TIDMVCAP
RNS Number : 3359L
Vector Capital PLC
05 September 2023
5 September 2023
Vector Capital plc
("Vector Capital", "Company" or "Group")
Half Year Results for the period ended 30 June 2023
Vector Capital Plc (AIM: VCAP), a commercial lending group that
offers secured loans primarily to businesses located in England and
Wales, is pleased to announce its interim results for the six
months ended 30 June 2023.
Highlights
-- Revenue for the period GBP2.9m (H1 2022: GBP3.0m) reflecting
a prudent approach to new lending.
-- Profit before tax GBP1.3m (H1 2022: GBP1.6m) reflecting
an increase in the doubtful debt reserve of GBP167,000
and an inflationary effect on overheads.
-- Loan book at 30 June 2023 GBP48.8m (December 2022:
GBP53.2m), as a result of net redemptions during the
period.
-- Interim dividend of 1.00p per share (2022: 1.00p),
recognising a resilient performance in challenging
market conditions.
Operational Highlights
-- Increase in wholesale banking facilities from GBP40m
-- to GBP45m during the period.
Extended and more flexible facilities to allow greater
capacity for loans secured on second charges.
-- Continued investment in the technology platform to improve
operational resilience and efficiency.
-- Further engagement in staff training and development.
-- Best practice ESG policies in place to support responsible
lending and encourage sustainability across the business.
Agam Jain, CEO of Vector Capital, commented: "We are very
pleased to report a robust set of interim results. The trading
climate for the first six months of this year has been set by the
backdrop of historic base rate rises from 0.10% in March 2020 to 5%
in June 2023, and now 5.25 %. For those borrowers experiencing
difficulty, our approach is to be flexible and supportive where we
believe that the circumstances justify this methodology.
Our strategy this year has been to seek to maintain higher
liquidity, with a correspondingly lower loan book and reduced
wholesale borrowings. To the extent that we lend our own capital we
can now earn a much higher return than previously. We have a strong
capital base which provides the Board with a high level of
confidence that we can weather continued or increased economic
headwinds.
Our pipeline is healthy with a steady stream of enquiries from
our Broker network allowing us to pick and choose the deals that
suit us."
Enquiries
Vector Capital Plc
Robin Stevens (Chairman) c/o IFC Advisory
Agam Jain (CEO)
WH Ireland Limited 020 7220 1666
Hugh Morgan, Chris Hardie, Darshan Patel
IFC Advisory Limited 020 3934 6630
Graham Herring, Florence Chandler, Zach Cohen
Notes to Editors
Vector Capital Plc provides secured, business-to-business loans
to SMEs based principally in England and Wales. Loans are typically
secured by a first legal charge against real estate. The Group's
customers typically borrow for general working capital purposes,
bridging ahead of refinancing, land development and property
acquisition. The loans provided by the Group are typically for
renewable 12-month terms with fixed interest rates.
Chairman's Statement
I am pleased to present our 2023 Interim Results for the six
months ended 30 June 2023, which report consolidated pre-tax
profits of GBP1,274,000 (2022 GBP1,556,000), and to propose an
interim dividend of 1.00 pence per share payable on 29 September
2023 (2022 1.00 pence).
The results for the first half of the year should be seen in the
light of the combined effects of the well-publicised headwinds in
the UK economy, as borrowers struggle with continuingly rising
interest rates, inflationary pressure on input prices and falling
property prices; almost the perfect storm for any sector. Against
this challenging backdrop, the Group's results show considerable
resilience and reflect our strong capital base, our selective and
cautious lending policy, our proven loan management systems and the
experience of the executive management team. The reduction in the
Group's loan book to GBP48.8m from GBP53.2m during the period from
31 December 2022, was to be expected where the terms of trade of
many SME borrowers are being squeezed. While these conditions
prevail, our aim is to maximise the return to shareholders on our
capital base. Our overall aim remains to create a leading market
presence in the provision of secured loans to the SME sector, which
our strong capital position in these challenging conditions may
well accelerate as other lenders trading on the margins
struggle.
During the period we extended and deepened our wholesale banking
facilities such that we can now utilise up to GBP45 million (31
December 2022 GBP40 million) from these sources, of which GBP2.5
million can be applied to loans secured by second charges, thus
providing scope for additional and in some cases higher-margin
lending as opportunities arise and market conditions improve. We
are also selectively developing our co-lending relationships, and
the Company's parent company, Vector Holdings Limited has increased
its loan to the Company from GBP3 million to GBP4 million.
Despite the uncertainties in the immediate economic outlook in
the UK and the likely continuing relatively high interest rates
through to 2025, we remain determined to build on the Group's
strong business foundations, to maximise returns from our existing
capital base and to build the loan book utilising the debt
facilities described above.
We are increasingly aware of our environmental, social and
governance responsibilities to shareholders and other stakeholders
and we are following what we believe to be market best practice 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 Group's half year results are based on the continued hard
work of the executive team, to whom considerable thanks is due, the
quality of the underlying operational systems and the robustness of
the business model. Thanks, are also due to my fellow Board members
and our business partners.
We believe that our team has the skills and experience to adapt
to the challenges presented by the UK economic conditions and to
continue to build the business by capitalising on the opportunities
that are expected to arise through the rest of 2023 and beyond.
Robin Stevens
Chairman
4 September 2023
Chief Executive's Statement
Background
The trading climate for the first six months of this year has
been set by the backdrop of historic base rate rises from 0.10% in
March 2020 to 5% in June 2023, and now to 5,25%, the highest rate
since April 2008. For the mortgage sector, these are circumstances
not experienced by many lenders or borrowers. The tool used by the
Bank of England to control inflation has hit some of our borrowing
customers extremely hard. Our principal market consists of
borrowers that take loans to refurbish or develop land and
property.
Our borrowers have been faced with multiple issues of rising
building material costs and long lead times since 2022. This has
led to cost overruns and delays. On top of this, they are now faced
with substantial interest rate rises. This has a negative bearing
on project viability and the ability of some borrowers to
re-finance their developments.
Stressed Loans
For those borrowers experiencing difficulty, our approach is to
be flexible and supportive where we believe that the circumstances
justify this approach. We do this by agreeing to re-schedule
monthly payments and capital repayments. Where we are not satisfied
with the financial viability of a borrowers' loan, we work with the
borrowers to give time for them to sell or re-finance and, if
necessary, appoint an LPA Receiver to sell the property. Bearing in
mind the circumstances prevailing this year, the number of receiver
appointments has increased over previous years.
Our expectation is that we will recover our full capital in
almost all cases and also the fees and accrued interest in most
cases, albeit with consequent delays of 4-12 months. In accordance
with our normal policy, we have made provision for estimated
doubtful debts with the results for the period and the impact on
our results is within the margins we had stress tested. It should
be stressed that we have not written off any debts in the current
period under review but are taking a prudent view due to the
macro-economic environment. We have a strong capital base which
provides the Board with a high level of confidence that we can
weather continued or increased economic headwinds.
Excellent Interim Results
Against these adverse market conditions, I am very pleased to
report that Vector has delivered an excellent set of results and we
expect to continue to pay attractive dividends.
The unaudited profit before tax for the period was GBP1.3m on a
revenue of GBP2.9m (GBP1.6m and GBP3.0m, respectively, 30 June
2022).
At 30 June 2023 the loan book was GBP48.8m (31 December 2022,
GBP53.2m), and the consolidated net assets were GBP25.4m (31
December 2022, GBP25.1m).
We are fortunate to have a very strong capital base that allows
us the flexibility and security to capitalise on the market
opportunities that still exist in these challenging times.
We will propose an interim dividend of 1.00 pence per share
payable on 29 September 2023 (2022 1.0 pence.
Loan Book KPIs
HY 2023 % FY 2022 %
Residential 27,234,055 55.80% 30,351,346 57.02%
Commercial 11,681,461 23.93% 11,643,949 21.87%
-------------------- -------- --------------------- --------
Land & Development 5,050,619 10.35% 4,681,424 8.79%
-------------------- -------- --------------------- --------
Mixed 3,937,194 8.07% 4,707,648 8.84%
-------------------- -------- --------------------- --------
2nd charge 492,023 1.01% 1,545,273 2.90%
-------------------- -------- --------------------- --------
Other 415,000 0.85% 300,000 0.56%
-------------------- -------- --------------------- --------
48,810,352 100.00% 53,229,641 100.00%
-------- --------------------- --------
The loans we have issued to the various market segments that we
serve remain broadly similar.
The average rate achieved during the period was 10.18% p.a.
(June 2022, 11.69% p.a.)
The average loan size was GBP474,000 spread over 103 live loans.
(June 2022, GBP532,000)
Security held at 30 June 2023 was estimated at GBP84m giving an
average LTV of 58.10% (June 2022, 59.41%).
The loan balances are stated net of provisions of GBP367,000 at
30 June 2023 (December 2022, GBP200,000)
Operational review
Our strategy this year has been to seek to maintain higher
liquidity, with a correspondingly lower loan book and reduced
wholesale borrowings. To the extent that we lend our own capital we
can now earn a much higher return than previously.
Our pipeline is healthy with a steady stream of enquiries from
our Broker network allowing us to pick and choose the deals that
suit us.
Our wholesale banking rates have inevitably increased. However,
the rates are still viable for us to continue to drawdown against
the facilities. Our facilities are currently GBP45m and we do not
need to seek a further increase this year.
The existing operational team is extremely efficient and
provides a fast response time to brokers and borrowers alike. We
remain lean and have not needed to increase the head count in the
period.
Outlook
Vector is in a healthy financial position with a strong capital
base and we remain keen to return to a growth path when market
conditions allow. However, we still remain cautious and will wait
to see the impact on our market when the base rates stabilise.
There is strong demand for our loans, we have good support from our
lenders, and we remain excited about capitalising on the
opportunities ahead, albeit selectively.
Agam Jain
Chief Executive Officer
4 September 2023
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2023
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Revenue 3 2,851 2,980 5,928
Cost of sales (156) (289) (429)
-------------- -------------- -------------
Gross profit 2,695 2,691 5,499
Administrative expenses (532) (307) (911)
Operating profit 2,163 2,384 4,588
Finance income - - 3
Finance costs (889) (828) (1,782)
-------------- -------------- -------------
Profit on ordinary activities
before taxation 1,274 1,556 2,809
-------------- -------------- -------------
Income tax expense 4 (305) (296) (534)
-------------- -------------- -------------
Profit after taxation 969 1,260 2,275
Other comprehensive income - - -
-------------- -------------- -------------
Total comprehensive income attributable
to the shareholders of the Company 969 1,260 2,275
============== ============== =============
Pro - forma basic and diluted
earnings per share
attributable to the owners
of the Company (pence) 9 2.14 2.79 5.03
============== ============== =============
Condensed Consolidated Statements of Financial Position
For the six months ended 30 June 2023
Notes 30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Non-Current assets
Property, plant and equipment 5 1 2 1
1 2 1
-------------- -------------- ------------
Current assets
Trade and other receivables 6 49,422 52,223 53,997
Cash and bank balances 479 737 688
49,901 52,960 54,685
-------------- -------------- ------------
Total Assets 49,902 52,962 54,686
============== ============== ============
Current liabilities
Trade and other payables 7 20,230 28,140 25,800
Income tax payable 307 296 240
20,537 28,436 26,040
-------------- -------------- ------------
Non-Current liabilities
Trade and other payables 7 4,000 - 3,558
Total Liabilities 24,537 28,436 29,598
-------------- -------------- ------------
Equity
Share capital 8 226 226 226
Share premium 20,876 20,876 20,876
Group reorganisation reserve 188 188 188
Retained earnings 4,075 3,236 3,798
25,365 24,526 25,088
-------------- -------------- ------------
Total Equity and Liabilities 49,902 52,962 54,686
============== ============== ============
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2023
Share Share Group reorganisation Retained Total equity
capital premium reserve profits
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2022 226 20,876 188 2,659 23,949
Profit for the six months
ended 30 June 2022 - - - 1,260 1,260
Dividends paid - - - (683) (683)
Balance at 30 June 2022 226 20,876 188 3,236 24,526
Profit for the six months
ended 31 December 2022 - - - 1,015 1,015
Dividends paid - - - (453) (453)
Balance at 31 December
2022 226 20,876 188 3,798 25,088
Profit for the six months
ended 30 June 2023 - - - 969 969
Dividends paid - - - (692) (692)
Balance at 30 June 2023 226 20,876 188 4,075 25,365
-------- -------- -------------------- -------- ------------
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2023
Six Months Six Months Year ended
ended 30 ended 30 31 December
June June
2023 2022 2022
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Cash flow from operating
activities
Profit for the period before
taxation 1,274 1,556 2,809
Adjustment for :
Interest expense 889 828 1,782
Depreciation - 1 1
Finance income - - (3)
Tax paid (238) (289) (581)
------------ ------------ -------------
Operating cash flows before
movements in working capital 1,925 2,096 4,008
(Increase)/decrease in trade
and other receivables 4,575 (5,658) (7,432)
Increase/(decrease) in trade
and other payables (5,131) 4,283 5,499
------------ ------------ -------------
Cash generated from operating
activities 1,369 721 2,075
Interest paid (889) (828) (1,782)
Net cash generated from/(absorbed
in) operating activities 480 (107) 293
------------ ------------ -------------
Cash flows (for)/from investing
activities
Finance income - - 3
Net cash generated from investing
activities - - 3
------------ ------------ -------------
Cash flows ( for )/ from
financing activities
Amounts introduced by directors 3 - 1
Equity dividends paid (692) (683) (1,136)
Net cash (absorbed in)/generated
from financing activities (689) (683) 1,135
------------ ------------ -------------
Net (decrease) in cash &
cash equivalents (209) (790) (839)
Cash and equivalent at beginning
of period 688 1,527 1,527
Cash and equivalent at end
of period 479 737 688
============ ============ =============
Notes to the Interim Financial Statements
For the six months ended 30 June 2023
1 . Basis of Preparation
The interim consolidated financial statements of Vector Capital
Plc (the "Company") are unaudited condensed financial statements
for the six months ended 30 June 2023. These include unaudited
comparatives for the six months ended 30 June 2022 together with
audited comparatives for the year ended 31 December 2022. The
financial information for the six months ended 30 June 2022 does
not constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006. A copy of the audited
financial statements for the year ended 31 December 2022 is
available on the Company's website. The auditor's opinion on those
financial statements was unqualified and did not draw attention to
any matters by way of an emphasis of matter paragraph. These
interim condensed financial statements have been prepared on the
basis of the accounting policies expected to apply for the
financial year to 31 December 2023 based on the recognition and
measurement principles of United Kingdom adopted International
Financial Reporting Standards (IFRS), in accordance with the
provisions of the Companies Act 2006, applicable to companies
reporting under IFRS.
The financial statements have been prepared under the historical
cost convention. The Group's presentation and functional currency
is Sterling (GBP). The interim financial statements do not include
all of the information required for full annual financial
statements and do not comply with all the disclosures in IAS 34
'Interim Financial Reporting' and should be read in conjunction
with the Group's annual financial statements to 31 December 2022.
Accordingly, whilst the interim statements have been prepared in
accordance with IFRS, they cannot be construed as being in full
compliance with IFRS. The preparation of financial statements in
conformity with United Kingdom adopted International Financial
Reporting Standards (IFRS) requires the use of certain critical
accounting estimates. It also requires management to exercise its
judgement in the process of applying the Group's accounting
policies. The accounting policies adopted are consistent with those
followed in the preparation of the Group's annual financial
statements for the year ended 31 December 2022.
2. General information
The condensed consolidated financial information comprises the
financial information of the Company, Vector Asset Finance Ltd and
Vector Business Finance Ltd (the Group ).
The principal activities of the entities in the Group are as
follows : -
Name of company Country of incorporation Principal activities
------------------------- ------------------------- ---------------------
Vector Capital Plc England and Wales Holding company
Vector Business Finance England and Wales Commercial lending
Ltd
Vector Asset Finance Ltd England and Wales Commercial lending
There have been no significant changes in these activities
during the relevant financial periods .
3. Segmental reporting
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the chief operating decision maker (which
takes the form of the Board of Directors) as defined in IFRS 8, in
order to allocate resources to the segment and to assess its
performance.
Based on management information there is one operating segment.
Revenues are reviewed based on the services provided.
No customer has accounted for more than 10 % of total revenue
during the periods presented .
4. Income Tax expense
The tax charge on profits assessable has been calculated at the
rates of tax prevailing, based on existing legislation,
interpretation and practices in respect thereof.
5. Property, plant and equipment
Fixture, fittings and equipment
---------------------------------------------
30 Jun 30 Jun 31 Dec
23 22 22
(Unaudited (Unaudited)GBP'000 (Audited`)
GBP'000 GBP'000
Cost
Brought forward 5 5 5
Additions - - -
Disposals - - -
Carried forward 5 5 5
----------- ------------------- -----------
Accumulated depreciation
Brought forward 4 2 2
Depreciation - 1 2
----------- ------------------- -----------
Carried forward 4 3 4
----------- ------------------- -----------
NBV c/fwd 1 2 1
----------- ------------------- -----------
NBV b / fwd 1 3 3
----------- ------------------- -----------
6. Trade and other receivables
30 Jun 23 30 Jun 22 31 Dec 22
(Unaudited) (Unaudited) (Audited)
Current GBP'000 GBP'000 GBP'000
Trade receivables 48,810 51,604 51,709
Prepayments and accrued income 612 619 768
Total 49,422 52,223 52,477
-------------- -------------- ------------
Non-Current
Trade receivables - - 1,520
49,422 52,223 53,997
-------------- -------------- ------------
At 30 June 2023 48% of trade receivables were held by third
party secure funding via the block discounting facility (30 Jun 22:
54%, 31 Dec 22: 72%).
Trade receivables due after more than 1 year is not considered
material and therefore not reflected separately on the Balance
Sheet.
7 . Trade and other payables
30 Jun 23 30 Jun 22 31 Dec 22
(Unaudited) (Unaudited) (Audited)
Current GBP'000 GBP'000 GBP'000
Trade payable 38 31 11
Amounts owed to parent company - 3,000 -
Other payables 20,082 25,070 25,556
Accruals and deferred income 110 39 233
Total 20,230 28,140 25,800
-------------- -------------- ------------
Non-Current
Amounts owed to parent company 4,000 - 3,000
Other creditors - - 558
-------------- -------------- ------------
4,000 - 3,558
-------------- -------------- ------------
Other payables includes loan finance of GBP20,069k (30 Jun 22:
GBP24,882k, 31 Dec 22: GBP26,100k) which is secured against
associated loans assigned by way of block discounting.
8. Called up share capital
30 Jun 23 30 Jun 22 31 Dec 22
Authorised Nominal value (Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
45,244,385 Ordinary GBP0.005 226 226 226
9. Basic and diluted earnings per share
The calculation of earnings per share is based on the following
earnings and number of shares .
30 Jun 30 Jun 31 Dec
23 22 22
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Total comprehensive income for
the period, used in the calculation
of total basic and diluted profit
per share 969 1,260 2,275
Weighted average number of ordinary
shares for the purpose of basic
and diluted profit per share 45,244,385 45,244,385 45,244,385
Earnings per share
Basic and diluted earnings per
share (pence) 2.14 2.79 5.03
10 . Significant related party transactions
The Group owed GBP4 million to its parent company, Vector
Holdings Ltd (30 Jun 22 GBP3 million, 31 Dec 22: GBP3 million).
During the period the Company paid interest totalling GBP97k to
Vector Holdings Ltd in relation to the balance owed as per the loan
agreement (30 Jun 22: GBP75k, 31 Dec 22: GBP150k).
During the period the Company paid GBP520k in dividends to
Vector Holdings Ltd (30 Jun 22: GBP513k, 31 Dec 22: GBP853k).
11 . Subsequent events
There were no significant subsequent events which warranted
disclosure.
12 . Half Year Report
A copy of this interim report, as well as the annual statutory
accounts to 31 December 2022 are available on the Company's website
at www.vectorcapital.co.uk/investors/corporate-documents
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