Non-Standard Fin - Audited full year results to 31 December 2022

RNS Number : 8457X

Non-Standard Finance PLC

28 April 2023

PRESS RELEASE

Non-Standard Finance plc

('Non-Standard Finance', 'NSF', the 'Company' or the 'Group')

Audited full year results to 31 December 2022

28 April 2023

· The Group continued to face significant regulatory and financial challenges in 2022, many of which have continued into 2023.

· The Net loan book of the Group reduced from £208m to £177m as a result of the administration of the home credit division and continued collect out of guarantor loans. Despite the ongoing uncertain macroeconomic and regulatory environment, the net loan book of the branch-based lending division increased by 6% from £157.2m to £167.0m.

· Normalised and reported revenue was down 25% to £98.3m (2021: £131.4m)

· Normalised loss before tax of £24.6m (2021: normalised loss before tax of £16.7m)

· Total exceptional charges of £31.8m (2021: £12.9m) meant that the reported loss before tax was £56.4m (2021: reported loss of £29.6m).

· Following the impact of the Covid-19 pandemic and regulatory issues, the home credit division went into administration on 15 March 2022.

· Regulatory reviews resulted in the guarantor loans division being placed into managed run-off in 2021.

· The launch of a scheme of arrangement (the "Scheme") in March 2023 is designed to reach a resolution with regard to the payment of redress to customers with valid claims both in respect of the guarantor loans division and the branch-based lending division (although there were no systemic issues with branch-based lending, claims in relation to the division have been included in the Scheme to ensure an equitable treatment of customers).

· Should the Scheme be sanctioned, the Group's intention is to proceed with its planned restructuring and recapitalisation (the "Proposed Recapitalisation") to fund the partial payment of redress claims, restore the Group's balance sheet and return the branch-based business to profitable trading.

· The Proposed Recapitalisation has the support in principle of NSF's largest shareholder and the Group's secured lenders, subject to agreement on the terms and other conditions described below and, in the case of NSF's largest shareholder, further diligence on and its assessment of the Group's revised business plan and financial projections. Completion of the Proposed Recapitalisation is subject to the agreement of terms between lenders and the Group's largest shareholder, and a number of conditions, including Court sanction of the Scheme, shareholder approval, the take-up of shares under the equity raise and execution of definitive documents. Assuming all the above outlined conditions are satisfied ("the Conditions") NSF expects the Proposed Recapitalisation to complete at the end of Q2 2023 or the start of Q3 2023.

· The Group has also agreed with its secured lenders to implement an alternative transaction (the "Alternative Transaction") if the Scheme is sanctioned but the Conditions to the Proposed Recapitalisation are not satisfied and / or the Proposed Recapitalisation fails, which would preserve the Group's branch-based lending business as a going concern but which, if implemented, would result in no recovery for the Group's current shareholders,

· Should the Scheme fail, there would be a material risk of the entire Group becoming insolvent.

· Cash balances decreased to £32.8 million (2021: £114.6 million) predominantly because of the repayment of the Group's revolving credit facility and a repayment towards the debt facility.

· Whilst the Group's loan to value ratio was higher than the level permitted under its loan to value covenant at each quarter end in 2022, it remains a going concern and has received temporary waivers to enable it to pursue a Scheme and raise additional capital which would reduce loan to value levels, fund customer redress, and strengthen the Group's balance sheet.

· Current trading - Since the start of 2023 we have seen growth in loan issuance in branch-based lending and better than expected collection performance, and are consequently trading ahead of budget.

Financial summary

Year to 31 December	2022 £000	2021 £000	% change
Normalised revenue¹	98,337	131,387	-25%
Reported revenue	98,337	131,387	-25%

Normalised operating profit¹	4,460	9,299	-52%
Reported operating profit	4,460	7,092	37%

Normalised loss before tax¹	(24,591)	(16,680)	-47%³
Reported loss before tax	(56,359)	(29,610)	-90%³

Normalised loss after tax¹	(24,591)	(16,755)	-47%³
Reported loss after tax	(56,359)	(29,685)	-90%³

Normalised earnings per share²	(7.87)p	(5.36)p	-47%³
Reported (loss) per share	(18.04)p	(9.50)p	-90%³

Full-year dividend per share	0.00p	0.00p	0%

1 See glossary of alternative performance measures and key performance indicators in the Appendix.

2 Basic and diluted (loss) earnings per share is calculated as normalised loss after tax of £(24.6)m (2021: £(18.6)m) divided by the weighted average number of shares in issue of 312,437,422 (2021: 312,437,422).

3 Adverse movement.

Jono Gillespie, Group Chief Executive Officer, said

"Despite facing ongoing regulatory and liquidity challenges throughout the year, the underlying performance of Everyday Lending Ltd (trading as Everyday Loans) was pleasing as it sought to rebuild the loan book.

The Group is working hard to resolve the regulatory challenges faced with the convening hearing for the Group's Scheme of Arrangement taking place later today.

Having worked extensively with the Scheme Customer Committee, our lenders and key shareholder to reach a sustainable solution for the business and partial payment of customer redress, we are hopeful that the Scheme will progress and be sanctioned.

We are hopeful that the Scheme process will conclude towards the end of June 2023 and that this will then enable us to proceed with the recapitalisation of the business, through either the Proposed Recapitalisation or Alternative Transaction as previously announced.

If successful, the Proposed Recapitalisation or Alternative Transaction fund the partial payment of redress claims and underpin the future growth of the Group's branch-based lending business - Everyday Loans.

The Group's loan to value ratio was higher than the levels permitted at each quarter end in 2022, but we have continued to trade throughout with the support of our secured lenders, who have granted fortnightly waivers (currently until 17 May 2023) pending a conclusion to the Scheme process and the recapitalisation (or alternative lender-led transaction).

If the Scheme is not sanctioned by the Court, or the Scheme is sanctioned but the Proposed Recapitalisation and the Alternative Transaction fail, then the Group would remain insolvent and the most likely outcome would be a Group-wide insolvency (most likely administration), resulting in no return for the current shareholders, a significantly reduced return for secured lenders and minimal or no cash recovery for customers with valid redress claims. In the event that the Scheme is sanctioned, and the Alternative Transaction takes place (due to the failure of the Proposed Recapitalisation), there would be no recovery for the Company's shareholders.

It is clear that consumers face a difficult period as the cost of living crisis continues. However, experience suggests this could increase the demand for credit and present a significant opportunity for companies in a non-standard credit sector that fulfils a vital role by supporting millions of consumers who have limited savings. Previous recessions have shown that prime lenders tend to be particularly risk averse, tightening their lending criteria and leaving a large and expanding pool of higher quality applicants seeking access to regulated and responsible credit markets. Assuming we are able to raise capital as planned, the Group will be well placed to serve any such increase in demand."

Context for results

On 15 March, 2022 it was announced that the Group's home credit division had gone into administration and so the 2022 results include the home credit division up to 14 March 2022, after which the division was derecognised from the Group in line with IFRS accounting standards. The results therefore include exceptional items totalling £19.4m in relation to the derecognition and impairments associated with the home credit division. Exceptional items also include £12.4m in relation to the Scheme being pursued by the Group with further detail provided below (refer note 6 to the financial statements for further information).

Normalised divisional results

The table below provides an analysis of the 'normalised' results for the Group for the 12-month period to 31 December 2022. Management believes that by removing the impact of exceptional items, the normalised results provide a clearer view of the underlying performance of the Group

Year ended 31 Dec 2022 Normalised¹	Branch-based lending £000	Home credit £000	Guarantor loans £000	Central costs £000	Group £000
Revenue	84,470	7,315	6,552	-	98,337
Other operating income	173	-	-	-	173
Modification loss	(250)	-	(12)	-	(262)
Derecognition loss	-		-	-	-
Impairments	(26,704)	(2,781)	1,595	-	(27,890)
Administration expenses	(50,493)	(5,065)	(7,300)	(3,040)	(65,898)
Operating profit/(loss)	7,196	(531)	835	(3,040)	4,460
Finance cost	(14,925)	(257)	(2,000)	(11,869)	(29,051)
Loss before tax	(7,729)	(788)	(1,165)	(14,909)	(24,591)
Taxation	(102)	123	-	(21)	-
Loss after tax	(7,831)	(665)	(1,165)	(14,930)	(24,591)

Normalised loss per share					(7.87)p
Dividend per share					0.00p

Year ended 31 Dec 2021 Normalised¹	Branch-based lending £000	Home credit £000	Guarantor loans £000	Central costs £000	Group £000
Revenue	79,940	38,401	13,046	-	131,387
Other operating income	384	587	1	11	983
Modification loss	(1,383)	-	(1,478)	-	(2,861)
Derecognition loss	-		-	-	-
Impairments	(18,994)	(6,230)	1,061	-	(24,163)
Administration expenses	(46,294)	(34,962)	(10,695)	(4,096)	(96,047)
Operating profit/(loss)	13,653	(2,204)	1,935	(4,085)	9,299
Finance cost	(14,491)	(1,102)	(4,350)	(6,036)	(25,979)
Loss before tax	(838)	(3,306)	(2,415)	(10,121)	(16,680)
Taxation	48	158	299	(580)	(75)
Loss after tax	(790)	(3,148)	(2,116)	(10,701)	(16,755)

Normalised loss per share					(5.36)p
Dividend per share					0.00p

¹ See glossary of alternative performance measures and key performance indicators in the Appendix.

Net loan book	31 December 2022	31 December 2021
	£m	£m
Branch-based lending	167.0	157.2
Guarantor loans	10.1	26.8
Home credit²	-	24.0
Total	177.1	208.0

² Home credit division placed into administration on 15 March 2022 and therefore derecognised from the Group.

Online presentation on 28 April 2023

There will be webcast presentation of the results at 09:30 on 28 April 2023 given by Jono Gillespie, Group Chief Executive. To access the webcast, please register here or via the Group's website or dial in using the number below. A copy of the slides presented will also be available on the Group's website, http://www.nsfgroupplc.com later today.

For more information:

Non-Standard Finance plc

Jono Gillespie Group Chief Executive

Sarah Day Group Company Secretary and Chief ESG Officer

+44 (0) 20 3869 9020

H/Advisors Maitland

Neil Bennett

Finlay Donaldson

+44 (0) 20 7379 5151

Group Chief Executive's Report

Summary

The past year presented several challenges for the Group as we sought to resolve a number of outstanding regulatory issues, dealt with the impact of rising inflation and an uncertain UK economic environment on our operations whilst also managing the impact on our balance sheet which remains in a net liabilities position.

Following the reviews which started with the FCA's multi-firm review into the guarantor loan business in March 2020, it also became clear that Loans at Home, the Group's home credit business (trading out of the legal entity S.D.Taylor Limited), was no longer viable and so it went into administration on 15 March 2022. Whilst deeply saddened and disappointed with this outcome, it was clear that administration was the only option available to preserve value for creditors. As the operations and activities of Loans at Home were separate from the rest of the Group, the Board of NSF confirms that, having received certain waivers from the Group's secured lenders, the administration of Loans at Home has had minimal impact on the rest of the Group's business.

In addition, the Group has been in the process of developing an appropriate redress scheme for Guarantor Lending customers since August 2020 and more latterly development of the Scheme since June 2022 to address redress claims in relation to its historical unaffordable lending. As noted in the 2022 half year announcement, although the independent review of the branch-based lending division carried out in 2021 identified no systemic issues requiring redress, as this division and the guarantor loans division (now in collect-out) trade out of the same legal entity (Everyday Lending Limited), the Scheme encompasses potential claims from both divisions in order to ensure equitable treatment of customers. The practice statement letter for the scheme was published on 17 March 2023 and the Board considers that there is a reasonable prospect of the Scheme being successfully sanctioned by the Court.

Due to the developments described above, the Group is seeking to progress the Proposed Recapitalisation or Alternative Transaction in readiness, should the Court sanction the Scheme. As the Group's loan to value ratio during the year was higher than the level allowed under its loan to value covenant, the Group has received the requisite waivers and extensions to avoid a covenant breach so that it can progress with the Scheme and, if successfully sanctioned by the Court, the Proposed Recapitalisation. The Group's secured lenders continue to provide temporary waivers and have expressed their support for the business. As such, they have agreed to enter into the Alternative Transaction in the event that the Scheme is successfully sanctioned, but that the Conditions, to the Proposed Recapitalisation are not satisfied, such that the branch-based lending business would be preserved as a going concern, but which, if implemented, would result in no recovery for the Group's current shareholders and the Company (ultimate parent company) may enter into an insolvency process. Both the Proposed Recapitalisation and the Alternative Transaction include both significant debt write offs and extensions to the term of the Group's existing debt facilities to support the business going forward.

The Group's strong market position, in combination with a number of both external and internal profit drivers, means that the Board is confident that, subject to the timely completion of the Proposed Recapitalisation or Alternative Transaction (which themselves are subject to the sanctioning of the Scheme and the Conditions), the prospects for branch-based lending remain positive, driven by a planned recovery of ground lost over the past two years that should result in a marked improvement in the Group's financial performance. Further details regarding our future plans can be found in the 2022 financial review below.

Whilst there remain a number of material uncertainties which may cast significant doubt on the ability of both the Group and Company to continue as a going concern and remain viable, it remains the Directors' reasonable expectation that, if the Scheme and the subsequent Proposed Recapitalisation go ahead, the Group and Company will have raised sufficient capital in the timeframe required and will continue to operate and meet their respective liabilities as they fall due for the next 12 months and beyond. The Board has therefore concluded that, whilst a material uncertainty remains, the business is viable and remains a going concern.

If successful, the Proposed Recapitalisation or Alternative Transaction will reduce high levels of gearing, fund the partial payment of redress claims and underpin the future growth of the Group's branch-based lending business. In addition, whilst there would be no need for access to further debt funding beyond the extension of the term of the Group's existing debt facilities in the short term, given the significant cash balance that would then be at the Group's disposal, it is hoped that in due course, the Group would be better placed to broaden its sources of debt funding.

Without the successful completion of the Scheme and the Proposed Recapitalisation (or the Alternative Transaction in the event the Conditions, to the Proposed Recapitalisation are not satisfied, which, if implemented, would result in no recovery for the Group's current shareholders and the Company (ultimate parent company) may enter into an insolvency process), the balance sheet remains deeply insolvent. In the event that the Scheme is not sanctioned by the court, or in the event that both the Proposed Recapitalisation and the Alternative Transaction fail, there would be a very significant likelihood of a Group-wide insolvency (most likely administration), resulting in no return for current shareholders and a significantly reduced return for secured lenders. However, the Directors continue to believe there is a reasonable prospect of resolving this position through the Scheme, which was recently launched on 17 March 2023, and the Proposed Recapitalisation with the Group's largest shareholder and secured lender support, which remains subject to the Conditions, or, in case of the Alternative Transaction, the support of the secured lenders (noting, as above, that the Alternative Transaction may result the Company (ultimate parent company) entering into an insolvency process).

2022 full year results

Since emerging from the effects of the pandemic, a new set of economic challenges has presented itself, particularly the inflationary environment causing a cost-of-living crisis. However, these circumstances have proven to be supportive for the need for non-standard finance and created a liquidity gap for those not served by traditional lenders.

The Group reported an increased normalised loss before tax of £24.6m (2021: normalised loss before tax of £16.7m). Once again, the full year results were impacted by a number of non-operating items as well as the home credit division being placed into administration and derecognised from the Group on 15 March 2022. The guarantor loans division collect out continues to progress well whilst the branch-based lending business continues to deliver good financial performance driven by higher revenues and loan book growth. Group revenues decreased 25% from £131.4m to £98.3m due to the aforementioned derecognition of the home credit division in Q1 and collect out of guarantor loans, however this was partly offset by the higher revenue at branch-based lending which increased 6% to £84.5m (2021: £79.9m) as a result of higher revenue yields, with yields having reduced during 2020 and 2021 following an increase in the number of customers utilising forbearance measures during the pandemic. Impairments at branch-based lending were higher in the current period at £26.7m (2021: £19.0m) due to 2021 benefitting from lower lending volumes, however despite this, collections performance remained strong throughout 2022. Administrative expenses for the Group were lower by 31% at £65.9m (2021: £96.0m) as 2021 included a full year of the home credit division. Excluding this, the Group saw savings in expenses at its guarantor loans division with a decrease of 32% to £7.3m (2021: £10.7m) as the division continues to wind down and savings in staff costs, professional fees and complaints costs are realised. The branch-based lending division however saw increased spend on employee costs following investment in expanding the operational headcount to drive the growth in new lending resulting in administrative expenses increasing by 9%. The Group also remains in a net liability position, due to the net losses over the past few years, the derecognition of the home credit division and the continued non-recognition of deferred tax assets. The Group is progressing with plans to resolve its regulatory issues via the Scheme and support from the Group's secured lenders and largest shareholder (subject to the Conditions), means the Board continue to believe that there is a reasonable prospect of resolving the current position subject to the implementation of the Scheme and the Proposed Recapitalisation (or the Alternative Transaction).

A summary of the other key performance indicators for each of our businesses for 2022 is shown below:

Key performance indicators¹ Year ended 31 Dec 22	Branch-based lending	Guarantor loans³
Loan book growth	6.2%	(62.1)%
Revenue yield	52.3%	38.3%
Risk adjusted margin	35.8%	47.7%
Impairments/revenue	31.6%	(24.4)%
Impairments/average net loan book	16.5%	(9.3)%
Cost: income ratio	59.8%	111.4%
Operating profit margin	8.5%	12.8%
Return on assets	4.5%	4.9%

Key performance indicators¹ Year ended 31 Dec 21	Branch-based lending	Home credit²	Guarantor loans³
Loan book growth	(8.3)%	(10.8)%	(55.2)%
Revenue yield	48.8%	157.2%	32.1%
Risk adjusted margin	37.2%	131.7%	34.7%
Impairments/revenue	23.8%	16.2%	(8.1)%
Impairments/average net loan book	11.6%	25.5%	(2.6)%
Cost: income ratio	57.9%	91.0%	82.0%
Operating profit margin	17.1%	(5.7)%	14.8%
Return on assets	8.3%	(9.0)%	4.8%

1 See glossary of alternative performance measures and key performance indicators in the Appendix.

2 The home credit division went into administration on 15 March 2022.

3 The Guarantor Loans Division was placed into managed run-off on 30 June 2021 and did not issue any new loans in 2021 and 2022.

The reduction in the net loan book from the collect out of the guarantor loans division and administration and subsequent derecognition of the home credit division was the main driver behind the 25% reduction in normalised and reported revenue to £98.3m (2021: £131.4m). Higher interest rates in 2022 also contributed to 12% higher finance costs in the year. This meant that the Group produced a normalised loss per share of 7.87p (2021: normalised loss per share of 5.36p).

The Group's 2022 and 2021 reported, or statutory results were both affected by exceptional items, a summary of which is shown in the table below. The 2022 results saw greater impact from the derecognition and impairments related to the home credit division and the provision for customer redress and scheme costs.

Year ended 31 December Exceptional items	2022 £000	2021 £000
Advisory fees	-	(1,580)
Write down of balance sheet relating to home credit division	-	(8,542)
Loss on derecognition of the home credit division	(5,647)	-
Impairment of intercompany receivable with home credit division	(13,714)	-
Scheme of arrangement customer redress and costs	(12,407)	(2,207)
Restructuring costs	-	(601)
Total	(31,768)	(12,930)

The Group reported a statutory loss before interest and tax of £27.3m (2021: loss before interest and tax of £3.6m) and a statutory loss before tax of £56.4m (2021: £29.6m).

A summary of the performance of each division in 2022 is given below with further details in the 2022 financial review.

Branch-based lending

While the impact of the pandemic on lending volumes meant that the net loan book declined in both 2020 and 2021, the positive recovery in lending volumes has resulted in the net loan book returning to growth in 2022 and it ended the year up 6% at £167.0m (2021: £157.2m). We continually look to enhance our lending processes, including the assessment of creditworthiness and the refinement of credit scorecards and strategies. Whilst acutely aware of the cost-of-living crisis, the collections performance of the business remains ahead of expectation with customer payment levels particularly strong, whilst early settlements continue below pre-pandemic levels. Delinquency performance has returned to historically normal levels. The nature of IFRS 9 accounting meant that lower lending volume in the prior years also helped to reduce impairment charges however, as lending volumes have continued to recover throughout 2022, impairment rates are gradually seeing a corresponding reversal of the recent low levels, though remain below expectations. The result of this was the division reported a normalised operating profit of £7.2m (2021: £13.7m). The impact of higher finance costs and exceptional costs relating to the Scheme meant the division reported a statutory loss before tax of £20.1m (2021: loss before tax of £0.8m).

The Board continues to believe that the branch-based lending division has potential for future growth once the Group has resolved its outstanding regulatory issues and completed the planned Proposed Recapitalisation or Alternative Transaction (noting, as above, that the Alternative Transaction may result in the Company (ultimate parent company) entering into an insolvency process).

Although the independent review of the Group's branch-based lending business carried out in 2021 identified no systemic issues requiring redress, since this business and the guarantor loans division trade out of the same legal entity (ELL), the Scheme will encompass potential claims from both businesses to ensure equitable treatment of customers. As a result, provisioning for the scheme redress and operational costs have now been included within the branch-based lending reporting.

As outlined below, due to the need to launch the Scheme which encompasses both branch-based lending and guarantor loan customers, to ensure equitable treatment of customers within the same legal entity, an added exceptional charge for Scheme costs and customer redress of £12.4m has been recorded in the 2022 accounts.

Home credit

The Group's home credit division, which traded as Loans at Home ('LAH') out of S.D.Taylor Limited, was placed into administration on 15 March 2022. In the first two and a half months of the year the division performed ahead of budget although it delivered a negative contribution with a normalised operating loss of £0.5m (2021: normalised operating loss £2.2m).

In the current period, exceptional items of £5.6m in relation to losses on derecognition of the home credit division were recognised as well as an additional £13.7m (2021: £nil) of impairments of related receivable balances held with the division in order to reflect the fact that these may not be recovered directly by the Group. Whilst the Group will not recover the balances held directly with LAH following the conclusion of the administration, as LAH remains a guarantor of the Group's financing facilities, proceeds from the administration will be paid directly to its secured lenders, thereby reducing the external debt balance held by the Group at that point. During H2 2022 £10m of such proceeds were paid from the LAH administration and a further £3m in February 2023.

Guarantor loans

The Group's guarantor loans division was placed into a managed run-off on 30 June 2021. Since then, the Group has continued to collect out its loan book balance with the result that the division delivered a positive contribution to normalised operating profits in the year.

The loan book, net of provisions, has now fallen to £10.1 million (2021: £26.8m) and the Group continues to focus on collecting out the remaining book. The ELL Directors, supported by the Group Directors, decided to pursue the Scheme to address the Group's redress liabilities. As noted in the 2022 Half Year announcement, although the independent review of the branch based lending division carried out in 2021 identified no systemic issues requiring redress, as this division and the guarantor loans division (now in collect-out) trade out of the same legal entity (ELL), the Scheme encompasses potential claims from both divisions in order to ensure equitable treatment of customers.

The FCA's current views in relation to the Scheme are set out in its letter of 25 April 2023. The FCA has stated that it does not, at this stage, anticipate that it will oppose the Scheme from being sanctioned should the requisite majorities of Scheme Creditors vote in favour of the Scheme. The FCA has confirmed that it does, however, fully reserve its position in respect of the Scheme and its right to object to the Scheme in due course, if the FCA considers it appropriate to do so

Liquidity, funding and going concern

As at 31 December 2022 the Group had cash at the bank of £32.8m (2021: £114.6m) and gross borrowings of £255.0m (2021: £330.0m). As at 31 March 2023, cash balances were £15.8m and gross borrowings reduced to £252m.

The Group's active loan facility comprises a £285m term loan facility that matures in August 2023 ('Existing Facilities'), which at the year end had been partially repaid, with £255m remaining drawn down at 31 December 2022. Having received appropriate waivers from its secured lenders ensuring that the administration of Loans at Home would have minimal impact on the rest of the Group, the Board and its advisers have discussed and reached agreement on the extension of the existing facilities and the terms under which interest is paid, dependent upon the successful sanctioning of the Scheme.

The Group's multi-year £200m securitisation facility, which was undrawn at the start of the year, was closed during the course of the year as it was unlikely to have been available for use, owing to the associated covenant requirements embedded in the facility agreement.

As noted in the 2022 Half Year Results, the Group's subsidiary S.D. Taylor Limited (Loans at Home) was placed into administration on 15 March 2022. As the operations and activities of Loans at Home were separate from the rest of the Group, having received certain waivers from the Group's secured lenders, the administration of Loans at Home has had minimal impact on the existing funding arrangements of the Group.

For the quarters ended 31 March 2022, 30 June 2022, 30 September 2022 and 31 December 2022, the Group's loan to value (LTV) ratio was higher than the level permitted under its LTV covenant. The Group has agreed extensions with its secured lenders such that the LTV covenant will not be formally tested, and no covenant breach or event of default will arise, until the Group provides its compliance certificates for the aforementioned quarter dates. The date on which the Group is required to supply these compliance certificates has been extended until 17 May 2023, with a mechanism for this date to be extended further with lender support.

The Group is now pursuing the Scheme in order to provide certainty as to the amount that will be paid to customers with valid redress claims, which, as explained above, is one of the Conditions to the Group's largest shareholder and secured lenders being willing to participate in the Proposed Recapitalisation (or the Alternative Transaction). Although the independent review of the Group's branch-based lending division carried out in 2021 identified no systemic issues requiring redress, as this division and the guarantor loans division (now in collect-out) trade out of the same legal entity (Everyday Lending Limited), the Scheme encompasses potential claims from both divisions in order to ensure equitable treatment of customers. On 17 March 2023, the Group sent out a practice statement letter to its creditors and a first court hearing is scheduled for 28 April 2023.

The Group and Company can reasonably expect to raise sufficient new capital to enable them to continue to operate and meet their respective liabilities as they fall due for the next 12 months. The Board has therefore adopted the going concern basis of accounting. The Board's position is, in part, informed by the fact that the Group's largest shareholder and secured lenders remain supportive of the Proposed Recapitalisation subject to the Conditions, while the Group also has contractual commitments from its secured lenders to support the Alternative Transaction (noting, as above, that the Alternative Transaction may result in the Company (ultimate parent company) entering into an insolvency process and, that although the Group has contractual commitments from its secured lenders to support the Alternative Transaction, there is a risk that it will not be possible to implement either the Proposed Recapitalisation nor the Alternative Transaction. In these circumstances, if neither the Proposed Recapitalisation or the Alternative Transaction has been implemented by 31 December 2023, it will not be possible to pay the Scheme fund into a nominated trust account and the Scheme will fail).

In adopting the going concern assumption in preparing the financial statements, the Directors have considered the activities of its principal subsidiaries, as well as the Group's principal risks and uncertainties as set out in the Governance Report and Viability Statement within the Group's 2022 Annual Report.

The assumption of support from the Group's largest shareholder and secured lenders for the Proposed Recapitalisation and the extension of existing financing facilities and the satisfactory conclusion of regulatory and redress matters within or close to the assumptions made in the Group's base case, each as outlined above and in the Conditions, form a significant judgement of the Directors in the context of approving the Group's going concern status (see note 1 to the financial statements).

The Board will continue to monitor the Company and the Group's financial position (including access to liquidity and balance sheet solvency) carefully as a better understanding of the impact of these various factors are developed. The Board recognises the importance of the success of the Scheme and the Proposed Recapitalisation to mitigate the uncertainties noted above and to support the future growth prospects of the Group. If the Scheme was not to be sanctioned or if the Group was otherwise unable to implement the Proposed Recapitalisation (or the Alternative Transaction in the event the Conditions, to the Proposed Recapitalisation are not satisfied) following the successful sanctioning of the Scheme, there would be a material risk of the Group entering insolvency.

Regulation

Concluding all the Group's outstanding regulatory issues has been a key priority over the past 24 months. As previously outlined, whilst the conclusion from the two independent reviews carried out at the request of the FCA was that there was no requirement for systemic customer redress in branch-based lending, the Directors of the Group's home credit business, Loans at Home (trading out of the legal entity S.D. Taylor Limited), reluctantly concluded that it was no longer viable and so the business was put into administration on 15 March 2022. As the operations and activities of Loans at Home are separate from the rest of the Group and following the receipt of certain waivers from the Group's secured lenders. The administration of Loans at Home has had minimal impact on the rest of the Group's business. As a result, the Group is fully committed to the growth of its branch-based lending business.

Scheme

The Group has decided to pursue the Scheme and, as noted in the half year 2022 announcement, although the independent review of the Group-based lending division carried out in 2021 identified no systemic issues requiring redress, as this division and the guarantor loans division (now in collect-out) trade out of the same legal entity (ELL), the Scheme encompasses potential claims from both divisions in order to ensure equitable treatment of customers.

As set out in the Practice Statement Letter as published on 17 March 2023, the Scheme will compromise:

· subject to certain limited exceptions, the redress claims (i.e. claims in relation to any activity which occurred on or before 31 March 2021 in connection with a loan provided by Everyday Loans, George Banco or Trust Two; and

· case fees owed to the Financial Ombudsman Service arising from complaints referred to the FOS on or after 17 March 2023 in relation to any activity which occurred on or before 31 March 2021 in connection with a loan provided by Everyday Loans, George Banco or Trust Two (the "FOS Fees").

Under the current expected timetable, the Court convening hearing will be held on 28 April 2023 and the Court sanction hearing on 22 June 2023, with the creditors' meeting where the scheme creditors will vote on the Scheme being held virtually between these dates.

The Proposed Recapitalisation and Alternative Transaction

The Scheme is a key component of the Proposed Recapitalisation, which will ensure the future of the Group and the Everyday Loans business. The Group's intention is for the Proposed Recapitalisation to be implemented shortly following Court sanction of the Scheme.

The Proposed Recapitalisation will involve:

· NSF raising gross proceeds of approximately £95 million through a public equity raise, part of which will be applied towards the cost of the equity raise and part of which will be used to fund the Scheme Fund and cover the costs of the Scheme, with the remainder being invested in the Everyday Loans business;

· the Group's secured lenders releasing a portion of their secured debt in exchange for shares in NSF;

· the extension of the maturity date under the Group's secured debt facilities from August 2023 to June 2027; and

· the Company and its advisers exploring the cancellation of NSF's listing on the Main Market of the London Stock Exchange plc and its admission of its enlarged share capital to trading on AIM.

The Proposed Recapitalisation has the support in principle of NSF's largest shareholder and the Group's secured lenders, subject to the Conditions.

NSF expects the equity raise to include both a placing with new and existing institutional investors as well as an open offer component, whereby existing shareholders will be provided with an opportunity to participate in the capital raise. The structure, detailed terms and viability of the equity raise are expected to be confirmed in Q2 2023 following consultation with major shareholders and potential investors.

Although the Proposed Recapitalisation will ensure the future of the Group and the Everyday Loans business, it will materially dilute the interests of the Company's existing equity holders, most likely to negligible value, unless they choose to participate in the equity raise.

Completion of the Proposed Recapitalisation is subject to the Conditions. Assuming all the Conditions are satisfied, NSF expects the Proposed Recapitalisation to complete at the end of Q2 2023 or the start of Q3 2023.

The Group has also agreed with its secured lenders to implement the Alternative Transaction if the Scheme is sanctioned but the Conditions to the Proposed Recapitalisation are not satisfied. The Alternative Transaction would involve a transfer of the ownership of the Group's business to the secured lenders (pursuant to a share pledge enforcement) in exchange for the release of a portion of their secured debt and the provision of a new lending facility. Part of the proceeds from this new lending facility would be used to fund the Scheme Fund and cover the costs of this Scheme. Under the Alternative Transaction, there would be no recovery for the Company's shareholders and the Company (ultimate parent company) may enter into an insolvency process.

However, if the Scheme is not sanctioned by the Court, or the Scheme is sanctioned but the Proposed Recapitalisation and the Alternative Transaction both fail, then the Group would remain insolvent and the most likely outcome would be a Group-wide insolvency (most likely administration), resulting in no return for the Company's shareholders, a significantly reduced return for secured lenders and minimal or no cash recovery for customers with valid redress claims. In the event that the Scheme is sanctioned and the Alternative Transaction takes place (due to the failure of the Proposed Recapitalisation), there would be no recovery for the Company's shareholders.

Complaint handling

Whilst the overall number of complaints received by the Group reduced in 2022, this was largely due to the closure of Loans at Home which had, until that point, been on an upwards trend of complaint volumes. The remaining two divisions saw contrasting trends where branch-based lending increased by 14% and guarantor loans fell by 23%. The majority of complaints came from three CMCs in branch-based lending, all of which sent more complaints than the previous year, and one CMC in guarantor loans. FOS decisions fell significantly across these two divisions after FOS aimed to clear their outstanding backlog in the early part of the year.

Consumer Duty

One of the most significant regulatory initiatives in recent years was the introduction of the new consumer duty which aims to raise the standard for how firms should be treating consumers. The new principle, rules and guidance were issued in July 2022 with an expectation to implement within 12 months. Following on from the issued guidance, the business has created a gap analysis, a detailed action plan and an implementation plan to fulfil the requirements ahead of the July 2023 deadline. ELL Directors sit on a steering group to oversee the project, whilst an experienced project manager has been employed to drive the project forward and report back to the steering group. Six separate work streams consisting of senior management have been, and are currently working on, ensuring all actions are satisfactorily completed within the expected timeframes. Much of the work done over the past few years has put the branch-based lending in an excellent position ahead of the new regulations. However, the project remains a priority and the business is confident that all elements of the consumer duty will be met.

Further details on the consumer duty and the other pertinent regulatory developments during 2022 and into 2023 are available on the Group's website: www.nsfgroupplc.com.

Current trading and outlook, no final dividend

Whilst the fallout from the pandemic, Brexit and more recently the Ukrainian crisis means that macroeconomic uncertainty remains high, recent trading in branch-based lending and the collect out of guarantor loans has been slightly ahead of management's expectations. Lending volumes in the first quarter of 2023 were a little better than expected and collections and impairment performance have been much better with the result that the Group's overall early performance for the year to date has been promising.

Given the financial position of the Company and the fact that as at 31 December 2022 the Company did not have any distributable reserves, no final dividend has been declared. Assuming the Court sanctioning of the Scheme and the subsequent Proposed Recapitalisation is successful, the Company intends to create additional distributable reserves so that, when and if appropriate, the Board can consider the payment of cash dividends to shareholders at some point in the future.

The outlook for the Group is such that, without the successful completion of the Scheme and the Proposed Recapitalisation (or the Alternative Transaction in the event the Conditions to the Proposed Recapitalisation) are not satisfied), the balance sheet remains deeply insolvent. If the Scheme is not sanctioned by the Court, or the Scheme is sanctioned but the Proposed Recapitalisation and the Alternative Transaction both fail, then the Group would remain insolvent and the most likely outcome would be a Group-wide insolvency (most likely administration), resulting in no return for the current shareholders, a significantly reduced return for secured lenders and minimal or no cash recovery for customers with valid redress claims. In the event that the Scheme is sanctioned and the Alternative Transaction takes place (due to the failure of the Proposed Recapitalisation), there would be no recovery for the Company's shareholders and the Company (ultimate parent company) may enter into an insolvency process.

The Directors continue to believe there is a reasonable prospect of resolving this position through the Scheme and the Proposed Recapitalisation with the support in principle of the Group's largest shareholder and secured lenders, which support remains subject to the Conditions, or, in case of the Alternative Transaction, the support of the secured lenders.

Assuming the Proposed Recapitalisation or Alternative Transaction is completed as planned, our focus in 2023 is to re-energise the business following the enormous structural changes over the past few years and the regulatory changes to the industry more generally. As outlined in the 2022 financial review, this recovery will be dependent on us restoring the momentum in our branch-based lending business through a combination of investment in staffing, technology and process-driven productivity improvements and a steady recovery in demand for non-standard consumer credit.

Given the Group's pre-eminent position in branch-based lending, the Board continues to believe that, subject to funding, the current business environment represents a significant opportunity for NSF. In the past, when UK consumers have faced periods of macroeconomic difficulty and stress, the non-standard consumer lending sector saw a marked increase in demand as the number of consumers that were unable to access mainstream credit increased. At the same time, we have seen a significant reduction in the supply of regulated non-standard consumer credit that may provide an additional opportunity for the Group to gain market share as we continue to serve the very large numbers of UK consumers that are unable or unwilling to access regulated mainstream credit.

Annual General Meeting

The AGM of the Company is scheduled to take place on 23 June 2023. A separate notice of meeting will be being sent to shareholders nearer the time of the meeting and will be available from the Group's website: www.nsfgroupplc.com.

Jono Gillespie

Group Chief Executive

28 April 2023

2022 Financial Review

Group results

The Group reported an increased normalised loss before tax of £24.6m (2021: normalised loss before tax of £16.7m). Once again the full year results were impacted by a number of non-operating items as well as the home credit division being placed into administration and derecognised from the Group on 15 March 2022. The guarantor loans division collect out continues to progress well whilst the branch-based lending business continues to deliver good financial performance driven by higher revenues and loan book growth. Group revenues decreased 25% from £131.4m to £98.3m due to the aforementioned derecognition of the home credit division in Q1 and collect out of guarantor loans, however this was partly offset by the higher revenue at branch-based lending which increased 6% to £84.5m (2021: £79.9m) as a result of higher revenue yields, with yields having reduced during 2020 and 2021 following an increase in the number of customers utilising forbearance measures during the pandemic. Impairments at branch-based lending were higher in the current period at £26.7m (2021: £19.0m) due to 2021 benefitting from lower lending volumes, however despite this, collections performance remained strong throughout 2022. Administrative expenses for the Group were lower by 31% at £65.9m (2021: £96.0m) as 2021 included a full year of the home credit division. Excluding this, the Group saw savings in expenses at its guarantor loans division with a decrease of 32% to £7.3m (2021: £10.7m) as the division continues to wind down and savings in staff costs, professional fees and complaints costs are realised. The branch-based lending division however saw increased spend on employee costs following investment in expanding the operational headcount to drive the growth in new lending resulting in administrative expenses increasing by 9%.

There were £31.8m of exceptional items (2021: £12.9m) comprised of £5.7m in relation to the derecognition of the home credit division following the business being placed into administration on 15 March 2022, a £13.7m charge in relation to impairment of intercompany receivable balances following the administration of the home credit division, and an additional £12.4m of costs and redress provisions in relation to the Scheme. 2021 exceptional costs comprised £2.2m of additional customer redress, £1.6m of advisory fees, £8.5m relating to the write-down of assets and the recognition of liabilities in the home credit division triggered by the business going into administration on 15 March 2022 and £0.6m of restructuring costs.

Cash balances decreased to £32.8m (2021: £114.6m) following the full repayment of the RCF and part repayments of the term loan made during the year. The high interest environment however adversely impacted net finance costs and the total charge in the period was £29.1m (2021: £26.0m).

The net effect was that the Group reported a statutory loss before tax of £56.4m (2021: loss of £29.6m) and with no tax charge/credits recognised in the year, the reported loss after tax was £56.4m (2021: loss of £29.7m). The resulting reported loss per share was 18.0p (2021: loss per share of 9.5p).

The Group also remains in a net liability position, due to the net losses over the past few years, the derecognition of the home credit division and the continued non-recognition of deferred tax assets. The Group is continuing is progressing with plans to resolve its regulatory issues via the Scheme and support in principle from the Group's secured lenders and largest shareholder means the Board continue to believe that the balance sheet situation will be remedied subject to a successful completion of the Scheme and Proposed Recapitalisation (or the Alternative Transaction in the event the Conditions, to the Proposed Recapitalisation are not satisfied) noting, as above, that the Alternative Transaction may result in the Company (ultimate parent company) entering into an insolvency process.

Normalised figures are before exceptional items.

Year ended 31 December	2022 Normalised¹ £000	2022 Exceptional items £000	2022 Reported £000
Revenue	98,337	-	98,337
Other operating income	173	-	173
Modification loss	(262)	-	(262)
Impairments	(27,890)	-	(27,890)
Administration expenses	(65,898)	-	(65,898)
Operating profit / (loss)	4,460	-	4,460
Exceptional items	-	(31,768)	(31,768)
Profit / (Loss) before interest and tax	4,460	(31,768)	(27,308)
Finance cost	(29,051)	-	(29,051)
Loss before tax	(24,591)	(31,768)	(56,359)
Taxation	-	-	-
Loss after tax	(24,591)	(31,768)	(56,359)

Loss per share	(7.86)		(18.04)
Dividend per share	0.00p		0.00p
Year ended 31 December	2021 Normalised¹ £000	2021 Exceptional items £000	2021 Reported £000
Revenue	131,387	-	131,387
Other operating income	983	-	983
Modification loss	(2,861)	-	(2,861)
Impairments	(24,163)	-	(24,163)
Exceptional provision for customer redress	-	(2,207)	(2,207)
Administration expenses	(96,047)	-	(96,047)
Operating profit / (loss)	9,299	(2,207)	7,092
Other exceptional items	-	(10,723)	(10,723)
Profit / (Loss) before interest and tax	9,299	(12,930)	(3,631)
Finance cost	(25,979)	-	(25,979)
Loss before tax	(16,680)	(12,930)	(29,610)
Taxation	(75)	-	(75)
Loss after tax	(16,755)	(12,930)	(29,685)

Loss per share	(5.36)p		(9.50)p
Dividend per share	0.00p		0.00p

1 See glossary of alternative performance measures and key performance indicators in the Appendix.

Normalised divisional results

Year ended 31 Dec 2022 Normalised¹	Branch-based lending £000	Home credit £000	Guarantor loans £000	Central costs £000	Group £000
Revenue	84,470	7,315	6,552	-	98,337
Other operating income	173	-	-	-	173
Modification loss	(250)	-	(12)	-	(262)
Derecognition loss	-		-	-	-
Impairments	(26,704)	(2,781)	1,595	-	(27,890)
Administration expenses	(50,493)	(5,065)	(7,300)	(3,040)	(65,898)
Operating profit/(loss)	7,196	(531)	835	(3,040)	4,460
Finance cost	(14,925)	(257)	(2,000)	(11,869)	(29,051)
Loss before tax	(7,729)	(788)	(1,165)	(14,909)	(24,591)
Taxation	(102)	123	-	(21)	-
Loss after tax	(7,831)	(665)	(1,165)	(14,930)	(24,591)

Normalised loss per share					(7.87)p
Dividend per share					0.00p

Year ended 31 Dec 2021 Normalised¹	Branch-based lending £000	Home credit £000	Guarantor loans £000	Central costs £000	Group £000
Revenue	79,940	38,401	13,046	-	131,387
Other operating income	384	587	1	11	983
Modification loss	(1,383)	-	(1,478)	-	(2,861)
Derecognition loss	-		-	-	-
Impairments	(18,994)	(6,230)	1,061	-	(24,163)
Administration expenses	(46,294)	(34,962)	(10,695)	(4,096)	(96,047)
Operating profit/(loss)	13,653	(2,204)	1,935	(4,085)	9,299
Finance cost	(14,491)	(1,102)	(4,350)	(6,036)	(25,979)
Loss before tax	(838)	(3,306)	(2,415)	(10,121)	(16,680)
Taxation	48	158	299	(580)	(75)
Loss after tax	(790)	(3,148)	(2,116)	(10,701)	(16,755)

Normalised loss per share					(5.36)p
Dividend per share					0.00p

¹ See glossary of alternative performance measures and key performance indicators in the Appendix.

Net loan book	31 December 2022	31 December 2021
	£m	£m
Branch-based lending	167.0	157.2
Guarantor loans	10.1	26.8
Home credit²	-	24.0
Total	177.1	208.0

² Home credit division placed into administration on 15 March 2022 and therefore derecognised from the Group.

Impairment provisioning - coverage ratios

Consistent with prior year, the below shows coverage ratios excluding adjustments for modification and derecognition gains and losses in order to allow more direct comparability with sector companies:

	31 December 2022	31 December 2021	Change

Branch-based lending	17.6%	19.0%	-1.4%
Home credit	N/A	46.7%	N/A
Guarantor loans	38.3%	33.2%	5.1%
Group	19.1%	25.5%	-6.4%

Coverage ratios at branch based lending improved whilst worsening at guarantor loans due to the reducing size of the loan book as the division remains in collect-out. The Group coverage ratio fell 6.4% as a result of the home credit division no longer being part of the Group.

Divisional review

Branch-based lending

Financial results

Year ended 31 December	2022	2022	2022
	Normalised³	Exceptional items	Reported
	£'000	£'000	£'000
Revenue	84,470	-	84,470
Other operating income	173	-	173
Modification gain/(loss)	(250)	-	(250)
Impairments	(26,704)	-	(26,704)
Admin expenses	(50,493)	-	(50,493)
Operating profit	7,196	-	7,196
Exceptional items	-	(12,407)	(12,407)
Profit/(loss) before interest and tax	7,196	(12,407)	(5,211)
Finance costs	(14,925)	-	(14,925)
Loss before tax	(7,729)	(12,407)	(20,136)
Taxation	(102)	-	(102)
Loss after tax	(7,831)	(12,407)	(20,238)

Year ended 31 December	2021	2021	2021
	Normalised³	Exceptional items	Reported
	£'000	£'000	£'000
Revenue	79,940	-	79,940
Other operating income	384	-	384
Modification gain/(loss)	(1,383)	-	(1,383)
Impairments	(18,994)	-	(18,994)
Admin expenses	(46,294)	-	(46,294)
Operating profit	13,653	-	13,653
Exceptional items	-	-	-
Profit/(loss) before interest and tax	13,653	-	13,653
Finance costs	(14,491)	-	(14,491)
Loss before tax	(838)	-	(838)
Taxation	48	-	48
Loss after tax	(790)	-	(790)

The business saw a 20% increase in the volume of qualifying 'applications to branch' ('ATBs') during 2022 versus the full year 2021. This drove an increase in the total number of loans booked, with new money lent to customers increasing 19% in comparison to 2021. While the impact of the pandemic on lending volumes meant that the net loan book declined in both 2020 and 2021, the positive recovery in lending volumes has resulted in the net loan book returning to growth in 2022 and it ended the year up 6% at £167.0m (2021: £157.2m). The number of active customers has seen a small increase to 66,500 at December 2022 (December 2021: 66,000).

We continually look to enhance our lending processes, including the assessment of creditworthiness and the refinement of credit scorecards and strategies. Whilst acutely aware of the cost-of-living crisis, the collections performance of the business remains ahead of expectation with customer payment levels particularly strong, whilst early settlements continue below pre-pandemic levels. Delinquency performance has returned to historically normal levels. The nature of IFRS 9 accounting meant that lower lending volume in the prior years also helped to reduce impairment charges however, as lending volumes have continued to recover throughout 2022, impairment rates are gradually seeing a corresponding reversal of the recent low levels, though remain below expectations.

Key Performance Indicators³	2022	2021
Number of branches	77	75
Period end customer numbers (000)	66.5	66.0
Period end loan book (£m)	167.0	157.2
Average loan book (£m)	161.5	163.7
12 Month Rolling:
Revenue yield	52.3%	48.8%
Risk adjusted margin	35.8%	37.2%
Impairments/revenue	31.6%	23.8%
Impairments (including modifications)/revenue	31.9%	25.5%
Impairment/average loan book	16.5%	11.6%
Cost to income ratio	59.8%	57.9%
Operating profit margin	8.5%	17.1%
Return on asset	4.5%	8.3%

³ ^{See glossary of alternative performance measures and key performance indicators in the Appendix.}

Revenues increased 6% to £84.5m (2021: £79.9m) despite lower average receivables due to a higher revenue yield. Yields reduced during 2020 and 2021 following an increase in the number of customers utilising forbearance measures during the pandemic. Modification losses were lower at £0.3m (2021: £1.4m) with the prior year seeing an increased level of deferred and rescheduled loans as the business utilised forbearance measures as a result of the pandemic. Impairments were higher in the current period at £26.7m (2021: £19.0m) with corresponding increases in the impairment ratios, due to 2021 benefitting from lower lending volumes (whereby the nature of IFRS 9 means lower lending helps reduce impairment charges). Despite the higher impairment costs, collections performance remained strong throughout 2022, supported by continued tight underwriting with a rigorous creditworthiness assessment and strengthening of the credit scorecards and strategies.

Increased spend on employee costs following investment in expanding the operational headcount to drive the growth in new lending and the filling of support staff vacancies has resulted in administrative expenses increasing by 9% to £50.5m (2021: £46.3m). The net impact of all of these factors was that normalised operating profit fell to £7.2m (2021: £13.7m).

As detailed above, the Group has now launched the Scheme to address its redress liabilities, which will provide certainty as to the amount that will be paid to customers with valid redress claims. Although the independent review of the Group's branch-based lending business carried out in 2021 identified no systemic issues requiring redress, since this business and the guarantor loans division trade out of the same legal entity, the Scheme encompasses potential claims from both businesses in order to ensure equitable treatment of customers. The exceptional charge in the year of £12.4m relates to costs and redress associated with the Scheme.

Finance costs increased by 3% to £14.9m (2021: £14.5m) funding growth in the loan book. As a result of the reasons noted above, the business produced a normalised pre-tax loss of £7.7m (2021: loss before tax of £0.8m).

In branch-based lending, the key performance drivers that underpin the operational and financial performance of the business include network capacity, lead volume and quality, network productivity and impairment management. A summary of how these factors were affected during 2022 is summarised below:

Network capacity - Qualifying application levels have grown steadily through 2021 and 2022 and the recruitment of in-branch employees has increased alongside this to take advantage of the return to growth. In-branch full time employee numbers have increased from 341 at December 2021 to 377 at the end of December 2022 with plans to increase further throughout 2023. The branches that were originally planned to be opened in late 2020 but were deferred by the pandemic were successfully opened in 2022, splitting larger branches in the North West and North East conurbations to take advantage of the growth opportunities in these areas. This increases the total number of branch locations to 77. Two further branches are planned to open in the second half of 2023.

Lead volumes - The number of qualified new borrower applications increased by 19% in 2022 compared to 2021 levels. Due to a more cautious approach to lending post-pandemic, new borrower conversion rates dipped slightly to 6.1% (2021: 6.5%) whilst new borrower loans written increased by 13%. We credit scored 2.5 million new borrower applications in 2022 (2021: 1.7 million) of which 485,055 (2021: 403,800) applications passed our screening criteria to qualify as applications to branch (ATBs).

Productivity and quality - The total number of loans issued in 2022 reached 38,781 (2021:37,150) a 4% increase over the prior year. The focus on better quality customers led to new cash lent increasing 19% to £121m compared to £102m in 2021. We continue to invest in the enhancement of our technology. A new integrated telephony solution was implemented in the current year, this alongside continued strengthening of our creditworthiness process and open banking improvements will drive efficiencies in our lending processes whilst continuing to deliver good customer outcomes and improved customer journeys.

Delinquency management -Increasing costs of living were a key concern for our customers across the year. A continual review process ensured that our underwriting remained appropriate from both credit risk and affordability perspectives and we maintained a high quality of new lending. Pro-active communication and monitoring of forbearance tools ensured that existing customers continued to have the support they need. This was further enhanced by the introduction of a central collections team, utilising available capacity from within the Guarantor Loans business as that loan book runs down. As a result, collections performance was consistently ahead of expectations throughout the year, and by year end the proportion of the loan book that was up-to-date and not rescheduled or deferred had recovered to the pre-Covid levels of early 2020.

Plans for 2023

We remain focused on our commitment to servicing the needs of those consumers that may have been excluded from mainstream lenders, using our face-to-face lending model. We continue to evolve our credit risk assessment processes in order to maintain the highest standards of responsible lending, ensuring that we continue to deliver good customer outcomes for all our customers. The ability to grow the business efficiently and enhancing the customer journey are key areas of focus in 2023. Investment in in-branch recruitment, a focus on streamlining back-office tasks and embracing technology opportunities such as 'Open Banking' will reduce waiting times for customers through a smoother application process.

We continue to expect that the demand for our products and services will increase given the current macroeconomic environment as well as from some of the structural changes in the market regarding both potential customer population and companies operating in the market. As a result, and whilst we remain vigilant given the rapidly changing environment, based on our performance to-date and the steps already taken, we continue to focus on operational efficiency and loan book growth through 2023 and beyond. Future growth plans will require the Group to complete the Scheme and the Proposed Recapitalisation or Alternative Transaction, but once achieved, the business will be well placed to realise that vision.

Home credit

Following the conclusions of the review into home credit, the Directors of S.D. Taylor Limited ('Loans at Home') concluded that the Loans at Home business was no longer viable and so the business was placed into administration on 15 March 2022. Whilst deeply saddened and disappointed with this news, the Boards of both Loans at Home and NSF were clear that administration was the only option available in order to preserve value for creditors. As the operations and activities of Loans at Home were separate from the rest of the Group, having received certain waivers from the Group's secured lenders, the administration of Loans at Home has had minimal impact on the rest of the Group's business.

The results of the home credit division for the period ended 14 March 2022 are shown below:

Financial results

The home credit division contributed a normalised operating loss of £0.5m to the Group (2021: normalised operating loss of £2.2m). An exceptional charge of £5.6m was recognised in 2022 in relation the derecognition of the remaining net assets of the division existing at the date of administration.

Period to 14 March	2022	2022	2022
	Normalised⁴	Exceptional items	Reported
	£'000	£'000	£'000
Revenue	7,315	-	7,315
Other income	-	-	-
Impairments	(2,781)	-	(2,781)
Admin expenses	(5,065)	-	(5,065)
Operating loss	(531)	-	(531)
Exceptional items	-	(5,647)	(5,647)
Loss before interest and tax	(531)	(5,647)	(6,178)
Finance cost	(257)	-	(257)
Loss before tax	(788)	(5,647)	(6,435)
Taxation	123	-	123
Operating loss	(665)	(5,647)	(6,312)

Year ended 31 December	2021 Normalised⁴ £000	2021 Exceptional items £000	2021 Reported £000
Revenue	38,401	-	38,401
Other income	587	-	587
Impairments	(6,230)	-	(6,230)
Administration expenses	(34,962)	-	(34,962)
Operating loss	(2,204)	-	(2,204)
Exceptional items	-	(8,542)	(8,542)
Loss before interest and tax	(2,204)	(8,542)	(10,746)
Finance cost	(1,102)	-	(1,102)
Loss before tax	(3,306)	(8,542)	(11,848)
Taxation	158	-	158
Loss after tax	(3,148)	(8,542)	(11,690)

⁴ ^{See glossary of alternative performance measures and key performance indicators in the Appendix.}

Guarantor loans

The Group's guarantor loans division was placed into a managed run-off in June 2021 and so continues not to issue any new loans. Therefore the financial performance of the business has been driven by collections from the outstanding loan book.

Financial results

The reduction in the net loan book meant that revenue declined by 49% to £6.6m (2021: £13.0m). Collections performance during 2022 has remained strong, leading to impairments of £(1.6)m (2021: £(1.1m). Administration costs fell by 32% to £7.3m (2021: £10.7m) as the division continues to wind down and savings in staff costs, professional fees and complaints costs are realised. The division achieved a normalised operating profit of £0.8m (2021: £1.9m) whilst strong cashflow has contributed to lower finance costs that reduced the normalised loss before tax to £1.2m (2021: loss before tax of £2.4m).

Year ended 31 December	2022	2022	2022
	Normalised⁵	Exceptional items	Reported
	£'000	£'000	£'000
Revenue	6,552	-	6,552
Other income	-	-	-
Modification gain/(loss)	(12)	-	(12)
Impairments	1,595	-	1,595
Admin expenses	(7,300)	-	(7,300)
Operating profit/(loss)	835	-	835
Exceptional items	-	-	-
Profit/(loss) before interest and tax	835	-	835
Finance costs	(2,000)	-	(2,000)
Loss before tax	(1,165)	-	(1,165)
Taxation	-	-	-
Loss after tax	(1,165)	-	(1,165)

Year ended 31 December	2021	2021	2021
	Normalised⁵	Exceptional items	Reported
	£'000	£'000	£'000
Revenue	13,046	-	13,046
Other income	1	-	1
Modification gain/(loss)	(1,478)	-	(1,478)
Impairments	1,061	-	1,061
Exceptional provisions	-	(2,207)	(2,207)
Admin expenses	(10,695)	-	(10,695)
Operating profit/(loss)	1,935	(2,207)	(272)
Exceptional items	-	(601)	(601)
Profit/(loss) before interest and tax	1,935	(2,808)	(873)
Finance costs	(4,350)	-	(4,350)
Loss before tax	(2,415)	(2,808)	(5,223)
Taxation	299	-	299
Loss after tax	(2,116)	(2,808)	(4,924)

Key Performance Indicators⁵	2022	2021

Period end customer numbers (000)	6.8	14.5
Period end loan book (£m)	10.1	26.8
Average loan book (£m)	17.1	40.6
12 Month Rolling:
Revenue yield	38.3%	32.1%
Risk adjusted margin	47.7%	34.7%
Impairment/revenue	(24.4)%	(8.1)%
Impairment (including modifications)/revenue	(24.2)%	3.2%
Impairment/average loan book	(9.3)%	(2.6)%
Cost to income ratio	111.4%	82.0%
Operating profit margin	12.8%	14.8%
Return on asset	4.9%	4.8%

⁵ ^{See glossary of alternative performance measures and key performance indicators in the Appendix.}

Plans for 2023

The collect-out of the outstanding loan book is progressing well and as planned.

Central costs

Year ended 31 December	2022 Normalised⁶	2022 Exceptional items	2022 Reported
	£000	£000	£000
Revenue	-	-	-
Other income	-	-	-
Admin expenses	(3,040)	-	(3,040)
Operating loss	(3,040)	-	(3,040)
Exceptional items	-	(13,714)	(13,714)
Loss before interest and tax	(3,040)	(13,714)	(16,754)
Finance costs	(11,869)	-	(11,869)
Loss before tax	(14,909)	(13,714)	(28,623)
Taxation	(21)	-	(21)
Loss after tax	(14,930)	(13,714)	(28,644)

Year ended 31 December	2021 Normalised⁶ £000	2021 Exceptional items £000	2021 Reported £000
Revenue	-	-	-
Other income	11	-	11
Administration expenses	(4,096)	-	(4,096)
Operating loss	(4,085)	-	(4,085)
Exceptional items	-	(1,580)	(1,580)
Loss before interest and tax	(4,085)	(1,580)	(5,665)
Finance cost	(6,036)	-	(6,036)
Loss before tax	(10,121)	(1,580)	(11,701)
Taxation	(580)	-	(580)
Loss after tax	(10,701)	(1,580)	(12,281)

⁶ ^{See glossary of alternative performance measures and key performance indicators in the Appendix.}

Normalised administrative expenses fell by 26% to £3.0m (2021: £4.1m) driven principally by lower staff, rent and professional fees. Finance fees increased due to surplus cash held at Group level alongside higher interest rates.

An exceptional charge of £13.7m relates to impairments recognised on intercompany receivable balances held with the home credit division. Prior year exceptional costs comprised £1.6m of advisory fees.

Balance sheet

As at 31 December 2022, the Group had increased its cash balances to £32.8m (2021: £114.6m) and gross debt reduced to £255m (2021: £330m). The Group's balance sheet remained in a negative net tangible assets position. A summary of the Group's balance sheet at December 2022 is shown below:

Year ended 31 December	2022 £000	2021 £000
Loan book	177,104	207,984
Cash	32,783	114,577
Trade receivables and other assets	1,363	4,003
Property, plant and equipment, intangibles and right of use assets	12,719	14,574
Payables and provisions	(59,055)	(44,018)
Lease liability	(7,460)	(9,545)
Debt	(255,000)	(328,762)
Net (liabilities)/assets	(97,546)	(41,187)

The clear priority for the Group is to complete the Proposed Recapitalisation that, if successful, is expected to, amongst other things, fund the Scheme, strengthen the Group's balance sheet and restore it to a positive net assets position. However, the Directors note that a material uncertainty exists regarding the success of the Scheme and execution of the Proposed Recapitalisation (or the Alternative Transaction, noting, as above, that the Alternative Transaction may result in the Company (ultimate parent company) entering into an insolvency process) which casts significant doubt on both the Group's and the Company's ability to continue as a going concern.

Principal risks

The principal risks facing the Group are:

· Going concern, solvency and liquidity - the Directors note that material uncertainties exist regarding the: (i) success of the Scheme, including positive creditor votes and the court sanction of the Scheme within the timeframes required; (ii) the ability of the Group to raise sufficient capital in the timeframes required (iii) the agreement of extensions to the testing dates and other forms of waivers from secured lenders in relation to potential future covenant breaches and implementation of the Scheme prior to completion of the Proposed Recapitalisation (or the Alternative Transaction); (iv) the contractual commitments from secured lenders to extend the term of existing debt facilities and to write off a portion of their debt as well as agree other changes to the facilities (including the covenant levels); and (v) the impact of macroeconomic uncertainties and other unforeseen factors on the financial performance of the Group. The range of assumptions and the likelihood of them all proving correct creates material uncertainty and therefore the impact on liquidity and solvency under both the base case and downside scenarios may cast significant doubt on both the Group's and individual division's ability to continue as a going concern. The Director's note that although the Group has contractual commitments from its secured lenders to support the Alternative Transaction, there is a risk that it will not be possible to implement either the Proposed Recapitalisation or the Alternative Transaction. In these circumstances, if neither the Proposed Recapitalisation nor the Alternative Transaction has been implemented by 31 December 2023, it will not be possible to pay the Scheme fund into a nominated trust account and the Scheme will fail. Refer to the going concern statement in note 1 of the financial statements for further detail on the base and downside case;

· Regulation - the Group faces significant operational and financial risk through changes to regulations, changes to the interpretation of regulations or a failure to comply with existing rules and regulations, some of which have crystallised in the year. Due to the need to bring this uncertainty to a resolution, the Group has launched the Scheme to address the redress claims which will provide certainty as to the amount that will be paid to customers with valid redress claims. As outlined above, the review into branch-based lending concluded that there was no need for systemic customer redress, although claims in relation to the branch-based lending business have been included in the Scheme. The conclusion of the home credit review resulted in the administration of the business as it was concluded that the business model was no longer viable and that an administration was the only option available to preserve value for creditors.

§ Conduct - risk of poor outcomes for our customers or other key stakeholders as a result of the Group's actions;

§ Credit - risk of loss through poor underwriting or a diminution in the credit quality of the Group's customers;

§ Business strategy - risk that the Group's strategy fails to deliver the outcomes expected;

§ Business risks:

o operational - the Group's activities are large and complex and so there are many areas of operational risk that include technology failure, fraud, staff management and recruitment risks, underperformance of key staff, the risk of human error, taxation, increasing numbers of customer complaints, health and safety as well as disaster recovery and business continuity risks;

o reputational - a failure to manage one or more of the Group's principal risks may damage the reputation of the Group or any of its subsidiaries which in turn may materially impact the future operational and/or financial performance of the Group;

o cyber - increased connectivity in the workplace coupled with the increasing importance of data and data analytics in operating and managing consumer finance businesses means that this risk has been identified separately from operational risk;

o aftermath of pandemic - a large pandemic such as COVID-19, coupled with the possibility of the return of restrictions on face-to-face contact by HM Government, may cause significant disruption to the Group's operations and severely impact the supply and level of demand for the Group's products. As a result, any sustained period where such measures are in place could result in the Group suffering significant financial loss; and

o cost of living crisis - the significant pressure of the cost of living at the current time increases the risk of delinquency for some customers, whilst also presenting an opportunity for the business in terms of those potential customers who may previously have been served by the prime financial services sector.

Emerging risks that may impact the future performance of the Group include the anticipated increase in the cost of living, climate change and technology where we plan to become more agile and independent with greater control over our ability to augment and improve our lending proposition. Further details are included on page 27 of the 2022 Annual Report.

On behalf of the Board of Directors

Jono Gillespie

Group Chief Executive

28 April 2023

Consolidated statement of comprehensive income

for the year ended 31 December 2022

	Note	Before exceptional items £000	Exceptional items³ £000	Year ended 31 Dec 2022 £000
Revenue¹	3	98,337	-	98,337
Other operating income		173	-	173
Modification loss	10	(262)	-	(262)
Impairment of financial assets²		(27,890)	-	(27,890)
Administrative expenses		(65,898)	-	(65,898)
Operating profit/(loss)	4	4,460	-	4,460
Exceptional items	6	-	(31,768)	(31,768)
Profit/(loss) on ordinary activities before interest and tax		4,460	(31,768)	(27,308)
Finance costs		(29,051)	-	(29,051)
Loss on ordinary activities before tax		(24,591)	(31,768)	(56,359)
Tax on loss on ordinary activities	7	-	-	-
Loss for the year		(24,591)	(31,768)	(56,359)
Total comprehensive loss for the year				(56,359)

1 Revenue comprises interest income calculated using the EIR method.

2 Impairments comprise expected credit losses on amounts receivable from customers. Refer to note 10 in the notes to the financial statements for further detail.

3 Refer to the appendix for detail of alternative performance measures used ('APMs'). Refer to note 6 in the notes to the financial statements for further detail.

Loss attributable to:
· Owners of the Parent		(56,359)
· Non-controlling interests		-

Loss per share
	Note	Year ended 31 Dec 2022 Pence
Basic and diluted	8	(18.04)

There are no recognised gains or losses other than disclosed above and there have been no discontinued activities in the year.

Consolidated statement of comprehensive income

For the year ended 31 December 2021

	Note	Before exceptional items £000	Exceptional items³ £000	Year ended 31 Dec 2021 £000
Revenue¹	3	131,387	-	131,387
Other operating income		983	-	983
Modification loss	10	(2,861)	-	(2,861)
Impairment of financial assets²		(24,163)	-	(24,163)
Exceptional provision for customer redress	6	-	(2,207)	(2,207)
Administrative expenses		(96,047)	-	(96,047)
Operating profit/(loss)	4	9,299	(2,207)	7,092
Other exceptional items	6	-	(10,723)	(10,723)
Profit/(loss) on ordinary activities before interest and tax		9,299	(12,930)	(3,631)
Finance costs		(25,979)	-	(25,979)
Profit/(loss) on ordinary activities before tax		(16,680)	(12,930)	(29,610)
Tax on profit/(loss) on ordinary activities	7	(75)	-	(75)
Profit/(loss) for the year		(16,755)	(12,930)	(29,685)
Total comprehensive loss for the year				(29,685)
1 Revenue comprises interest income calculated using the EIR method, refer to note 1 in the notes to the financial statements for further detail. 2 Impairments comprise expected credit losses on amounts receivable from customers. Refer to notes 1 and 18 in the notes to the financial statements for further detail. 3 Refer to the appendix for detail of alternative performance measures. Refer to note 7 in the notes to the financial statements for further detail.
Loss attributable to:
· Owners of the Parent				(29,685)
· Non-controlling interests				-
Loss per share
			Note	Year ended 31 Dec 2021 Pence
Basic and diluted			8	(9.50)

Consolidated statement of financial position

as at 31 December 2022

	Note	31 Dec 2022 £000	31 Dec 2021 £000
ASSETS
Non-current assets
Intangible assets		2,886	2,772
Deferred tax asset	11	-	-
Right-of-use asset		6,834	7,877
Property, plant and equipment		2,999	3,925
Amounts receivable from customers	10	101,969	98,836
		114,688	113,410
Current assets
Amounts receivable from customers	10	75,135	109,148
Trade and other receivables		1,363	2,526
Corporation tax asset		-	1,477
Cash and cash equivalents		32,783	114,577
		109,281	227,728
Total assets		223,969	341,138
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables	12	28,365	18,375
Provisions	24	30,690	25,643
Lease liability		1,765	2,129
Loans and borrowings		255,000	-
Total current liabilities		315,820	46,147
Non-current liabilities
Lease liability		5,695	7,416
Loans and borrowings		-	328,762
Total non-current liabilities		5,695	336,178
Equity
Share capital	15	15,621	15,621
Share premium	16	180,019	180,019
Other reserves		255	255
Retained loss		(293,441)	(237,082)
Total equity		(97,546)	(41,187)
Total equity and liabilities		223,969	341,138

These financial statements were approved by the Board of Directors on 28 April 2023

Signed on behalf of the Board of Directors.

Jono Gillespie

Group Chief Executive

Consolidated statement of changes in equity

for the year ended 31 December 2022

	Note	Share capital £000	Share premium £000	Other reserves £000	Retained loss £000	Non- controlling interest £000	Total £000
At 31 December 2020		15,621	180,019	551	(207,727)	-	(11,536)
Total comprehensive loss for the year		-	-	-	(29,685)	-	(29,685)
Transactions with owners, recorded directly in equity:
Dividends paid	9	-	-	-	-	-	-
Credit to equity for equity-settled share-based payments		-	-	34	-	-	34
Transfer of share-based payments on vesting of share awards		-	-	(330)	330	-	-
At 31 December 2021		15,621	180,019	255	(237,082)	-	(41,187)
Total comprehensive loss for the year		-	-	-	(56,359)	-	(56,359)
Transactions with owners, recorded directly in equity:
Dividends paid	9	-	-	-	-	-	-
At 31 December 2022		15,621	180,019	255	(293,441)	-	(97,546)

Consolidated statement of cash flows

for the year ended 31 December 2022

	Note	Year ended 31 Dec 2022 £000	Year ended 31 Dec 2021 £000
Net cash from/(used in) operating activities	17	17,916	57,762
Cash flows from/(used in) investing activities
Purchase of property, plant and equipment		(315)	(261)
Purchase of software intangibles		(1,092)	(2,514)
Proceeds from sale of property, plant and equipment		4	17
Reduction in cash resulting from derecognition of home credit division in administration		(7,062)	-
Net cash from/(used in) investing activities		(8,465)	(2,758)
Cash flows from/(used in) financing activities
Finance cost		(24,549)	(15,832)
Repayment of principal portion of lease liabilities		(1,696)	(2,551)
Repayment of loans and borrowings		(65,000)	-
Dividends paid	9	-	-
Net cash from/(used in) financing activities		(91,245)	(18,383)
Net increase/(decrease) in cash and cash equivalents		(81,794)	36,621
Cash and cash equivalents at beginning of year		114,577	77,956
Cash and cash equivalents at end of year		32,783	114,577

Notes to the financial statements

1. Basis of preparation

Basis of preparation

The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2022 or 2021.

The financial information for the year ended 31 December 2021 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified and did not contain a statement under s498(2) or (3) of the Companies Act 2006, but did include a section highlighting a material uncertainty that may cast significant doubt on the Group and Company's ability to continue as a going concern.

The statutory financial statements for the year ended 31 December 2022 will be filed with the Registrar of Companies following the General Meeting to be held on 23 June 2023. The report of the auditor was unqualified and did not contain a statement under s498(2) or (3) of the Companies Act 2006, but did include a section highlighting a material uncertainty that may cast significant doubt on the Group and Company's ability to continue as a going concern.

The financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share‑based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IFRS 16 Leases, and measurements that have some similarities to fair value but are not fair value, such as value in use ('VIU') in IAS 36 Impairment of Assets.

On 15 March 2022, the Company's indirect subsidiary S.D Taylor Limited (trading as 'Loans at Home' and forming the home credit division of the Group) was placed into administration. As a result, the financial statements of the home credit division for the prior year ended 31 December 2021 were prepared on a basis other than going concern. This required carrying value of the assets to be at the amounts they were expected to realise and the liabilities included any amounts for onerous contracts as a result of the administration. In all other respects the financial statements have been prepared in accordance with the accounting framework.

As Non-Standard Finance plc retained control of the division up to the date of administration, the financial statements of S.D. Taylor have been consolidated and are reported in the Group financial statements for the current year up to 14 March 2022 and the prior year for the full year. The financial statements of the Group have been prepared on a going concern basis with the exception of the home credit division which was prepared on non-going concern basis (as described above).

This announcement has been agreed with the Company's auditor for release.

Basis of consolidation

The Group financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) prepared to 31 December 2022. Control is achieved where the Company is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration the existence and effect of potential voting rights that currently are exercisable or convertible.

The results of any subsidiaries acquired during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition.

As noted above, the Group's home credit division (S.D. Taylor Limited) was placed into administration on 15 March 2022. Up to the date of administration, Non-Standard Finance plc retained control of the division and as such, in line with IAS 10, its results have been consolidated to 14 March 2022 for the purposes of these financial statements. The appointment of an administrator on 15 March 2022 represents a loss of control by Non-Standard Finance plc, and as such, the home credit division has been derecognised from this date and the effect of this reflected in the current year ended 31 December 2022 financial statements.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-Group transactions and balances and any unrealised gains and losses arising from intra-Group transactions are eliminated in preparing the consolidated financial statements.

The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 from publishing its individual statement of comprehensive income and related notes.

Going concern

As noted in the 2022 Half Year Results, the Group's subsidiary S.D. Taylor Limited (which traded as Loans at Home) was placed into administration on 15 March 2022. As the operations and activities of Loans at Home were separate from the rest of the Group, having received certain waivers from the Group's secured lenders, the administration of Loans at Home has had minimal impact on the existing funding arrangements of the Group.

For the quarters ended 31 March 2022, 30 June 2022, 30 September and 31 December 2022, the Group's loan to value (LTV) ratio was higher than the level permitted under its LTV covenant. The Group has agreed extensions with its lenders such that the LTV covenant will not be formally tested, and no covenant breach or event of default will arise, until the Group provides its compliance certificates for the aforementioned quarter dates. The date on which the Group is required to supply these compliance certificates has been extended until 17 May 2023, with a mechanism for this date to be extended further with lender support.

The Group is pursuing a scheme of arrangement (the "Scheme") in order to resolve its outstanding regulatory issues, so as to allow it to proceed with its planned restructuring and recapitalisation (the "Proposed Recapitalisation"). The Proposed Recapitalisation has the support in principle of the Company's largest shareholder and the Group's secured lenders, subject to agreement on the terms and other conditions described below and, in the case of the Company's largest shareholder, further diligence on and its assessment of the Group's revised business plan and financial projections.

Completion of the Proposed Recapitalisation is subject to the agreement of terms between lenders and the Company's largest shareholder, and a number of conditions, including Court sanction of the Scheme, shareholder approval, the take-up of shares under the equity raise and execution of definitive documents. Assuming all the above outlined conditions are satisfied (the "Conditions"), the Group expects the Proposed Recapitalisation to complete at the end of Q2 2023 or the start of Q3 2023. The Group has also agreed with its secured lenders to implement an alternative transaction if the Scheme is sanctioned but the Conditions, to the Proposed Recapitalisation are not satisfied (the "Alternative Transaction").

Although the independent review of the Group's branch-based lending division carried out in 2021 identified no systemic issues requiring redress, as this division and the guarantor loans division (now in collect-out) trade out of the same legal entity (Everyday Lending Limited), the Scheme encompasses potential claims from both divisions in order to ensure equitable treatment of customers. On 17 March 2023, the Group sent out a practice statement letter to its creditors and a first court hearing is scheduled for 28 April 2023.

In light of the above, the Group has produced two possible scenarios as part of its going concern assessment:

(i) the base case scenario assumes:

a. the Scheme is successful;

b. the Scheme is sanctioned by the court by the end of June 2023;

c. a substantial equity injection is received in late Q2 or early Q3 2023 (the Proposed Recapitalisation);

d. the Group has obtained extensions to the testing dates and/or other forms of waivers from its secured lenders for potential covenant breaches to enable it to proceed with the Proposed Recapitalisation;

e. the extension of the term of the Group's debt facilities and write-off of a portion of the debt on terms acceptable to investors;

f. the Group is able to raise a revolving credit facility at a level acceptable to its lenders and potential investors; and

g. should the Proposed Recapitalisation be unsuccessful, the Alternative Transaction is implemented which would preserve the branch-based lending business and a going concern, but which, if implemented, would result in no recovery for the Company's current shareholders and the Company may enter into an insolvency process.

(ii) the downside scenario assumes:

a. the Scheme is unsuccessful;

b. the Group is unable to complete the Proposed Recapitalisation (or the Alternative Transaction), whilst no acceptable alternative to the base case that is capable of implementation is agreed between the Group and its secured lenders, resulting in the secured lenders enforcing their security and the Group going into an insolvency process;

c. the Group is not granted extensions to the testing dates and/or other forms of waivers from its secured lenders of covenant breaches and the Group's secured lenders become entitled to enforce their security, resulting in the Group entering an insolvency process; and

d. as a result of the Group entering into an insolvency process, no return for current shareholders and a significantly reduced return for secured lenders.

The above downside assumptions are not mutually exclusive. The Group's ability to complete the Proposed Recapitalisation or the Alternative Transaction is entirely dependent on the success of the Scheme.

The base case scenario is entirely dependent upon the base case assumptions listed above proving true. In addition, it is dependent on factors such as the impact of the cost-of-living crisis and other macroeconomic uncertainties on performance as well as any further changes in the environment not varying materially from that assumed in the base case.

The Directors continue to maintain a regular dialogue with key stakeholders including the Company's largest shareholder and Group's secured lenders regarding the above matters.

The Directors acknowledge the considerable challenges presented by the uncertainty around the:

· success of the Scheme;

· the ability of the Group to raise sufficient capital in the timeframes required;

· the agreement of extensions to the testing dates and other forms of waivers from secured lenders in relation to potential future covenant breaches and the implementation of the Scheme and the Proposed Recapitalisation (or the Alternative Transaction);

· the agreement from secured lenders to extend the term of existing debt facilities and to write off a portion of their debt as well as agree other changes to the facilities (including the covenant levels); and

· the impact of macroeconomic uncertainties and other unforeseen factors on the financial performance of the Group.

In making their overall assessment on going concern, the Directors considered both the balance sheet solvency and the liquidity position of the Group and Company. In connection with the former, the Proposed Recapitalisation would create a positive net asset position. In connection with the latter the Directors have taken into consideration the impact of the Proposed Recapitalisation on the existing cash balances which would then be available to the business. This combination would provide sufficient liquidity throughout the going concern period. Whilst essential for the future of the Group and Company, the Proposed Recapitalisation would materially dilute the interest of current shareholders, most likely to negligible value unless they chose to participate in the Proposed Recapitalisation. However, the Proposed Recapitalisation is dependent on the Conditions, including the sanctioning of the Scheme by the Court, and this dependency creates a material uncertainty.

The secured lenders continue to provide short-term waivers of the Group's loan to value covenant, ensuring the Group has the liquidity to pursue the Scheme and the Proposed Recapitalisation (or the Alternative Transaction in the event the Conditions, to the Proposed Recapitalisation are not satisfied, which, if implemented, would result in no recovery for the Group's current shareholders), however the Directors recognise that, in the absence of the secured lenders granting the necessary extensions to the testing dates or other forms of waivers in respect of potential future covenant breaches, cash balances may not be available to the Group or Company. With regard to the balance sheet solvency of the Group, the Directors noted that under the base case scenario, assuming the Group is able to raise sufficient equity within the timeframes required, the Group returns to a net asset position post Proposed Recapitalisation and remains there for the going concern period.

As noted above, the Group has agreed the Alternative Transaction in the event that the Scheme is sanctioned but the Proposed Recapitalisation is unsuccessful, which would preserve the branch-based lending business as a going concern. However, there is no certainty that the Alternative Transaction would necessarily be successful and, in this scenario, there would be no recovery for the Company's current shareholders and the Company may enter into an insolvency process. Should the going concern assumption not be appropriate, the assets of the Company would have to be reduced to their market value which is expected to be £nil and require the recognition of contractual commitments which would become onerous in relation to the lease liability held at the Company totalling £62k as at 31 December 2022.

Despite the material uncertainties associated with the forecast assumptions, the Directors note that the Group's largest shareholder and secured lenders are supportive in principle, of the Proposed Recapitalisation, subject to agreement on the terms and the satisfaction of certain conditions, including further diligence on and its assessment of the Group's revised business plan and financial projections as outlined in the Conditions noted earlier.

The Directors believe that if the actual outcomes do not differ materially from the assumptions outlined in the base case, the Group can reasonably expect to continue to operate and meet its respective liabilities as they fall due for at least the next 12 months. In regards to the Company, the Directors believe that under the base case which assumes a successful Proposed Recapitalisation, the Company can reasonably expect to continue to operate and meet its respective liabilities as they fall due for at least the next 12 months. However, should the Alternative Transaction be implemented, there would be no recovery for the Company's current shareholders and the Company may enter into an insolvency process. Accounting standards require that financial statements are prepared on a going concern basis unless the Directors either intend to liquidate the entity or to cease trading or have no realistic alternative but to do so. The Directors therefore believes it remains appropriate to prepare the financial statements on a going concern basis whilst recognising the material uncertainties that remain. The Directors acknowledge that, whilst a scheme of arrangement is complex, time consuming and not guaranteed to be successful, they believe that there is a reasonable chance of success. The Directors' position is, in part, informed by the favourable performance to date against plan, support the Group has received from its secured lenders to date, including a contractual commitment to the Alternative Transaction, in the event the Proposed Recapitalisation fails, and the fact that the Company's largest shareholder remains supportive in principle of the Proposed Recapitalisation subject to the Conditions. The Director's notes that although the Group has contractual commitments from its secured lenders to support the Alternative Transaction, there is a risk that it will not be possible to implement either the Proposed Recapitalisation or the Alternative Transaction. In these circumstances, if neither the Proposed Recapitalisation nor the Alternative Transaction has been implemented by 31 December 2023, it will not be possible to pay the Scheme fund into a nominated trust account and the Scheme will fail.

As previously mentioned, the Directors recognise there are a high number of assumptions and variables in the modelling of the base case which are not directly within the Group's control and have therefore concluded that a material uncertainty exists which may cast significant doubt over the Group and Company's ability to continue as a going concern and therefore, that the Group and Company may be unable to realise their assets and discharge their liabilities in the normal course of business.

Should the going concern assumption not be appropriate, the assets of the Group would have to be reduced to their market values and the liabilities would have to include any amounts for onerous contracts and in addition, is likely to result in an increase in the amount of the redress provision.

The Directors will continue to monitor the Group and Company's financial position (including access to liquidity and balance sheet solvency) carefully as a better understanding of the impact of these various factors is developed. The Directors recognise the importance of the success of the Scheme and the Proposed Recapitalisation to mitigate the uncertainties noted above and to support the future growth prospects of the Group. The Directors will also continue to monitor the Group and Company's risk management and internal control systems.

Significant judgement

The below factors form a significant judgement of the Directors in the context of approving the Group and Company's going concern status:

· the assumption of a successful completion of the Scheme,

· support in principle from the Group's largest shareholder for the Proposed Recapitalisation,

· lender support for waivers and the Proposed Recapitalisation,

· the extension of existing financing facilities and partial write-off of debt as part of the Proposed Recapitalisation,

· the continued performance of the Group and that the outcomes are not materially different to those assumptions envisaged under the base case, and

· should the Proposed Recapitalisation be unsuccessful, lender support for the Alternative Transaction which would preserve the branch-based lending business and a going concern, but which, if implemented, would result in no recovery for the Company's current shareholders and the Company may enter into an insolvency process.

2. Changes in accounting policies and disclosures

New and amended standards and interpretations for the financial year ending 31 December 2022

There are no other new IFRSs or International Financial Reporting Interpretations that are effective for the first time for the year ended 31 December 2022 which have a material impact on the Group. The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective (effective 1 January 2023): Amendments to IAS 1, Presentation of financial statements on classification of liabilities; IFRS 17, Insurance contracts; Amendments to IAS 8, Definition of accounting estimates; Amendments to IAS 12, Deferred tax relating to assets and liabilities from a single transaction, and IFRS Practice statement 2, disclosure of accounting policy

Management will continue to assess the impact of new and amended standards and interpretations on an ongoing basis.

3. Revenue

Revenue is recognised by applying the EIR to the carrying value of a loan. The EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortised cost of a financial liability.

Year ended

31 Dec 2022

£000

Year ended

31 Dec 2021

£000

Interest income

98,337

131,387

Total revenue

98,337

131,387

4. Operating profit/(loss) for the year is stated after charging/(crediting):

	Year ended 31 Dec 2022 £000	Year ended 31 Dec 2021 £000
Depreciation of property, plant and equipment	1,215	2,175
Depreciation of right-of-use asset	1,462	2,878
Amortisation and impairment of intangible assets	978	7,910
Staff costs excluding agent commission¹	33,093	42,690
Rentals under operating leases	460	728
Profit/(loss) on sale of property, plant and equipment	(1)	454

1 Agent commission for the period ended 14 March 2022 was £1.5m (year ended 31 December 2021: £9.5m). Refer to note 1 for accounting policy.

5. Segment information

Management has determined the operating segments by considering the financial and operational information that is reported internally to the chief operating decision-maker, the Board of Directors, by management. For management purposes, the Group is currently organised into four operating segments: branch-based lending (Everyday Loans); guarantor loans (TrustTwo and George Banco); home credit (Loans at Home); and central (head office activities). The Group's divisions are all located in the United Kingdom and all revenue is attributable to customers in the United Kingdom.

	Branch-based lending £000	Home Credit⁴ £000	Guarantor loans¹ £000	Central £000	2022 Total £000
Year ended 31 December 2022
Interest income	84,470	7,315	6,552	-	98,337
Other income	173	-	-	-	173
Total revenue	84,643	7,315	6,552	-	98,510
Operating profit/(loss) before exceptionals	7,196	(531)	835	(3,040)	4,460
Exceptional items²	(12,407)	(5,647)	-	(13,714)	(31,768)
Finance cost	(14,925)	(257)	(2,000)	(11,869)	(29,051)
Loss before taxation	(20,136)	(6,435)	(1,165)	(28,623)	(56,359)
Taxation	(102)	123	-	(21)	-
Loss for the year	(20,238)	(6,312)	(1,165)	(28,644)	(56,359)

	Branch-based lending £000	Home credit £000	Guarantor loans¹ £000	Central £000	Consolidation adjustments³ £000	2022 Total £000
Total assets	185,129	-	10,147	197,994	(169,301)	223,969
Total liabilities	(226,088)	-	-	(274,061)	178,634	(321,515)
Net assets/(liabilities)	(40,959)	-	10,147	(76,067)	9,333	(97,546)
Capital expenditure	1,876	-	-	73	-	1,949
Depreciation of plant, property and equipment	1,214	-	-	1	-	1,215
Depreciation of right-of-use asset	1,451	-	-	11	-	1,462
Amortisation and impairment of intangible assets	957	-	-	22	-	979

1 The Guarantor Loans Division includes George Banco and TrustTwo. TrustTwo is supported by the infrastructure of Everyday Loans but its results are reported to the Board separately and has therefore been disclosed within the Guarantor Loans Division above.

2 Refer to note 6 for further details.

3 Consolidation adjustments include the elimination of intra-Group balances.

4 The home credit division was placed into administration on 15 March 2022; therefore its results reflect the period up to 14 March 2022.

	Branch-based lending £000	Home credit £000	Guarantor loans £000	Central £000	2021 Total £000
Year ended 31 December 2021
Interest income	79,940	38,401	13,046	-	131,387
Fair value unwind on acquired loan portfolio	-	-	-	-	-
Total revenue	79,940	38,401	13,046	-	131,387
Exceptional provision for customer redress	-	-	(2,207)	-	(2,207)
Operating profit/(loss) before amortisation	13,653	(2,204)	(272)	(4,085)	7,092
Amortisation of intangible assets	-	-	-	-	-
Operating profit/(loss) before exceptional items	13,653	(2,204)	(272)	(4,085)	7,092
Other exceptional items	-	(8,542)	(601)	(1,580)	(10,723)
Finance cost	(14,491)	(1,102)	(4,350)	(6,036)	(25,979)
Loss before taxation	(838)	(11,848)	(5,223)	(11,701)	(29,610)
Taxation	48	158	299	(580)	(75)
Loss for the year	(790)	(11,690)	(4,924)	(12,281)	(29,685)

	Branch-based lending £000	Home credit £000	Guarantor loans £000	Central £000	Consolidation Adjustments restated £000	2021 Total £000
Total assets	188,068	26,929	26,763	286,258	(186,880)	341,138
Total liabilities	(220,927)	(20,777)	-	(325,421)	184,800	(382,325)
Net assets	(32,859)	6,152	26,763	(39,163)	(2,080)	(41,187)
Capital expenditure	2,191	1,662	-	129	-	3,982
Depreciation of plant, property and equipment	1,585	578	-	12	-	2,175
Depreciation of right-of-use asset	1,338	1,420	-	120	-	2,878
Amortisation and impairment of intangible assets	797	7,091	-	23	-	7,910

The results of each segment have been prepared using accounting policies consistent with those of the Group as a whole.

6. Exceptional items

During the year ended 31 December 2022, the Group incurred exceptional costs totalling £31.8m (2021: £12.9m).

Exceptional items during the current year comprised: £5.65m in relation to the derecognition of the home credit division (S.D. Taylor Limited) which was placed into administration on 15 March 2022; £13.71m impairments recognised on related intercompany receivable balances held with the division; and £12.41m of costs and redress in relation to the Scheme.

Exceptional items during the prior year comprised: £1.6m advisory fees incurred (equity related fees are treated as non-deductible for tax purposes), £2.2m additional interest costs accrued in relation to the guarantor loans redress program; £0.6m relating to the guarantor loans redundancies arising as a result of the Group's announcement on 30 June 2021 to place the division into managed run-off; and £8.5m in relation to the write-down of assets and the recognition of liabilities in the home credit division as a result of the business being placed into administration on 15 March 2022 and its financial statements no longer being prepared on a going concern basis.

7. Taxation

For the year ended 31 December 2022, the Group has continued not to recognise a deferred tax asset on its current year losses. Deferred tax assets not recognised in current and prior year losses as at 31 December 2022 totalled £30.1m (2021: £21.8m unrecognised deferred tax asset).

	Year ended 31 Dec 2022 £000	Year ended 31 Dec 2021 £000
Current tax charge
Current tax	-	-
Prior period adjustment to current tax	-	75
Total current tax charge	-	75
Deferred tax charge¹	-	-
Prior period adjustment to deferred tax	-	-
Total tax (credit)/charge	-	75

1 Unrecognised deferred tax assets arising from tax losses in the current year were £6.3m (2021: £5.0m).

The difference between the total tax expense shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows:

	Year ended 31 Dec 2022 £000	Year ended 31 Dec 2021 £000
Loss before taxation	(56,359)	(29,610)
Tax on loss on ordinary activities at standard rate of UK corporation tax of 19% (2021: 19%):	(10,708)	(5,626)
Effects of:
Fixed asset differences	62	114
Non-deductible expenses	4,329	456
Share-based payments	-	7
Prior year adjustments	-	75
Deferred tax assets not recognised on current year losses	6,317	5,049
Total tax (credit)/charge	-	75

Certain exceptional items and costs related to the derecognition of the home credit division and related impairments as well as Scheme costs have been treated as non-deductible for tax purposes.

The Finance Bill 2021 had its third reading on 24 May 2021 and is now considered substantively enacted. This will have a consequential effect on the Group's future tax charge and means that the 25% main rate of corporation tax and marginal relief will be relevant for any asset sales or timing differences expected to reverse on or after 1 April 2023.

8. Loss per share

	Year ended 31 Dec 2022	Year ended 31 Dec 2021
Retained loss attributable to Ordinary Shareholders (£000)	(56,359)	(29,685)
Weighted average number of Ordinary Shares at year ended 31 December	312,437,422	312,437,422
Basic and diluted loss per share (pence)	(18.04)p	(9.50)p

The loss per share was calculated on the basis of net loss attributable to Ordinary Shareholders divided by the weighted average number of Ordinary Shares in issue. The basic and diluted loss per share is the same, as the exercise of any share options would reduce the loss per share and is anti-dilutive. At 31 December 2022, nil shares were held as options and nil shares were held in treasury (2021: nil).

Year ended

31 Dec 2022

000s

Year ended

31 Dec 2021

000s

Weighted average number of potential Ordinary Shares that are not currently dilutive

339

The weighted average number of potential Ordinary Shares that are not currently dilutive includes the Ordinary Shares that the Company may potentially issue relating to its share option schemes and share awards under the Group's long-term incentive plans and SAYE schemes. The amount is based upon the average number of shares over the year that would have been issued if 31 December 2022 was the end of the contingency period. There were no active LTIP or SAYE schemes during the year ended 31 December 2022.

9. Dividends

As a result of the significant reported losses over the past three years, the Company does not have any distributable reserves and is therefore not in a position to declare a final dividend. Assuming that the Proposed Recapitalisation is successfully completed, the Board is committed to completing a process, subject to shareholder and Court approval, to create sufficient distributable reserves so that the Company is able to resume the payment of cash dividends to shareholders as soon as it is appropriate to do so.

As reported in the Interim Results to 30 June 2022, the Group did not declare a half-year dividend during the first half of 2022 (2021: nil).

10. Amounts receivable from customers

	2022 £000	2021 £000
Gross carrying amount	212,153	265,021
Loan loss provision	(35,049)	(57,037)
Amounts receivable from customers	177,104	207,984

The movement on the loan loss provision for the period relates to the provision at the branch-based lending, guarantor loans and home credit divisions for the year.

Included within the gross carrying amount above are unamortised broker commissions, see table below:

2022

£000

2021

£00

Unamortised broker commissions

7,348

6,653

Total unamortised broker commissions

7,348

6,653

The fair value of amounts receivable from customers are:

	2022 £000	2021 £00
Branch-based lending¹	222,856	208,440
Home credit²	-	36,368
Guarantor loans¹	12,316	31,366
Fair value of amounts receivable from customers	235,172	276,174

1 Includes amounts receivable from customers which have been provided for as part of the scheme of arrangement for further detail.

2 The home credit division was placed into administration on 15 March 2022 and derecognised from the Group.

Fair value has been derived by discounting expected future cash flows (net of collection costs) at the credit risk adjusted discount rate at the balance sheet date. Under IFRS 13 Fair Value Measurement, receivables are classed as Level 3 which defines fair value measurements as those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Maturity of amounts receivable from customers:	2022 £000	2021 £00
Due within one year	75,135	109,148
Due in more than one year	101,969	98,836
Amounts receivable from customers	177,104	207,984

Analysis of receivables from customers

31 December 2022	Stage 1 £000	Stage 2 £000	Stage 3 £000	Total £000
Branch-based lending	159,594	27,878	8,658	196,130
Guarantor loans	-	13,510	2,513	16,023
Gross carrying amount	159,594	41,388	11,171	212,153
Branch-based lending	(9,332)	(12,476)	(7,365)	(29,173)
Guarantor loans	-	(3,803)	(2,073)	(5,876)
Loan loss provision	(9,332)	(16,279)	(9,438)	(35,049)
Branch-based lending	150,262	15,402	1,293	166,957
Guarantor loans	-	9,707	440	10,147
Net amounts receivable	150,262	25,109	1,733	177,104

31 December 2021	Stage 1 £000	Stage 2 £000	Stage 3 £000	Total £000
Branch-based lending	141,979	33,723	7,138	182,840
Home credit	-	32,162	12,975	45,137
Guarantor loans	-	30,768	6,276	37,044
Gross carrying amount	141,979	96,653	26,389	265,021
Branch-based lending	(6,831)	(13,347)	(5,481)	(25,659)
Home credit	-	(9,186)	(11,911)	(21,097)
Guarantor loans	-	(5,965)	(4,316)	(10,281)
Loan loss provision	(6,831)	(28,498)	(21,708)	(57,037)
Branch-based lending	135,148	20,376	1,657	157,181
Home credit	-	22,976	1,064	24,040
Guarantor loans	-	24,803	1,960	26,763
Net amounts receivable	135,148	68,155	4,681	207,984

11. Deferred tax asset/(liability)

	£000
At 31 December 2021	-
Prior period adjustment to deferred tax	-
Reversal of prior year deferred tax assets	-
At 31 December 2022	-

Consistent with prior years, the Group has not recognised a deferred tax asset during the financial year on its losses due to the uncertainty in the regulatory and macroeconomic environment. The Group reviews the carrying amount of deferred tax assets at each balance sheet date and reduces it to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

The deferred tax asset is attributable to temporary timing differences and carried forward losses arising in respect of:

	2022 £000	2021 £000
Accelerated tax depreciation	334	271
Carried forward losses	26,747	18,214
Restatement of loan loss spreading	(22)	(30)
Other short-term timing differences	-	317
Unpaid employer pension contributions	73	100
FRS 102 adoption	(2)	(3)
IFRS 16 transitional adjustment	12	15
IFRS 9 transitional adjustment	2,457	2,949
Unutilised provisions	413	-
Unpaid employee remuneration	87	-
Unpaid donations	2	4
Unrecognised tax losses	(30,101)	(21,837)
Net deferred tax asset	-	-

12. Trade and other payables and provisions

	2022 £000	2021 £000
Trade creditors and payables	10,941	955
Other creditors	1,992	3,932
Current tax liability	-	-
Accruals and deferred income	15,432	13,488
	28,365	18,375

Provisions - Group

	Plevin £000	Onerous contracts £000	Complaints £000	Dilapidations £000	Scheme provision £000	Restructuring £000	Total £000
Balance at 31 December 2020	49	-	5,129	1,322	15,313	-	21,813
Charge during the year	-	282	4,936	15	2,251	601	8,085
Utilised	(49)	-	(3,432)	(68)	(636)	(70)	(4,255)
Balance at 31 December 2021	-	282	6,633	1,269	16,928	531	25,643
Derecognition of home credit division¹	-	(282)	(3,636)	(230)	-	-	(4,148)
Charge during the year	-	-	-	390	9,502	-	9,892
Utilised	-	-	(232)	-	-	(465)	(697)
Balance at 31 December 2022	-	-	2,765	1,429	26,430	66	30,690

¹ The Group's home credit division was placed into administration on 15 March 2022.

Provisions are recognised for present obligations arising as a consequence of past events where it is more likely than not that a transfer of economic benefit will be necessary to settle the obligation, which can reliably be estimated.

The Group is pursuing the Scheme in order to resolve the outstanding regulatory issues and compromise its redress liabilities. Although the independent review of the Group's branch-based lending division carried out in 2021 identified no systemic issues requiring redress, as this division and the guarantor loans division (now in collect-out) trade out of the same legal entity (Everyday Lending Limited), the Scheme encompasses potential claims from both divisions in order to ensure equitable treatment of customers. The publication of the Practice Statement Letter on 17 March 2023 provides details regarding the Scheme. The Group has included a provision of £26.4m as at 31 December 2022 based on the amount it expects to be available for redress creditors and costs associated with the Scheme. If the Scheme is successful, it would compromise redress liabilities for loan activity prior to 31 March 2021, however it is possible that claims relating to post 31 March 2021 loan activity could increase in the future due to unforeseen circumstances and/or if FOS were to change its policy with respect to how such claims are adjudicated. The Group has recognised a provision for business as usual (BAU) complaints received at year end of £2.8m as at 31 December 2022 (2021: £6.6m). This is in relation to potential outflows to customers related to past non-compliance with regulations relating to affordability assessments. Judgement is applied to determine the quantum of such provisions, including making assumptions regarding the extent to which the complaints already received may be upheld, average redress payments and related administrative costs.

The home credit division was placed into administration on 15 March 2022 and therefore is no longer part of the Group as at 31 December 2022.

13. Contingent liabilities

A contingent liability is a possible obligation depending on whether some uncertain future event occurs. During the normal course of business, the Group is subject to regulatory reviews and challenges. All material matters arising from such reviews and challenges are assessed, with the assistance of external professional advisors where appropriate, to determine the likelihood of the Group incurring a liability as a result. In those instances, including future thematic reviews performed by the regulator in response to recent challenges noted in the industry, where it is concluded that it is more likely than not that a payment will be made, a provision is established based on management's best estimate of the amount required to meet such liability at the relevant balance sheet date.

The Group is pursuing the Scheme which if successful, would compromise redress liabilities for loan activity prior to 31 March 2021. It is possible that claims relating to post 31 March 2021 loan activity could increase in the future due to unforeseen circumstances and/or if FOS were to change its policy with respect to how such claims are adjudicated. Should the final outcome of these complaints differ materially from management's current estimates, the cost of resolving such complaints could be higher than expected. It is however not possible to estimate any such increase reliably.

14. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. The Company received dividend income of £nil from its subsidiary undertakings during the year (2021: £nil). The Company receives charges from and makes charges to these related parties in relation to shared costs, staff costs and other costs incurred on their behalf. Intra-Group transactions between the Company and the fully consolidated subsidiaries or between fully consolidated subsidiaries are eliminated on consolidation.

The Loan Smart charity was closed on 11 July 2022. During the year, the Company donated £nil to Loan Smart (2021: £15,000).

Information about the remuneration of individual Directors is provided in the Annual Report and Accounts.

Toby Westcott who is a Nominee Director of the Company receives no direct remuneration from the Company. However, Alchemy Special Opportunities LLP were remunerated for the services of Toby Westcott through a services agreement. This figure equates to a £75k fee plus VAT per annum. Total fees paid in relation to these services totalled £75k (plus VAT) for the year ended 31 December 2022 (2021: £75k+VAT).

15. Share capital

All shares in issue are Ordinary 'A' Shares consisting of £0.05 per share. All 312,437,422 shares are fully paid up.

The Company's share capital is denominated in Sterling. The Ordinary Shares rank in full for all dividends or other distributions, made or paid on the Ordinary Share capital of the Company.

During the year, the Company cancelled nil shares (2021: nil shares) and issued nil shares (2021: nil shares).

Share movements

	Number
Balance at 31 December 2021	312,437,422
Cancellation of shares	-
Issue of shares	-
Balance at 31 December 2022	312,437,422

Non-Standard Finance plc sponsors the Non-Standard Finance plc 2019 Employee Benefit Trust ('EBT') which is a discretionary trust established on 21 October 2019 for the benefit of the employees of the Group. The Company has appointed Estera Trust (Jersey) Limited to act as trustee of the EBT. The trustee has waived the right to receive dividends on the shares it holds. As at 31 December 2022, the EBT held nil (2021: nil) shares in the Company with a cost of £nil (2021: £nil) and a market value of £nil (2021: £nil).

16. Share premium

The share premium account is used to record the aggregate amount or value of premiums paid when the Company's shares are issued at a premium.

	Total £000
Balance at 31 December 2021	180,019
Capital reduction	-
Issue of shares	-
Balance at 31 December 2022	180,019

17. Net cash generated/(used) in operating activities

	Year ended 31 Dec 2022 £000	Year ended 31 Dec 2021 £000
Operating loss	(27,308)	(3,631)
Taxation refund/(paid)	1,353	-
Interest portion of the repayment of lease liabilities	(816)	(983)
Depreciation	2,677	3,833
Share-based payment charge	-	34
Amortisation of intangible assets	979	2,727
Derecognition and impairments related to administration of home credit division	19,361	-
Exceptional charge for write-down of assets and recognition of liabilities of home credit division	-	8,542
Profit/(loss) on disposal of property, plant and equipment	123	1,022
Decrease/(increase) in amounts receivable from customers	13,374	48,522
Decrease/(increase) in receivables	332	(446)
(Decrease)/increase in payables and provisions	7,841	(1,858)
Cash generated/(used) in operating activities	17,916	57,762

18. Subsequent Events

The Everyday Lending Limited Directors, supported by the Group Directors, decided to pursue a scheme of arrangement to address the Group's redress liabilities and a practice statement letter for the scheme was published on 17 March 2023 (refer to note 24 for amounts provided for as part of this).

On 7 February 2023, the S.D. Taylor administrators repaid a further £3m to the Group's secured lenders, thereby reducing the Group's gross loans and borrowings to £252m.

APPENDIX

Glossary of alternative performance measures and key performance indicators

The Group has developed a series of alternative performance measures that it uses to monitor the financial and operating performance of each of its business divisions and the Group as a whole. These measures seek to adjust reported metrics for the impact of non-cash and other accounting charges (including modification loss) that make it more difficult to see the true underlying performance of the business. These APMs are not defined or specified under the requirements of International Financial Reporting Standards, however we believe these APMs provide readers with important additional information on our business. To support this, we have included a reconciliation of the APMs we use, how they are calculated and why we use them on the following pages.

Alternative performance measure	Definition
Net debt	Gross borrowings less cash at bank
Normalised revenue	Normalised figures are before fair value adjustments, amortisation of acquired intangibles and exceptional items (refer to note 7).
Normalised operating profit
Normalised profit before tax
Normalised earnings per share

Key performance indicator
Impairments/revenue	Impairments as a percentage of normalised revenues
Impairments (including modifications)/revenue	Impairments (including modification and derecognition losses) as a percentage of normalised revenues
Impairments/average loan book	Impairments as a percentage of 12-month average net loan book, excluding fair value adjustments
Net loan book	Net loan book before fair value adjustments but after deducting any impairment due
Net loan book growth	Annual growth in the net loan book
Operating profit margin	Normalised operating profit as a percentage of normalised revenues
Cost:income ratio	Normalised administrative expenses as a percentage of normalised revenue
Return on asset	Normalised operating profit as a percentage of average loan book excluding fair value adjustments
Revenue yield	Normalised revenue as a percentage of average loan book excluding fair value adjustments
Risk adjusted margin	Normalised revenue less impairments as a percentage of average loan book excluding fair value adjustments

Alternative performance measures reconciliation

1. Net debt

	31 Dec 2022 £000	31 Dec 2021 £000
Borrowings	255,000	330,000
Cash at bank and in hand¹	(31,732)	(114,544)
	223,268	215,456

1 Cash at bank and in hand excludes cash held by the Parent Company that sits outside of the security group.

This is deemed useful to show total borrowings if cash available at year end was used to repay borrowing facilities.

2. Normalised and reported revenue

Branch-based lending

Guarantor loans

31 Dec 2022

£000

31 Dec 2021

£000

31 Dec 2022

£000

31 Dec 2021

£000

Normalised and reported revenue

84,470

79,940

6,552

13,046

3. Normalised operating profit/(loss)

	Branch-based lending		Guarantor loans
	31 Dec 2022 £000	31 Dec 2021 £000	31 Dec 2022 £000	31 Dec 2021 £000
Reported operating profit/(loss)	7,196	13,653	835	(272)
Add back fair value adjustments and amortization of acquired intangibles	-	-	-	-
Add back exceptional items	-	-	-	2,207
Normalised operating profit/(loss)	7,196	13,653	835	1,935

Fair value adjustments and amortisations have been excluded due to them being non-business-as-usual transactions. They result from the Group making acquisitions and do not reflect the underlying performance of the business. Removing this item is deemed to give a fairer representation of revenue within the relevant financial year.

4. Normalised profit/(loss) before tax

	31 Dec 2022 £000	31 Dec 2021 £000
Reported loss before tax	(56,359)	(29,610)
Add back fair value adjustments	-	-
Add back amortisation and write-off of intangibles	-	-
Add back exceptional items	31,768	12,930
Normalised (loss)/profit before tax	(24,591)	(16,680)

Exceptional items have been excluded due to them being non-business-as-usual transactions. They are one-off and are not as a result of underlying business-as-usual transactions (refer to note 7 for further detail) and therefore do not reflect the underlying performance of the business. Hence, removing these items is deemed to give a fairer representation of the underlying profit performance within the financial year.

5. Normalised profit/(loss) for the year

	Group
	31 Dec 2022 £000	31 Dec 2021 £000
Reported loss for the year	(56,359)	(29,685)
Add back exceptional items	31,768	12,930
Adjustment for tax relating to above items	-	-
Normalised profit/(loss) for the year	(24,591)	(16,755)
Weighted average shares	312,437,422	312,437,422
Normalised earnings/(loss) per share (pence)	(7.87)p	(5.36)p

6. Impairment as a percentage of revenue

	Branch-based lending		Guarantor loans
	31 Dec 2022 £000	31 Dec 2021 £000	31 Dec 2022 £000	31 Dec 2021 £000
Normalised revenue	84,470	79,940	6,552	13,046
Impairment	(26,704)	(18,994)	1,595	1,061
Impairment as a percentage revenue	31.6%	23.8%	(24.4)%	(8.1)%

	Branch-based lending		Guarantor loans
	31 Dec 2022 £000	31 Dec 2021 £000	31 Dec 2022 £000	31 Dec 2021 £000
Normalised revenue	84,470	79,940	6,552	13,046
Impairment and modifications	(26,954)	(20,337)	1,583	(417)
Impairment and modifications as a percentage revenue	31.9%	25.5%	(24.2)%	3.2%

Impairment as a percentage revenue is a key measure for the Group in monitoring risk within the business.

7. Impairment as a percentage loan book

	Branch-based lending		Guarantor loans
	31 Dec 2022 £000	31 Dec 2021 £000	31 Dec 2022 £000	31 Dec 2021 £000
Opening net loan book	157,181	171,460	26, 763	59,794
Closing net loan book	166,957	157,181	10,147	26, 763

Average net loan book	161,460	163,724	17,095	40,609
Impairment	(26,704)	(18,994)	1,595	1,061
Impairment as a percentage loan book	16.5%	11.6%	(9.3)%	(2.6%)

Impairment as a percentage loan book allows review of impairment level movements year on year.

8. Net loan book growth

	Branch-based lending		Guarantor loans
	31 Dec 2022 £000	31 Dec 2021 £000	31 Dec 2022 £000	31 Dec 2021 £000
Opening net loan book	157,181	171,460	26, 763	59,794
Closing net loan book	166,957	157,181	10,147	26, 763
Net loan book growth	6.2%	(8.3%)	(62.1)%	(55.2%)

9. Return on asset

	Branch-based lending		Guarantor loans
	31 Dec 2022 £000	31 Dec 2021 £000	31 Dec 2022 £000	31 Dec 2021 £000
Normalised operating profit	7,196	13,653	835	1,935
Average net loan book	161,460	163,724	17,095	40,609
Return on asset	4.5%	8.3%	4.9%	4.8%

The return on asset measure is used internally to review the return on the Group's primary key assets.

10. Revenue yield

	Branch-based lending		Guarantor loans
	31 Dec 2022 £000	31 Dec 2021 £000	31 Dec 2022 £000	31 Dec 2021 £000
Normalised revenue	84,470	79,940	6,522	13,046
Average net loan book	161,460	163,724	17,095	40,609
Revenue yield percentage	52.3%	48.8%	38.3%	32.1%

Revenue yield percentage is deemed useful in assessing the gross return on the Group's loan book.

11. Risk adjusted margin

	Branch-based lending		Guarantor loans
	31 Dec 2022 £000	31 Dec 2021 £000	31 Dec 2022 £000	31 Dec 2021 £000
Normalised revenue	84,470	79,940	6,552	13,046
Impairments	(26,704)	(18,994)	1,595	1,061
Normalised risk adjusted revenue	57,766	60,946	8,147	14,107
Average net loan book	161,460	163,724	17,095	40,609
Risk adjusted margin percentage	35.8%	37.2%	47.7%	34.7%

The Group defines normalised risk adjusted revenue as normalised revenue less impairments. Risk adjusted revenue is not a measurement of performance under IFRSs, and you should not consider risk adjusted revenue as an alternative to profit before tax as a measure of the Group's operating performance, as a measure of the Group's ability to meet its cash needs or as any other measure of performance under IFRSs. The risk adjusted margin measure is used internally to review an adjusted return on the Group's primary key assets.

12. Operating profit margin

	Branch-based lending		Guarantor loans
	31 Dec 2022 £000	31 Dec 2021 £000	31 Dec 2022 £000	31 Dec 2021 £000
Normalised operating profit	7,196	13,653	835	1,935
Normalised revenue	84,470	79,940	6,552	13,046
Operating profit margin percentage	8.5%	17.1%	12.8%	14.8%

13. Cost to income ratio

	Branch-based lending		Guarantor loans
	31 Dec 2022 £000	31 Dec 2021 £000	31 Dec 2022 £00	31 Dec 2021 £000
Normalised revenue	84,470	79,940	6,552	13,046
Administration expense	(50,493)	(46,294)	(7,300)	(10,695)
Operating profit margin percentage	59.8%	57.9%	111.4%	82.0%

This measure allows review of cost management.

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