Half Year Results for period ended 30 June 2024

Vector Capital PLC

02 August 2024

 

02 August 2024

Vector Capital plc

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

Half Year Results for the period ended 30 June 2024

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 2024.

Financial Highlights

·	Revenue for the period £2.5m (H1 2023: £2.9m) reflecting a continuing cautious approach to new lending.
·	Profit before tax £707,000 (H1 2023: £1.3m) a reflection of lower revenue and the write-off of bad debts of £364,000. An aggregate doubtful debt reserve of £ 928,000 exists at the period ended (December 2023 £928,000).
·	Loan book at 30 June 2024 of £44.8m (December 2023: £47.9m), reflecting net redemptions during the period and selective new lending.
·	No interim dividend for the period due to the planned buy-back of ordinary shares announced today in the Tender Offer (H1 2023: 1.00p).

Other Highlights

·	Wholesale banking facilities remained unchanged at £45m during the period.
·	Continuing challenging conditions within the Company's SME bridge financing sector, with borrowers often taking longer to redeem loans as they deal with supply cost issues, persistently high interest rates and a cautious lending environment.
·	Results are presented concurrently with the issue of a Shareholders' Circular that sets out a Tender Offer by the Company to buy back up to 11,244,385 ordinary shares from shareholders and which provides details of the planned withdrawal of the Company from the AIM Market.
·	Continuing investment and 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: "These results are released alongside the Shareholders' Circular referring to a Tender Offer to buy back up to 11,244,385 issued ordinary 0.5p shares for 33p per share which will absorb up to £3.7 million, plus expenses, as a prelude to a withdrawal from the AIM Market. This will reduce the Company's ability to expand its loan book in the short to medium term, but in view of the generally challenging market conditions and limited expectations for expansion at our previously intended rate, we believe it is important to provide shareholders with the opportunity to withdraw their investment and re-invest in the market as they think fit. Vector is in a financial position that allows it to undertake the planned buy back and we hope to return to a growth path when market conditions improve."

Enquiries
Vector Capital Plc
Robin Stevens (Chairman)	c/o IFC Advisory
Agam Jain (CEO)
Zeus Capital Limited.	020 3829 5000
Hugh Morgan, 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.

VECTOR CAPITAL PLC

Chairman's Statement

For the six months ended 30 June 2024

I am pleased to present our 2024 interim results for the six months ended 30 June 2024, which report a consolidated operating profit of £1,630,000 (H1 2023: £2,163,000) and consolidated pre-tax profits of £707,000 (H1 2023: £1,274,000), which reflect the challenging conditions within the Company's SME bridge financing sector.

These results are presented concurrently with the issue of a Shareholders' Circular that sets out a Tender Offer by the Company to buy back up to 11,244,385 of the Company's ordinary shares and which provides details of the planned withdrawal of the Company from the AIM Market. The interim report should therefore be read in the context of these proposals. In view of the Tender Offer, no interim dividend will be paid in respect of the year.

While general inflation appears to be largely under control, the interim results have been impacted by the adverse effect on some borrowers of persistently high interest rates, the continued upward pressure of input prices and a challenging property market, based on a lack of affordability. Although most of the Group's borrowers have been resilient to these issues, some borrowers have seen their equity extinguished and in such circumstances we have been forced to appoint receivers to safeguard the Group's position. In doing so, we have had to write off loan balances of £364,000 in the period and, in many cases, we have not been able to re-employ our capital in new loans as quickly as we would seek to achieve in stronger markets. This has reduced the equity available to support new loans and has therefore depressed income.

Our wholesale banking facilities remain unchanged at £45 million (31 December 2023: £45 million) of which £2.5 million can be applied to loans secured by second charges. The Vector Holdings Limited loan facility reduced from £4 million to £3.5 million during the period.

Our strong capital base, our proven loan management systems and the experience of the executive management team has provided considerable comfort during this period. However, market conditions suggest that we are very unlikely to see a return to significant growth in the short to medium term. The reduction in the Group's loan book to £44.8m from £47.9m, during the period from 31 December 2023, is consistent with the longer holding periods before we have been able to redeem loans and then re-lend our equity, as described above.

Due to capital market conditions outside our control, we were not able to raise the equity we had intended on acceptable terms to grow the business in line with our previously stated strategy. In addition, in the last two years, economic pressure on the SME market sector have restricted our growth opportunities. Despite these conditions, our underlying intention remains to maximise the return to shareholders and to that end we believe it is in the best interests of shareholders to have the opportunity to sell their shares back to the Company under the Tender Offer.

We remain fully 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 results are based on the continued hard work and persistence of the executive team, to whom considerable thanks is due in these challenging business conditions. Thanks, are also due to my fellow Board members and our business partners.

Robin Stevens

Chairman

1 August 2024

VECTOR CAPITAL PLC

Chief Executive's Statement

For the six months ended 30 June 2024

Background

Our principal market continues to be SME borrowers that take loans to refurbish or develop land and property. 

Many of these borrowers continue to be faced with high building material costs, long lead times, cost overruns   and interest rates that have failed to fall in line with inflation. Banks and other lenders remain extremely cautious and opportunities for borrowers to re-finance developments remain limited. 

Stressed Loans

Our approach when borrowers experience problems is to be supportive where we believe that the circumstances justify this approach. Where we are not satisfied with the financial viability of a borrowers' loan, we work with the borrowers to give them time to sell or re-finance and, if necessary, appoint an LPA Receiver to sell the property.  The number of receiver appointments again increased in this period over previous years. 

Our expectation is that we will recover our capital in most cases and where possible 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 at the end the period and the impact on our results is within the margins we had stress tested. During the period, we wrote off £363,681 mainly on accrued interest and costs. Our strong capital base provides the Board with a high level of confidence that we can weather these continued challenging market conditions for many of our borrowers.

Interim Results

As a consequence of these challenging market conditions, unaudited profit before tax for the period was £707,000 (H1 2023: £1.3m) on a revenue of £2.5m (H1 2023: £2.9m). 

At 30 June 2024 the loan book was £44.8m (31 December 2023: £47.9m), and the consolidated net assets were £25.4m (31 December 2023: £25.5m). The loan balances are stated net of provisions of £928,000 at 30 June 2023 (December 2023: £928,000).

No interim dividend will be paid in respect of the six months ended 30 June 2024 (2023 1.0 pence).

Loan Book KPIs

	HY 2024 £'000	%	FY 2023 £'000	%
Residential	26,429	59.0%	26,623	55.5%
Commercial	7,955	17.8%	10,389	21.7%
Land & Development	5,063	11.3%	5,442	11.3%
Mixed	3,452	7.7%	3,547	7.4%
2nd charge	1,611	3.6%	1,523	3.2%
Other	268	0.6%	415	0.9%
	44,778	100.0%	47,939	100.0%

The loans we have issued to the various market segments that we serve remain broadly similar.

The average rate achieved during the period was 8.92% p.a. (June 2023: 10.18% p.a)

The average loan size was £418,000 spread over 107 live loans. (June 2023: £474,000)

Security held at 30 June 2024 was estimated at £75m giving an average LTV of 59.3% (June 2023: 58.1%).

VECTOR CAPITAL PLC

Chief Executive's Statement (cont.)

For the six months ended 30 June 2024

Operational review

Our strategy for the period has continued to be to seek to maintain high liquidity, with a correspondingly lower loan book and reduced wholesale borrowings.

Our pipeline is healthy with a steady stream of enquiries from our Broker network allowing us to be very selective on the deals that suit us.

Our wholesale banking rates have remained historically high inevitably increased. Our facilities are currently £45m sufficient for the foreseeable future.

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 headcount in the period. 

Outlook

These results are released alongside the Shareholders' Circular referring to a Tender Offer to buy back up to 11,244,385 issued ordinary 0.5p shares for 33p per share which will absorb up to £3.7 million, plus expenses, as a prelude to a withdrawal from the AIM Market. This will reduce the Company's ability to expand its loan book in the short to medium term, but in view of the generally challenging market conditions and limited expectations for expansion at our previously intended rate, we believe it is important to provide shareholders with the opportunity to withdraw their investment and re-invest in the market as they think fit. Vector is in a financial position that allows it to undertake the planned buy back and we hope to return to a growth path when market conditions improve.

Agam Jain

Chief Executive Officer

1 August 2024

VECTOR CAPITAL PLC

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2024

			Six months ended  30 June	Six months ended  30 June	Year ended 31 December
			2024	2023	2023
	Notes		£'000 (Unaudited)	£'000 (Unaudited)	£'000 (Audited)
Revenue	3		2,544	2,851	5,713
Cost of sales			(175)	(156)	(392)
Gross profit			2,369	2,695	5,321
Administrative expenses			(739)	(532)	(1,490)
Operating profit			1,630	2,163	3,831
Finance income			2	-	18
Finance costs			(925)	(889)	(1,782)
Profit on ordinary activities before taxation			707	1,274	2,067
Income tax expense	4		(177)	(305)	(487)
Profit after taxation			530	969	1,580
Other comprehensive income			-	-	-
Total comprehensive income attributable to the shareholders of the Company			530	969	1,580
Pro-forma basic and diluted earnings per share
attributable to the owners of the Company (pence)	9		1.17	2.14	3.49

VECTOR CAPITAL PLC

Condensed Consolidated Statement of Financial Position

For the six months ended 30 June 2024

	Notes		30 June 2024	30 June 2023	31 December 2023
			£'000 (Unaudited)	£'000 (Unaudited)	£'000 (Audited)
Non-Current assets
Property, plant and equipment	5		-	1	-
			-	1	-
Current assets
Trade and other receivables	6		45,555	49,422	48,746
Cash and bank balances			1,598	479	306
			47,153	49,901	49,052
Total Assets			47,153	49,902	49,052
Current liabilities
Trade and other payables	7		18,219	20,230	22,648
Income tax payable			72	307	169
			18,291	20,537	22,817
Non-Current liabilities
Trade and other payables	7		3,500	4,000	712
Total Liabilities			21,791	24,537	23,529
Equity
Share capital	8		226	226	226
Share premium			20,875	20,876	20,876
Group reorganisation reserve			188	188	188
Retained earnings			4,073	4,075	4,233
			25,362	25,365	25,523
Total Equity and Liabilities			47,153	49,902	49,052

VECTOR CAPITAL PLC

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2024

	Share capital	Share premium		Group reorganisation reserve		Retained profits		Total equity
	£'000	£'000		£'000		£'000		£'000
Balance at 1 January 2023	226	20,876		188		3,798		25,088
Profit for the six months ended 30 June 2022	-	-		-		969		969
Dividends paid	-	-		-		(692)		(692)
Balance at 30 June 2023	226	20,876		188		4,075		25,365
Profit for the six months ended 31 December 2023	-	-		-		612		612
Dividends paid	-	-		-		(452)		(452)
Balance at 31 December 2023	226	20,876		188		4,235		25,525
Profit for the six months ended 30 June 2024	-	-		-		530		530
Dividends paid	-	-		-		(692)		(692)
Balance at 30 June 2024	226	20,876		188		4,073		25,363

VECTOR CAPITAL PLC

Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2024

		Six Months ended 30 June	Six Months ended 30 June	Year ended 31 December
		2024	2023	2023
		£'000	£'000	£'000
		(Unaudited)	(Unaudited)	(Audited)
Cash flow from operating activities
Profit for the period before taxation		707	1,274	2,067
Adjustment for:
Finance cost		925	889	1,741
Depreciation			-	1
Finance income		(2)	-	(17)
Tax paid		(273)	(238)	(558)
Operating cash flows before movements in working capital		1,357	1,925	3,234
Decrease in trade and other receivables		3,191	4,575	5,251
Decrease in trade and other payables		(1,140)	(5,131)	(7,000)
Cash generated from operating activities		3,408	1,369	1,485
Interest paid		(925)	(889)	(1,741)
Net cash generated from/(absorbed in) operating activities		2,483	480	(256)
Cash flows from investing activities
Finance income		2	-	17
Net cash generated from investing activities		2	-	17
Cash flows (for)/from financing activities
(Paid to)/Introduced by Holding company		(500)	-	1,000
Amounts (drawn)/introduced by directors		(1)	3	2
Equity dividends paid		(692)	(692)	(1,145)
Net cash absorbed in financing activities		(1,193)	(689)	(143)
Net (decrease) in cash & cash equivalents		1,292	(209)	(382)
Cash and equivalent at beginning of period		306	688	688
Cash and equivalent at end of period		1,598	479	306

VECTOR CAPITAL PLC

Notes to the Interim Financial Statements

For the six months ended 30 June 2024

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 2024. These include unaudited comparatives for the six months ended 30 June 2023 together with audited comparatives for the year ended 31 December 2023.  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 2023 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 2024 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 (£). 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 2023. 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 2023.

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 Ltd		England and Wales		Commercial lending
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.

VECTOR CAPITAL PLC

Notes to the Interim Financial Statements

For the six months ended 30 June 2024

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 24	30 Jun 23	31 Dec 23
	(Unaudited £'000	(Unaudited)£'000	(Audited`) £'000
Cost
Brought forward	1	5	5
Disposals	-	-	(4)
Carried forward	1	5	1
Accumulated depreciation
Brought forward	1	4	4
Depreciation	-	-	1
Depreciation on disposals	-	-	(4)
Carried forward	1	4	1
NBV c/fwd	-	1	-
NBV b/fwd	-	1	1

6.   Trade and other receivables

		30 Jun 24 (Unaudited)	30 Jun 23 (Unaudited)	31 Dec 23 (Audited)
Current		£'000	£'000	£'000
Trade receivables		43,446	48,810	45,891
Prepayments and accrued income		777	612	808
Total		44,223	52,223	46,699
Non-Current
Trade receivables		1,332	-	2,047
		45,555	52,223	48,746

      At 30 June 2024 37% of trade receivables were held by third party secure funding via the block discounting facility (30 Jun 23: 48%, 31 Dec 23: 52%).

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

VECTOR CAPITAL PLC

Notes to the Interim Financial Statements

For the six months ended 30 June 2024

7.   Trade and other payables

		30 Jun 24 (Unaudited)	30 Jun 23 (Unaudited)	31 Dec 23 (Audited)
Current		£'000	£'000	£'000
Trade payable		11	38	9
Amounts owed to parent company		-	-	4,000
Other payables		17,401	20,082	18,483
Accruals and deferred income		114	110	156
Total		17,526	28,140	22,648
Non-Current
Amounts owed to parent company		3,500	4,000	-
Other payables		693	-	712
		4,193	4,000	712

Other payables includes loan finance of £16,800k (30 Jun 23: £20,069k, 31 Dec 23: £19,167k) which is secured against associated loans assigned by way of block discounting.

8.   Called up share capital

Authorised	Nominal value		30 Jun 24 (Unaudited)	30 Jun 23 (Unaudited)	31 Dec 23 (Audited)
			£'000	£'000	£'000
45,244,385 Ordinary	£0.005		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 24	30 Jun 23	31 Dec 23
	(Unaudited)	(Unaudited)	(Audited)
	£'000	£'000	£'000
Total comprehensive income for the period, used in the calculation of total basic and diluted profit per share
	530	969	1,580
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)	1.17	2.14	3.49

VECTOR CAPITAL PLC

Notes to the Interim Financial Statements

For the six months ended 30 June 2024

10. Significant related party transactions

      The Group owed £3.5 million to its parent company, Vector Holdings Ltd (30 Jun 23 £4 million, 31 Dec 23: £4 million).  During the period the Company paid interest totalling £112k to Vector Holdings Ltd in relation to the balance owed as per the loan agreement (30 Jun 23: £97k, 31 Dec 23: £222k).

During the period the Company paid £520k in dividends to Vector Holdings Ltd (30 Jun 23: £520k, 31 Dec 23: £860k).

11. Subsequent events

      On 2^nd August 2024 the Company issued a Tender Offer to acquire up to 11,244,385 ordinary shares at a price of 33 p per share and announced the intention to withdraw from the AIM market of the London Stock Exchange.  This is a non-adjusting post balance sheet event.

12. Half Year Report

A copy of this interim report, as well as the annual statutory accounts to 31 December 2023 are available on the Company's website at www.vectorcapital.co.uk/investors/corporate-documents

 

END