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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| City Of London Group Plc | LSE:CIN | London | Ordinary Share | GB00BD9GS058 | ORD 2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 10.00 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Jan 2022 to Jan 2025
TIDMCIN
RNS Number : 6630K
City of London Group PLC
22 December 2022
TIDM: CIN
22 December 2022
City of London Group plc
("COLG", "the Company" or "the Holding Company" and, together with its subsidiaries, "the Group")
Results for the six-month period ended 30 September 2022
Th e Compa ny a nnou n ces its un a udited interim results f or t he six-month period ended 30 September 2 022, along with an update on business developments.
Financial results
-- Loss before tax GBP7.2m (2021/22 first half loss before tax GBP5.8m)
-- Loan book at 30 September 2022 GBP112.1m (31 March 2022 GBP101.1m; 30 September 2021 GBP24.1m)
-- Deposits at 30 September 2022 GBP127.9m (31 March 2022 GBP95.0m; 30 September 2021 GBP8.7m)
Business developments
-- Reorganisation of the Group structure and investment of GBP25m in new shares of Recognise Bank
As announced separately today, a circular will be sent to the Company's shareholders explaining that the Directors have concluded that it is in the best interests of the Company and shareholders as a whole to streamline the Group's corporate structure by seeking shareholders' approval for cancellation of the admission of the Company's shares to trading on AIM and implementing a members' voluntary liquidation of the Company. This has no material impact on Recognise Bank Limited whatsoever. The Circular also includes details of a conditional agreement between Parasol V27 Limited ("PV27"), the Company's largest shareholder, and Recognise Bank Limited under which GBP25m, in aggregate, would be subscribed by PV27 for new shares in Recognise Bank Limited to meet capital requirements, for general working capital purposes, and to support growth in the loan book and the development of new products and innovation.
-- Appointment of Jean Murphy as Recognise Bank CEO in August 2022
Jean Murphy was announced as the new Chief Executive Officer of Recognise Bank ("Bank") in August 2022. Bringing over 25 years of financial services sector and capital markets experience, Jean will lead Recognise Bank as it develops its digital capability, grows its balance sheet and launches new products and services.
-- Launch of Business Savings
The Bank launched its first Business Savings Account, an Easy Access product, in April 2022. This was quickly followed by a One Year Fixed Rate Business Savings Account and a 95 Day Notice Business Savings Account. By early December 2022, thousands of SMEs had opened accounts with business savings attracting over GBP110m in deposits, with total savings deposits fast approaching GBP200m.
-- Bank continues vital lending to SMEs
Recognise Bank continues to support British businesses by providing over GBP112m in lending to SMEs across a wide range of sectors, including industrial, retail and residential rental property. Having achieved its target of lending GBP100m to British business by 31 March 2022, from a pipeline of over GBP1bn in applications, just six months after receiving its full banking licence, the pace of lending was moderated deliberately as the Bank focused resources on building its technology capabilities and launching new savings products. This also enabled the Bank to review its lending product mix and risk appetite against the backdrop of a challenging economy, as it prepares for the next phase of the Bank's development and its return to full lending capacity.
Philip Jenks, Chair of City of London Group plc, commented:
"After a milestone year that saw Recognise Bank achieve fully licensed status, the last six months have continued to be busy.
"We continue to build our strategy for the next phase of Recognise Bank's development, focusing in particular on the digital journey to help improve our processes and delivery of product to customers. The SME sector is still woefully under-supported by the established banks, so the opportunity for fresh ideas and innovation is huge.
"We look forward to the proposals which have been separately announced today being implemented, including, the investment by PV27 of GBP25m in new shares in Recognise Bank. This latest investment of GBP25m will be used to fund working capital, the further development of innovations and improvements to existing services, at the same time supporting the growth of our commercial lending book. This new investment demonstrates the confidence of our major shareholder in the Bank's strategy and potential, and our vision for business banking in the UK.
"While we do not underestimate the ongoing challenges that SMEs and their customers face from the current economic conditions, the Board believes Recognise Bank is in a good position to capitalise on the opportunities we foresee. The loan book is strong because of prudent credit management, we are well capitalised, and with our innovation team we are already looking to develop the financial solutions SMEs will need in the future."
For further information:
City of London Group plc +44 (0)20 3988 6504 Georgina Behrens, Group Counsel, Recognise Bank Georgina.Behrens@recognisebank.co.uk Shore Capital (Nominated Adviser and Broker) Tom Griffiths Guy Wiehahn Iain Sexton +44 (0)20 7408 4090 For media enquiries, please contact: Paul Beadle, Head of Communications, Recognise Bank +44 (0)7801 105001 ( Paul.Beadle@recognisebank.co.uk )
LEI: 2138003UW63TMQ5ZFD85
Notes to Editors:
City of London Group plc is quoted on AIM (TIDM: CIN) and is the parent company of Recognise Bank which focuses on serving the UK SME market. Recognise Bank is continuing its development as a digital bank through its Innovation Team which will develop new and improved products and services to meet the needs of growing UK businesses.
www.cityoflondongroup.com
Chair's statement
I am pleased to present this statement which covers the period from 1 April 2022. After a milestone year that saw Recognise Bank achieve fully licensed status, the last six months have continued to be busy, laying the foundations for the Bank's future growth and success.
Small businesses continue to be marginalised and ignored by the mainstream banks and their reluctance to support SME borrowers is only likely to increase in the current economic climate. It is here that Recognise Bank's digitally enabled relationship banking model will be able to support customers with lending solutions that many other larger competitors will not be able to provide because of their tick box approach to business borrowers, rather than our combination of expert relationships and world-class technology.
We have provided more than GBP112m of commercial lending so far, from a pipeline of over GBP1bn in applications, which shows the demand among smaller businesses. We have supported a wide range of SMEs with varied borrowing needs, from an owner-occupier business looking to secure its own premises, through to building a presence in the buy-to-let residential property sector. Crucially, thanks to our robust governance, the experience of our management team and expert knowledge of the marketplace, Recognise Bank has built a good quality loan book that continues to perform well during the current challenging economic and financial climate.
As we head into 2023, we anticipate there will still be strong demand from UK SMEs allowing Recognise Bank to help experienced business owners as they invest and expand. It is all part of our mission to provide businesses with the level of support and delivery they rightly expect in a digitally led world. By combining the best of technology with genuine relationship banking, Recognise Bank has an opportunity to deliver new and innovative financial services, while addressing the needs of SMEs that are not met elsewhere.
A great example of our ambition in SME banking is Business Savings Accounts, which only launched in April 2022, but have already attracted over GBP117m in deposits from thousands of companies looking for a simpler way to manage their savings and, crucially, get a better return on their savings. Business customers are too often taken for granted by banks: we are determined to change this.
The engine room for these new and improved solutions will be our innovation team, which is building on the Bank's existing cloud-based technology capability to deliver seamless integrated experiences for customers, broker partners and colleagues.
I look forward to the proposals which have been separately announced today being implemented, including, the investment by PV27 of GBP25m in new shares in Recognise Bank. This latest investment will be used to fund working capital, the further development of these innovations and improvements to existing services, at the same time supporting the growth of our commercial lending book. This new investment takes the total raised to support the Bank to over GBP96m, and demonstrates the confidence of our major shareholder in the Bank's strategy and potential and our vision for business banking in the UK.
The New Year will bring a simplification of the Bank's structure, with Recognise Bank becoming a standalone private company, enabling a single focus on the Bank and its mission. It is another milestone for Recognise Bank, the start of the next chapter in a story of delivering on each target we have set, from full authorisation through to stretching lending and savings targets, each one helping to build a successful, innovative and digital SME bank.
Outlook
While we do not underestimate the ongoing challenges that SMEs and their customers face from the current economic conditions, the Board believes Recognise Bank is in a good position to weather the storm clouds and capitalise on the opportunities we foresee. The loan book is strong because of prudent credit management, we are well capitalised, and with our innovation team we are already looking to develop the financial solutions SMEs will need in the future.
Philip Jenks
Chair
Recognise Bank CEO's statement
Business review
I am delighted to be writing my first statement after becoming CEO of Recognise Bank in August 2022. Having worked in the financial services sector for many years, I saw this as an exciting opportunity to lead a new UK SME bank, building on its achievements to date and creating the foundations for the next chapter in its evolution.
We continue to implement and refine our strategy, with a strong focus on the digital journey to help improve our processes and delivery of products and services to customers. The SME sector is still woefully under-supported by the established banks, so the opportunity for fresh ideas and innovation is huge. At the same time, we are well placed to provide lending support to proven business owners and entrepreneurs who see opportunities for growth and investment and are well placed to navigate the current economic headwinds. Importantly, the Bank's costs remain tightly controlled and building sustainable revenue and reaching profitable trading remains our absolute priority.
For all banks, capital is vital to underpin growth and particularly so for new banks given the inevitable time it takes to reach profitability and capital creation. I am delighted, therefore, that we can also confirm new investment of GBP25m into the Bank from the Company's largest shareholder, reinforcing its support for Recognise Bank and belief in our strategy to create a digital bank for SMEs. This brings total investment in Recognise Bank to over GBP96m so far.
To see the potential in the SME sector, you only have to look at Recognise Bank's achievements over the six months to 30 September 2022. April 2022 saw the launch of our first Business Savings Accounts, which were designed to meet the needs of small businesses: easy to open, straightforward to manage online, and offering competitive rates where so many of our competitors fail to do so. Recognise Bank has introduced Easy Access, One Year Fixed and 95 Day Notice Accounts that give businesses a real choice and decent rates. The products have attracted thousands of new business savers, and by early December 2022 we had reached over GBP117m in savings, helping and supporting UK businesses.
Launching Business Savings was another step in our mission to become a full-service bank for SMEs, as we expanded our business proposition beyond lending and personal savings. The insight gained from working with an even wider range of small businesses will be invaluable as we grow and develop new services.
The Bank's innovation team is already hard at work scoping out future products and service improvements, headed up by Sahil Thapa, who joined in the last half year as Chief Technology Officer from Deutsche Bank.
All this activity has taken place against a challenging economic environment. We are still dealing with the financial fall-out of the COVID pandemic, but that has been exacerbated by the impact of the war in Ukraine. Energy prices soared, inflation pushed up costs for consumers and businesses, which in turn led to interest rates rising quickly from their record lows a year ago.
However, this also shows the vital need for a bank like Recognise Bank - a smart, innovative institution that continues to support UK SMEs as they grow and thrive. Whatever happens over the coming months and years, Recognise Bank is well placed with a great proposition, a strong loan book, a skilled executive team, and a determination to support British businesses.
Financial review
A summary of the financial performance of the Group is set out in the table below:
Hot Features
Premium
6 months 6 months Year to
GBP'000 to to 31/03/22
30/09/22 30/09/21
------------------------------------- ---------- ---------- ----------
Banking activities (note a) (6,595) (5,426) (11,795)
Holding company (note b) (565) (743) (1,850)
-------------------------------------- ---------- ---------- ----------
Loss from continuing activities (7,160) (6,169) (13,645)
Profit from discontinued activities - 379 360
-------------------------------------- ---------- ---------- ----------
Loss before tax (7,160) (5,790) (13,285)
-------------------------------------- ---------- ---------- ----------
(a) Includes all loan, lease and professions financing activities.
(b) Includes Other
The key performance indicators for the Group are:
GBP'000 30/09/22 30/09/21 31/03/22 ------------------------------ --------- --------- --------- Loan book at period end 112,056 24,076 101,054 Deposits at period end 127,863 8,739 94,994 ------------------------------ --------- --------- -----------
The results for the six months are in line with the Board's expectations.
The loan portfolio increased by GBP11m to GBP112.1m over the period. The increase of GBP12m in the Recognise Bank portfolio was offset by a reduction of GBP1m in the Credit Asset Management Limited/ Professions Funding Limited ("CAML/PFL") portfolio as its run-off continues. The IFRS 9 provision for impairment for the Recognise Bank loan portfolio increased by GBP166k over the period to GBP309k, which is attributable to a forecast reduction in GDP affecting the macro-economic environment and to the increase in the loan portfolio.
Deposits increased from GBP95m to GBP128m over the period, reflecting the successful launch of business saving products which contributed GBP46m of deposits at 30 September 2022. The increase in deposits is reflected in the increased interest expense of GBP0.8m over the period. Since the period end, the level of deposits has continued to increase with deposits at end November 2022 being GBP186m, including GBP106m of business savings.
The process of running-off the CAML/ PFL loan and lease portfolios continued over the period and has continued to go smoothly. The size of the CAML/ PFL portfolios decreased by approximately 44% from GBP2.3m to GBP1.3m over the 6-month period. Since August 2022, CAML has been a direct subsidiary of Recognise Bank, following its transfer from the Company in an internal reorganisation.
COLG
The process of simplifying the Group's structure and administration continued during the period.
In May 2022, COLG acquired the preference shares in CAML that it did not already own for GBP2.2m by way of a share exchange agreement, issuing 3,158,992 new ordinary shares at a price of 69p each as consideration. The acquisition facilitated an internal group restructuring whereby, following redemption of the GBP3m CAML preference shares in issue, in August 2022 COLG transferred all its interests in CAML to Recognise Bank for a consideration of GBP1.7m which was satisfied by the issue of shares in Recognise Bank. The transfer, which was made to align ownership with management reporting lines, included the assignment of an inter-group balance and the novation of a loan, as well as the transfer of shares. As set out above, CAML is now a wholly-owned subsidiary of Recognise Bank.
Following the Group's move to new offices in June 2022 on the expiry of its lease, COLG is no longer providing shared property services to group companies as the new lease is held by Recognise Bank. It now acts solely as a holding company to its one direct subsidiary, Recognise Bank Limited.
The two holders of the Subscription Agreements warrants exercised their warrants on 16 May 2022, subscribing approximately GBP6.5m in cash for 9,458,333 new ordinary shares of 2p each, which were issued at 69p per share. The net proceeds of GBP6.45m were invested in Recognise Bank to support its continuing growth and investment in technology. Further details of the exercise of warrants and the issue of new ordinary shares are set out in note 13 below.
Further progress which has been made in simplifying the Group since the period end is set out in the post balance sheet events note (note 17).
Risks
The principal and emerging risks of the Group are reviewed and assessed annually by the Board which, through the Company's Audit and Risk Committee, places reliance on the oversight provided by committees established by the Recognise Bank board that contribute to various aspects of risk management. The principal risks described in the Strategic Report in the 2022 Annual Report, which is available at https://www.cityoflondongroup.com/wp-content/uploads/2022/09/220906-City-of-London-2022-Annual-Report-Web.pdf , are still appropriate.
The 2022 Annual Report also included information on financial risk management in note 5 of the financial statements. This also remains relevant.
Jean Murphy
Recognise Bank CEO
This half-yearly report may contain certain statements about the future outlook for COLG and its subsidiaries. Although the Directors believe their expectations are based on reasonable assumptions, any statements about the future outlook may be influenced by factors that could cause actual outcomes to be materially different. Such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking statements.
This half-yearly report has been drawn up and presented with the purpose of complying with English law. Any liability arising out of or in connection with the half-yearly report for the six months to 30 September 2022 will be determined in accordance with English law. The half-yearly results for 2022 and 2021 have neither been audited nor reviewed pursuant to guidance issued by the Auditing Practices Board.
22 December 2022
Unaudited interim results
Condensed consolidated income statement
Notes 6 months 6 months Year to
to 30/09/22 to 30/09/21 31/03/22
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
(note (a))
--------------------------------- ------ ------------- ------------- ----------
Interest income 3,554 846 2,897
Interest expense (946) (168) (1,088)
--------------------------------- ------ ------------- ------------- ----------
Net interest income 2 2,608 678 1,809
--------------------------------- ------ ------------- ------------- ----------
Fee and commission income 102 61 52
Fee and commission expense (1) - (23)
--------------------------------- ------ ------------- ------------- ----------
Net fees and commission 101 61 29
--------------------------------- ------ ------------- ------------- ----------
Total operating Income 2,709 739 1,838
Operating expenses
Staff costs (5,711) (4,442) (9,658)
Other operating expenses 4 (3,612) (2,151) (5,482)
Finance expense (17) (12) (19)
Depreciation and amortisation (373) (296) (629)
Net impairment gain/ (loss)
on financial assets (156) (7) 305
--------------------------------- ------ ------------- ------------- ----------
Loss from continuing operations (7,160) (6,169) (13,645)
Profit for the period from
discontinued operations 11 - 379 360
Tax charge for the period 5 - - -
--------------------------------- ------ ------------- ------------- ----------
Loss for the period after
tax (7,160) (5,790) (13,285)
Other comprehensive income - - 1
Total comprehensive loss
for the period attributable
to equity shareholders (7,160) (5,790) (13,284)
--------------------------------- ------ ------------- ------------- ----------
Basic and diluted earnings
per share attributable to
owners of the parent 7
Continuing operations (6.43)p (7.57)p (14.84)p
Discontinued operations - 0.47p 0.40p
Total (6.43)p (7.10)p (14.44)p
--------------------------------- ------ ------------- ------------- ----------
(a) Prior year figures have been reclassified within the consolidated income statement: the results previously reported are unchanged (see note 16).
(b) The loss in each period is wholly attributable to the owners of the parent.
Condensed consolidated statement of comprehensive income
6 months 6 months Year to
to 30/09/22 to 30/09/21 31/03/22
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Loss from continuing operations (7,160) (6,169) (13,645)
Profit from discontinued operations - 379 360
---------------------------------------------- -------------- ------------- ----------
Total loss (7,160) (5,790) (13,285)
---------------------------------------------- -------------- ------------- ----------
Other comprehensive income
Item that will not be reclassified
to profit or loss
Income from legal case investments - 1 1
---------------------------------------------- -------------- ------------- ----------
Other comprehensive income from continuing
operations - 1 1
---------------------------------------------- -------------- ------------- ----------
Total other comprehensive income - 1 1
---------------------------------------------- -------------- ------------- ----------
Total comprehensive expense from continuing
operations (7,160) (6,168) (13,644)
Total comprehensive income from discontinued
operations - 379 360
---------------------------------------------- -------------- ------------- ----------
Total comprehensive expense (7,160) (5,789) (13,284)
---------------------------------------------- -------------- ------------- ----------
Condensed consolidated balance sheet
30/09/22 31/03/22 30/09/21
Notes GBP'000 GBP'000 GBP'000
(unaudited) (audited) (unaudited)
(note
(a))
Assets
Cash and cash equivalents 56,728 37,522 24,705
Debt securities - - 11,499
Loans and leases receivables 8, 9 112,056 101,054 24,076
Property, plant and equipment 275 120 145
Intangible assets 10 993 980 959
Right-of-use assets 491 189 338
Other assets 842 1,012 894
--------------------------------- ------ ------------ ---------- ------------
171,385 140,877 62,616
Assets in disposal groups
classified as held for sale 11 - - 62,848
Total assets 171,385 140,877 125,464
--------------------------------- ------ ------------ ---------- ------------
Liabilities
Borrowings 236 2,952 3,702
Deposits from customers 12 127,863 94,994 8,739
Lease liabilities 495 130 295
Other liabilities 2,882 4,770 5,936
--------------------------------- ------ ------------ ---------- ------------
131,476 102,846 18,672
Liabilities directly associated
with assets in disposal group
classified as held for sale 11 - - 62,598
Total liabilities 131,476 102,846 81,270
--------------------------------- ------ ------------ ---------- ------------
Equity
Share capital 13 2,388 2,136 2,096
Share premium 106,165 97,711 96,534
Capital reserve 3,648 3,648 3,648
Accumulated losses (72,292) (65,464) (58,084)
Total equity 39,909 38,031 44,194
--------------------------------- ------ ------------ ---------- ------------
Total equity and liabilities 171,385 140,877 125,464
--------------------------------- ------ ------------ ---------- ------------
(a) Prior year figures have been reclassified within the consolidated balance sheet: the carrying amounts previously reported are unchanged as is the equity (see note 16).
Condensed consolidated statement of changes in equity
Accumulated Capital Share Share Total
Attributable to owners losses reserve premium capital Equity
of the parent company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------------ --------- --------- --------- ---------
At 31 March 2022 (audited) (65,464) 3,648 97,711 2,136 38,031
Loss for the period -
continuing operations (7,160) - - - (7,160)
Other comprehensive income
Income from legal case
investments - - - - -
------------------------------------ ------------ --------- --------- --------- ---------
Total comprehensive expense (7,160) - - - (7,160)
------------------------------------ ------------ --------- --------- --------- ---------
Contributions by and distributions
to owners
Share-based payments 112 - - - 112
Transfer of shares from
Employee Benefit Trust 220 - - - 220
Issue of shares on exercise
of Subscription Agreement
warrants - - 6,337 189 6,526
Issue of shares on acquisition
of CAML Preference shares - - 2,117 63 2,180
Total contributions by
and distributions to owners 332 - 8,454 252 9,038
------------------------------------ ------------ --------- --------- --------- ---------
At 30 September 2022
(unaudited) (72,292) 3,648 106,165 2,388 39,909
------------------------------------ ------------ --------- --------- --------- ---------
Accumulated Capital Share Share Total
losses reserve premium capital equity
----------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------ --------- --------- --------- ---------
At 31 March 2021
(audited) (48,652) 3,648 82,775 1,615 39,386
Loss for the period
- continuing operations (6,169) - - - (6,169)
Profit for the period
- discontinued operations 379 - - - 379
Other comprehensive
income
Income from legal
case investments 1 - - - 1
---------------------------- ------------ --------- --------- --------- ---------
Total comprehensive
expense (5,789) - - - (5,789)
---------------------------- ------------ --------- --------- --------- ---------
Contributions by and
distributions to owners
Share-based payments 144 - - - 144
Issue of shares to
Employee Benefit Trust (3,787) - 3,684 103 -
Issue of shares under
Subscription Agreements - - 10,075 378 10,453
---------------------------- ------------ --------- --------- --------- ---------
Total contributions
by and distributions
to owners (3,643) - 13,759 481 10,597
---------------------------- ------------ --------- --------- --------- ---------
At 30 September 2021
(unaudited) (58,084) 3,648 96,534 2,096 44,194
---------------------------- ------------ --------- --------- --------- ---------
Loss for the period
-continuing operations (7,476) - - - (7,476)
Loss for the period
-discontinued operations (19) - - - (19)
Total comprehensive
expense (7,495) - - - (7,4935)
---------------------------- ------------ --------- --------- --------- ---------
Contributions by and
distributions to owners:
Share-based payments 115 - - - 115
Issue of shares under
Subscription Agreements - - 7 - 7
Issue of shares under
Open Offer - - 1,170 40 1,210
Issue of shares on
exercise of warrants - - - - -
Total contributions
by and distributions
to owners 115 - 1,177 40 1,332
---------------------------- ------------ --------- --------- --------- ---------
At 31 March 2022 (65,464) 3,648 97,711 2,136 38,031
---------------------------- ------------ --------- --------- --------- ---------
Condensed consolidated statement of cash flows
6 months 6 months Year to
to 30/09/22 to 30/09/21 31/03/22
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
(note
(a))
------------------------------------------ ------------- ------------- ----------
Cash flows from operating activities
( 7,160
Loss before taxation ) (5,790) (13,285)
Adjustments for:
Depreciation and amortisation 373 296 629
Share-based payments 112 144 259
In crease/ (de crease ) in allowance
for expected credit losses 156 7 (305)
Change in value of business unit
held for disposal - (379) (360)
Interest payable on lease liabilities 1 7 12 19
Changes in operating assets and
liabilities:
Decrease/(i ncrease ) in trade
and other receivables 170 394 (76)
(Decrease)/i ncrease in trade and
other payables ( 1,5 48) 2,781 1,543
( 19,730
Leases and loans advanced ) (11,066) (98,096)
Leases and loans repaid 8,562 4,547 15,343
Change in Deposits received 32,868 8,736 94,992
Change in Debt securities - (4,999) 6,500
Cash generated from/ (used in) (5, 317
operations 13,820 ) 7,163
------------------------------------------ ------------- ------------- ----------
Corporation tax paid - - -
Cash flows from operating activities
- discontinued operations - 1,200 3,289
------------------------------------------ ------------- ------------- ----------
Net cash generated from / (used
in) operating activities 13,820 (4,117) 10,452
------------------------------------------ ------------- ------------- ----------
Cash flow from investing activities
Net cash received on disposal of
discontinued operations less cash
held in each at the disposal date:
Milton Homes Limited - 7,459 5,620
Acorn to Oaks Financial Services
Limited - ( 523 ) (523)
Costs of disposal of discontinued
operations - (546) (565)
Purchase of rights to CAML 8% Preference
shares accrued dividends - (9 6 6) (966)
Purchase of CAML 8% Preference
Shares - ( 3 4) (34)
Proceeds from sale of fixed asset - 1 1
Investment in intangible assets (1 37 ) (18) (156)
Purchase of property, plant and
equipment ( 199 ) (34) (53)
Net cash (used in)/ generated
from investing activities ( 33 6) 5,339 3,324
------------------------------------------ ------------- ------------- ----------
(a) The presentation of the consolidated cash flow for the six months to 30 September 2021 has been aligned with that used in the Annual Report for the year to 31 March 2022.
6 months 6 months Year to
to 30/09/22 to 30/09/21 31/03/22
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
(note(a))
-------------------------------------- ------------- ------------- ----------
Cash flow from financing activities
Gross proceeds from issues of
ordinary shares 6,526 11,349 12,560
Costs of share issues - (896) (889)
Repayment of loans (646) (1,979) (2,729)
Payments of lease liabilities
and rent deposits (158) (254) (459)
Net cash generated from financing
activities 5,722 8,220 8,483
-------------------------------------- ------------- ------------- ----------
Net increase in cash and cash
equivalents 19,206 9,442 22,259
Cash and cash equivalents brought
forward 37,522 14,493 14,493
Cash held in discontinued operations
at beginning of period - 770 770
-------------------------------------- ------------- ------------- ----------
Net cash and cash equivalents 56,728 24,705 37,522
-------------------------------------- ------------- ------------- ----------
Operating, investing and financing
activities are categorised as
follows:
Net cash generated from/ (used
in) operating activities
Continuing operations 13,820 (5,317) 7,163
Discontinued operations - 1,200 3,289
-------------------------------------- ------------- ------------- ------------
13,820 (4,117) 10,452
-------------------------------------- ------------- ------------- ------------
Net cash (used in)/ generated
from investing activities
Continuing operations (336) (1,051) (1,208)
Discontinued operations - 6,390 4,532
-------------------------------------- ------------- ------------- ------------
(336) 5,339 3,324
-------------------------------------- ------------- ------------- ------------
Net cash generated from financing
activities
Continuing operations 5,722 8,220 8,483
Discontinued operations - - -
-------------------------------------- ------------- ------------- ------------
5,722 8,220 8,483
-------------------------------------- ------------- ------------- ------------
Interest received and paid are
as follows:
Interest received 3,307 942 5,095
Interest paid 606 136 518
------------------------------- ----- --- -----
Changes in liabilities arising from financing activities
Total
--------------------------------------------------------
GBP'000
-------------------------------------------------------- ---------
At 31 March 2021 62,220
Cash flows (2,257)
Non-cash flow
Cancellation of Rollover Loan Notes 2021 on sale
of Acorn to Oaks Financial Services Limited (1,293)
Lease liabilities 139
Interest accrued in period on lease liabilities 12
-------------------------------------------------------- ---------
At 30 September 2021 58,821
Cash flows (946)
Non-cash flow
Borrowings included in liabilities directly associated
with assets in disposal group held for sale (54,824)
Lease liabilities 24
Interest accrued in period on lease liabilities 7
At 31 March 2022 3,082
Cash flows (3,038)
Non-cash flow
Lease liabilities 669
Interest accrued in period on lease liabilities 18
-------------------------------------------------------- ---------
At 30 September 2022 731
-------------------------------------------------------- ---------
Notes to condensed financial statements
1 Basis of preparation
1.1 These unaudited interim financial results do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006 and have been neither audited nor reviewed pursuant to guidance issued by the Auditing Practices Board. Statutory accounts for the year ended 31 March 2022 were approved by the Directors on 6 September 2022 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement within the meaning of section 498 of the Companies Act 2006.
Presentation of figures for the six months ended 30 September 2021
The presentation and classification of the figures included in the condensed consolidated financial statements for the six months ended 30 September 2021 have been aligned with the presentation and classification of figures in the audited accounts for the year ended 31 March 2022.
The reclassification, which does not impact the results and carrying amounts for the period, affects mainly the primary statements. A reconciliation between the original and reclassified figures for the six months ended 30 September 2022 is set out in note 16.
Going concern
The condensed consolidated financial statements have been prepared on a going concern basis which the Directors consider to be appropriate following their assessment of the Group's financial position and its ability to meet its obligations as and when they fall due. The Directors have reviewed in detail the monthly cash flow forecasts for the period to 31 December 2023 and challenged the assumptions in the forecast, including those relating to the raising of additional capital to support the growth of banking activities. The note on post balance sheet events (note 17 below) summarises the proposals which have been announced separately today: the proposed members' voluntary liquidation of the Holding Company is not anticipated to have a material adverse impact on the operations of Recognise Bank Limited.
1.2 Accounting policies
These condensed consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting". The condensed consolidated financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended 31 March 2022, which were prepared in accordance with IFRS in conformity with the requirements of the Companies Act 2006. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the unaudited interim condensed consolidated financial statements for the six months ended 30 September 2022 have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published audited consolidated financial statements for the year ended 31 March 2022.
1.3 Adoption of new standards and interpretations
The adoption of new standards and amendments to standards remains as set out in note 2.2 of the Annual Report 2022. The amendments to accounting standards which are effective for the first time in the current financial period have not had any impact on the financial statements as either they are not relevant to the Group's activities or are consistent with the Group's current accounting policies.
1.4 Consistency
This interim report, including the financial information contained therein is the responsibility of, and was approved by, the Company's Directors on 22 December 2022. The AIM Rules for Companies require that accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing annual accounts except where any changes, and the reason for them, are disclosed.
There have been no changes to the Group's accounting policies in the period to 30 September 2022.
2 Net interest income
6 months 6 months Year
to 30/09/22 to 30/09/21 to 31/03/22
GBP'000 GBP'000
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Cash and cash equivalents 182 - 24
Debt securities - 1 254
Loans and leases receivables 3,372 845 2,619
Interest income 3,554 846 2,897
------------------------------ ------------ ------------ ------------
Deposits from customers 894 2 545
Wholesale funding 52 166 285
Debt securities amortisation - - 258
Interest expense 946 168 1,088
------------------------------ ------------ ------------ ------------
Net interest income 2,608 678 1,809
------------------------------ ------------ ------------ ------------
All revenue arises in the United Kingdom. The revenue attributable to discontinued operations during the year to 31 March 2022 is shown in note 11.
3 Segmental reporting
During the year ended 31 March 2022, the Group divested itself of its non-core activities (see note 11). The Group's main activities are now undertaken through the Company's sole direct subsidiary, Recognise Bank Limited, which has operated as a fully-licensed bank focusing on the UK SME market since September 2021 when it was granted a full licence. In August 2022, the Company transferred ownership of its only other direct subsidiary, Credit Asset Management Limited, which is currently running off its loan and lease portfolio, to Recognise Bank Limited. The Company now acts primarily as the holding company of Recognise Bank Limited.
Recognise Bank manages all the Group's lending activities and, as the processes for underwriting, managing lending activities and assessing risks and rewards as well as the distribution channels are similar for all products, it is appropriate to report these as one class of business. It is considered that the chief operating decision maker, which has been identified as the full Board of the Company, uses only one segment to control resources and assess performance, when it is considering the strategic direction of the Group.
4 Other operating expenses
6 months 6 months Year
to 30/09/22 to 30/09/21 to 31/03/22
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Legal and professional costs 1,068 713 1,624
Irrecoverable VAT 435 210 604
Property costs 238 133 335
IT infrastructure and support costs 798 454 1,074
Outsourced costs 553 292 909
Other miscellaneous costs 520 349 936
3,612 2,151 5,482
------------------------------------- ------------- ------------- -------------
5 Taxation
The provision for the six month period to 30 September 2022 of nil is based on the best estimate of the effective rate for the full year, as the charge for taxation is for a period of less than one year.
6 Dividends
The Directors have not declared an interim dividend for the year ending 31 March 2023 (Interim 2022: nil). The Directors did not recommend payment of a final dividend for the year ended 31 March 2022.
7 Earnings per share
Basic and diluted earnings per share is calculated by dividing the loss attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the period less those held in treasury and in the Employee Benefit Trust.
30/09/22 30/09/21 31/03/22
(unaudited) (unaudited) (audited)
(Loss)/ profit attributable to equity
holders (GBP'000)
Continuing operations (7,160) (6,169) (13,645)
Discontinued operations - 379 360
----------------------------------------- ------------ ------------ ----------
(7,160) (5,790) (13,285)
----------------------------------------- ------------ ------------ ----------
Weighted average number of ordinary
shares of 2p in issue ('000) 111,291 81,534 91,945
Basic and diluted earnings per ordinary
share of 2p
Continuing operations (6.43)p (7.57)p (14.84)p
Discontinued operations - 0.47p 0.40p
----------------------------------------- ------------ ------------ ----------
(6.43)p (7.10)p (14.44)p
----------------------------------------- ------------ ------------ ----------
The basic and diluted earnings per share are the same as, given the loss for the period, the outstanding share options would reduce the loss per share.
8 Financial risk management
Note 5.2 of the annual financial statements to 31 March 2022 includes the Company's objectives, policies and processes for financial risk management, and provides information on capital management as well as its exposure to credit risk, liquidity risk, interest rate risk, and price risk.
The 2022 Annual Report identified the main risk factor relating to the cash flow forecast in the Strategic Report at that time.
A summary of financial instruments to which the impairment requirements in IFRS 9 are applied are listed in the tables below, with the exception of those financial instruments held within Milton Homes at 30 September 2021, prior to completion of its disposal on 10 March 2022 (see note 11).
30/09/22 31/03/22 30/09/21
GBP'000 GBP'000 GBP'000
Financial Instruments (unaudited) (audited) (unaudited)
--------------------------------------- ------------ ---------- ------------
Financial assets
Measured at amortised cost
Cash and cash equivalents 56,728 37,522 24,705
Loans and advances to customers 112,056 101,054 24,076
Other debtors 250 341 264
Measured at fair value through
other comprehensive income
Debt securities - - 11,499
169,034 138,917 60,544
--------------------------------------- ------------ ---------- ------------
Financial Liabilities
Measured at amortised cost
Borrowings 236 2,952 3,702
Deposits from customers of Recognise
Bank 127,863 94,994 8,739
Lease liabilities 495 130 295
Other liabilities 2,534 4,118 5,506
131,128 102,194 18,242
--------------------------------------- ------------ ---------- ------------
Credit risk
The Credit Risk exposures, which are all Stage 1, unless otherwise stated, are set out in the table below:
30/09/22 31/03/22 30/09/21
GBP'000 GBP'000 GBP'000
(unaudited) (audited) (unaudited)
------------------------------------ ----------- --------- -----------
On-balance sheet
Cash and balances at central banks 56,728 37,522 24,705
Debt securities - - 11,499
Gross loans and leases receivable
(net of ECLs)
Stage 1 112,056 101,054 23,507
Stage 2 - - 313
Stage 3 - - 256
Other assets 250 1,012 423
Off-balance sheet
Loan commitments and other credit
related liabilities 8,194 19,700 44,326
------------------------------------ ----------- --------- -----------
As at 31 March 177,228 159,288 105,029
------------------------------------ ----------- --------- -----------
Price risk
Due to the nature of these instruments and their short maturity profiles, management is of the opinion that the carrying amounts of debt securities, cash and cash equivalents and short-term borrowings in the financial statements are reasonable estimates of their fair value. The fair value of advances which are short term or repayable on demand is equivalent to their carrying amount.
The fair value of other non -- current financial instruments for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The fair value of the Group's non -- current fixed interest rate advances, customer deposits and borrowings at the end of the reporting periods is not significantly different from the carrying amounts. The current market interest rates utilised for discounting purposes, which were almost equivalent to the respective instruments' contractual interest rates, are deemed observable but other significant inputs are not observable and accordingly these fair value estimates have been categorised as Level 3 within the fair value measurement hierarchy required by IFRS 7, 'Financial Instruments: Disclosures'.
On their reclassification as disposal groups as at 31 March 2021, both Milton Homes and Acorn to Oaks were included in the accounts for the year ended 31 March 2021 at the estimated net realisable value of each business, with the valuation of each being categorised as a level 3 valuation.
The following table shows the movement over the year to 31 March 2022 on Level 1, Level 2 and Level 3 assets that were measured at fair value. There were no transfers of assets between categories during the period. An asset is transferred when, due to changes in circumstances, it falls into another category within the fair value hierarchy.
No Level 1 or Level 2 assets were held at 30 September 2022.
Level Level Level
1 assets 2 assets 3 assets
GBP'000 GBP'000 GBP'000
-------------------------------------------- --------- --------- ---------
Balance at 1 April 2021 6,500 - 9,564
Debt securities - increase 4,999 - -
Acorn to Oaks disposal group - disposal - - (1,114)
Milton Homes Deep Discount Bonds -
repayment - - (9,046)
Milton Homes - movement in net realisable
value - - 846
-------------------------------------------- --------- --------- ---------
Balance at 30 September 2021 11,499 - 250
Debt securities - decrease (11,499) - -
Milton Homes - on completion - - (250)
-------------------------------------------- --------- --------- ---------
Balance at 31 March 2022 - - -
-------------------------------------------- --------- --------- ---------
9 Loans and leases receivables
The provisions for impairment of the Group's current lease and loan portfolio as at 30 September 2022 were assessed on the same basis as set out in note 3(b) of the 2022 Annual Report.
For the Recognise Bank credit portfolio, the IFRS 9 model developed with a third party managed service provider was used, and the internally-developed IFRS 9 model was used for the CAML/PFL lease and loan portfolio, which is in the latter part of its run-off phase.
The gross carrying amount of the Group's lease and loan portfolios, including arrears, increased by GBP10,979,000 from GBP102,317,000 to GBP113,296,000 over the six-month period. While the loan portfolio of Recognise Bank increased by GBP12,225,000 to GBP111,320,000 at 30 September 2022, there was a reduction of GBP1,246,000 in the CAML/PFL lease and loan portfolio to GBP1,976,000, including arrears, as the run-off of that portfolio, which began in March 2020, continued.
The table below shows an analysis of the movement in the gross loans and leases under IFRS 9:
Stage 1 Stage Stage Total
2 3
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------- ------- ------- -------
Gross loans and leases at
1 April 2021 17,502 606 2,275 20,383
Originations 11,180 - - 11,180
Repayments (4,667) (204) (103) (5,074)
Write-offs - - (403) (303)
Transfer to Stage 1 18 (18) - -
Transfer to Stage 2 - - - -
Transfer to Stage 3 (72) - 72 -
---------------------------------- ------- ------- ------- -------
Gross loans and leases at
30 September 2021 23,961 384 1,841 26,186
Originations 86,916 - - 86,916
Repayments (9,586) (204) - (9,790)
Write-offs - - (895) (995)
Transfer to Stage 1 178 (178) - -
Transfer to Stage 2 - - - -
Transfer to Stage 3 (5) - 5 -
---------------------------------- ------- ------- ------- -------
Gross loans and leases at
31 March 2022 101,364 2 951 102,317
Originations 19,730 - - 19,730
Repayments (8,384) - (303) (8,687)
Write-offs - - (64) (64)
Transfer to Stage 1 - - - -
Transfer to Stage 2 - - - -
Transfer to Stage 3 (62) (2) 64 -
---------------------------------- ------- ------- ------- -------
Gross loans and leases at
30 September 2022 112,648 - 648 113,296
---------------------------------- ------- ------- ------- -------
Allowances for ECLs at 1 April
2021 375 53 1,959 2,387
Total movement in loss allowance
during the period 79 18 (374) (277)
---------------------------------- ------- ------- ------- -------
Allowances for ECLs at 30
September 2021 454 71 1,585 2,110
Total movement in loss allowance
during the period (144) (69) (634) (847)
---------------------------------- ------- ------- ------- -------
Allowances for ECLs at 31
March 2022 310 2 951 1,263
Total movement in loss allowance
during the period 282 (2) (303) (23)
---------------------------------- ------- ------- ------- -------
Allowances for ECLs at 30
September 2022 592 - 648 1,240
---------------------------------- ------- ------- ------- -------
Net loans and leases at 30
September 2022 112,056 - - 112,056
---------------------------------- ------- ------- ------- -------
Net loans and leases at 31
March 2022 101,054 - - 101,054
---------------------------------- ------- ------- ------- -------
Net loans and leases at 30
September 2021 23,507 313 256 24,076
---------------------------------- ------- ------- ------- -------
Impairment
The table below shows an analysis of movements in the provision for impairments under IFRS 9:
Stage 1 Stage 2 Stage 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------- ------- ------- -------
As at 1 April 2021 375 53 1,959 2,387
Movement in provision
for impairment
Transfer to Stage 2 - - - -
Transfer to Stage 3 (1) - 1 -
Specific provisions - - 34 34
New financial assets originated 7 - - 7
Other movements 73 18 (106) (15)
Write-offs - - (303) (303)
------------------------------------ ------- ------- ------- -------
Total movement in loss
allowance 79 18 (374) (277)
------------------------------------ ------- ------- ------- -------
As at 30 September 2021 454 71 1,585 2,110
Movement in provision
for impairment
Transfer to Stage 2 3 (3) - -
Transfer to Stage 3 1 - (1) -
Specific provisions - - 4 4
New financial assets originated 142 - - 142
Other movements (290) (66) 71 (285)
Write-offs - - (708) (708)
------------------------------------ ------- ------- ------- -------
Total movement in loss
allowance (144) (69) (634) (847)
------------------------------------ ------- ------- ------- -------
As at 31 March 2022 310 2 951 1,263
Movement in provision
for impairment
Transfer to Stage 2 - - - -
Transfer to Stage 3 - (2) 2 -
Specific provisions - - (297) (297)
New financial assets originated 156 - - 156
Other movements 126 - (6) 120
Write-offs - - (2) ( 2)
------------------------------------ ------- ------- ------- -------
Total movement in loss
allowance 282 (2) (303) (23)
------------------------------------ ------- ------- ------- -------
As at 30 September 2022 592 - 648 1,240
------------------------------------ ------- ------- ------- -------
The provision for impairment of loans and finance leases as at 30 September 2022 has been assessed on the same basis as set out in note 3(b) of the 2022 Annual Report.
The overall reduction of GBP23,000 in the loss allowance over the period to 30 September 2022 reflects the changes in the Group's lease and loan portfolios. The reduction in Stage 3 provisions over the year relates solely to the CAML/PFL portfolio. The increase in the Recognise Bank loan portfolio has resulted in an additional Stage 1 impairment charge of GBP156,000.
The provisions for impairment on loans and finance leases classified as Stage 3, which are assessed individually by management, include provisions made for arrears on these agreements.
10 Intangible Assets Software licence & development GBP'000 ---------------------------------------- ------- Cost At 31 March 2021 1,081 Additions 18 ---------------------------------------- ------- At 30 September 2021 1,099 Additions 138 At 31 March 2022 1,237 Additions 137 ---------------------------------------- ------- At 30 September 2022 1,374 Accumulated amortisation and impairment At 31 March 2021 53 Charge 87 ---------------------------------------- ------- At 30 September 2021 140 Charge 117 At 31 March 2022 257 Charge 124 ---------------------------------------- ------- At 30 September 2022 381 ---------------------------------------- ------- Carrying amount ---------------------------------------- ------- At 30 September 2022 (unaudited) 993 ---------------------------------------- ------- At 31 March 2022 (audited) 980 ---------------------------------------- ------- At 30 September 2021 (unaudited) 959 ---------------------------------------- ------- 11 Discontinued operations
Following reclassification of the Group's non-core activities as disposal groups as at 31 March 2021, the assets and related liabilities of the two non-core businesses, Acorn to Oaks Financial Services Limited and Milton Homes Limited, were remeasured at their fair value at that date. These fair values, assessed as the estimated realisable value net of disposal costs, were carried as current assets and current liabilities within the financial statements for the year ended 31 March 2021.
The first non-core business, Acorn to Oaks Financial Services Limited, was sold on 1 April 2021 at its estimated net realisable value, net of disposal costs.
The sale of the second, Milton Homes Limited, was agreed on 3 September 2021, subject to regulatory approval for the change in control. The FCA approved the change in control on 25 February 2022 and the sale was completed on 10 March 2022.
As part of the arrangements for the sale of Milton Homes, Milton Homes paid the Company GBP1,200,000 in respect of the Deep Discount Bonds held by the Company on 2 September 2021 and a further GBP7,846,002 on 3 September 2021 to redeem the Deep Discount Bonds in full. The latter payment was made from the proceeds of an issue of new bonds to an entity connected with the purchaser. The conditional sale agreements provided for a further GBP250,000 to be received from the purchaser on completion, when ownership of the equity would be transferred.
As at 30 September 2021, the fair value of Milton Homes was thus GBP250,000, which comprised assets of GBP62,848,000 and associated liabilities of GBP62,598,000.
A reassessment of the charge recognised in the prior year following remeasurement of the carrying amounts of the Milton Homes assets transferred to disposal groups was made as at 30 September 2021. This led to a credit of GBP339,000 being included in the results from discontinued operations in that six- month period. The credit for the full year was GBP320,000. The balance of the profit in both periods relates to intra-group costs recharged to Milton Homes.
Under the terms of the sale agreement, profits of Milton Homes arising after 31 March 2021 were retained in Milton Homes for the benefit of the purchaser.
The results of discontinued operations for the year ended 31 March 2022, which relate only to Milton Homes, are shown below.
6 months Year
to 30/09/21 to 31/03/22
GBP'000 GBP'000
(unaudited) (audited)
Revenue 4,527 6,935
Cost of sales - -
--------------------------------------- ------------- -------------
Gross profit 4,527 6,935
Administrative expenses (535) (956)
---------------------------------------- ------------- -------------
Profit from operations 3,992 5,979
Finance expense (2,281) (3,852)
---------------------------------------- ------------- -------------
Profit before tax 1,711 2,127
Tax expense (122) (309)
---------------------------------------- ------------- -------------
1,589 1,818
Profit retained in disposal group for
benefit of purchaser (1,589) (1,818)
Surplus on remeasurement of assets
in disposal groups 379 360
---------------------------------------- ------------- -------------
Profit from discontinued operations 379 360
---------------------------------------- ------------- -------------
12 Deposits from customers
30/09/22 31/03/22 30/09/21
GBP'000 GBP'000 GBP'000
(unaudited) (audited) (unaudited)
---------------------- ------------ ---------- ------------
Easy access accounts 38,791 - -
Notice accounts 30,755 37,380 1,851
Term deposits 58,317 57,614 6,888
---------------------- ------------ ---------- ------------
127,863 94,994 8,739
---------------------- ------------ ---------- ------------
13 Movements in equity
30/09/22 31/03/22 30/09/22 31/03/22
(unaudited) (audited) (unaudited) (audited)
Allotted, called up and
fully paid Number Number GBP'000 GBP'000
--------------------------- ------------ ----------- ------------ ----------
Ordinary shares of GBP0.02 119,430,638 106,813,313 2,388 2,136
--------------------------- ------------ ----------- ------------ ----------
2,388 2,136
--------------------------- ------------ ----------- ------------ ----------
The Company did not hold any ordinary shares in treasury at 30 September 2022 (2022: nil). 4,813,819 ordinary shares of GBP0.02 were held by the Employee Benefit Trust ("EBT") at 30 September 2022 (2022: 5,174,643). During the period, 360,824 shares were transferred from the EBT to a former employee (2022: nil). The fair value of shares held by the EBT at 30 September 2022 amounted to GBP1,925,528 (2022: GBP3,156,000). The issue price of the shares held by the EBT is deducted from equity.
On 16 May 2022, the Company issued 9,458,333 new ordinary shares for GBP6.6m in cash when the two holders of the Subscription Agreements warrants, Parasol V27 Limited and Max Barney Investments Limited, exercised their warrants at 69p per share. The premium of GBP6,337,083 was credited to Share premium. The net proceeds of GBP6.45m were invested in Recognise Bank to support its continuing growth and investment in technology.
On 16 May 2022, the Company issued 3,158,992 new ordinary shares at 69p as consideration for the acquisition of GBP2,069,914 8% Redeemable Preference Shares in Credit Asset Management Limited ("Preference Shares") (see note 15). The premium of GBP2,116,525 was credited to Share premium.
Ordinary shares of 2p each in issue Number GBP'000 ----------------------------------------------- ----------- ------- As at 31 March 2021 80,727,119 1,615 Issued for cash on 6 September 2021 5,152,794 103 Issued for cash on 14 September 2021 18,916,667 378 ----------------------------------------------- ----------- ------- As at 30 September 2021 104,796,580 2,096 Issued for cash on 5 October 2021 2,016,388 40 Issued for cash on 8 December 2021 on exercise of warrants 24 - Issued for cash on 17 January 2022 on exercise of warrants 321 - As at 31 March 2022 106,813,313 2,136 Issued for cash on 16 May 2022 on exercise of warrants 9,458,333 189 Issued as consideration for CAML Preference shares on 16 May 2022 3,158,992 63 As at 30 September 2022 119,430,638 2,388 ----------------------------------------------- ----------- ------- Share warrants in issue Number GBP'000 ============================================== =========== ======= As at 30 September 2021 - - Subscription Agreements warrants issued on 14 September 2021 9,458,333 - Open Offer warrants issued on 21 October 2021 1,008,180 - Open Offer warrants exercised (345) -
---------------------------------------------- ----------- ------- As at 31 March 2022 10,466,168 - Subscription Agreements warrants exercised on 16 May 2022 (9,458,333) - As at 30 September 2022 1,007,835 - ============================================== =========== =======
The holders of the warrants in issue at 30 September 2022 are entitled to subscribe for new ordinary shares of the Company at 69p each up to 21 October 2024.
14 Commitments
As at 30 September 2022, Recognise Bank Limited was contractually committed to make future loan advances of GBP8,194,000 (2022: GBP19,700,000) to customers.
The Company is contractually committed to issue up to 1,007,835 new ordinary shares should holders of the 1,007,835 Open Offer warrants referred to in note 13 exercise their right to subscribe for shares at 69p in cash per share on or before 21 October 2024, the third anniversary of the date of issue.
Under the terms of a Settlement Agreement dated 24 May 2022 with a former employee of Recognise Bank Limited, the Company is contractually committed to issue an option for him to acquire shares worth GBP350,000 at the date of issue of the option, which is exercisable in whole or in part on payment of GBP1 within a three year period from its date of issue.
15 Related party transactions
Exercise of Subscription Agreements warrants
On 16 May 2022, the two holders of the Subscription Agreements warrants, Parasol V27 Limited and Max Barney Investments Limited, exercised their warrants to subscribe a gross amount of GBP6,526,250 in cash for 9,458,333 new ordinary shares of 2p each which were issued at 69p each. The net proceeds of GBP6.45m were invested in Recognise Bank to support its continuing growth and investment in technology.
8% Redeemable Preference Shares in Credit Asset Management Limited
On 16 May 2022, the Company acquired GBP2,069,914 8% Redeemable Preference Shares in Credit Asset Management Limited ("Preference Shares") held by HPB Pension Trust, an entity associated with Max Barney Investments Limited. The consideration of GBP2,179,704, which comprised the nominal value plus the amount of accrued but unpaid dividends on the Preference Shares, was satisfied by the issue of 3,158,992 new ordinary shares of 2 pence which were issued at 69p each.
On 26 July 2022, the Company subscribed GBP3m for ordinary shares which were issued at par by CAML. On 27 July 2022, CAML redeemed the GBP3m Preference Shares in issue from the proceeds of this issue of ordinary shares. Following the redemption, CAML had only ordinary shares in issue.
16 Reclassification of figures for the six months ended 30 September 2021
The tables below provide a reconciliation between the consolidated income statement and consolidated balance sheet as originally presented in the condensed consolidated financial statements for the six months ended 30 September 2021 and the prior year figures for the same six month period in the condensed consolidated financial statements for the current period, following reclassifications occasioned by a change in the presentation of the financial statements for the year ended 31 March 2022. The change in the presentation and classification of the financial statements was made to reflect the change in the Group's business activities.
Consolidated income statement
The revised presentation of the consolidated income statement did not result in any changes in the results for the six months ended 30 September 2021. The representation of the prior period consolidated income statement is as follows:
Re-presented figures - six months to 30/09/21
----------------------------------------------------------------------------------------------------------
Net
impairment
Consolidated 2021 Net Net Fees loss on
income Interim Interest and Staff Operating Finance financial Discontinued
statement Report Income Commission costs expenses expense Depreciation assets operations
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------- --------- ----------- -------- ---------- -------- ------------- ----------- -------------
Revenue 894 860 34 - - - - - -
Cost of
sales (14) (14) - - - - - - -
Administrative
expenses (6,896) - - (4,442) (2,151) - (296) (7) -
Other income 27 - 27 - - - - - -
Finance
expense (180) (168) - - - (12) - - -
Profit from
discontinued
operations 379 - - - - - - - 379
Loss for
the period (5,790) 678 61 (4,442) (2,151) (12) (296) (7) 379
---------------- -------- --------- ----------- -------- ---------- -------- ------------- ----------- ------------------------
Consolidated balance sheet
The revised presentation of the consolidated balance sheet as at 30 September 2021 has not changed either the description or amounts of the following items within the consolidated balance sheet:
GBP'000
-------------------------------------- ---------
Intangible assets 959
Property, plant and equipment 145
Right-of-use assets 338
Debt securities 11,499
Cash and cash equivalents 24,705
Assets in disposal groups classified
as held for sale 62,848
Liabilities directly associated
with assets in disposal groups
classified as held for sale (62,598)
-------------------------------------- ---------
The following items have been reclassified as shown in the table below:
Re-presented figures - 30/09/21
=====================================================================================
Extracts from
Consolidated 2021 Loans
balance Interim and advances Other Deposits Lease Other
sheet Report to customers assets Borrowings from customers Liabilities Liabilities
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================== ========= ============== ======== =========== ================ ============= =============
Non-current
assets
Loans `16,651 `16,651 - - - - -
Finance leases 568 568 - - - - -
Current assets
Loans 4,951 4,951 - - - - -
Finance leases 373 373 - - - - -
Trade and other
receivables 2,677 1,783 894 - - - -
================== ========= ============== ======== =========== ================ ============= =============
Total assets (A) 25,220 24,326 894 - - - -
------------------ --------- -------------- -------- ----------- ---------------- ------------- -------------
Current
liabilities
Borrowings (3,228) - - (3,228) - - -
Other creditors (8,037) (250) - - (1,851) - (5,936)
Lease liabilities (241) - - - - (241) -
Non-current
liabilities
Borrowings (474) - - (474) - - -
Other creditors (6,888) - - - (6,888) - -
Lease liabilities (54) - - - - (54) -
================== ========= ============== ======== =========== ================ ============= =============
Total liabilities
(B) (18,922) (250) - (3,702) (8,739) (295) (5,936)
As reclassified
(A-B) 6,298 24,076 894 (3,702) (8,739) (295) (5,936)
------------------ --------- -------------- -------- ----------- ---------------- ------------- -------------
17 Post balance sheet events
As announced separately today, the Company is issuing a Circular to Shareholders, which includes definitions of the defined terms used below. The Directors have concluded that it is in the best interests of the Company and its Shareholders as a whole to:
(i) cancel the admission of the ordinary shares to trading on AIM; and
(ii) place the Company into voluntary liquidation, pursuant to which it is expected that the Joint Liquidators will conduct a distribution in specie of all the Company's shares in the capital of Recognise Bank Limited to Shareholders on the Distribution Date, in proportion which is as close as practicable to such Shareholders' pro rata interests in the capital of the Company at the Record Date.
A general meeting of the Company is to be held on 25 January 2023 at which Shareholders will be asked to approve the Proposals.
The Circular sets out the rationale for cancelling the admission of the ordinary shares to trading on AIM and placing the Company into a members' voluntary liquidation ('MVL'). The Circular also includes details on an agreement under which GBP25m in aggregate will be subscribed by Parasol V27 Limited for new shares in Recognise Bank Limited (the 'Equity Subscription'). The conditions in the Equity Subscription to be satisfied include implementation of the Proposals, including completion of the distribution in specie.
While the Company has historically acted as a holding company for a number of operating subsidiaries, Recognise Bank Limited is now its only operating subsidiary. The Directors have concluded it is no longer beneficial for the Company to continue in existence and that it would be preferable for Recognise Bank Limited to have a simpler corporate structure without the Company remaining as a holding entity whose shares are admitted to trading on AIM.
The Company is solvent and the MVL is part of a solvent re-organisation of the group structure, which is intended to streamline the holding structure, with the Company's Shareholders becoming direct shareholders in Recognise Bank Limited. The Company does not anticipate that the MVL will have a material adverse impact on the operations of Recognise Bank Limited.
By order of the Board
Philip Jenks
Chair
22 December 2022
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December 22, 2022 09:02 ET (14:02 GMT)
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