

 

 

Shareholders

2,289

1,902

Earnings per share expressed

in pence per share:

 

 

Basic

5.24

5.58

Diluted

5.24

5.58

 

 

 

Consolidated Income Statement and Other Comprehensive Income

for the Year Ended 31 December 2021

 

  

 

2021

2020

 

Notes

£'000

£'000

PROFIT FOR THE YEAR

 

2,289

1,902

OTHER COMPREHENSIVE INCOME

 

-

-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

 

2,289

1,902

Total comprehensive income attributable to:

 

 

 

Owners of the parent

 

2,289

1,902

  

The notes form part of these financial statements

 

 

Consolidated Statement of Financial Position

31 December 2021

 

 

2021

2020

 

£'000

£'000

ASSETS

 

 

NON-CURRENT ASSETS

 

 

Property, plant and equipment

3

4

Trade and other receivables

-

-

TOTAL NON-CURRENT ASSETS

3

4

CURRENT ASSETS

 

 

Trade and other receivables

46,565

36.963

Cash and cash equivalents

1,527

2.569

TOTAL CURRENT ASSETS

48,092

39.532

TOTAL ASSETS

48,095

39,536

 

 

 

SHAREHOLDERS' EQUITY

 

 

Called up share capital

226

210

Share premium

20,876

19,502

Group reorganisation reserve

188

188

Retained earnings

2,659

1,401

TOTAL EQUITY

23,949

21,301

 

 

 

Trade and other payables

23,858

18,030

Tax payable

288

205

TOTAL LIABILITIES

24,146

18,235

TOTAL EQUITY AND LIABILITIES

48,095

39,536

 

The financial statements were approved by the Board of Directors on 22 April 2022. And were signed on its behalf by:

 

 

….......................................................

J Pugsley - Director

 

The notes form part of these financial statements

 

 

Company Statement of Financial Position

31 December 2021

 

  

2021

2020

 

£'000

£'000

ASSETS

 

 

NON-CURRENT ASSETS

 

 

Property, plant and equipment

3

4

Investments

17,000

17,000

TOTAL NON-CURRENT ASSETS

17,003

17,004

CURRENT ASSETS

 

 

Trade and other receivables

8,467

5,174

Cash and cash equivalents

121

1,899

TOTAL CURRENT ASSETS

8,588

7,073

TOTAL ASSETS

25,591

24,077

 

 

 

SHAREHOLDERS' EQUITY

 

 

Called up share capital

226

210

Share premium

20,876

19,502

Retained earnings

1,454

1,210

TOTAL EQUITY

22,556

20,922

 

 

 

Trade and other payables

3,035

3,155

TOTAL LIABILITIES

3,035

3,155

TOTAL EQUITY AND LIABILITIES

25,591

20,922

 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 £1,275,687 (2020 - £1,609,732).

 The financial statements were approved by the Board of Directors on 22 April 2022 and were signed on its behalf by:

  

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

J Pugsley - Director

 

The notes form part of these financial statements

 

 

 

Consolidated Statement of Changes in Equity

for the Year Ended 31 December 2021

 

 

 

Called up share capital

Retained earnings

Share premium

Group reorganisation reserve

Total equity

 

£'000

£'000

£'000

£'000

£'000

Balance at 1 January 2020

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

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

20,8776

188

23,949

  

 

 

 

Company Statement of Changes in Equity

for the Year Ended 31 December 2021

 

  

Called up share capital

Retained earnings

Share premium

Total equity

 

£'000

£'000

£'000

£'000

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

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

 

 

 

 

Consolidated Statement of Cash Flows

for the Year Ended 31 December 2021

 

 

 

2021

2020

 

Notes

£'000

£'000

Cash flows from operating activities

 

 

 

Cash generated from operations

1

247

(913)

Interest paid

 

(1,195)

(1,018)

Tax paid

 

(455)

(614)

Net cash from operating activities

 

(1,403)

(2,545)

Cash flows from investing activities

 

 

 

Purchase of tangible fixed assets

 

-

(5)

Interest received

 

2

-

Net cash from investing activities

 

2

(5)

Cash flows from financing activities

 

 

 

Intercompany loans

 

-

2,473

Amount withdrawn by directors

 

-

(3)

Issue of new shares

 

1,390

2,712

Equity dividends paid

 

(1,031)

(400)

Net cash from financing activities

 

359

4,782

Increase in cash and cash equivalents

 

(1,042)

2,232

Cash and cash equivalents at beginning of year

2

2,569

337

Cash and cash equivalents at end of year

2

1,527

2,569

 

 

 

Company Statement of Cash Flows

for the Year Ended 31 December 2021

 

 

 

2021

2020

 

Notes

£'000

£'000

Cash flows from operating activities

 

 

 

Cash generated from operations

1

(727)

(383)

Interest paid

 

(150)

(5)

Tax paid

 

 

 

Net cash from operating activities

 

(877)

(388)

Cash flows from investing activities

 

 

 

Purchase of tangible fixed assets

 

-

(5)

Dividends received

 

2,050

2,100

Net cash from investing activities

 

2,050

2,095

Cash flows from financing activities

 

 

 

Intercompany loans

 

(3,310)

(2,184)

Amount withdrawn by directors

 

(2)

(2)

Issue of new shares

 

1,390

2,712

Equity dividends paid

 

(1,031)

(400)

Net cash from financing activities

 

(2,952)

126

Increase in cash and cash equivalents

 

(1,779)

1.833

Cash and cash equivalents at beginning of year

2

1,899

66

Cash and cash equivalents at end of year

2

121

1.899

 

 

Notes to the Statements of Cash Flows

for the Year Ended 31 December 2021

 

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

           

Group

 

2021

2020

 

£'000

£'000

Profit before income tax

2,827

2,347

Depreciation charges

1

1

Finance costs

1,195

1,018

Finance income

(2)

 

 

4,021

3,366

Increase in trade and other receivables

(9,602)

(2,713)

(Decrease)/increase in trade and other payables

5,828

(1,566)

Cash absorbed in operations

247

(913)

                                   

Company

 

2021

2020

 

£'000

£'000

Profit before income tax

1,275

1,610

Depreciation charges

1

1

Finance costs

150

5

Dividend income

(2,050)

(2,100)

 

(624)

(484)

Increase in trade and other receivables

17

(28)

Increase in trade and other payables

(120)

129

Cash absorbed in operations

(727)

(383)

 

 

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

 

31.12.21

1.1.21

31.12.21

1.1.21

 

£'000

£'000

£'000

£'000

Year ended 31 December 2020

 

 

 

 

Cash and cash equivalents

1,527

2,569

121

1,899

Year ended 31 December 2019

 

 

 

 

Cash and cash equivalents

2,569

337

1,899

66

 

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.

 

 

3.    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 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.

 

On 31 December 2020 IFRS as adopted by the European Union were brought into UK law and became UK-adopted international accounting standards with future changes being subject to endorsement by the UK Endorsement Board.

 

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 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)

 

 

 

 

 

IFRS9, IAS39 and IFRS7

Interest Rate Benchmark Reform Phase 2

Amendments regarding measurement and classification

1 January 2021

 

 

 

 

           

 

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 2021 reporting periods.

 

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

 

 

 

 

 

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 £35m 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

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 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 (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 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 (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 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 £46,262,775 (2020: £36,373,856) represented 54% (2020: 44%) 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.

 

4.    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.

 

5.    OTHER INCOME

               

 

2021

2020

 

£'000

£'000

Grant income:  Coronavirus job retention scheme

-

29

 

-

29

           

6.    EMPLOYEES AND DIRECTORS

 

2021

2020

 

£'000

£'000

Wages and salaries

320

294

Social security costs

31

28

Other pension costs

24

2

 

375

324

                                   

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

 

 

2021

2020

 

No.

No.

Administrative

8

7

Directors' remuneration                       

 

2021

2020

 

£'000

£'000

Salaries

169

194

Pension contributions

20

-

 

189

194

    

The highest paid director, Agam Jain, was paid remuneration of £120,000 (2020, £100,000) during the year.

 

7.    PROFIT BEFORE INCOME TAX

               

 

2021

2020

 

£'000

£'000

Broker's commission

502

321

Depreciation - owned assets

1

1

Auditors' remuneration

 

 

Audit of Group

35

31

Non-audit services

3

19

 

38

50

Bad debts

50

43

 

8.    INCOME TAX

 

Analysis of tax expense

 

2021

2020

 

£'000

£'000

Current tax:

 

 

Corporation tax

538

445

Total tax expense in consolidated statement of profit or loss

538

445

 

Factors affecting the tax expense

The tax assessed for the year is higher than (2020 - lower than) the standard rate of corporation tax in the UK. The difference is explained below:

 

2021

2020

 

£'000

£'000

Profit before income tax

2,827

2,347

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

537

446

Effects of:

 

 

Accelerated capital allowances  

 

 (1)

Rounding

1

 

Tax expense

538

445

 

 

9.    PROFIT OF THE 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 Company's profit for the financial year was £1,275,687 (2020 - £1,609,732).

 

 

10.  DIVIDENDS

               

 

2021

2020

 

£'000

£'000

Ordinary shares of £0.01 each

 

 

Final

601

-

Interim

430

400

 

430

400

 

The interim dividend for the year of 0.95 pence per share was paid on 24 September 2021

 

11.  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.

  

 

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

 

 

 

 

     

 

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

       

 

12.  PROPERTY, PLANT AND EQUIPMENT

 

 

Group

 

 

 

 

Fixtures and fittings

Computer equipment

Totals

 

£'000

£'000

£'000

COST

 

 

 

At 1 January 2021 and 31 December 2021

1

4

5

DEPRECIATION

 

 

 

At 1 January 2021

-

1

1

Charge for year

-

1

1

At 31 December 2021

-

2

2

NET BOOK VALUE

 

 

 

At 31 December 2021

1

2

3

At 31 December 2020

1

3

4

 

Company

 

 

 

 

Fixtures and fittings

Computer equipment

Totals

 

£'000

£'000

£'000

COST

 

 

 

At 1 January 2021 and 31 December 2021

1

4

5

DEPRECIATION

 

 

 

At 1 January 2021

-

1

1

Charge for year

-

1

1

At 31 December 2021

-

2

2

NET BOOK VALUE

 

 

 

At 31 December 2021

1

2

3

At 31 December 2020

1

3

4

 

 

13.  INVESTMENTS

 

Company

 

Shares in Group Undertakings

 

£'000

COST

 

At 1 January 2021 and 31 December 2021

17,000

NET BOOK VALUE

 

At 31 December 2021

17,000

At 31 December 2020

17,000

               

 

Shares in Group Undertakings comprises;

 


Name of entity

 

Country of incorporation

Ownership held
 

Principal activities

 

2021

2020

 

 

Vector Business Finance Ltd

 

 

England and Wales

 

100%

 

100%

Commercial lending


Vector Asset Finance Ltd

 


England and Wales


100%


100%

Commercial lending

 

 

14.  TRADE AND OTHER RECEIVABLES

 

 

Group

Company

 

2021

2020

2021

2020

 

 

£'000

£'000

£'000

£'000

 

Current:

 

 

 

 

 

Trade debtors

46,263

36,374

-

-

 

Amounts owed by Group undertakings

-

-

8,456

5,146

 

Prepayments and accrued income

302

589

11

28

 

 

46,585

36,963

8,467

5,174

 

 

Trade receivables are stated after provisions for impairment of £Nil (2020; £Nil).

 

68% of trade receivables were held by third party secure funding (2020, 73%).

 

Trade and other receivables are stated at amortised cost.

 

 

15.  CASH AND CASH EQUIVALENTS

 

 

Group

Company

 

2021

2020

2021

2020

 

£'000

£'000

£'000

£'000

Bank deposit account

1,527

2,569

121

1,899

               

 

16.  TRADE AND OTHER PAYABLES

 

 

Group

Company

 

2021

2020

2021

2020

 

£'000

£'000

£'000

£'000

Current:

 

 

 

 

Trade creditors

3

18

2

18

Amounts owed to Group undertakings

3,000

3,000

3,000

3,000

Social security and other taxes

11

9

11

9

Other creditors

20,335

14,814

-

-

Accruals and deferred income

509

189

22

128

 

23,858

18,030

3,035

3,155

 

The following secured debts are included within creditors:

 

Group

Company

 

£'000

£'000

Other creditors under 1 year

20,335

-

 

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.

 

17.  CALLED UP SHARE CAPITAL

 

Allotted, issued and fully paid:

               

Number:

Class:

Nominal value:

2021

 

2020

 

 

 

£'000

£'000

45,244,385 (2020: 42,052,895)

Ordinary

£0.005

226

210

               

On 28 June 2021 3,191,490 Ordinary £0.005 shares were allotted for cash. 

 

 

               

18.  RESERVES

 

                Group

 

Retained earnings

Share premium

Group reorganisation reserve

Totals

 

£'000

£'000

£'000

£'000

At 1 January 2021

1,401

19,502

188

21,091

Profit for the year

2,289

-

-

2,289

Dividends

(1,031)

-

-

(1,031)

Cash share issue

-

1,374

-

1,374

At 31 December 2021

2,659

20,876

188

23,723

           

Company

 

Share premium

Totals

 

£'000

£'000

At 1 January 2021

19,502

20,712

Profit for the year

-

1,275

Dividends

-

(1,031)

Cash share issue

1,374

1,374

At 31 December 2021

20,876

22,330

 

 

19.  ULTIMATE PARENT COMPANY

 

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

 

 

20.  RELATED PARTY DISCLOSURES

 

All figures quoted in £'000s         

 

Vector Business Finance Ltd - wholly owned subsidiary

-   

Monies paid from subsidiary £1,550 (2020; £220)

-   

Funds paid to subsidiary £1,550 (2020; £530)

-   

Transfer of assets to subsidiary £Nil (2020; £1,634)

-   

Dividends voted from subsidiary £1,550 (2020; £1,450)

-   

Balance owed to the Company at year end £5,494 (2020; £3,944)

 

Vector Asset Finance Ltd - wholly owned subsidiary

-   

Monies paid from subsidiary £240 (2020; £1,575)

-   

Funds paid to subsidiary £1,600 (2020; £2,000)

-   

Transfer of assets from subsidiary £Nil (2020; £123)

-   

Dividends voted from subsidiary £500 (2020; £650)

-   

Balance owed to the Company at year end £2,903 (2020; £1,202)

 

Vector Holdings Ltd - ultimate parent company

-   

The Group owed £3,000 to the parent company (2020; £3,000)

-   

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

-   

Dividends totalling £809 were paid to the parent company (2020; £400)

-   

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 £239 (2020: £194).

 

Jonathan Pugsley - Director

During the year, Allazo Ltd, a company controlled by Jonathan Pugsley, charged accountancy fees of £8 (2020: £28) to the Group.

 

 

21.  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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