Non-Standard Finance plc

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

2022 Trading Statement

(13 February 2023): Non-Standard Finance today issues this update on trading for the full year 2022, as well as an update on its ongoing discussions with the FCA and its lenders, ahead of the expected publication of its Full Year audited results by the end of April.

Operating performance

The Group's operating performance continues to meet expectations and trading in the Group's remaining operating division, Everyday Loans (branch-based lending) which sits under Everyday Lending Limited ("ELL"), remains encouraging and followed the trends that were visible at the half year. ELL's Everyday Loans (branch-based lending) net loan book grew 6.2% during the year to £167m as at 31st December 2022, as demand strengthened for its branch-based lending services. The company continues to operate under tight lending criteria given the economic backdrop and is pleased to see this reflected in better than expected delinquency throughout the year.

ELL continues to invest in credit and collections technology improvements despite the financial constraints it is operating under. It continued its recovery following the Covid pandemic, opening a further three branches during the year and increasing operational staff numbers from 355 FTE to 402 FTE.

The NSF Board continues to believe that the business has good growth potential provided the Group's remaining regulatory issues are resolved, and it can successfully recapitalise.

Update on scheme of arrangement

Talks with advisors and the FCA regarding a potential scheme of arrangement in relation to redress liabilities are progressing. As noted in the 2022HY announcement, 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 (ELL), it is intended that a scheme of arrangement would encompass potential claims from both divisions in order to ensure equitable treatment of customers.

Engagement with the FCA is continuing and the Group hopes to obtain greater clarity from the FCA in the coming weeks as to their views on a potential scheme, while also concluding negotiations on the terms of such a scheme with a committee of eligible customers, before it formally launches the process. If a scheme of arrangement is sanctioned, the Group's intention is to proceed with a capital raise to generate funds for the payment of redress under a scheme as well as recapitalise the remaining group and enable Everyday Loans (branch-based lending) to move forward with its growth plan.

The Group continues to work closely with its secured lenders on an alternative transaction to be implemented in the event that a scheme of arrangement is completed but the proposed capital raise is unsuccessful, which would preserve the branch-based lending business as a going concern.

The proposed capital raise, whilst ensuring the future for the Group, will materially dilute the interests of existing equity holders, most likely to negligible value unless they choose to participate in the capital raise. In the alternative transaction (in the event the capital raise is unsuccessful), there would be no recovery for the Company's shareholders. 

In parallel, the Group continues to engage with the FCA with respect to the business' plan to rely on DISP 1.6.2R(2), pursuant to which, the business is able to place a temporary hold on the processing of customer complaints included in the terms of a potential scheme of arrangement as it would not be in a position to make a final response on these claims until the conclusion of the court process.

Without the successful completion of a scheme of arrangement and subsequent recapitalisation of the Group, the balance sheet remains deeply insolvent. In the event that the scheme of arrangement is not sanctioned by the court, or in the event that the subsequent recapitalisation of the business fails, there would then 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 a potential scheme of arrangement and a subsequent recapitalisation, in the form of either a capital raise or the proposed alternative transaction, with the support of our largest shareholder and/or principal lenders.

In the meantime, 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 its plans pending resolution of a potential scheme of arrangement and subsequent recapitalisation.  As part of these funding discussions, the Group has reduced its gross borrowings by a further £20 million to £255 million, following the repayment of its £45 million RCF last July. The Board would like to express its gratitude for the continued support of both its lenders and its principal shareholders.

The Board is conscious that discussions regarding the current situation have now been going on for some considerable time and it is keen to bring the current situation to a conclusion to enable the management, staff and customers of ELL to move forward. Further updates will be announced as appropriate.

Jono Gillespie, Group Chief Executive, said: "Everyday Loans continues to perform well, despite the considerable constraints it is operating under and this gives us confidence in the future of the business provided the Group can successfully complete its planned restructuring. We are making good progress with our restructuring plans, thanks to the support of our main lenders and largest shareholder and hope to be in a place to provide more specific details before too long."