REGISTERED NUMBER: |
STRATEGIC REPORT, REPORT OF THE DIRECTORS AND |
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023 |
FOR |
ASSETZ SME CAPITAL LIMITED |
REGISTERED NUMBER: |
STRATEGIC REPORT, REPORT OF THE DIRECTORS AND |
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023 |
FOR |
ASSETZ SME CAPITAL LIMITED |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
CONTENTS OF THE FINANCIAL STATEMENTS |
for the Year Ended 31 March 2023 |
Page |
Company Information | 1 |
Strategic Report | 2 |
Report of the Directors | 5 |
Report of the Independent Auditors | 7 |
Profit and Loss Account | 11 |
Statement of Financial Position | 12 |
Statement of Changes in Equity | 13 |
Notes to the Financial Statements | 14 |
ASSETZ SME CAPITAL LIMITED |
COMPANY INFORMATION |
for the Year Ended 31 March 2023 |
DIRECTORS: |
REGISTERED OFFICE: |
REGISTERED NUMBER: |
AUDITORS: |
100 Barbirolli Square |
Manchester |
M2 3BD |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
STRATEGIC REPORT |
for the Year Ended 31 March 2023 |
The directors present their Strategic Report for Assetz SME Capital Limited ("the Company") for the year ended 31 March 2023. |
Review of the business |
Assetz SME Capital Ltd is an FCA regulated, marketplace lending platform for property secured UK business lending. We originate property development loans, commercial mortgages, buy-to-let loans and bridging loans which are funded by a combination of retail, corporate and institutional investors via our proprietary marketplace technology. Our aim is to provide a stable and secure income producing asset class for all investors who engage with our platform and to address a funding gap in under-served UK SME Lending segments. |
The Company's revenues arise principally from fee income charged to borrowers for both facilitating and then servicing their loans. |
The Company has invested significantly in developing its proprietary marketplace technology which allows investors to quickly invest in loans matching their chosen criteria and achieve diversification across portfolios and aid liquidity if needed. |
In addition, the Company has credit knowledge and experience at its core having invested in people with extensive UK SME property-backed lending experience to allow us to facilitate sustainable lending opportunities for investors. |
Developments and performance during the year |
In the early months of FY23 our strategy of growing lending through a re-activated peer to peer platform and increased institutionally funded lending was working, with lending levels tracking similar levels to that seen in FY22. Supportive of the strategy, a number of key stakeholders in the group converted debt of £2.6m into equity on the group's balance sheet. |
However, the substantial and rapid rise in interest rates from an all-time low in Autumn 2022 had a substantial impact on lending markets. Our institutional funders were forced to consider their own lending capacity and as a minimum needed to raise interest rates to compensate, which we then needed to pass on to potential new borrowers in the form of increased interest rates on new loans being offered. With savings rates increasing very substantially, retail investor demand fell away to a net withdrawal position, meaning our peer-to-peer platform was no longer a funding source for new lending. |
These two factors resulted in a substantial slowdown in new lending from late in the third quarter of 2022 and also rendered a substantial proportion of our pending loan pipeline un-fundable at that time when compared to the other lending mandates we held from other institutions. |
In adjusting to the new market dynamic the business took steps to focus on higher value, institutionally funded lending going forward. As a result, in December 2022, the difficult decision was taken to close the peer-to-peer platform to new investment, moving the retail loan book, along with the concluded CBILS and RLS scheme loan books into run-off. The group also formed a new subsidiary, a sister company to Assetz SME Capital Ltd, whose objective would be to handle the origination of all new institutionally funded loans in an un-regulated, and more cost efficient, commercial environment. |
Responding to these events the Company began to reduce its headcount and costs, making a number of redundancies and transferring roles into the new sister company, in the second half of FY23. As we followed necessary employment protocols it meant that the effect of these actions on costs were only seen right at the end of FY23. In light of these additional costs, arising from restructuring the business in light of macroeconomic events, investor membership fees were re-introduced on the peer-to-peer platform (having previously applied during COVID). |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
STRATEGIC REPORT |
for the Year Ended 31 March 2023 |
The directors monitor the progress of the Company by reference to the following financial measures, alongside complimentary KPIs: |
FY23 | FY22 | FY21 |
Outstanding loan book at period end | £298m | £357m | £321m |
Loans originated | £123m | £267m | £160m |
Revenue | £11.4m | £16.0m | £15.2m |
EBITDA pre exceptionals | (£2.6m | ) | (£0.8m | ) | £3.8m |
Operating Profit / (Loss) post exceptionals | (£4.3m | ) | (£3.0m | ) | £2.4m |
Profit / (Loss) for the financial year | (£3.6m | ) | (£3.2m | ) | £2.6m |
Average headcount | 126 | 128 | 119 |
A substantial proportion of the lending for FY23 was delivered in the first half of the year prior to macroeconomic events causing the substantial impact we describe above, which significantly impacted lending in the second half of FY23. The time taken to implement the necessary cost reductions and restructuring following these events, at a time when lending levels were very low, has led to the losses incurred in FY23. |
PRINCIPAL RISKS AND UNCERTAINTIES |
As custodian of loans originated for other investors, the Company has significant resources dedicated to assessing and managing the risk that borrowers may default on their loans. |
In addition to credit risk, the Company manages other risks, including: |
Liquidity Risk |
The risk that the Company will not be able to meet its financial obligations as they fall due. This is managed by ensuring that there is always sufficient liquidity to meet liabilities when due both under normal and stressed conditions. The directors monitor the liquidity position on an ongoing basis. |
Market risk |
The Company's business is the facilitation of property secured UK SME lending and the directors are aware that a general and persistent weakening of the UK economy and, in particular, property values, may impact on investor appetite for property secured loans. The Company has sought to mitigate these risks by increasing its range of loan funding sources including institutional investors and also by maintaining a modest level of Loan to Value across the loan book. |
Operational risk |
The Company maintains robust operational systems and controls through its investment in people and technology. A risk committee reports regularly to the directors, and the Company continues its development of strong operational, risk and compliance function. |
Capital Management |
The Company's objective when managing capital is to safeguard its ability to continue as a going concern (referred to in liquidity risk above) and to meet the FCA regulatory capital requirement. Financial performance is regularly reviewed by various committees within the business, focusing on the amount of regulatory and working capital needed. |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
STRATEGIC REPORT |
for the Year Ended 31 March 2023 |
FUTURE DEVELOPMENTS |
Following the events of FY23 described above the role of the Company within the group is to manage the run-off of the retail, CBILS and RLS loan books over their life, and return funds to the respective investors as efficiently as possible. All future lending is via the other group subsidiaries. |
Direct employees of the Company have reduced to c30 FTE since the year end. |
ON BEHALF OF THE BOARD: |
21 December 2023 |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
REPORT OF THE DIRECTORS |
for the Year Ended 31 March 2023 |
The directors present their report with the financial statements of the company for the year ended 31 March 2023. |
DIVIDENDS |
No dividends will be distributed for the year ended 31 March 2023. |
FUTURE DEVELOPMENTS |
Details regarding future developments are included in the strategic report. |
DIRECTORS |
The directors shown below have held office during the whole of the period from 1 April 2022 to the date of this report. |
Other changes in directors holding office are as follows: |
OTHER ACTIVITY |
The principal activity of the company is that of a marketplace lender. The main focus is secured business and property lending to SME business borrowers. Assetz SME Capital Limited do not lend their own capital. |
STATEMENT OF DIRECTORS' RESPONSIBILITIES |
The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations. |
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 101 'Reduced Disclosure Framework'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to: |
- | select suitable accounting policies and then apply them consistently; |
- | make judgements and accounting estimates that are reasonable and prudent; |
- | prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. |
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
REPORT OF THE DIRECTORS |
for the Year Ended 31 March 2023 |
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS |
So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information. |
AUDITORS |
The auditor, Xeinadin Audit Limited, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006. |
ON BEHALF OF THE BOARD: |
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF |
ASSETZ SME CAPITAL LIMITED |
Opinion |
We have audited the financial statements of Assetz SME Capital Limited (the 'company') for the year ended 31 March 2023 which comprise the Profit and Loss Account, Statement of Financial Position, Statement of Changes in Equity and Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 'Reduced Disclosure Framework' (United Kingdom Generally Accepted Accounting Practice). |
In our opinion the financial statements: |
- | give a true and fair view of the state of the company's affairs as at 31 March 2023 and of its loss for the year then ended; |
- | have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and |
- | have been prepared in accordance with the requirements of the Companies Act 2006. |
Basis for opinion |
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. |
Conclusions relating to going concern |
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. |
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. |
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. |
Other information |
The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon. |
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. |
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. |
Opinions on other matters prescribed by the Companies Act 2006 |
In our opinion, based on the work undertaken in the course of the audit: |
- | the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and |
- | the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements. |
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF |
ASSETZ SME CAPITAL LIMITED |
Matters on which we are required to report by exception |
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors. |
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: |
- | adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or |
- | the financial statements are not in agreement with the accounting records and returns; or |
- | certain disclosures of directors' remuneration specified by law are not made; or |
- | we have not received all the information and explanations we require for our audit. |
Responsibilities of directors |
As explained more fully in the Statement of Directors' Responsibilities set out on page five, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. |
In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. |
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF |
ASSETZ SME CAPITAL LIMITED |
Auditors' responsibilities for the audit of the financial statements |
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. |
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: |
Identifying and assessing potential risks related to irregularities |
In identifying and assessing risks of material misstatement in respect of irregularities including fraud and non-compliance with laws and regulations we have considered the following: |
- | The nature of the industry and sector, control environment and business performance including the company's remuneration policies, key drivers for directors remuneration, bonus levels and performance targets; |
- | Results of the enquiries of management about their own identification and assessment of the risks of irregularities; |
- | Any matters we have identified having obtained and reviewed the company's documentation of their policies and procedures relating to: |
- | identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of noncompliance; |
- | detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; |
- | the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; |
- | the matters discussed among the audit engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. |
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas: timing of recognition of income and provisions. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. |
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the company's ability to operate or to avoid a material penalty. |
Audit response to risks identified |
Our procedures to respond to risks identified included the following: |
- | reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements; |
- | enquiring of management concerning actual and potential litigation and claims; |
- | performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; |
- | reading minutes of meetings of those charged with governance and reviewing correspondence with HMRC; and |
- | in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. |
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. |
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF |
ASSETZ SME CAPITAL LIMITED |
No instances of material non-compliance were identified. However, the likelihood of detecting irregularities, including fraud, is limited by the inherent difficulty in detecting irregularities, the effectiveness of the entity's controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud might be inherently more difficult to detect than irregularities that result from error. As explained above, there is an unavoidable risk that material misstatements may not be detected, even though the audit has been planned and performed in accordance with ISAs (UK). |
We also obtained an understanding of the legal and regulatory frameworks that the company operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included UK Companies Act, employment law, health and safety, pensions legislation and tax legislation. |
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors. |
Use of our report |
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. |
for and on behalf of |
100 Barbirolli Square |
Manchester |
M2 3BD |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
PROFIT AND LOSS ACCOUNT |
for the Year Ended 31 March 2023 |
2023 | 2022 |
Notes | £ | £ |
REVENUE |
Cost of sales |
GROSS PROFIT |
Administrative expenses |
OPERATING LOSS | ( |
) | ( |
) |
Exceptional items | 5 |
(4,289,289 | ) | (3,024,910 | ) |
Interest receivable and similar income |
(4,276,965 | ) | (3,023,512 | ) |
Interest payable and similar expenses | 6 |
LOSS BEFORE TAXATION | 7 | ( |
) | ( |
) |
Tax on loss | 8 | ( |
) |
LOSS FOR THE FINANCIAL YEAR | ( |
) | ( |
) |
OTHER COMPREHENSIVE INCOME | - | - |
TOTAL COMPREHENSIVE LOSS FOR THE YEAR | ( |
) | ( |
) |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
STATEMENT OF FINANCIAL POSITION |
31 March 2023 |
2023 | 2022 |
Notes | £ | £ | £ | £ |
NON-CURRENT ASSETS |
Intangible assets | 10 |
Property, plant and equipment | 11 |
Right-of-use assets | 12 |
CURRENT ASSETS |
Trade and other receivables | 13 |
Cash at bank and in hand |
LIABILITIES |
Amounts falling due within one year | 14 |
NET CURRENT ASSETS |
TOTAL ASSETS LESS CURRENT LIABILITIES |
LIABILITIES |
Amounts falling due after more than one year |
15 |
( |
) |
( |
) |
PROVISIONS FOR LIABILITIES | 19 | ( |
) |
NET ASSETS |
EQUITY |
Share capital | 20 |
Share premium | 21 |
Retained earnings | 21 | ( |
) | ( |
) |
SHAREHOLDERS' FUNDS |
The financial statements were approved by the Board of Directors and authorised for issue on |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
STATEMENT OF CHANGES IN EQUITY |
for the Year Ended 31 March 2023 |
Share | Retained | Share | Total |
capital | earnings | premium | equity |
£ | £ | £ | £ |
Balance at 1 April 2021 | ( |
) |
Deficit for the year | - | (3,152,534 | ) | - | (3,152,534 | ) |
Total comprehensive loss | - | ( |
) | - | ( |
) |
Balance at 31 March 2022 | (4,537,463 | ) |
Deficit for the year | - | (3,626,821 | ) | - | (3,626,821 | ) |
Total comprehensive loss | - | ( |
) | - | ( |
) |
Issue of share capital | - |
Balance at 31 March 2023 | ( |
) |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS |
for the Year Ended 31 March 2023 |
1. | STATUTORY INFORMATION |
Assetz SME Capital Limited is a private company limited by share capital, incorporated in England and Wales, registration number 08007191. The address of the registered office and principal place of business is Assetz House, Manchester Green, 335 Styal Road, Manchester, M22 5LW. |
2. | ACCOUNTING POLICIES |
Basis of preparation |
The company maintains its books and records in sterling ("£") and presents its annual financial statements in conformity with United Kingdom laws and regulations. |
These annual financial statements have been prepared in accordance with Financial Reporting Standard FRS 101 Reduced Disclosure Framework and in accordance with applicable accounting standards, as adopted by the European Union and the Companies Act 2006. |
The results of Assetz SME Capital Limited are included in the consolidated financial statements of Assetz Capital Limited which are available from Assetz House, 335 Styal Road, Manchester, M22 5LW. |
The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. Changes in assumptions may have a significant impact on the financial statements in the year the assumptions changed. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3. |
Going concern |
The financial statements have been prepared on a going concern basis, applying a historical cost convention except for certain financial instruments that are carried at fair value. |
The company's business activities together with the factors likely to affect its future development and position are set out in the Principal Activity and General Business Review section of the Strategic report on page 3. |
The financial statements are prepared on a going concern basis, as the directors are satisfied that the company has the resources to continue in business for the foreseeable future (which has been taken as 12 months from the date of approval of the financial statements). The company is expecting to be self-supporting going forward with a lower cost base and continuing loan book / investor income expecting to move into profitability shortly. |
Having made appropriate enquiries, the directors consider that the company has the ability to remain in operation for the foreseeable future, as they have confirmed the continuing financial support and the ability to provide that support of the parent and have therefore continued to adopt the going concern basis in preparing the financial statements. |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
2. | ACCOUNTING POLICIES - continued |
The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by FRS 101 "Reduced Disclosure Framework": |
• | the requirements of paragraph 24(6) of IFRS 6 Exploration for and Evaluation of Mineral Resources; |
• | the requirements of IFRS 7 Financial Instruments: Disclosures; |
• | the requirements of paragraphs 91 to 99 of IFRS 13 Fair Value Measurement; |
• | the requirements of paragraph 52, the second sentence of paragraph 89, and paragraphs 90, 91 and 93 of IFRS 16 Leases; |
the requirements of paragraph 58 of IFRS 16; |
• | the requirements of the second sentence of paragraph 110 and paragraphs 113(a), 114, 115, 118, 119(a) to (c), 120 to 127 and 129 of IFRS 15 Revenue from Contracts with Customers; |
• | the requirements of paragraphs 10(d), 10)(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D and 111 of IAS 1 Presentation of Financial Statements; |
• | the requirements of IAS 7 Statement of Cash Flows; |
• | the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors; |
• | the requirements of paragraphs 17 and 18A of IAS 24 Related Party Disclosures; |
• | the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group. |
Revenue |
Revenue represents fees receivable for the arranging and servicing of finance through the marketplace lending platform. |
Revenue earned for the arrangement of finance is classified as arrangement fees and is recognised immediately when loans are fully funded on the marketplace and after the loans are accepted by the borrowers. Such fees are automatically deducted from the amount borrowed and recognised at that point as the company has the right to consideration. |
Revenue also includes the cost of Valuation and Monitoring surveys instructed by the Company in the course of its due diligence on loans which are recharged back to the customer and recognised at the time of the receipt. This revenue is received directly from the customer. |
Revenue earned from servicing of finance via the marketplace lending platform is recognised at the beginning of the contract to the extent of the minimum revenue entitlement to be contractually received by the company in relation to the loan agreement, and thereafter on receipt. |
Revenue comprises the fair value of the consideration received or receivable in the ordinary course of the company's activities. All revenue recorded in the financial statements is generated in the UK and sourced from financing transactions. All fees are calculated based on the above revenue recognition policy. |
Interest receivable |
Interest receivable is recognised on an accruals basis within 'Interest income' in the statement of comprehensive income. |
Administrative expenses |
Expenses are recognised as an expense in the statement of comprehensive income in the period in which they are incurred on an accruals basis. |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
2. | ACCOUNTING POLICIES - continued |
Property, plant and equipment |
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. |
Depreciation on property, plant and equipment is charged to the profit and loss so as to write off their value, over their estimated useful lives, using the following methods: |
Plant and machinery | - | 25% on cost |
Fixture and fittings | - | 25% on cost |
Computer equipment | - | 25% on cost |
Right of use assets | - | straight line over 8.5 years |
At each balance sheet date, the company reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that any items have suffered an impairment loss. If any such indication exists, the recoverable amount of an asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of the asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. |
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment loss is recognised as an expense immediately. |
Intangible assets |
Intangible assets are stated cost less accumulated amortisation and accumulated impairment losses. |
Amortisation is calculated to write off the cost of the intangible assets over their useful life as follows: |
Website development | - | 20% on cost |
The carrying amounts of the company's assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the fixed asset may not be recoverable. If any such indication exists, the asset's recoverable amount is estimated and an impairment provision made if appropriate. |
Trade and other receivables |
Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method, less impairment losses for bad and doubtful debts except where the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less impairment losses for bad and doubtful debts. |
Trade and other payables |
Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost. |
Cash and cash equivalents |
Cash and cash equivalents comprise cash at bank and in hand. In the statement of financial position, bank overdrafts are shown within borrowings or current liabilities. |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
2. | ACCOUNTING POLICIES - continued |
Financial assets |
The company determines the classification of its financial assets at initial recognition. From 1 April 2018 the requirements of IFRS 9 for classification and subsequent measurement have been applied which require financial assets to be classified based on the company's business model for managing the asset, and the contractual cash flow characteristics of the asset: |
- Financial assets are measured at amortised cost if they are held within a business model the objective of which is to hold financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of principal and interest. |
- Financial assets are measured at fair value through profit or loss if they are held within a business model the objective of which is achieved by both collecting contractual cash flows and selling financial assets and their contractual cash flows represent solely payments of principal and interest. |
- Financial assets that do not meet the criteria to be amortised cost or fair value through other comprehensive income are measured at fair value through profit or loss. In addition, the company may, at initial recognition, designate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch. |
When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. · |
The company does not recognise on its balance sheet loans arranged between borrowers and investors as it is not a principal party to the contracts and is not exposed to the risks and rewards of these loans. |
Other financial assets |
Financial assets recognised in the balance sheet as trade and other receivables are classified as loans and receivables (from 1 April 2018: amortised cost). They are recognised at fair value and subsequently measured at amortised cost less provision for impairment. |
Impairment of financial assets |
The company applied the impairment requirements of IFRS 9. The IFRS 9 impairment model introduces a three-stage approach: |
Stage 1 includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month expected credit losses (that is, expected losses arising from the risk of default in the next 12 months) are recognised and interest revenue is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). |
Stage 2 includes financial instruments that have had a significant increase in credit risk since initial recognition (unless they have low credit risk at the reporting date) but are not credit-impaired. For these assets, lifetime ECL (that is, expected losses arising from the risk of default over the life of the financial instrument) are recognised, and interest revenue is still calculated on the gross carrying amount of the asset. |
Stage 3 consists of financial assets that are credit-impaired, which is when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. For these assets, lifetime ECL are also recognised, but interest revenue is calculated on the net carrying amount (that is, net of the ECL allowance). |
The introduction of the 'expected credit loss' model has not significantly impacted the company's accounting as it does not have any complex financial instruments or material credit risks. The company uses its historical experience, external indicators and forward-looking information to calculate expected credit losses. |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
2. | ACCOUNTING POLICIES - continued |
Derecognition of financial assets |
Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire or the company has either transferred the contractual right to receive the cash flows from that asset, or has assumed an obligation to pay those cash flows to one or more recipients. |
The company derecognises a transferred financial assets if it transfers substantially all the risks and rewards of ownership. |
Financial liabilities |
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. |
Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost. The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted. |
Current and deferred tax |
The tax expense for the period comprises current and deferred tax. Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the year end date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate, based on amounts expected to be paid to the tax authorities. |
Deferred tax assets for unused tax losses, tax credits and deductible temporary are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. |
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities and there is an intention to settle the balances on a net basis. |
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affect neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted at the year-end date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax balances are not discounted. |
Research and development |
Expenditure on research is expensed in the profit or loss in the year in which it occurred. Development expenditure is capitalised in the year in which it is incurred. |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
2. | ACCOUNTING POLICIES - continued |
Leases |
The right of use asset is measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimated of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. |
The right of use asset is depreciated using the straight line method from the commencement date to the end of the lease term. |
The lease liability is measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease. |
The company presents right of use assets separately on the statement of financial position. |
The company has elected not to recognise right of use assets and lease liabilities for leases of low value assets or short-term leases. The company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. |
Pension obligations |
The company operates a defined contribution pension scheme. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. The company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Contributions payable to the company's pension scheme are charged to the Statement of comprehensive income in the period to which they relate. The company has no further payment obligations once the contributions have been paid |
Provisions |
Provisions are recognised when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that the company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. |
3. | CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY |
Estimates and judgements are continually evaluated and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. |
The following are the key sources of estimation uncertainty that the directors have made in the process of applying the company's accounting policies and have the most significant effect on the amounts recognised in the financial statements. There are no further critical accounting judgements. |
Useful life of intangible assets |
The assessment of the useful economic life of the company's internally developed and acquired software and licences is judgemental and can change due to obsolescence due to unforeseen technological developments, and other factors. The useful life of licences represents management's view of the expected term over which the company will receive benefits from the software, and does not exceed the licence term. For internally developed and acquired software the life is based on historical experience with similar products as well as anticipation of future events which may impact their useful economic life. |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
4. | EMPLOYEES AND DIRECTORS |
2023 | 2022 |
£ | £ |
Wages and salaries | 6,902,513 | 6,200,142 |
Social security costs |
Other pension costs |
The average number of employees during the year was as follows: |
2023 | 2022 |
IT | 20 | 23 |
Operations, support and administrative | 106 | 105 |
2023 | 2022 |
£ | £ |
Director's remuneration (inc BIK) | 1,099,141 | 1,192,206 |
1,099,141 | 1,192,206 |
Highest paid Director |
£ | £ |
Director's remuneration (inc BIK) | 203,692 | 221,453 |
203,692 | 221,453 |
The directors are also the key management personnel of the company. |
5. | EXCEPTIONAL ITEMS |
A charge of £81,200 (2022: £831,200) was expensed to the profit and loss account in the period relating to a default of a non-property backed loan arranged by the company in its early years of business. This relates to payments made to third party lenders and related costs. The company has been able to recover its substantial costs on this matter during the period. |
6. | INTEREST PAYABLE AND SIMILAR EXPENSES |
2023 | 2022 |
£ | £ |
Other interest paid | 10,812 | 18,472 |
Loan interest |
Leasing |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
7. | LOSS BEFORE TAXATION |
2023 | 2022 |
£ | £ |
Depreciation - owned assets | 61,366 | 62,398 |
Depreciation - HP assets | 11,126 | 3,709 |
Depreciation - right-of-use assets | 220,664 | 220,665 |
Amortisation - development costs | 1,319,196 | 1,079,731 |
Auditor's remuneration | 44,400 | 36,000 |
8. | TAXATION |
Analysis of tax income |
2023 | 2022 |
£ | £ |
Deferred tax: |
Deferred tax |
Research and development |
credit | (767,000 | ) | - |
Total deferred tax | ( |
) |
Total tax income in profit and loss account | ( |
) |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
9. | FINANCIAL INSTRUMENTS |
The principal financial instruments used by the company, from which financial instrument risk arises, are as follows: |
- loan due from and payable to related undertakings |
- trade and other receivables |
- cash and cash equivalents |
- trade and other payables |
- categorisation of financial assets and financial liabilities |
The company has exposure to the following risks from its use of financial instruments: |
- credit risk |
- liquidity risk |
The table shows the carrying amounts and fair values of financial assets and financial liabilities by category of financial instrument as at 31 March 2023: |
Carrying amount |
Fair value |
£ | £ |
Assets |
Trade and other receivables | 2,862,461 | 2,878,628 |
Cash and cash equivalents | 501,337 | 501,337 |
3,363,798 | 3,363,798 |
Liabilities |
Trade and other payable | 3,443,076 | 3,443,076 |
Interest bearing loan | 25,197 | 25,197 |
3,468,273 | 3,468,273 |
The table shows the carrying amounts and fair values of financial assets and financial liabilities by category of financial instrument as at 31 March 2022: |
Carrying amount |
Fair value |
£ | £ |
Assets |
Trade and other receivables | 3,365,978 | 3,365,978 |
Cash and cash equivalents | 992,912 | 992,912 |
4,358,890 | 4,350,890 |
Liabilities |
Trade and other payable | 3,680,627 | 3,680,627 |
Interest bearing loan | 54,610 | 54,610 |
3,735,237 | 3,735,237 |
Financial instruments measured at amortised cost |
Financial instruments measured at amortised cost, rather than fair value, include cash and cash equivalents, trade and other receivables, trade and other payables, and loans and payables/receivables to/from related parties. Due to their short-term nature, the carrying value of each of the above financial instruments approximates to their fair value |
Credit risk |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
Credit risk is the risk of financial loss to the company if a customer or counter party to a financial instrument fails to meet its contractual obligations, and arises principally from the company's receivables from customers and cash and cash equivalents held at banks. |
The company's maximum exposure to credit risk by class of financial asset is as follows: |
2023 | 2022 |
£ | £ |
Assets |
Trade and other receivables | 2,862,461 | 3,365,978 |
Cash and cash equivalents | 501,337 | 992,912 |
3,363,798 | 4,358,890 |
Trade receivables of £865,239 (2022: £669,895) represent invoiced amount in respect of due deferred arrangement or exit fees from borrowers. The risk of financial loss is deemed minimal because all loans are secured. |
Ongoing credit evaluation is performed on the financial condition of other receivable and, where appropriate, a provision for impairment is recorded in the financial statements. |
Individual risk limits for banks and financial institutions are set by external rating agencies. The credit risk on cash and cash equivalents is managed under the company's treasury policy that stipulates the limits and quantities that the company must remain within. No credit or counter party limits were exceeded during the year. |
10. | INTANGIBLE ASSETS |
Website |
£ |
COST |
At 1 April 2022 |
Additions |
Disposals | ( |
) |
At 31 March 2023 |
AMORTISATION |
At 1 April 2022 |
Amortisation for year |
Eliminated on disposal | ( |
) |
At 31 March 2023 |
NET BOOK VALUE |
At 31 March 2023 |
At 31 March 2022 |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
11. | PROPERTY, PLANT AND EQUIPMENT |
Fixtures |
Plant and | and | Computer |
machinery | fittings | equipment | Totals |
£ | £ | £ | £ |
COST |
At 1 April 2022 |
Additions |
At 31 March 2023 |
DEPRECIATION |
At 1 April 2022 |
Charge for year |
At 31 March 2023 |
NET BOOK VALUE |
At 31 March 2023 |
At 31 March 2022 |
The net book value of computer equipment includes £29,670 (2022: £40,796) in respect of assets held under hire purchase contract. |
12. | RIGHT-OF-USE ASSETS |
Total |
£ |
FAIR VALUE |
At 1 April 2022 |
and 31 March 2023 |
DEPRECIATION |
At 1 April 2022 | 661,994 |
Charge for year |
At 31 March 2023 | 882,658 |
NET BOOK VALUE |
At 31 March 2023 |
At 31 March 2022 |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
13. | TRADE AND OTHER RECEIVABLES |
2023 | 2022 |
£ | £ |
Amounts falling due within one year: |
Trade receivables |
Amounts owed by group undertakings |
Other receivables |
Prepayments and accrued income |
Amounts falling due after more than one year: |
Trade receivables |
Aggregate amounts |
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. |
Receivables from related undertakings are interest free and repayable on demand. |
No trade receivables were impaired. |
14. | TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE WITHIN ONE YEAR |
2023 | 2022 |
£ | £ |
Leases (see note 16) |
Trade payables |
Amounts owed to group undertakings |
Social security and other taxes |
VAT | 42,377 | 31,944 |
Other payables |
Accrued expenses |
15. | TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR |
2023 | 2022 |
£ | £ |
Leases (see note 16) |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
16. | FINANCIAL LIABILITIES - BORROWINGS |
2023 | 2022 |
£ | £ |
Current: |
Leases (see note 17) | 284,626 | 272,272 |
Non-current: |
Leases (see note 17) | 1,020,555 | 1,318,482 |
Terms and debt repayment schedule |
1 year or |
less | 1-2 years | 2-5 years | Totals |
£ | £ | £ | £ |
Leases | 284,626 | 290,538 | 730,017 | 1,305,181 |
17. | LEASING |
Other leases |
2023 | 2022 |
£ | £ |
Short-term leases | 220,664 | 220,665 |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
17. | LEASING - continued |
Lease liabilities |
Minimum lease payments fall due as follows: |
2023 | 2022 |
£ | £ |
Gross obligations repayable: |
Within one year | 330,768 | 341,012 |
Between one and five years | 1,075,800 | 1,290,036 |
In more than five years | - | 129,833 |
1,406,568 | 1,760,881 |
Finance charges repayable: |
Within one year | 46,142 | 68,740 |
Between one and five years | 55,245 | 101,387 |
101,387 | 170,127 |
Net obligations repayable: |
Within one year | 284,626 | 272,272 |
Between one and five years | 1,020,555 | 1,188,649 |
In more than five years | - | 129,833 |
1,305,181 | 1,590,754 |
18. | SECURED DEBTS |
The following secured debts are included within creditors: |
2023 | 2022 |
£ | £ |
Hire purchase | 25,197 | 54,611 |
Included within trade and other payables: amounts falling due within one year are amounts of £132,888 (2022: £212,764) owing to several third parties which are secured with a fixed and floating charge over the assets of the company. |
19. | PROVISIONS FOR LIABILITIES |
2023 | 2022 |
£ | £ |
Deferred tax |
ASSETZ SME CAPITAL LIMITED (REGISTERED NUMBER: 08007287) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 March 2023 |
19. | PROVISIONS FOR LIABILITIES - continued |
Deferred |
tax |
£ |
Provided during year | 19,440 |
Balance at 31 March 2023 |
20. | SHARE CAPITAL |
Allotted, issued and fully paid: |
Number: | Class: | Nominal | 2023 | 2022 |
value: | £ | £ |
Ordinary | £1.00 | 260 | 203 |
57 ordinary shares were issued in March 2023 at £50,000 per share |
21. | RESERVES |
Retained | Share |
earnings | premium | Totals |
£ | £ | £ |
At 1 April 2022 | ( |
) | 5,645,377 |
Deficit for the year | ( |
) | ( |
) |
Cash share issue | - | 2,849,943 | 2,849,943 |
At 31 March 2023 | ( |
) | 4,868,499 |
22. | ULTIMATE PARENT UNDERTAKING AND CONTROLLING PARTY |
The parent company of the largest and smallest group that includes the company and for which group financial statements are prepared is Assetz Capital Limited. Copies of Assetz Capital Limited financial statements can be obtained from the registered office at Assetz House, Manchester Green, 335 Styal Road, Manchester, M22 5LW. |
The directors do not consider there to be one single ultimate controlling party. |