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1. Material accounting policies
General information
Funding Circle Holdings plc (the \u201cCompany\u201d) is a public company limited by shares, which is listed on the London Stock
Exchange and is domiciled and incorporated in the United Kingdom under the Companies Act 2006 and registered in
England and Wales. The address of its registered office is given on page 196. The consolidated financial statements of
the Group for the year ended 31 December 2023 comprise the Company and its subsidiaries (together referred to as
the \u201cGroup\u201d and individually as \u201cGroup entities\u201d).
The principal activities of the Group and the nature of the Group\u2019s operations are as a global SME loan platform.
The principal accounting policies applied in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
Going concern
The Group\u2019s business activities together with the factors likely to affect its future development and position are set out
in the Strategic Report.
The financial statements are prepared on a going concern basis as the Directors are satisfied that the Group has the
resources to continue in business for the foreseeable future (which has been taken as at least 12 months from the date
of approval of the financial statements).
The Group made a total comprehensive loss of \u00a341.0 million during the year ended 31 December 2023 (2022: loss
of \u00a31.1 million). As at 31 December 2023, the Group had net assets of \u00a3246.8 million (2022: \u00a3284.0 million). This
includes \u00a3221.4 million of cash and cash equivalents (2022: \u00a3177.7 million) of which \u00a351.8 million (2022: \u00a312.1 million)
is held for specific purposes and is restricted in use. Additionally, within the net assets, the Group holds \u00a363.5 million
(2022: \u00a396.5 million) of invested capital, some of which is capable of being monetised if liquidity needs arise.
The Group has prepared detailed cash flow forecasts for the next 15 months and has updated the going concern
assessment to factor in the potential ongoing impact of inflation and related economic stress.
The base case scenario assumes:
5 The economic environment still contains a high degree of uncertainty, this is factored into the 2024 credit risk
strategies which include stressed assumptions;
5 Ongoing investment in FlexiPay along with growth in UK loans with an exit of the US loans business;
5 FlexiPay sees significant growth in top line as lines of credit become established and the card offering becomes a
fully functional offering;
5 The Group continues to fund the lines of credit through its balance sheet along with the senior banking facility; and
5 Costs are controlled with any growth driven by marketing, expected credit losses (ECL) and cost of funds.
Remaining costs grow but predominantly through inflation.
Management prepared a severe but plausible downside scenario in which:
5 further macroeconomic volatility continues through the period with increased inflation and interest rates reducing
Core originations and increasing costs;
5 investment returns reduce owing to increased funding costs, widening discount rates and deterioration in loan
performance;
5 an operational event occurs requiring a cash outlay;
5 a downside loss scenario is applied to Funding Circle\u2019s on-balance sheet investment in SME loans resulting in higher
initial fair value losses and lower cash flows to the investments it owns; and
5 a combined credit and liquidity risk stress for FlexiPay.
Management has reviewed financial covenants the Group must adhere to in relation to its servicing agreements. These
are with institutional investors for which there are unrestricted cash, tangible net worth and debt to tangible net worth
ratios. Management has also reviewed regulatory capital requirements. In the downside scenario the risk of covenant
or capital requirement breach is considered remote. The Group does not currently rely on committed or uncommitted
borrowing facilities, with the exception of a facility for the purpose of originating FlexiPay lines of credit and a small
remaining balance on the PPPLF previously used to fund PPP loans, and does not have undrawn committed borrowing
facilities available to the wider Group.
The Directors have made enquiries of management and considered budgets and cash flow forecasts for the Group and
have, at the time of approving these financial statements, a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the foreseeable future.
The Directors have made enquiries of management and considered budgets and cash flow forecasts for the Group and have, at the time of approving these financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Further detail is contained in the Strategic Report on pages 64 and 65. Basis of preparation The Group presents its annual financial statements in conformity with United Kingdom laws and regulations. The financial statements have been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 and the disclosure guidance and transparency rules sourcebook of the United Kingdom\u2019s Financial Conduct Authority. The financial statements have been prepared on the historical cost basis except for certain financial instruments that are carried at fair value through profit and loss (\u201cFVTPL\u201d). The preparation of financial statements requires the use of certain accounting estimates. It also requires management to exercise its judgement in the process of applying the Group\u2019s 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 2. Significant changes in the current reporting year The financial position and performance of the Group were affected by the following events and transactions during the year ended 31 December 2023: i) Launch of FlexiPay leveraged warehouse During the year ended 31 December 2023, the Group set up a warehouse special purpose vehicle (\u201cSPV\u201d) for the purposes of scaling up the FlexiPay product through bank borrowings. The vehicle is consolidated by the Group as a consequence of it having control through the design of the vehicle and ability to influence the returns and exposure to the majority of the variability of the cash flows generated by the vehicle. As a result, the underlying lines of credit and borrowings through the senior lending facility in the vehicle are also consolidated. The interest and other fees associated with the borrowing facility are presented within cost of funds. Details of the borrowing facility terms are outlined in note 14. ii) Unwind of US SPV In April 2023, Funding Circle exercised the call rights associated with the ownership of the unrated junior residual tranches of Small Business Lending Trust 2020-A\u2019s bonds in the US. This resulted in Funding Circle buying out the remaining bondholders. The Group continues to recognise 100% of the previously securitised SME loans, which continue to be held at fair value through profit and loss within SME loans (securitised), as the Group continues to hold these with the intention of selling them. All the Group\u2019s securitisation SPVs have now been unwound and all bond liabilities have now been repaid. iii) Sale of SME loans (other) In February 2023, commercial loans in the US which had been temporarily funded by the Group with the intention of selling onwards, and were held at fair value through profit and loss, were sold to a third party investor for \u00a330.4 million with a fair value loss of \u00a30.4 million from the sale. Changes in accounting policy and disclosures The Group has adopted the following new and amended IFRSs and interpretations from 1 January 2023 on a full retrospective basis.
Applicable for financial
Standard/interpretation
Content
years beginning on/after
Amendments to IAS 8 \u2013 Definition of Accounting Estimates
Accounting policies, changes
1 January 2023
in accounting estimates
Amendments to IAS 1 and IFRS Practice Statement 2
Accounting policies
1 January 2023
\u2013 Disclosure of Accounting Policies
Amendments to IAS 12 \u2013 Deferred Tax Related to Assets
Deferred tax
1 January 2023
and Liabilities Arising from a Single Transaction
The amendments and interpretations listed above did not materially affect the current year and are not expected to materially affect future years. Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2023 reporting years and have not been early adopted by the Group as follows:
Applicable for financial
Standard/interpretation
Content
years beginning on/after
Amendments to IAS 1 \u2013 Classification of Liabilities as Current
Presentation of financial statements
1 January 2024
or Non-current
Amendments to IAS 1 \u2013 Non-current Liabilities with Covenants
Presentation of financial statements
1 January 2024
Amendment to IFRS 16 \u2013 Lease Liability in a Sale and Leaseback
Leases
1 January 2024
These standards are not expected to have a material impact on the Group in the current or future reporting years or on foreseeable future transactions. Re-presentation of interest income on cash and cash equivalents and impact on alternative performance measures The business uses its cash resources where it makes the platform stronger. As a result, the Group historically invested in warehouse and securitisation vehicles (which are now largely unwound), co-invested alongside investors and more recently in the FlexiPay product. Where cash is not invested in these areas, it is held at banks and in money market funds earning interest. Given its use is integral to the business and the Group is now earning interest through various mechanisms, we now show the interest we earn on bank deposits, money market funds and client money, previously shown in \u201cFinance income\u201d, in \u201cInterest income\u201d within \u201cOperating income\u201d. Finance costs and profit/(loss) from share of associates are now presented within \u201cOther costs\u201d as these are not considered material. The comparative financial presentation has been re-presented accordingly with an additional \u00a32.3 million presented in \u201cInterest income\u201d previously presented in \u201cFinance income\u201d, \u00a30.5 million presented within \u201cOther costs\u201d, \u00a30.9 million of which was previously presented within \u201cFinance costs\u201d and \u00a30.4 million credit which was previously presented in \u201cShare of net profit from associates\u201d. The consolidated statement of cash flows and note 20 have also been re-presented to mirror this with interest received now forming part of cash flows from operating activities which were previously disclosed as investing activities, with the comparative period re-presented with \u00a32.3 million included within cash flows from operations previously within cash flows from investing activities. The Group\u2019s definition of the alternative performance measure, adjusted EBITDA, has consequently also been adjusted to take account of this re-presentation. The definition used is now profit for the period before finance costs (being the discount unwind on lease liabilities), taxation, depreciation, amortisation and impairment (\u201cAEBITDA\u201d) and additionally excludes share-based payment charges and associated social security costs, foreign exchange and exceptional items. The comparative period AEBITDA is re-presented higher by \u00a32.7 million including the re-presentation of interest income on bank deposits and share of net profit from associates. Summary of new and amended accounting policies There were no new or amended accounting policies in the year related to material items.
Summary of existing accounting policies
Basis of consolidation
Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three
of the following elements are present: power over the investee, exposure to variable returns from the investee, and
the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these elements of control.
Structured entities are entities that are designed so that their activities are not governed by voting rights. In assessing
whether the Group has power over such entities, the Group considers factors such as the purpose and design of the
entity, its practical ability to direct the relevant activities of the entity, the nature of the relationship with the entity, and
the size of its exposure to the variability of returns of the entity.
The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a
single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.
The Group applies the acquisition method to account for business combinations. In the consolidated balance sheet,
the acquiree\u2019s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at
the acquisition date. Acquisition-related costs are recognised in profit or loss as incurred. The results of acquired
operations are included in the consolidated statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control ceases.
Foreign currency translation
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment
in which they operate (their \u201cfunctional currency\u201d) are recorded at the rates ruling when the transactions occur. Foreign
currency monetary assets and liabilities are translated at the prevailing rate at the reporting date. Exchange differences
arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve
relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive
income as part of the profit or loss on disposal.
Presentation currency
These consolidated financial statements are presented in GBP sterling, which is the Group\u2019s presentation currency.
All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations,
are translated at the prevailing rate at the reporting date. Income and expense items are translated at the average
exchange rates for the year, unless exchange rates fluctuate significantly during that year, in which case the exchange
rates at the date of transactions are used. Exchange differences arising are recognised in other comprehensive income
and accumulated in equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of
the foreign entity and translated at the prevailing rate at the reporting date.
Segment reporting
Operating segments are reported in the manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, which is the function responsible for allocating resources
and assessing performance of the operating segments, has been identified as the Global Leadership Team that
makes strategic decisions. For each identified operating segment, the Group has disclosed information for the key
performance indicators that are assessed internally to review and steer performance in the Strategic Report.
Transactions between segments are on an arm\u2019s length basis in a manner similar to transactions with third parties.
Exceptional items
Exceptional items are the items of income or expense that the Group considers are material, one-off in nature and
of such significance that they merit separate presentation in order to aid the reader\u2019s understanding of the Group\u2019s
financial performance. Such items would include profits or losses on disposal of businesses, transaction costs,
acquisitions and disposals, major restructuring programmes, significant goodwill or other asset impairments, and other
particularly significant or unusual items.
Income recognition Fee income is recognised in line with IFRS 15 which provides a single, principles-based five-step model to be applied to all contracts with customers: 1) identify the contract with the customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contracts, on a relative stand-alone selling price basis; and 5) recognise income when (or as) the entity satisfies its performance obligation. Fee income earned for the arrangement of loans is classified as transaction fees. The contract signed by the borrower and related terms are clearly identifiable. The performance obligation in the contract is considered to be the funding of the loan through the platform and the transaction price is clearly stated in the borrower\u2019s contract. Fees are recognised immediately once loans are fully funded and after the loans are accepted by the borrowers. At this point the performance obligation has been met, there are no clawback provisions and the fee is recognised. Such fees are automatically deducted from the amount borrowed. Fee income earned from referrals to partner institutions is classified as transaction fees. There are contracts in place with partner institutions with clearly identifiable terms. The performance obligation in the contract is considered to be the referral by the Group and subsequent funding of the referred loan by the partner institution and the transaction price is clearly stated in the referral agreement. Fees are recognised once the referred loan has been funded by the partner institution and accepted by the referred borrower. At this point, the performance obligation has been met and there are no significant clawback provisions. Fee income earned from servicing third party loans is classified as servicing fees and is a cost of the investor, except in the case of the first year of servicing fees related to CBILS loans, where the government paid the cost. It comprises an annualised fee representing a percentage of outstanding principal. The contractual basis for the servicing fee and transaction price is based on the terms and conditions agreed by investors to the lending platform. The performance obligation is servicing the loans and allocating repayments of the loan parts to the respective lenders. The transaction price is allocated as a percentage of the outstanding principal balance, representing the outstanding performance obligation. Fees are recognised on a monthly basis upon repayment of loan parts. Due to the conditions of the loans, there are no partially completed contracts at the balance sheet date and no advance payments from customers. Fee income earned from interchange fees from FlexiPay Card is classified as a transaction fee. Foreign exchange fees earned from FlexiPay Card are classified as other fees and are a cost to the FlexiPay Card borrower. A contract is in place with the card provider who remits the fee revenues to the Group. Card fees are recognised immediately at the point of transaction as at this point the performance obligation has been met. Borrowers using their card will \u201cflip\u201d the balance into a FlexiPay loan repayable over three months and for a fee. The fee incurred by borrowers who flip the card balance into a loan is recognised under IFRS 9 from the point of the flip over the life of the loan under the effective interest rate method and is recognised under interest income. Other fees include excess premium earned from arrangements to buy back defaulted loans from certain institutional investors and performance related fees related to the loans held by certain institutional investors. Other fees also includes income from collections charges levied on the successful recovery of defaulted loans. These are recognised as services are performed or performance obligations are met. Net income includes the following elements under which the recognition criteria of IFRS 9 and not IFRS 15 are applied: Interest income includes: 5 interest income recognised on assets held at amortised cost under the effective interest rate method including FlexiPay and interest income on corporate cash and client monies held.
Investment income includes:
5 interest income from SME loans and investments in trusts that the Group holds on balance sheet.
Investment expense includes:
5 interest payable on funds borrowed to finance the acquisition of underlying loan investments;
5 interest payable on bond liabilities held on balance sheet;
5 amortisation of costs associated with the issuing of bonds and the credit facility; and
5 gains/losses from changes in fair value of interest hedging instruments.
Fair value gains/losses includes:
5 gains/losses from changes in the fair value of financial assets and liabilities held on balance sheet.
Cost of funds includes:
5 interest payable on funds borrowed to finance the issuing of lines of credit.
Net income recorded in the financial statements is generated in the UK, the US, Germany and the Netherlands. All fees
are recognised and measured based on the above income recognition policy.
Administrative expenses
Administrative expenses are recognised as an expense in the statement of comprehensive income in the period in
which they are incurred on an accruals basis.
Share-based payments
The Group operates a number of equity-settled share-based compensation plans, under which the Group receives
services from employees as consideration for equity instruments (options and shares) of the Company. The fair value of
the employee services received in exchange for the grant of the options and shares is recognised as an expense. The
total amount to be expensed is determined by reference to the fair value of the options and shares granted:
5 including any market performance conditions (for example, an entity\u2019s share price);
5 excluding the impact of any service and non-market performance vesting conditions (for example, net income,
earnings per share and remaining an employee of the Group over a specified time period); and
5 including the impact of any non-vesting conditions (for example, the requirement for employees to save).
Non-market vesting conditions are included in assumptions about the number of options and shares that are expected
to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified
vesting conditions are to be satisfied. At the end of each reporting period, the Group revises its estimate of the number
of options and shares that are expected to vest based on the non-market vesting conditions. It recognises the impact
of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
When the options are exercised, the Company issues new shares or utilises shares that have been purchased in the
market. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal
value) and share premium when the options are exercised. The original fair value of the amount exercised is transferred
from the share option reserve to the accumulated losses reserve.
The grant by the Company of options and shares over its equity instruments to the employees of subsidiary
undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured
by reference to the grant date fair value, is recognised over the vesting period as an increase in investment in
subsidiary undertakings, with a corresponding credit to equity in the Parent entity (the \u201cCompany\u201d) accounts.
Pension obligations
The Group operates a defined contribution pension scheme for employees in the UK and US. The schemes are pension
plans under which the Group pays fixed contributions into a separate entity. The Group 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 years. Contributions payable to the Group\u2019s pension scheme are
charged to the statement of comprehensive income in the year to which they relate. The Group has no further payment
obligations once the contributions have been paid.
Current and deferred tax The tax expense for the year 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 balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. The Group has established transfer pricing policies and there are mechanisms in place that ensure subsidiaries are remunerated appropriately on an arm\u2019s length basis for services provided. 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 differences 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 are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised. Deferred tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for any deferred tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. 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 affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates and laws that have been enacted or substantively 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. Dividends Dividends are recognised when they become legally payable, in accordance with the Companies Act 2006. Intangible assets Intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful lives. Useful lives and amortisation methods are reviewed at the end of each annual reporting period, or more frequently when there is an indication that the intangible asset may be impaired, with the effect of any changes accounted for on a prospective basis. Amortisation commences when the intangible asset is available for use. The residual value of intangible assets is assumed to be zero. Computer software licences Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over the licence period, which is up to five years as at 31 December 2023. Capitalised development costs Costs associated with maintaining computer software programs are recognised as an expense as incurred. Development costs that are directly attributable to the design, build and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met: 5 it is technically feasible to complete the build of the platform products so that they will be available for use; 5 management intends to complete the build of the platform products for use within the Group; 5 there is an ability to use the platform products; 5 it can be demonstrated how the platform products will generate probable future economic benefits; 5 adequate technical, financial and other resources to complete the development and to use the platform products are available; and 5 the expenditure attributable to the platform products during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development
employee and contractor costs. The capitalisation of employee costs is based on the amount of time spent on specific
projects which meet the criteria as a proportion of their total time, and this proportion of their salary-related costs is
attributed to the applicable projects.
Other development expenditure that does not meet these criteria is recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is
ready for use over their estimated useful lives, ranging from three to five years.
Other intangibles
Other intangibles relate to the technology platform and customer relationship (representing fees due on contracted
loans expected to be realised in the foreseeable future) acquired on a business combination. These costs are
amortised over their estimated useful lives, which do not exceed three years.
Tangible fixed assets
Tangible fixed assets are stated at cost less depreciation and any provision for impairment. Depreciation is provided
on all tangible fixed assets, at rates calculated to write off the cost less estimated residual value of each asset on a
straight-line basis over its expected useful life, as follows:
Computer equipment 1\u20133 years
Furniture and fixtures 3\u20135 years
Leasehold improvements that qualify for recognition as an asset are measured at cost and are presented as part of
property, plant and equipment in the non-current assets section on the balance sheet. Depreciation on leasehold
improvements is calculated using the straight-line method over the lease term.
Impairment of tangible and intangible assets
Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation
and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of
the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement
of comprehensive income.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine
the asset\u2019s recoverable amount since the last impairment loss was recognised. If this was the case, the carrying
amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in
profit or loss.
Leases
At inception of a contract, the Group assesses whether or not a contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. When a lease is recognised in a contract the Group recognises a right-of-use asset and a
lease liability at the lease commencement date.
Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability, less any
lease incentives. Subsequently, right-of-use assets are measured at cost, less any accumulated depreciation and any
accumulated impairment losses, and are adjusted for certain remeasurements of the lease liability. Depreciation is
calculated on a straight-line basis over the length of the lease.
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: 5 fixed payments less any lease incentives receivable; 5 variable lease payments based on an index or a rate, initially measured using the index or rate at the commencement date; and 5 amounts expected to be payable by the Group under residual value guarantee. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Group\u2019s incremental borrowing rate is used, which is the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Group: 5 where possible, uses recent third party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received; 5 uses an approach taking the risk-free interest rate adjusted for credit risk for leases held by Funding Circle Holdings plc; and 5 makes adjustments specific to the lease for term, country and currency. Subsequently, the lease liability is measured by increasing the carrying amount to reflect interest on the lease liability and reducing it by the lease payments made. The lease liability and right-of-use asset are remeasured when there is a lease modification. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Extension and termination options are included in a number of property leases in the Group. Management considers the facts and circumstances that may create an economic incentive to exercise an extension or termination option in order to determine whether the lease term should include or exclude such options. Extension or termination options are only included within the lease term if they are reasonably certain to be exercised in the case of extension options and not exercised in the case of termination options. Considerations include: 5 if leasehold improvements are expected to have significant value at the end of the lease term; 5 expected costs or business disruption as a result of replacing a lease; and 5 significant penalties incurred in order to terminate. Lease terms are reassessed if the option is exercised or if a significant event occurs which impacts the assessment of reasonable certainty. The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expenses on a straight-line basis over the lease term. When the Group is an intermediate lessor, entering into a sublease, it accounts for the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease. Rental income from operating leases is recognised on a straight-line basis over the lease term and the Group retains the right-of-use asset deriving from the head lease and the lease liability on the balance sheet. Amounts due from lessees under finance leases are recognised as receivables equivalent to the Group\u2019s net investment in the lease and the right-of-use asset from the head lease is derecognised. Any difference resulting from the derecognition of the right-of-use asset and recognition of the net investment in the sublease is recognised in the consolidated statement of comprehensive income. The head lease liability remains on the balance sheet and interest expense continues to be recognised, while interest income is recognised from the sublease. Consolidation of special purpose vehicles (\u201cSPVs\u201d) Subsidiaries are those entities, including structured vehicles, over which the Group has control. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the investee. The Group has power over an entity when it has existing rights that give it the current ability to direct the activities that most significantly affect the entity\u2019s returns. Power may be determined on the basis of voting rights or, in the case of structured entities, other contractual arrangements. The Group assesses whether it controls SPVs and the requirement to consolidate them under the criteria of IFRS 10. Control is determined to exist if the Group has the power to direct the activities of each entity (for example, managing the performance of the underlying assets and raising debt on those assets which is used to fund the Group) and uses this control to obtain a variable return (for example, retaining the residual risk on the assets). Structures that do not meet these criteria are not treated as subsidiaries and the assets are derecognised when the rights to the cash flows have ended. Where the Group manages the administration of its securitised assets and is exposed to the risks and rewards of the underlying assets through its continued investment or where the Group does not retain a direct ownership interest in an SPE, but the Directors have determined that the Group controls those entities based on the criteria of IFRS 10, they are treated as subsidiaries and are consolidated. Investment in associates An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group\u2019s investment in its associate is accounted for using the equity method. Under the equity method of accounting, the investments are initially recognised at cost. This is adjusted thereafter to recognise the Group\u2019s share of the post-acquisition profits or losses of the investee in the consolidated statement of comprehensive income. The Group\u2019s share of movements in other comprehensive income of the investee is recognised in other comprehensive income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment. When the Group\u2019s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group\u2019s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is an indication that the investment in the associate is impaired. If there is such an indication, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognises the loss within the statement of comprehensive income. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. Financial instruments Financial assets The Group determines the classification of its financial assets at initial recognition. The requirements of IFRS 9 for classification and subsequent measurement are applied, which require financial assets to be classified based on the Group\u2019s business model for managing the asset and the contractual cash flow characteristics of the asset: 5 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; 5 financial assets are measured at fair value through other comprehensive income (\u201cFVTOCI\u201d) if they are held within the business model defined as \u201dheld to collect and sell\u201d, 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; and 5 financial assets that do not meet the criteria to be amortised cost or FVTOCI are measured at fair value through profit or loss (\u201cFVTPL\u201d). In addition, the Group may, at initial recognition, designate a financial asset as measured at FVTPL 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 purchase of any credit-impaired assets is
also at fair value after any impairment.
Except for certain investments in SME loans as described below, the Group 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.
With the exception of investment in trusts and co-investments, SME loans (warehouse), certain SME loans (other) and
SME loans (securitised), all financial assets are held to collect contractual cash flows.
Following the call option being exercised on the UK and US securitisation vehicles and the repayment of the warehouse
borrowings, some of the SME loans were purchased from the vehicles and are held directly in Funding Circle Limited
and Funding Circle Marketplace LLC. These loans continue to be held at FVTPL as the business model under which
they are held remains to sell the loans. They continue to be presented within SME loans (securitised) and SME loans
(warehouse) representing the legacy nature of the loans.
The five types of SME loans held are as follows:
i) SME loans (warehouse) and SME loans (securitised)
During the securitisation programmes previously run by the Group, SME loans were originated in leveraged
warehouse vehicles and subsequently sold into securitisation SPVs. By 31 December 2023 the warehouse vehicles
had been repaid and the securitisation vehicles unwound with the loans of the vehicles purchased and directly
held by subsidiaries of the Group and remaining bond liabilities repaid. The SME loans (warehouse) and SME loans
(securitised) are classified reflecting the legacy nature of the loans. These SME loans have been classified as financial
assets at fair value through profit or loss because all such loans are acquired principally for selling in the short term
and the collection of interest is incidental. They are initially measured at fair value on the balance sheet with the
subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of
comprehensive income.
ii) SME loans (other)
The Group has originated PPP loans using the SBA\u2019s PPPLF facility and these are held on balance sheet. Additionally,
the Group holds investments in certain SME business loans as a result of commercial arrangements with institutional
investors and in certain circumstances the Group also buys back loans from investors.
These loans are included in SME loans (other) (see note 11) and are classified as amortised cost (as they are held solely
to collect principal and interest payments) and are initially recognised at fair value and subsequently measured at
amortised cost less provision for impairment. PPP loans are fully guaranteed by the SBA.
SME loans (other) additionally includes loans temporarily funded by the Group in relation to the relaunch of commercial
loans which are classified as financial assets at fair value through profit or loss and are held with the intention of selling
on to investors. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair
value with all gains and losses being recognised in the consolidated statement of comprehensive income.
iii) Lines of credit
Lending through the FlexiPay product is recognised on the balance sheet within lines of credit. This represents the
drawn amount of the facilities, net of ECL. The contractual cash flows represent solely payments of principal and
interest (\u201cSPPI\u201d) and the business model under which they are held is in order to collect the contractual cash flows
resulting in the lines of credit being measured initially at fair value and subsequently at amortised cost. The origination
fee associated with FlexiPay is recognised under IFRS 9 within interest income at the effective interest rate in the
consolidated statement of comprehensive income and is recognised over the expected life of the drawdown.
The FlexiPay lines of credit are held net of expected credit loss allowances under IFRS 9, the methodology and
definitions of which align to the Group accounting policy on impairment of financial assets held at amortised cost with
the exception of being assessed at the available line of credit level, estimating the utilisation of the line of credit to
the estimated point of default and are detailed further within note 14. Additionally, the Group assesses the expected
credit loss allowance in relation to undrawn lines of credit, estimating the probability of default, loss given default and
exposure at default in relation to these lines of credit were they to be drawn. This loss allowance is recognised within
other liabilities in note 13.
iv) Investment in trusts and co-investments The Group holds a minority beneficial ownership in trusts set up to fund CBILS, RLS and commercial loans with the majority of the beneficial ownership held by institutional investors. The SME loans are originated by Group subsidiaries, Funding Circle Focal Point Lending Limited for CBILS and Funding Circle Eclipse Lending Limited or Funding Circle Polaris Lending Limited for RLS and commercial loans, which retain legal title to the loans. These entities hold this legal title on trust on behalf of the majority investors who substantially retain the economic benefits the CBILS, RLS and commercial loans generate and therefore the trusts and the assets held within, including the SME loans, are not consolidated. The Group assesses whether it controls the trust structure under the criteria of IFRS 10. Control is determined to exist if the Group has the power to direct the activities of entities and structures and uses this control to obtain a variable return, to which it is exposed to the majority of the variability. As the Group\u2019s holding is small compared to the majority investor and pari passu, the Group is not exposed to the majority of the variability in the cash flows of the trust, and it is not considered to control the trust structures, so they are not consolidated by the Group. Investments in trusts are classified at fair value through profit and loss. They are initially recognised at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. The Group recognises transaction fee income on origination of loans within the trust and service fee income on the assets within the trust, eliminating its proportional ownership share of the service fees. A scheme lender fee is charged in relation to the origination of CBILS and RLS loans and investment income is recognised in relation to returns on the investment. Other financial assets Financial assets recognised in the balance sheet as trade and other receivables are classified as amortised cost. They are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. Net investments in sublease receivables are recognised as other receivables representing the net present value of the lease payment receivable. Interest is recognised within other costs in the statement of comprehensive income. Cash and cash equivalents are classified as amortised cost with the exception of money market funds that are classified as FVTPL. Cash and cash equivalents include cash in hand, deposits held at call with banks, money market funds and other short-term highly liquid investments with original maturities of three months or less. The carrying amount of these assets approximates to their fair value. Impairment of financial assets held at amortised cost The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach: 5 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 (\u201cECLs\u201d) (that is, expected losses arising from the risk of default in the next 12 months) are recognised and interest income is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 5 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 ECLs (that is, expected losses arising from the risk of default over the life of the financial instrument) are recognised, and interest income is still calculated on the gross carrying amount of the asset. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the financial assets exceed 30 days, in line with the rebuttable presumption per IFRS 9 at which point the assets are considered to be stage 2. 5 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 ECLs are also recognised, but interest income is calculated on the net carrying amount (that is, net of the ECL allowance). The Group defines a default, classified as stage 3, as an asset with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the asset is considered to be defaulted. An account that is deemed to be fraudulent (i.e third party application fraud) is written off at point of identification. 5 In some circumstances where assets are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit-impaired (\u201cPOCI\u201d), and impairment is therefore based on lifetime ECLs. The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects: 5 an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; 5 the time value of money; and 5 reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income. Derecognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire or the Group 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 Group derecognises a transferred financial asset if it transfers substantially all the risks and rewards of ownership. Financial liabilities 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. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Bank borrowings Bank borrowings (drawdowns under the credit facilities) are recognised initially at fair value, being their issue proceeds net of transaction costs incurred. These instruments are subsequently measured at amortised cost using the effective interest rate method. Bonds Bonds represent the bond liabilities which the Group must pay to the bond holders from the cash flows generated from the SME loans (securitised) held on balance sheet. The liability excludes any amount of bonds that the Group has retained as these are eliminated upon consolidation. IFRS 9 permits a company to elect to fair value the bond liabilities where there is an accounting mismatch. In the Group\u2019s case the associated assets generating the cash flows to pay the bonds are the SME loans (securitised) which are measured at fair value through profit and loss. As the cash flows from the SME loans were used to repay the rated bond tranches in advance of the unrated bonds, the Group does not consider there to be a significant accounting mismatch as default levels impact the unrated bonds first. Therefore the rated bonds are measured at amortised cost. However, as the unrated bonds are most affected by fair value movements in the SME loans, the Group elected to measure the unrated tranches of bonds at fair value through profit and loss to eliminate the accounting mismatch. Following the unwind of the UK SPV entity during the year ended 31 December 2022, there are no externally held bond liabilities measured at FVTPL remaining on a consolidated Group basis. See note 14 for details of the fair value methodology and interest rate risk. Transaction costs associated with the issuance of bonds are deferred to the balance sheet and recognised over the lifetime of the bonds using the effective interest rate method. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event; it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Loan repurchases Loan repurchase contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Loan repurchase contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the contract. The liability is subsequently measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative amortisation. The expected credit loss model is used to measure and recognise the financial liability. Share capital Ordinary shares are classified as equity where their terms include no contractual obligation to transfer cash or another financial asset to another entity. Earnings/(loss) per share The Group presents basic and diluted earnings/(losses) per share (\u201cEPS\u201d) for its ordinary shares. Basic and diluted EPS are calculated by dividing the profit/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year excluding shares held as own shares in the Group\u2019s Employee Benefit Trusts. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive potential ordinary shares include those share options granted to employees under the Group\u2019s share-based compensation schemes which do not have an exercise price or where the exercise price is less than the average market price of the Company\u2019s ordinary shares during the year. Shares held by the Employee Benefit Trust and Share Incentive Plan Trust The Company has established an offshore Employee Benefit Trust (\u201cEBT\u201d) and an onshore Share Incentive Plan (\u201cSIP\u201d) Trust. The EBT and SIP Trust provide for the issue of shares to Group employees principally under share option schemes and SIP respectively. The Group has control of the EBT and SIP Trust and therefore consolidates the Trusts in the Group financial statements. Since 2022, the Group has purchased its own shares in the market in order to satisfy the exercise of employee share option schemes. Shares which are purchased are recognised at cost and are treated as a deduction to shareholders\u2019 equity. No gain or loss is recognised in the income statement on the purchase or utilisation of equity shares. Reserves Foreign exchange reserve The foreign exchange reserve represents the cumulative foreign currency translation movement on the assets and liabilities of the Group\u2019s international operations at year-end exchange rates and on the profit and loss items from average exchange rates to year-end exchange rates. Share options reserve The share options reserve represents the cumulative charges to income under IFRS 2 Share-based Payments on all share options and schemes granted, net of share option exercises. The costs are transferred to retained earnings when options are exercised.", "dimensions": { "concept": "ifrs-full:DisclosureOfMaterialAccountingPolicyInformationExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-281": { "value": "General information Funding Circle Holdings plc (the \u201cCompany\u201d) is a public company limited by shares, which is listed on the London Stock Exchange and is domiciled and incorporated in the United Kingdom under the Companies Act 2006 and registered in England and Wales. The address of its registered office is given on page 196. The consolidated financial statements of the Group for the year ended 31 December 2023 comprise the Company and its subsidiaries (together referred to as the \u201cGroup\u201d and individually as \u201cGroup entities\u201d). The principal activities of the Group and the nature of the Group\u2019s operations are as a global SME loan platform. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. ", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-4": { "value": "Funding Circle Holdings plc", "dimensions": { "concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-276": { "value": "Funding Circle Holdings plc", "dimensions": { "concept": "ifrs-full:NameOfParentEntity", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-5": { "value": "public company limited by shares", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-6": { "value": "United Kingdom", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-277": { "value": "United Kingdom", "dimensions": { "concept": "ifrs-full:DomicileOfEntity", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-7": { "value": "The principal activities of the Group and the nature of the Group\u2019s operations are as a global SME loan platform. ", "dimensions": { "concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-282": { "value": "Going concern The Group\u2019s business activities together with the factors likely to affect its future development and position are set out in the Strategic Report. The financial statements are prepared on a going concern basis as the Directors are satisfied that the Group has the resources to continue in business for the foreseeable future (which has been taken as at least 12 months from the date of approval of the financial statements). The Group made a total comprehensive loss of \u00a341.0 million during the year ended 31 December 2023 (2022: loss of \u00a31.1 million). As at 31 December 2023, the Group had net assets of \u00a3246.8 million (2022: \u00a3284.0 million). This includes \u00a3221.4 million of cash and cash equivalents (2022: \u00a3177.7 million) of which \u00a351.8 million (2022: \u00a312.1 million) is held for specific purposes and is restricted in use. Additionally, within the net assets, the Group holds \u00a363.5 million (2022: \u00a396.5 million) of invested capital, some of which is capable of being monetised if liquidity needs arise. The Group has prepared detailed cash flow forecasts for the next 15 months and has updated the going concern assessment to factor in the potential ongoing impact of inflation and related economic stress. The base case scenario assumes: 5 The economic environment still contains a high degree of uncertainty, this is factored into the 2024 credit risk strategies which include stressed assumptions; 5 Ongoing investment in FlexiPay along with growth in UK loans with an exit of the US loans business; 5 FlexiPay sees significant growth in top line as lines of credit become established and the card offering becomes a fully functional offering; 5 The Group continues to fund the lines of credit through its balance sheet along with the senior banking facility; and 5 Costs are controlled with any growth driven by marketing, expected credit losses (ECL) and cost of funds. Remaining costs grow but predominantly through inflation. Management prepared a severe but plausible downside scenario in which: 5 further macroeconomic volatility continues through the period with increased inflation and interest rates reducing Core originations and increasing costs; 5 investment returns reduce owing to increased funding costs, widening discount rates and deterioration in loan performance; 5 an operational event occurs requiring a cash outlay; 5 a downside loss scenario is applied to Funding Circle\u2019s on-balance sheet investment in SME loans resulting in higher initial fair value losses and lower cash flows to the investments it owns; and 5 a combined credit and liquidity risk stress for FlexiPay. Management has reviewed financial covenants the Group must adhere to in relation to its servicing agreements. These are with institutional investors for which there are unrestricted cash, tangible net worth and debt to tangible net worth ratios. Management has also reviewed regulatory capital requirements. In the downside scenario the risk of covenant or capital requirement breach is considered remote. The Group does not currently rely on committed or uncommitted borrowing facilities, with the exception of a facility for the purpose of originating FlexiPay lines of credit and a small remaining balance on the PPPLF previously used to fund PPP loans, and does not have undrawn committed borrowing facilities available to the wider Group. The Directors have made enquiries of management and considered budgets and cash flow forecasts for the Group and have, at the time of approving these financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.
The Directors have made enquiries of management and considered budgets and cash flow forecasts for the Group and
have, at the time of approving these financial statements, a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the foreseeable future. Further detail is contained in
the Strategic Report on pages 64 and 65.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-283": { "value": "
Basis of preparation
The Group presents its annual financial statements in conformity with United Kingdom laws and regulations.
The financial statements have been prepared in accordance with UK-adopted International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and the disclosure guidance and transparency rules
sourcebook of the United Kingdom\u2019s Financial Conduct Authority.
The financial statements have been prepared on the historical cost basis except for certain financial instruments that
are carried at fair value through profit and loss (\u201cFVTPL\u201d).
The preparation of financial statements requires the use of certain accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group\u2019s 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 2.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-334": { "value": "The Group presents its annual financial statements in conformity with United Kingdom laws and regulations. The financial statements have been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 and the disclosure guidance and transparency rules sourcebook of the United Kingdom\u2019s Financial Conduct Authority. ", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-284": { "value": "
Significant changes in the current reporting year
The financial position and performance of the Group were affected by the following events and transactions during the
year ended 31 December 2023:
i) Launch of FlexiPay leveraged warehouse
During the year ended 31 December 2023, the Group set up a warehouse special purpose vehicle (\u201cSPV\u201d) for the
purposes of scaling up the FlexiPay product through bank borrowings. The vehicle is consolidated by the Group as a
consequence of it having control through the design of the vehicle and ability to influence the returns and exposure
to the majority of the variability of the cash flows generated by the vehicle. As a result, the underlying lines of credit
and borrowings through the senior lending facility in the vehicle are also consolidated. The interest and other fees
associated with the borrowing facility are presented within cost of funds. Details of the borrowing facility terms are
outlined in note 14.
ii) Unwind of US SPV
In April 2023, Funding Circle exercised the call rights associated with the ownership of the unrated junior residual
tranches of Small Business Lending Trust 2020-A\u2019s bonds in the US. This resulted in Funding Circle buying out the
remaining bondholders. The Group continues to recognise 100% of the previously securitised SME loans, which
continue to be held at fair value through profit and loss within SME loans (securitised), as the Group continues to hold
these with the intention of selling them.
All the Group\u2019s securitisation SPVs have now been unwound and all bond liabilities have now been repaid.
iii) Sale of SME loans (other)
In February 2023, commercial loans in the US which had been temporarily funded by the Group with the intention of
selling onwards, and were held at fair value through profit and loss, were sold to a third party investor for \u00a330.4 million
with a fair value loss of \u00a30.4 million from the sale.
", "dimensions": { "concept": "fundingcircle:DisclosureOfSignificantChangesInTheCurrentReportingYear", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-285": { "value": "
Changes in accounting policy and disclosures
The Group has adopted the following new and amended IFRSs and interpretations from 1 January 2023 on a full
retrospective basis.
Applicable for financial
Standard/interpretation
Content
years beginning on/after
Amendments to IAS 8 \u2013 Definition of Accounting Estimates
Accounting policies, changes
1 January 2023
in accounting estimates
Amendments to IAS 1 and IFRS Practice Statement 2
Accounting policies
1 January 2023
\u2013 Disclosure of Accounting Policies
Amendments to IAS 12 \u2013 Deferred Tax Related to Assets
Deferred tax
1 January 2023
and Liabilities Arising from a Single Transaction
The amendments and interpretations listed above did not materially affect the current year and are not expected to
materially affect future years.
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2023
reporting years and have not been early adopted by the Group as follows:
Applicable for financial
Standard/interpretation
Content
years beginning on/after
Amendments to IAS 1 \u2013 Classification of Liabilities as Current
Presentation of financial statements
1 January 2024
or Non-current
Amendments to IAS 1 \u2013 Non-current Liabilities with Covenants
Presentation of financial statements
1 January 2024
Amendment to IFRS 16 \u2013 Lease Liability in a Sale and Leaseback
Leases
1 January 2024
These standards are not expected to have a material impact on the Group in the current or future reporting years or on
foreseeable future transactions.
Summary of new and amended accounting policies
There were no new or amended accounting policies in the year related to material items.
", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-335": { "value": "The Group has adopted the following new and amended IFRSs and interpretations from 1 January 2023 on a full retrospective basis.
Applicable for financial
Standard/interpretation
Content
years beginning on/after
Amendments to IAS 8 \u2013 Definition of Accounting Estimates
Accounting policies, changes
1 January 2023
in accounting estimates
Amendments to IAS 1 and IFRS Practice Statement 2
Accounting policies
1 January 2023
\u2013 Disclosure of Accounting Policies
Amendments to IAS 12 \u2013 Deferred Tax Related to Assets
Deferred tax
1 January 2023
and Liabilities Arising from a Single Transaction
The amendments and interpretations listed above did not materially affect the current year and are not expected to materially affect future years. ", "dimensions": { "concept": "ifrs-full:DescriptionOfInitialApplicationOfStandardsOrInterpretations", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-336": { "value": "Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2023 reporting years and have not been early adopted by the Group as follows:
Applicable for financial
Standard/interpretation
Content
years beginning on/after
Amendments to IAS 1 \u2013 Classification of Liabilities as Current
Presentation of financial statements
1 January 2024
or Non-current
Amendments to IAS 1 \u2013 Non-current Liabilities with Covenants
Presentation of financial statements
1 January 2024
Amendment to IFRS 16 \u2013 Lease Liability in a Sale and Leaseback
Leases
1 January 2024
These standards are not expected to have a material impact on the Group in the current or future reporting years or on foreseeable future transactions. ", "dimensions": { "concept": "ifrs-full:DescriptionOfExpectedImpactOfInitialApplicationOfNewStandardsOrInterpretations", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-286": { "value": "
Re-presentation of interest income on cash and cash equivalents and impact on alternative performance measures
The business uses its cash resources where it makes the platform stronger. As a result, the Group historically invested
in warehouse and securitisation vehicles (which are now largely unwound), co-invested alongside investors and more
recently in the FlexiPay product. Where cash is not invested in these areas, it is held at banks and in money market
funds earning interest. Given its use is integral to the business and the Group is now earning interest through various
mechanisms, we now show the interest we earn on bank deposits, money market funds and client money, previously
shown in \u201cFinance income\u201d, in \u201cInterest income\u201d within \u201cOperating income\u201d. Finance costs and profit/(loss) from
share of associates are now presented within \u201cOther costs\u201d as these are not considered material. The comparative
financial presentation has been re-presented accordingly with an additional \u00a32.3 million presented in \u201cInterest income\u201d
previously presented in \u201cFinance income\u201d, \u00a30.5 million presented within \u201cOther costs\u201d, \u00a30.9 million of which was
previously presented within \u201cFinance costs\u201d and \u00a30.4 million credit which was previously presented in \u201cShare of net
profit from associates\u201d. The consolidated statement of cash flows and note 20 have also been re-presented to mirror
this with interest received now forming part of cash flows from operating activities which were previously disclosed
as investing activities, with the comparative period re-presented with \u00a32.3 million included within cash flows from
operations previously within cash flows from investing activities.
The Group\u2019s definition of the alternative performance measure, adjusted EBITDA, has consequently also been adjusted
to take account of this re-presentation. The definition used is now profit for the period before finance costs (being the
discount unwind on lease liabilities), taxation, depreciation, amortisation and impairment (\u201cAEBITDA\u201d) and additionally
excludes share-based payment charges and associated social security costs, foreign exchange and exceptional
items. The comparative period AEBITDA is re-presented higher by \u00a32.7 million including the re-presentation of interest
income on bank deposits and share of net profit from associates.
", "dimensions": { "concept": "ifrs-full:DisclosureOfReclassificationsOrChangesInPresentationExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-287": { "value": "Basis of consolidation Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Structured entities are entities that are designed so that their activities are not governed by voting rights. In assessing whether the Group has power over such entities, the Group considers factors such as the purpose and design of the entity, its practical ability to direct the relevant activities of the entity, the nature of the relationship with the entity, and the size of its exposure to the variability of returns of the entity. The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full. The Group applies the acquisition method to account for business combinations. In the consolidated balance sheet, the acquiree\u2019s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. Acquisition-related costs are recognised in profit or loss as incurred. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-337": { "value": "Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Structured entities are entities that are designed so that their activities are not governed by voting rights. In assessing whether the Group has power over such entities, the Group considers factors such as the purpose and design of the entity, its practical ability to direct the relevant activities of the entity, the nature of the relationship with the entity, and the size of its exposure to the variability of returns of the entity. The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-370": { "value": "The Group applies the acquisition method to account for business combinations. In the consolidated balance sheet, the acquiree\u2019s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. Acquisition-related costs are recognised in profit or loss as incurred. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-388": { "value": "The Group applies the acquisition method to account for business combinations. In the consolidated balance sheet, the acquiree\u2019s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. Acquisition-related costs are recognised in profit or loss as incurred. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-288": { "value": "Foreign currency translation Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their \u201cfunctional currency\u201d) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the prevailing rate at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-289": { "value": "Presentation currency These consolidated financial statements are presented in GBP sterling, which is the Group\u2019s presentation currency. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the prevailing rate at the reporting date. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during that year, in which case the exchange rates at the date of transactions are used. Exchange differences arising are recognised in other comprehensive income and accumulated in equity. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the prevailing rate at the reporting date. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-290": { "value": "Segment reporting Operating segments are reported in the manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, which is the function responsible for allocating resources and assessing performance of the operating segments, has been identified as the Global Leadership Team that makes strategic decisions. For each identified operating segment, the Group has disclosed information for the key performance indicators that are assessed internally to review and steer performance in the Strategic Report. Transactions between segments are on an arm\u2019s length basis in a manner similar to transactions with third parties. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-291": { "value": "Exceptional items Exceptional items are the items of income or expense that the Group considers are material, one-off in nature and of such significance that they merit separate presentation in order to aid the reader\u2019s understanding of the Group\u2019s financial performance. Such items would include profits or losses on disposal of businesses, transaction costs, acquisitions and disposals, major restructuring programmes, significant goodwill or other asset impairments, and other particularly significant or unusual items. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForExceptionalItemsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-292": { "value": "
Income recognition
Fee income is recognised in line with IFRS 15 which provides a single, principles-based five-step model to be applied to
all contracts with customers:
1) identify the contract with the customer;
2) identify the performance obligations in the contract;
3) determine the transaction price;
4) allocate the transaction price to the performance obligations in the contracts, on a relative stand-alone selling price
basis; and
5) recognise income when (or as) the entity satisfies its performance obligation.
Fee income earned for the arrangement of loans is classified as transaction fees. The contract signed by the borrower
and related terms are clearly identifiable. The performance obligation in the contract is considered to be the funding
of the loan through the platform and the transaction price is clearly stated in the borrower\u2019s contract. Fees are
recognised immediately once loans are fully funded and after the loans are accepted by the borrowers. At this point
the performance obligation has been met, there are no clawback provisions and the fee is recognised. Such fees are
automatically deducted from the amount borrowed.
Fee income earned from referrals to partner institutions is classified as transaction fees. There are contracts in place
with partner institutions with clearly identifiable terms. The performance obligation in the contract is considered to be
the referral by the Group and subsequent funding of the referred loan by the partner institution and the transaction
price is clearly stated in the referral agreement. Fees are recognised once the referred loan has been funded by the
partner institution and accepted by the referred borrower. At this point, the performance obligation has been met and
there are no significant clawback provisions.
Fee income earned from servicing third party loans is classified as servicing fees and is a cost of the investor, except
in the case of the first year of servicing fees related to CBILS loans, where the government paid the cost. It comprises
an annualised fee representing a percentage of outstanding principal. The contractual basis for the servicing fee and
transaction price is based on the terms and conditions agreed by investors to the lending platform. The performance
obligation is servicing the loans and allocating repayments of the loan parts to the respective lenders. The transaction
price is allocated as a percentage of the outstanding principal balance, representing the outstanding performance
obligation. Fees are recognised on a monthly basis upon repayment of loan parts. Due to the conditions of the loans,
there are no partially completed contracts at the balance sheet date and no advance payments from customers.
Fee income earned from interchange fees from FlexiPay Card is classified as a transaction fee. Foreign exchange fees
earned from FlexiPay Card are classified as other fees and are a cost to the FlexiPay Card borrower. A contract is in
place with the card provider who remits the fee revenues to the Group. Card fees are recognised immediately at the
point of transaction as at this point the performance obligation has been met. Borrowers using their card will \u201cflip\u201d the
balance into a FlexiPay loan repayable over three months and for a fee. The fee incurred by borrowers who flip the card
balance into a loan is recognised under IFRS 9 from the point of the flip over the life of the loan under the effective
interest rate method and is recognised under interest income.
Other fees include excess premium earned from arrangements to buy back defaulted loans from certain institutional
investors and performance related fees related to the loans held by certain institutional investors. Other fees also
includes income from collections charges levied on the successful recovery of defaulted loans. These are recognised
as services are performed or performance obligations are met.
Net income includes the following elements under which the recognition criteria of IFRS 9 and not IFRS 15 are applied:
Interest income includes:
5 interest income recognised on assets held at amortised cost under the effective interest rate method including
FlexiPay and interest income on corporate cash and client monies held.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Investment income includes: 5 interest income from SME loans and investments in trusts that the Group holds on balance sheet. Investment expense includes: 5 interest payable on funds borrowed to finance the acquisition of underlying loan investments; 5 interest payable on bond liabilities held on balance sheet; 5 amortisation of costs associated with the issuing of bonds and the credit facility; and 5 gains/losses from changes in fair value of interest hedging instruments. Fair value gains/losses includes: 5 gains/losses from changes in the fair value of financial assets and liabilities held on balance sheet. Cost of funds includes: 5 interest payable on funds borrowed to finance the issuing of lines of credit. Net income recorded in the financial statements is generated in the UK, the US, Germany and the Netherlands. All fees are recognised and measured based on the above income recognition policy. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-338": { "value": "Fee income is recognised in line with IFRS 15 which provides a single, principles-based five-step model to be applied to all contracts with customers: 1) identify the contract with the customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contracts, on a relative stand-alone selling price basis; and 5) recognise income when (or as) the entity satisfies its performance obligation. Fee income earned for the arrangement of loans is classified as transaction fees. The contract signed by the borrower and related terms are clearly identifiable. The performance obligation in the contract is considered to be the funding of the loan through the platform and the transaction price is clearly stated in the borrower\u2019s contract. Fees are recognised immediately once loans are fully funded and after the loans are accepted by the borrowers. At this point the performance obligation has been met, there are no clawback provisions and the fee is recognised. Such fees are automatically deducted from the amount borrowed. Fee income earned from referrals to partner institutions is classified as transaction fees. There are contracts in place with partner institutions with clearly identifiable terms. The performance obligation in the contract is considered to be the referral by the Group and subsequent funding of the referred loan by the partner institution and the transaction price is clearly stated in the referral agreement. Fees are recognised once the referred loan has been funded by the partner institution and accepted by the referred borrower. At this point, the performance obligation has been met and there are no significant clawback provisions. Fee income earned from servicing third party loans is classified as servicing fees and is a cost of the investor, except in the case of the first year of servicing fees related to CBILS loans, where the government paid the cost. It comprises an annualised fee representing a percentage of outstanding principal. The contractual basis for the servicing fee and transaction price is based on the terms and conditions agreed by investors to the lending platform. The performance obligation is servicing the loans and allocating repayments of the loan parts to the respective lenders. The transaction price is allocated as a percentage of the outstanding principal balance, representing the outstanding performance obligation. Fees are recognised on a monthly basis upon repayment of loan parts. Due to the conditions of the loans, there are no partially completed contracts at the balance sheet date and no advance payments from customers. Fee income earned from interchange fees from FlexiPay Card is classified as a transaction fee. Foreign exchange fees earned from FlexiPay Card are classified as other fees and are a cost to the FlexiPay Card borrower. A contract is in place with the card provider who remits the fee revenues to the Group. Card fees are recognised immediately at the point of transaction as at this point the performance obligation has been met. Borrowers using their card will \u201cflip\u201d the balance into a FlexiPay loan repayable over three months and for a fee. The fee incurred by borrowers who flip the card balance into a loan is recognised under IFRS 9 from the point of the flip over the life of the loan under the effective interest rate method and is recognised under interest income. Other fees include excess premium earned from arrangements to buy back defaulted loans from certain institutional investors and performance related fees related to the loans held by certain institutional investors. Other fees also includes income from collections charges levied on the successful recovery of defaulted loans. These are recognised as services are performed or performance obligations are met. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFeeAndCommissionIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-339": { "value": "Net income includes the following elements under which the recognition criteria of IFRS 9 and not IFRS 15 are applied: Interest income includes: 5 interest income recognised on assets held at amortised cost under the effective interest rate method including FlexiPay and interest income on corporate cash and client monies held. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Investment income includes: 5 interest income from SME loans and investments in trusts that the Group holds on balance sheet. Investment expense includes: 5 interest payable on funds borrowed to finance the acquisition of underlying loan investments; 5 interest payable on bond liabilities held on balance sheet; 5 amortisation of costs associated with the issuing of bonds and the credit facility; and 5 gains/losses from changes in fair value of interest hedging instruments. Fair value gains/losses includes: 5 gains/losses from changes in the fair value of financial assets and liabilities held on balance sheet. Cost of funds includes: 5 interest payable on funds borrowed to finance the issuing of lines of credit. Net income recorded in the financial statements is generated in the UK, the US, Germany and the Netherlands. All fees are recognised and measured based on the above income recognition policy. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-340": { "value": "Administrative expenses Administrative expenses are recognised as an expense in the statement of comprehensive income in the period in which they are incurred on an accruals basis. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForExpensesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-293": { "value": "Administrative expenses Administrative expenses are recognised as an expense in the statement of comprehensive income in the period in which they are incurred on an accruals basis. ", "dimensions": { "concept": "fundingcircle:DescriptionOfAccountingPolicyForAdministrativeExpenses", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-294": { "value": "Share-based payments The Group operates a number of equity-settled share-based compensation plans, under which the Group receives services from employees as consideration for equity instruments (options and shares) of the Company. The fair value of the employee services received in exchange for the grant of the options and shares is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options and shares granted: 5 including any market performance conditions (for example, an entity\u2019s share price); 5 excluding the impact of any service and non-market performance vesting conditions (for example, net income, earnings per share and remaining an employee of the Group over a specified time period); and 5 including the impact of any non-vesting conditions (for example, the requirement for employees to save). Non-market vesting conditions are included in assumptions about the number of options and shares that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the Group revises its estimate of the number of options and shares that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. When the options are exercised, the Company issues new shares or utilises shares that have been purchased in the market. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. The original fair value of the amount exercised is transferred from the share option reserve to the accumulated losses reserve. The grant by the Company of options and shares over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase in investment in subsidiary undertakings, with a corresponding credit to equity in the Parent entity (the \u201cCompany\u201d) accounts. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-295": { "value": "Pension obligations The Group operates a defined contribution pension scheme for employees in the UK and US. The schemes are pension plans under which the Group pays fixed contributions into a separate entity. The Group 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 years. Contributions payable to the Group\u2019s pension scheme are charged to the statement of comprehensive income in the year to which they relate. The Group has no further payment obligations once the contributions have been paid. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-296": { "value": "
Current and deferred tax
The tax expense for the year 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 balance sheet
date in the countries where the Company and its subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation. The Group has established transfer pricing policies and there are mechanisms in place
that ensure subsidiaries are remunerated appropriately on an arm\u2019s length basis for services provided. 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 differences 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 are recognised on deductible temporary differences arising from investments in subsidiaries,
associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the
future and there is sufficient taxable profit available against which the temporary difference can be utilised.
Deferred tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries,
associates and joint arrangements, except for any deferred tax liability where the timing of the reversal of the
temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the
foreseeable future.
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 affects neither accounting nor taxable profit or loss.
Deferred tax is determined using tax rates and laws that have been enacted or substantively 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.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-341": { "value": "Current and deferred tax The tax expense for the year 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 balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. The Group has established transfer pricing policies and there are mechanisms in place that ensure subsidiaries are remunerated appropriately on an arm\u2019s length basis for services provided. 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 differences 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 are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised. Deferred tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for any deferred tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. 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 affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates and laws that have been enacted or substantively 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. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-297": { "value": "
Dividends
Dividends are recognised when they become legally payable, in accordance with the Companies Act 2006.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-298": { "value": "
Intangible assets
Intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful lives. Useful
lives and amortisation methods are reviewed at the end of each annual reporting period, or more frequently when
there is an indication that the intangible asset may be impaired, with the effect of any changes accounted for on
a prospective basis. Amortisation commences when the intangible asset is available for use. The residual value of
intangible assets is assumed to be zero.
Computer software licences
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the
specific software. These costs are amortised over the licence period, which is up to five years as at 31 December 2023.
Capitalised development costs
Costs associated with maintaining computer software programs are recognised as an expense as incurred.
Development costs that are directly attributable to the design, build and testing of identifiable and unique software
products controlled by the Group are recognised as intangible assets when the following criteria are met:
5 it is technically feasible to complete the build of the platform products so that they will be available for use;
5 management intends to complete the build of the platform products for use within the Group;
5 there is an ability to use the platform products;
5 it can be demonstrated how the platform products will generate probable future economic benefits;
5 adequate technical, financial and other resources to complete the development and to use the platform products are
available; and
5 the expenditure attributable to the platform products during its development can be reliably measured.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Directly attributable costs that are capitalised as part of the software product include the software development employee and contractor costs. The capitalisation of employee costs is based on the amount of time spent on specific projects which meet the criteria as a proportion of their total time, and this proportion of their salary-related costs is attributed to the applicable projects. Other development expenditure that does not meet these criteria is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use over their estimated useful lives, ranging from three to five years. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-342": { "value": "Intangible assets Intangible assets with finite useful lives are amortised on a straight-line basis over their estimated useful lives. Useful lives and amortisation methods are reviewed at the end of each annual reporting period, or more frequently when there is an indication that the intangible asset may be impaired, with the effect of any changes accounted for on a prospective basis. Amortisation commences when the intangible asset is available for use. The residual value of intangible assets is assumed to be zero. Computer software licences Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over the licence period, which is up to five years as at 31 December 2023. Capitalised development costs Costs associated with maintaining computer software programs are recognised as an expense as incurred. Development costs that are directly attributable to the design, build and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met: 5 it is technically feasible to complete the build of the platform products so that they will be available for use; 5 management intends to complete the build of the platform products for use within the Group; 5 there is an ability to use the platform products; 5 it can be demonstrated how the platform products will generate probable future economic benefits; 5 adequate technical, financial and other resources to complete the development and to use the platform products are available; and 5 the expenditure attributable to the platform products during its development can be reliably measured. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Directly attributable costs that are capitalised as part of the software product include the software development employee and contractor costs. The capitalisation of employee costs is based on the amount of time spent on specific projects which meet the criteria as a proportion of their total time, and this proportion of their salary-related costs is attributed to the applicable projects. Other development expenditure that does not meet these criteria is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use over their estimated useful lives, ranging from three to five years. Other intangibles Other intangibles relate to the technology platform and customer relationship (representing fees due on contracted loans expected to be realised in the foreseeable future) acquired on a business combination. These costs are amortised over their estimated useful lives, which do not exceed three years. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-371": { "value": "Capitalised development costs Costs associated with maintaining computer software programs are recognised as an expense as incurred. Development costs that are directly attributable to the design, build and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met: 5 it is technically feasible to complete the build of the platform products so that they will be available for use; 5 management intends to complete the build of the platform products for use within the Group; 5 there is an ability to use the platform products; 5 it can be demonstrated how the platform products will generate probable future economic benefits; 5 adequate technical, financial and other resources to complete the development and to use the platform products are available; and 5 the expenditure attributable to the platform products during its development can be reliably measured. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Directly attributable costs that are capitalised as part of the software product include the software development employee and contractor costs. The capitalisation of employee costs is based on the amount of time spent on specific projects which meet the criteria as a proportion of their total time, and this proportion of their salary-related costs is attributed to the applicable projects. Other development expenditure that does not meet these criteria is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use over their estimated useful lives, ranging from three to five years. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-299": { "value": "Tangible fixed assets Tangible fixed assets are stated at cost less depreciation and any provision for impairment. Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its expected useful life, as follows: Computer equipment 1\u20133 years Furniture and fixtures 3\u20135 years Leasehold improvements that qualify for recognition as an asset are measured at cost and are presented as part of property, plant and equipment in the non-current assets section on the balance sheet. Depreciation on leasehold improvements is calculated using the straight-line method over the lease term. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-343": { "value": "Tangible fixed assets are stated at cost less depreciation and any provision for impairment. Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its expected useful life, as follows: Computer equipment 1\u20133 years Furniture and fixtures 3\u20135 years Leasehold improvements that qualify for recognition as an asset are measured at cost and are presented as part of property, plant and equipment in the non-current assets section on the balance sheet. Depreciation on leasehold improvements is calculated using the straight-line method over the lease term. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-372": { "value": "Impairment of tangible and intangible assets Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset\u2019s recoverable amount since the last impairment loss was recognised. If this was the case, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. Impairment of financial assets held at amortised cost The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach: 5 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 (\u201cECLs\u201d) (that is, expected losses arising from the risk of default in the next 12 months) are recognised and interest income is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 5 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 ECLs (that is, expected losses arising from the risk of default over the life of the financial instrument) are recognised, and interest income is still calculated on the gross carrying amount of the asset. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the financial assets exceed 30 days, in line with the rebuttable presumption per IFRS 9 at which point the assets are considered to be stage 2. 5 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 ECLs are also recognised, but interest income is calculated on the net carrying amount (that is, net of the ECL allowance). The Group defines a default, classified as stage 3, as an asset with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the asset is considered to be defaulted. An account that is deemed to be fraudulent (i.e third party application fraud) is written off at point of identification. 5 In some circumstances where assets are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit-impaired (\u201cPOCI\u201d), and impairment is therefore based on lifetime ECLs. The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects: 5 an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; 5 the time value of money; and 5 reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-300": { "value": "Impairment of tangible and intangible assets Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset\u2019s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset\u2019s recoverable amount since the last impairment loss was recognised. If this was the case, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-301": { "value": "Leases At inception of a contract, the Group assesses whether or not a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. When a lease is recognised in a contract the Group recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are initially measured at cost, comprising the initial measurement of the lease liability, less any lease incentives. Subsequently, right-of-use assets are measured at cost, less any accumulated depreciation and any accumulated impairment losses, and are adjusted for certain remeasurements of the lease liability. Depreciation is calculated on a straight-line basis over the length of the lease.
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present
value of the following lease payments:
5 fixed payments less any lease incentives receivable;
5 variable lease payments based on an index or a rate, initially measured using the index or rate at the
commencement date; and
5 amounts expected to be payable by the Group under residual value guarantee.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, the Group\u2019s incremental borrowing rate is used, which is the rate that the Group would have to pay
to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
5 where possible, uses recent third party financing received by the individual lessee as a starting point, adjusted to
reflect changes in financing conditions since third party financing was received;
5 uses an approach taking the risk-free interest rate adjusted for credit risk for leases held by Funding Circle
Holdings plc; and
5 makes adjustments specific to the lease for term, country and currency.
Subsequently, the lease liability is measured by increasing the carrying amount to reflect interest on the lease liability
and reducing it by the lease payments made. The lease liability and right-of-use asset are remeasured when there is a
lease modification.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not
included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take
effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Extension and termination options are included in a number of property leases in the Group. Management considers
the facts and circumstances that may create an economic incentive to exercise an extension or termination option in
order to determine whether the lease term should include or exclude such options. Extension or termination options are
only included within the lease term if they are reasonably certain to be exercised in the case of extension options and
not exercised in the case of termination options.
Considerations include:
5 if leasehold improvements are expected to have significant value at the end of the lease term;
5 expected costs or business disruption as a result of replacing a lease; and
5 significant penalties incurred in order to terminate.
Lease terms are reassessed if the option is exercised or if a significant event occurs which impacts the assessment of
reasonable certainty.
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment
(i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a
purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that
are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as
expenses on a straight-line basis over the lease term.
When the Group is an intermediate lessor, entering into a sublease, it accounts for the head lease and the sublease
separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from
the head lease. Rental income from operating leases is recognised on a straight-line basis over the lease term and the
Group retains the right-of-use asset deriving from the head lease and the lease liability on the balance sheet.
Amounts due from lessees under finance leases are recognised as receivables equivalent to the Group\u2019s net
investment in the lease and the right-of-use asset from the head lease is derecognised. Any difference resulting from
the derecognition of the right-of-use asset and recognition of the net investment in the sublease is recognised in the
consolidated statement of comprehensive income. The head lease liability remains on the balance sheet and interest
expense continues to be recognised, while interest income is recognised from the sublease.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-302": { "value": "
Consolidation of special purpose vehicles (\u201cSPVs\u201d)
Subsidiaries are those entities, including structured vehicles, over which the Group has control. The Group controls an
entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the investee. The Group has power over an entity when it has existing rights
that give it the current ability to direct the activities that most significantly affect the entity\u2019s returns. Power may be
determined on the basis of voting rights or, in the case of structured entities, other contractual arrangements.
The Group assesses whether it controls SPVs and the requirement to consolidate them under the criteria of IFRS 10.
Control is determined to exist if the Group has the power to direct the activities of each entity (for example, managing
the performance of the underlying assets and raising debt on those assets which is used to fund the Group) and uses
this control to obtain a variable return (for example, retaining the residual risk on the assets). Structures that do not
meet these criteria are not treated as subsidiaries and the assets are derecognised when the rights to the cash flows
have ended.
Where the Group manages the administration of its securitised assets and is exposed to the risks and rewards of the
underlying assets through its continued investment or where the Group does not retain a direct ownership interest in
an SPE, but the Directors have determined that the Group controls those entities based on the criteria of IFRS 10, they
are treated as subsidiaries and are consolidated.
", "dimensions": { "concept": "fundingcircle:DescriptionOfAccountingPolicyForConsolidationOfSpecialPurposeVehiclesSPVs", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-303": { "value": "
Investment in associates
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate
in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The
considerations made in determining significant influence or joint control are similar to those necessary to determine
control over subsidiaries. The Group\u2019s investment in its associate is accounted for using the equity method.
Under the equity method of accounting, the investments are initially recognised at cost. This is adjusted thereafter to
recognise the Group\u2019s share of the post-acquisition profits or losses of the investee in the consolidated statement of
comprehensive income. The Group\u2019s share of movements in other comprehensive income of the investee is recognised
in other comprehensive income. Dividends received or receivable from associates are recognised as a reduction in the
carrying amount of the investment.
When the Group\u2019s share of losses in an equity-accounted investment equals or exceeds its interest in the entity,
including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group\u2019s
interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss
on its investment in its associate. At each reporting date, the Group determines whether there is an indication that the
investment in the associate is impaired. If there is such an indication, the Group calculates the amount of impairment as
the difference between the recoverable amount of the associate and its carrying value, and then recognises the loss
within the statement of comprehensive income.
Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at
its fair value. Any difference between the carrying amount of the associate upon loss of significant influence or joint
control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-344": { "value": "Investment in associates An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group\u2019s investment in its associate is accounted for using the equity method. Under the equity method of accounting, the investments are initially recognised at cost. This is adjusted thereafter to recognise the Group\u2019s share of the post-acquisition profits or losses of the investee in the consolidated statement of comprehensive income. The Group\u2019s share of movements in other comprehensive income of the investee is recognised in other comprehensive income. Dividends received or receivable from associates are recognised as a reduction in the carrying amount of the investment. When the Group\u2019s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group\u2019s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date, the Group determines whether there is an indication that the investment in the associate is impaired. If there is such an indication, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognises the loss within the statement of comprehensive income. Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-304": { "value": "
Financial instruments
Financial assets
The Group determines the classification of its financial assets at initial recognition. The requirements of IFRS 9 for
classification and subsequent measurement are applied, which require financial assets to be classified based on the
Group\u2019s business model for managing the asset and the contractual cash flow characteristics of the asset:
5 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;
5 financial assets are measured at fair value through other comprehensive income (\u201cFVTOCI\u201d) if they are held within
the business model defined as \u201dheld to collect and sell\u201d, 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; and
5 financial assets that do not meet the criteria to be amortised cost or FVTOCI are measured at fair value through
profit or loss (\u201cFVTPL\u201d). In addition, the Group may, at initial recognition, designate a financial asset as measured at
FVTPL 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 purchase of any credit-impaired assets is also at fair value after any impairment. Except for certain investments in SME loans as described below, the Group 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. With the exception of investment in trusts and co-investments, SME loans (warehouse), certain SME loans (other) and SME loans (securitised), all financial assets are held to collect contractual cash flows. Following the call option being exercised on the UK and US securitisation vehicles and the repayment of the warehouse borrowings, some of the SME loans were purchased from the vehicles and are held directly in Funding Circle Limited and Funding Circle Marketplace LLC. These loans continue to be held at FVTPL as the business model under which they are held remains to sell the loans. They continue to be presented within SME loans (securitised) and SME loans (warehouse) representing the legacy nature of the loans. The five types of SME loans held are as follows: i) SME loans (warehouse) and SME loans (securitised) During the securitisation programmes previously run by the Group, SME loans were originated in leveraged warehouse vehicles and subsequently sold into securitisation SPVs. By 31 December 2023 the warehouse vehicles had been repaid and the securitisation vehicles unwound with the loans of the vehicles purchased and directly held by subsidiaries of the Group and remaining bond liabilities repaid. The SME loans (warehouse) and SME loans (securitised) are classified reflecting the legacy nature of the loans. These SME loans have been classified as financial assets at fair value through profit or loss because all such loans are acquired principally for selling in the short term and the collection of interest is incidental. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. ii) SME loans (other) The Group has originated PPP loans using the SBA\u2019s PPPLF facility and these are held on balance sheet. Additionally, the Group holds investments in certain SME business loans as a result of commercial arrangements with institutional investors and in certain circumstances the Group also buys back loans from investors. These loans are included in SME loans (other) (see note 11) and are classified as amortised cost (as they are held solely to collect principal and interest payments) and are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment. PPP loans are fully guaranteed by the SBA. SME loans (other) additionally includes loans temporarily funded by the Group in relation to the relaunch of commercial loans which are classified as financial assets at fair value through profit or loss and are held with the intention of selling on to investors. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. iii) Lines of credit Lending through the FlexiPay product is recognised on the balance sheet within lines of credit. This represents the drawn amount of the facilities, net of ECL. The contractual cash flows represent solely payments of principal and interest (\u201cSPPI\u201d) and the business model under which they are held is in order to collect the contractual cash flows resulting in the lines of credit being measured initially at fair value and subsequently at amortised cost. The origination fee associated with FlexiPay is recognised under IFRS 9 within interest income at the effective interest rate in the consolidated statement of comprehensive income and is recognised over the expected life of the drawdown. The FlexiPay lines of credit are held net of expected credit loss allowances under IFRS 9, the methodology and definitions of which align to the Group accounting policy on impairment of financial assets held at amortised cost with the exception of being assessed at the available line of credit level, estimating the utilisation of the line of credit to the estimated point of default and are detailed further within note 14. Additionally, the Group assesses the expected credit loss allowance in relation to undrawn lines of credit, estimating the probability of default, loss given default and exposure at default in relation to these lines of credit were they to be drawn. This loss allowance is recognised within other liabilities in note 13.
iv) Investment in trusts and co-investments
The Group holds a minority beneficial ownership in trusts set up to fund CBILS, RLS and commercial loans with the
majority of the beneficial ownership held by institutional investors. The SME loans are originated by Group subsidiaries,
Funding Circle Focal Point Lending Limited for CBILS and Funding Circle Eclipse Lending Limited or Funding Circle
Polaris Lending Limited for RLS and commercial loans, which retain legal title to the loans. These entities hold this
legal title on trust on behalf of the majority investors who substantially retain the economic benefits the CBILS, RLS
and commercial loans generate and therefore the trusts and the assets held within, including the SME loans, are not
consolidated.
The Group assesses whether it controls the trust structure under the criteria of IFRS 10. Control is determined to exist
if the Group has the power to direct the activities of entities and structures and uses this control to obtain a variable
return, to which it is exposed to the majority of the variability. As the Group\u2019s holding is small compared to the majority
investor and pari passu, the Group is not exposed to the majority of the variability in the cash flows of the trust, and it is
not considered to control the trust structures, so they are not consolidated by the Group.
Investments in trusts are classified at fair value through profit and loss. They are initially recognised at fair value on
the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the
consolidated statement of comprehensive income.
The Group recognises transaction fee income on origination of loans within the trust and service fee income on the
assets within the trust, eliminating its proportional ownership share of the service fees. A scheme lender fee is charged
in relation to the origination of CBILS and RLS loans and investment income is recognised in relation to returns on
the investment.
Other financial assets
Financial assets recognised in the balance sheet as trade and other receivables are classified as amortised cost. They
are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment.
Net investments in sublease receivables are recognised as other receivables representing the net present value of the
lease payment receivable. Interest is recognised within other costs in the statement of comprehensive income.
Cash and cash equivalents are classified as amortised cost with the exception of money market funds that are
classified as FVTPL. Cash and cash equivalents include cash in hand, deposits held at call with banks, money market
funds and other short-term highly liquid investments with original maturities of three months or less. The carrying
amount of these assets approximates to their fair value.
Impairment of financial assets held at amortised cost
The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach:
5 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 (\u201cECLs\u201d) (that
is, expected losses arising from the risk of default in the next 12 months) are recognised and interest income is
calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance).
5 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 ECLs
(that is, expected losses arising from the risk of default over the life of the financial instrument) are recognised, and
interest income is still calculated on the gross carrying amount of the asset. The Group assumes there has been
a significant increase in credit risk if outstanding amounts on the financial assets exceed 30 days, in line with the
rebuttable presumption per IFRS 9 at which point the assets are considered to be stage 2.
5 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
ECLs are also recognised, but interest income is calculated on the net carrying amount (that is, net of the ECL
allowance). The Group defines a default, classified as stage 3, as an asset with any outstanding amounts exceeding
a 90-day due date, which reflects the point at which the asset is considered to be defaulted. An account that is
deemed to be fraudulent (i.e third party application fraud) is written off at point of identification.
5 In some circumstances where assets are bought back by the Group, the financial asset associated with the purchase meets
the definition of purchased or originated credit-impaired (\u201cPOCI\u201d), and impairment is therefore based on lifetime ECLs.
The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects: 5 an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; 5 the time value of money; and 5 reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income. Derecognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire or the Group 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 Group derecognises a transferred financial asset if it transfers substantially all the risks and rewards of ownership. Financial liabilities 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. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Bank borrowings Bank borrowings (drawdowns under the credit facilities) are recognised initially at fair value, being their issue proceeds net of transaction costs incurred. These instruments are subsequently measured at amortised cost using the effective interest rate method. Bonds Bonds represent the bond liabilities which the Group must pay to the bond holders from the cash flows generated from the SME loans (securitised) held on balance sheet. The liability excludes any amount of bonds that the Group has retained as these are eliminated upon consolidation. IFRS 9 permits a company to elect to fair value the bond liabilities where there is an accounting mismatch. In the Group\u2019s case the associated assets generating the cash flows to pay the bonds are the SME loans (securitised) which are measured at fair value through profit and loss. As the cash flows from the SME loans were used to repay the rated bond tranches in advance of the unrated bonds, the Group does not consider there to be a significant accounting mismatch as default levels impact the unrated bonds first. Therefore the rated bonds are measured at amortised cost. However, as the unrated bonds are most affected by fair value movements in the SME loans, the Group elected to measure the unrated tranches of bonds at fair value through profit and loss to eliminate the accounting mismatch. Following the unwind of the UK SPV entity during the year ended 31 December 2022, there are no externally held bond liabilities measured at FVTPL remaining on a consolidated Group basis. See note 14 for details of the fair value methodology and interest rate risk. Transaction costs associated with the issuance of bonds are deferred to the balance sheet and recognised over the lifetime of the bonds using the effective interest rate method. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-345": { "value": "Financial assets The Group determines the classification of its financial assets at initial recognition. The requirements of IFRS 9 for classification and subsequent measurement are applied, which require financial assets to be classified based on the Group\u2019s business model for managing the asset and the contractual cash flow characteristics of the asset: 5 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; 5 financial assets are measured at fair value through other comprehensive income (\u201cFVTOCI\u201d) if they are held within the business model defined as \u201dheld to collect and sell\u201d, 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; and 5 financial assets that do not meet the criteria to be amortised cost or FVTOCI are measured at fair value through profit or loss (\u201cFVTPL\u201d). In addition, the Group may, at initial recognition, designate a financial asset as measured at FVTPL 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 purchase of any credit-impaired assets is also at fair value after any impairment. Except for certain investments in SME loans as described below, the Group 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. With the exception of investment in trusts and co-investments, SME loans (warehouse), certain SME loans (other) and SME loans (securitised), all financial assets are held to collect contractual cash flows. Following the call option being exercised on the UK and US securitisation vehicles and the repayment of the warehouse borrowings, some of the SME loans were purchased from the vehicles and are held directly in Funding Circle Limited and Funding Circle Marketplace LLC. These loans continue to be held at FVTPL as the business model under which they are held remains to sell the loans. They continue to be presented within SME loans (securitised) and SME loans (warehouse) representing the legacy nature of the loans. The five types of SME loans held are as follows: i) SME loans (warehouse) and SME loans (securitised) During the securitisation programmes previously run by the Group, SME loans were originated in leveraged warehouse vehicles and subsequently sold into securitisation SPVs. By 31 December 2023 the warehouse vehicles had been repaid and the securitisation vehicles unwound with the loans of the vehicles purchased and directly held by subsidiaries of the Group and remaining bond liabilities repaid. The SME loans (warehouse) and SME loans (securitised) are classified reflecting the legacy nature of the loans. These SME loans have been classified as financial assets at fair value through profit or loss because all such loans are acquired principally for selling in the short term and the collection of interest is incidental. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. ii) SME loans (other) The Group has originated PPP loans using the SBA\u2019s PPPLF facility and these are held on balance sheet. Additionally, the Group holds investments in certain SME business loans as a result of commercial arrangements with institutional investors and in certain circumstances the Group also buys back loans from investors. These loans are included in SME loans (other) (see note 11) and are classified as amortised cost (as they are held solely to collect principal and interest payments) and are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment. PPP loans are fully guaranteed by the SBA. SME loans (other) additionally includes loans temporarily funded by the Group in relation to the relaunch of commercial loans which are classified as financial assets at fair value through profit or loss and are held with the intention of selling on to investors. They are initially measured at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. iii) Lines of credit Lending through the FlexiPay product is recognised on the balance sheet within lines of credit. This represents the drawn amount of the facilities, net of ECL. The contractual cash flows represent solely payments of principal and interest (\u201cSPPI\u201d) and the business model under which they are held is in order to collect the contractual cash flows resulting in the lines of credit being measured initially at fair value and subsequently at amortised cost. The origination fee associated with FlexiPay is recognised under IFRS 9 within interest income at the effective interest rate in the consolidated statement of comprehensive income and is recognised over the expected life of the drawdown. The FlexiPay lines of credit are held net of expected credit loss allowances under IFRS 9, the methodology and definitions of which align to the Group accounting policy on impairment of financial assets held at amortised cost with the exception of being assessed at the available line of credit level, estimating the utilisation of the line of credit to the estimated point of default and are detailed further within note 14. Additionally, the Group assesses the expected credit loss allowance in relation to undrawn lines of credit, estimating the probability of default, loss given default and exposure at default in relation to these lines of credit were they to be drawn. This loss allowance is recognised within other liabilities in note 13. iv) Investment in trusts and co-investments The Group holds a minority beneficial ownership in trusts set up to fund CBILS, RLS and commercial loans with the majority of the beneficial ownership held by institutional investors. The SME loans are originated by Group subsidiaries, Funding Circle Focal Point Lending Limited for CBILS and Funding Circle Eclipse Lending Limited or Funding Circle Polaris Lending Limited for RLS and commercial loans, which retain legal title to the loans. These entities hold this legal title on trust on behalf of the majority investors who substantially retain the economic benefits the CBILS, RLS and commercial loans generate and therefore the trusts and the assets held within, including the SME loans, are not consolidated. The Group assesses whether it controls the trust structure under the criteria of IFRS 10. Control is determined to exist if the Group has the power to direct the activities of entities and structures and uses this control to obtain a variable return, to which it is exposed to the majority of the variability. As the Group\u2019s holding is small compared to the majority investor and pari passu, the Group is not exposed to the majority of the variability in the cash flows of the trust, and it is not considered to control the trust structures, so they are not consolidated by the Group. Investments in trusts are classified at fair value through profit and loss. They are initially recognised at fair value on the balance sheet with the subsequent measurement at fair value with all gains and losses being recognised in the consolidated statement of comprehensive income. The Group recognises transaction fee income on origination of loans within the trust and service fee income on the assets within the trust, eliminating its proportional ownership share of the service fees. A scheme lender fee is charged in relation to the origination of CBILS and RLS loans and investment income is recognised in relation to returns on the investment. Other financial assets Financial assets recognised in the balance sheet as trade and other receivables are classified as amortised cost. They are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. Net investments in sublease receivables are recognised as other receivables representing the net present value of the lease payment receivable. Interest is recognised within other costs in the statement of comprehensive income. Cash and cash equivalents are classified as amortised cost with the exception of money market funds that are classified as FVTPL. Cash and cash equivalents include cash in hand, deposits held at call with banks, money market funds and other short-term highly liquid investments with original maturities of three months or less. The carrying amount of these assets approximates to their fair value. Impairment of financial assets held at amortised cost The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach: 5 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 (\u201cECLs\u201d) (that is, expected losses arising from the risk of default in the next 12 months) are recognised and interest income is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 5 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 ECLs (that is, expected losses arising from the risk of default over the life of the financial instrument) are recognised, and interest income is still calculated on the gross carrying amount of the asset. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the financial assets exceed 30 days, in line with the rebuttable presumption per IFRS 9 at which point the assets are considered to be stage 2. 5 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 ECLs are also recognised, but interest income is calculated on the net carrying amount (that is, net of the ECL allowance). The Group defines a default, classified as stage 3, as an asset with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the asset is considered to be defaulted. An account that is deemed to be fraudulent (i.e third party application fraud) is written off at point of identification. 5 In some circumstances where assets are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit-impaired (\u201cPOCI\u201d), and impairment is therefore based on lifetime ECLs.
The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at
amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects:
5 an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
5 the time value of money; and
5 reasonable and supportable information that is available without undue cost or effort at the reporting date about
past events, current conditions and forecasts of future economic conditions.
If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to
an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the
extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent
reversal of an impairment loss is recognised in the statement of comprehensive income.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire
or the Group 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 Group derecognises a transferred financial asset if it transfers substantially all the risks and rewards of ownership.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-373": { "value": "The Group determines the classification of its financial assets at initial recognition. The requirements of IFRS 9 for classification and subsequent measurement are applied, which require financial assets to be classified based on the Group\u2019s business model for managing the asset and the contractual cash flow characteristics of the asset: 5 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; 5 financial assets are measured at fair value through other comprehensive income (\u201cFVTOCI\u201d) if they are held within the business model defined as \u201dheld to collect and sell\u201d, 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; and 5 financial assets that do not meet the criteria to be amortised cost or FVTOCI are measured at fair value through profit or loss (\u201cFVTPL\u201d). In addition, the Group may, at initial recognition, designate a financial asset as measured at FVTPL 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 purchase of any credit-impaired assets is also at fair value after any impairment. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-374": { "value": "Financial assets recognised in the balance sheet as trade and other receivables are classified as amortised cost. They are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. Net investments in sublease receivables are recognised as other receivables representing the net present value of the lease payment receivable. Interest is recognised within other costs in the statement of comprehensive income. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-375": { "value": "Cash and cash equivalents are classified as amortised cost with the exception of money market funds that are classified as FVTPL. Cash and cash equivalents include cash in hand, deposits held at call with banks, money market funds and other short-term highly liquid investments with original maturities of three months or less. The carrying amount of these assets approximates to their fair value. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-389": { "value": "Impairment of financial assets held at amortised cost The Group applies the impairment requirements of IFRS 9. The IFRS 9 impairment model requires a three-stage approach: 5 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 (\u201cECLs\u201d) (that is, expected losses arising from the risk of default in the next 12 months) are recognised and interest income is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 5 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 ECLs (that is, expected losses arising from the risk of default over the life of the financial instrument) are recognised, and interest income is still calculated on the gross carrying amount of the asset. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the financial assets exceed 30 days, in line with the rebuttable presumption per IFRS 9 at which point the assets are considered to be stage 2. 5 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 ECLs are also recognised, but interest income is calculated on the net carrying amount (that is, net of the ECL allowance). The Group defines a default, classified as stage 3, as an asset with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the asset is considered to be defaulted. An account that is deemed to be fraudulent (i.e third party application fraud) is written off at point of identification. 5 In some circumstances where assets are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit-impaired (\u201cPOCI\u201d), and impairment is therefore based on lifetime ECLs. The Group assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortised cost and recognises a loss allowance for such losses at each reporting date. The measurement of ECLs reflects: 5 an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; 5 the time value of money; and 5 reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-376": { "value": "Derecognition of financial assets Financial assets are derecognised only when the contractual rights to the cash flows from the financial assets expire or the Group 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 Group derecognises a transferred financial asset if it transfers substantially all the risks and rewards of ownership. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-346": { "value": "
Financial liabilities
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.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Bank borrowings
Bank borrowings (drawdowns under the credit facilities) are recognised initially at fair value, being their issue proceeds
net of transaction costs incurred. These instruments are subsequently measured at amortised cost using the effective
interest rate method.
Bonds
Bonds represent the bond liabilities which the Group must pay to the bond holders from the cash flows generated
from the SME loans (securitised) held on balance sheet. The liability excludes any amount of bonds that the Group has
retained as these are eliminated upon consolidation.
IFRS 9 permits a company to elect to fair value the bond liabilities where there is an accounting mismatch. In the
Group\u2019s case the associated assets generating the cash flows to pay the bonds are the SME loans (securitised) which
are measured at fair value through profit and loss.
As the cash flows from the SME loans were used to repay the rated bond tranches in advance of the unrated bonds, the Group
does not consider there to be a significant accounting mismatch as default levels impact the unrated bonds first. Therefore
the rated bonds are measured at amortised cost. However, as the unrated bonds are most affected by fair value movements
in the SME loans, the Group elected to measure the unrated tranches of bonds at fair value through profit and loss to eliminate
the accounting mismatch. Following the unwind of the UK SPV entity during the year ended 31 December 2022, there are no
externally held bond liabilities measured at FVTPL remaining on a consolidated Group basis.
See note 14 for details of the fair value methodology and interest rate risk.
Transaction costs associated with the issuance of bonds are deferred to the balance sheet and recognised over the
lifetime of the bonds using the effective interest rate method.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-377": { "value": "Bank borrowings Bank borrowings (drawdowns under the credit facilities) are recognised initially at fair value, being their issue proceeds net of transaction costs incurred. These instruments are subsequently measured at amortised cost using the effective interest rate method. Bonds Bonds represent the bond liabilities which the Group must pay to the bond holders from the cash flows generated from the SME loans (securitised) held on balance sheet. The liability excludes any amount of bonds that the Group has retained as these are eliminated upon consolidation. IFRS 9 permits a company to elect to fair value the bond liabilities where there is an accounting mismatch. In the Group\u2019s case the associated assets generating the cash flows to pay the bonds are the SME loans (securitised) which are measured at fair value through profit and loss. As the cash flows from the SME loans were used to repay the rated bond tranches in advance of the unrated bonds, the Group does not consider there to be a significant accounting mismatch as default levels impact the unrated bonds first. Therefore the rated bonds are measured at amortised cost. However, as the unrated bonds are most affected by fair value movements in the SME loans, the Group elected to measure the unrated tranches of bonds at fair value through profit and loss to eliminate the accounting mismatch. Following the unwind of the UK SPV entity during the year ended 31 December 2022, there are no externally held bond liabilities measured at FVTPL remaining on a consolidated Group basis. See note 14 for details of the fair value methodology and interest rate risk. Transaction costs associated with the issuance of bonds are deferred to the balance sheet and recognised over the lifetime of the bonds using the effective interest rate method. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-305": { "value": "
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event; it
is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount
of the obligation.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-306": { "value": "
Loan repurchases
Loan repurchase contracts issued by the Group are those contracts that require a payment to be made to reimburse
the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the
terms of a debt instrument. Loan repurchase contracts are recognised initially as a liability at fair value, adjusted for
transaction costs that are directly attributable to the issuance of the contract. The liability is subsequently measured
at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and
the amount recognised less cumulative amortisation. The expected credit loss model is used to measure and recognise
the financial liability.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRepurchaseAndReverseRepurchaseAgreementsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-307": { "value": "
Share capital
Ordinary shares are classified as equity where their terms include no contractual obligation to transfer cash or another
financial asset to another entity.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIssuedCapitalExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-308": { "value": "
Earnings/(loss) per share
The Group presents basic and diluted earnings/(losses) per share (\u201cEPS\u201d) for its ordinary shares. Basic and diluted
EPS are calculated by dividing the profit/(loss) attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year excluding shares held as own shares in the Group\u2019s Employee
Benefit Trusts.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume
conversion of all dilutive potential ordinary shares. The dilutive potential ordinary shares include those share options
granted to employees under the Group\u2019s share-based compensation schemes which do not have an exercise price or
where the exercise price is less than the average market price of the Company\u2019s ordinary shares during the year.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-309": { "value": "
Shares held by the Employee Benefit Trust and Share Incentive Plan Trust
The Company has established an offshore Employee Benefit Trust (\u201cEBT\u201d) and an onshore Share Incentive Plan
(\u201cSIP\u201d) Trust.
The EBT and SIP Trust provide for the issue of shares to Group employees principally under share option schemes
and SIP respectively. The Group has control of the EBT and SIP Trust and therefore consolidates the Trusts in the
Group financial statements. Since 2022, the Group has purchased its own shares in the market in order to satisfy the
exercise of employee share option schemes. Shares which are purchased are recognised at cost and are treated as a
deduction to shareholders\u2019 equity. No gain or loss is recognised in the income statement on the purchase or utilisation
of equity shares.
", "dimensions": { "concept": "fundingcircle:DescriptionOfAccountingPolicyForSharesHeldByEmployeeBenefitTrustAndShareIncentivePlanTrust", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-310": { "value": "
Reserves
Foreign exchange reserve
The foreign exchange reserve represents the cumulative foreign currency translation movement on the assets and
liabilities of the Group\u2019s international operations at year-end exchange rates and on the profit and loss items from
average exchange rates to year-end exchange rates.
Share options reserve
The share options reserve represents the cumulative charges to income under IFRS 2 Share-based Payments on all
share options and schemes granted, net of share option exercises. The costs are transferred to retained earnings when
options are exercised.
", "dimensions": { "concept": "fundingcircle:DescriptionOfAccountingPolicyForReserves", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-311": { "value": "
2. Critical accounting judgements and key sources of estimation uncertainty
The preparation of the consolidated financial statements requires the Group to make estimates and judgements
that affect the application of policies and reported amounts. Critical judgements represent key decisions made
by management in the application of the Group accounting policies. Where a significant risk of materially different
outcomes exists due to management assumptions or sources of estimation uncertainty, this will represent a key source
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. Although these estimates
are based on management\u2019s best knowledge of the amount, event or actions, actual results ultimately may differ from
those estimates.
The significant judgements and estimates applied by the Group in the financial statements have been applied on a
consistent basis with the financial statements for the year to 31 December 2022.
Critical judgements
Loans originated through the platform
The Group originates SME loans through its platform which have been funded primarily by banks, asset managers,
other institutional investors, funds, national entities, retail investors or by usage of its own capital. Judgement is
required to determine whether these loans should be recognised on the Group\u2019s balance sheet. Where the Group, its
subsidiaries or SPVs which it consolidates have legal and beneficial ownership to the title of those SME loans, they
are recognised on the Group\u2019s balance sheet. Where this is not the case, the loans are not recognised at the point
of origination.
Key sources of estimation uncertainty
The following are the key sources of estimation uncertainty that the Directors have identified in the process of
applying the Group\u2019s accounting policies and have the most significant effect on the amounts recognised in the
financial statements.
Expected credit loss impairment of FlexiPay lines of credit (note 14)
At 31 December 2023, the Group held \u00a355.4 million of drawn FlexiPay lines of credit and \u00a3157.3 million of undrawn lines
of credit, gross of expected credit loss impairment allowances.
While other financial assets of the Group are held at amortised cost, the FlexiPay lines of credit are the most sensitive
to estimation uncertainty due to the higher balance outstanding and more limited historical data.
An expected credit loss impairment allowance is held against the lines of credit of \u00a36.8 million (\u00a35.4 million related to
drawn lines of credit and \u00a31.4 million related to undrawn).
The Group estimates the expected credit loss allowance following IFRS 9 through modelling the exposure at default
based on observed trends related to the overall line of credit facility and the proportion drawn at the time of default.
The probability of default is estimated utilising observed trends and combining these with forward-looking information
including different macroeconomic scenarios which are probability weighted. The loss given default is driven by
assumptions regarding the level of recoveries collected after defaults occur.
The area most sensitive to estimation uncertainty is the probability of default related to stage 1 lines of credit which
is based on actual experience and the probability weighting of the forward-looking scenarios utilised. Currently a
baseline scenario, upside scenario and downside scenario are utilised which are probability weighted 70% baseline,
10% upside and 20% downside, which provide a blended stage 1 probability of default of 4.3%. If 100% probability
weighting was to be applied to the upside scenario the probability of default related to stage 1 lines of credit would
decrease by 100 bps to 3.3% and the expected credit loss impairment provision would decrease by \u00a30.7 million
(\u00a30.4 million on drawn lines of credit and \u00a30.3 million on undrawn lines of credit). If a 100% probability weighting was
to be applied to the downside scenario, the stage 1 probability of default would increase 150 bps to 5.8% and the
expected credit loss impairment would increase by \u00a31.0 million (\u00a30.5 million on drawn lines of credit and \u00a30.5 million
on undrawn lines of credit). It is considered that the above sensitivities represent the range of reasonably possible
outcomes in relation to the probability of default on stage 1 FlexiPay lines of credit.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-312": { "value": "
3. Segmental information
IFRS 8 Operating Segments requires the Group to determine its operating segments based on information which is
used internally for decision making. Based on the internal reporting information and management structures within
the Group, it has been determined that there are four operating segments, three of which are term loans businesses
arranged geographically and the fourth which is a line of credit business, FlexiPay, based in the United Kingdom.
Reporting on this basis is reviewed by the Global Leadership Team (\u201cGLT\u201d) which is the chief operating decision maker
(\u201cCODM\u201d). The GLT is made up of the Executive Directors and other senior management and is responsible for the
strategic decision making of the Group.
The four reportable segments are as shown in the following table. The other segment includes the Group\u2019s term loan
businesses in Germany and the Netherlands.
The GLT measures the performance of each segment by reference to a non-GAAP measure, adjusted EBITDA, which
is defined as profit/loss for the period before finance costs (being the discount unwind on lease liabilities), taxation,
depreciation, amortisation and impairments (\u201cAEBITDA\u201d), and additionally excludes share-based payment charges and
associated social security costs, foreign exchange and exceptional items. Together with profit/loss before tax, adjusted
EBITDA is a key measure of Group performance as it allows better comparability of the underlying performance of
the business. The segment reporting, including adjusted EBITDA, excludes the impact of the Group\u2019s transfer pricing
arrangements as this is not information presented to, or used by, the CODM in decision making or the allocation
of resources.
Net income
31 December 2023
31 December 2022 (re-presented, see note 1)
Loans
FlexiPay
Total
Loans
FlexiPay
Total
United United United United United United
Kingdom States Other Kingdom Kingdom States Other Kingdom
\u00a3m \u00a3m \u00a3m
\u00a3m
\u00a3m
\u00a3m \u00a3m \u00a3m
\u00a3m
\u00a3m
Transaction fees
65.2
23.4
\u2014
0.1
88.7
59.8
17.7
\u2014
\u2014
77.5
Servicing fees
38.8
3.4
0.2
\u2014
42.4
44.8
2.4
0.7
\u2014
47.9
Other fees
6.3
0.6
0.1
\u2014
7.0
2.4
1.0
0.7
\u2014
4.1
Interest income
7.5
1.3
0.1
7.8
16.7
2.0
0.5
0.2
1.5
4.2
(including FlexiPay)
Operating income
117.8
28.7
0.4
7.9
154.8
109.0
21.6
1.6
1.5
133.7
Net investment income
3.6
3.8
\u2014
\u2014
7.4
9.8
7.5
\u2014
\u2014
17.3
Total income
121.4
32.5
0.4
7.9
162.2
118.8
29.1
1.6
1.5
151.0
Fair value gains/(losses)
3.1
5.6
\u2014
\u2014
8.7
(2.4)
7.2
\u2014
\u2014
4.8
Cost of funds
\u2014
\u2014
\u2014
(2.7)
(2.7)
\u2014
\u2014
\u2014
\u2014
\u2014
Net income
124.5
38.1
0.4
5.2
168.2
116.4
36.3
1.6
1.5
155.8
Segment profit/(loss)
31 December 2023
31 December 2022 (re-presented, see note 1)
Loans
FlexiPay
Total
Loans
FlexiPay
Total
United United United United United United
Kingdom States Other Kingdom Kingdom States Other Kingdom
\u00a3m \u00a3m \u00a3m
\u00a3m
\u00a3m
\u00a3m \u00a3m \u00a3m
\u00a3m
\u00a3m
Adjusted EBITDA
21.3
(10.6)
(0.2)
(14.4)
(3.9)
13.8
(3.1)
2.8
(4.0)
9.5
Discount unwind on
lease liabilities
(0.2)
(0.4)
\u2014
\u2014
(0.6)
(0.2)
(0.7)
\u2014
\u2014
(0.9)
Depreciation,
amortisation and
impairment
(11.3)
(10.3)
\u2014
(1.3)
(22.9)
(11.7)
(5.2)
(0.1)
\u2014
(17.0)
Share-based payments
and social security costs
(3.3)
(1.8)
\u2014
(0.5)
(5.6)
(3.9)
(0.8)
\u2014
\u2014
(4.7)
Foreign exchange
\u2014
(0.2)
\u2014
\u2014
(0.2)
0.2
\u2014
\u2014
\u2014
0.2
(losses)/gains
Profit/(loss) before tax
6.5
(23.3)
(0.2)
(16.2)
(33.2)
(1.8)
(9.8)
2.7
(4.0)
(12.9)
", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-314": { "value": "
4. Operating expenses
31 December
31 December 2022
2023 (re-presented,
see note 1)
\u00a3m \u00a3m
Depreciation
4.3
5.1
Amortisation
12.4
10.1
Rental income and other recharges
(0.2)
(1.0)
Operating lease rentals:
\u2013 Land and buildings
0.4
0.3
Employment costs (including contractors)
94.4
85.9
Marketing costs
(excluding employment costs)
48.4
38.4
Data and technology
9.3
9.7
Expected credit loss impairment charge/(credit)
4.4
(1.5)
Impairment of intangible and
tangible assets and investment in sublease (see notes 8, 9 and 14)
6.2
1.8
Other expenses
21.8
19.9
Total operating expenses
201.4
168.7
Auditors\u2019 remuneration
31 December 31 December
2023 2022
\u00a3m \u00a3m
Audit fees
\u2013 Fees payable to the Company\u2019s auditors for the audit of the Parent Company and consolidated
financial statements
0.5
0.5
\u2013 Fees payable to the Company\u2019s auditors and its associates for the statutory audit of the
financial statements of subsidiaries of the Company
0.5
0.3
Total audit fees
1.0
0.8
Non-audit service fees
\u2013 Audit-related assurance services
0.3
0.3
\u2013 Other non-assurance services
0.1
0.1
Total non-audit service fees
0.4
0.4
", "dimensions": { "concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-347": { "value": "
31 December
31 December 2022
2023 (re-presented,
see note 1)
\u00a3m \u00a3m
Depreciation
4.3
5.1
Amortisation
12.4
10.1
Rental income and other recharges
(0.2)
(1.0)
Operating lease rentals:
\u2013 Land and buildings
0.4
0.3
Employment costs (including contractors)
94.4
85.9
Marketing costs
(excluding employment costs)
48.4
38.4
Data and technology
9.3
9.7
Expected credit loss impairment charge/(credit)
4.4
(1.5)
Impairment of intangible and
tangible assets and investment in sublease (see notes 8, 9 and 14)
6.2
1.8
Other expenses
21.8
19.9
Total operating expenses
201.4
168.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-378": { "value": "
31 December
31 December 2022
2023 (re-presented,
see note 1)
\u00a3m \u00a3m
Depreciation
4.3
5.1
Amortisation
12.4
10.1
Rental income and other recharges
(0.2)
(1.0)
Operating lease rentals:
\u2013 Land and buildings
0.4
0.3
Employment costs (including contractors)
94.4
85.9
Marketing costs
(excluding employment costs)
48.4
38.4
Data and technology
9.3
9.7
Expected credit loss impairment charge/(credit)
4.4
(1.5)
Impairment of intangible and
tangible assets and investment in sublease (see notes 8, 9 and 14)
6.2
1.8
Other expenses
21.8
19.9
Total operating expenses
201.4
168.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-390": { "value": "
31 December
31 December 2022
2023 (re-presented,
see note 1)
\u00a3m \u00a3m
Depreciation
4.3
5.1
Amortisation
12.4
10.1
Rental income and other recharges
(0.2)
(1.0)
Operating lease rentals:
\u2013 Land and buildings
0.4
0.3
Employment costs (including contractors)
94.4
85.9
Marketing costs
(excluding employment costs)
48.4
38.4
Data and technology
9.3
9.7
Expected credit loss impairment charge/(credit)
4.4
(1.5)
Impairment of intangible and
tangible assets and investment in sublease (see notes 8, 9 and 14)
6.2
1.8
Other expenses
21.8
19.9
Total operating expenses
201.4
168.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-395": { "value": "
31 December
31 December 2022
2023 (re-presented,
see note 1)
\u00a3m \u00a3m
Depreciation
4.3
5.1
Amortisation
12.4
10.1
Rental income and other recharges
(0.2)
(1.0)
Operating lease rentals:
\u2013 Land and buildings
0.4
0.3
Employment costs (including contractors)
94.4
85.9
Marketing costs
(excluding employment costs)
48.4
38.4
Data and technology
9.3
9.7
Expected credit loss impairment charge/(credit)
4.4
(1.5)
Impairment of intangible and
tangible assets and investment in sublease (see notes 8, 9 and 14)
6.2
1.8
Other expenses
21.8
19.9
Total operating expenses
201.4
168.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-399": { "value": "Amortisation 12.4 10.1 Rental income and other recharges (0.2) (1.0) Operating lease rentals: \u2013 Land and buildings 0.4 0.3 Employment costs (including contractors) 94.4 85.9 Marketing costs (excluding employment costs) 48.4 38.4 Data and technology 9.3 9.7 Expected credit loss impairment charge/(credit) 4.4 (1.5) Impairment of intangible and tangible assets and investment in sublease (see notes 8, 9 and 14) 6.2 1.8 Other expenses 21.8 19.9 Total operating expenses 201.4 168.7 Auditors\u2019 remuneration
31 December 31 December
2023 2022
\u00a3m \u00a3m
Audit fees
\u2013 Fees payable to the Company\u2019s auditors for the audit of the Parent Company and consolidated
financial statements
0.5
0.5
\u2013 Fees payable to the Company\u2019s auditors and its associates for the statutory audit of the
financial statements of subsidiaries of the Company
0.5
0.3
Total audit fees
1.0
0.8
Non-audit service fees
\u2013 Audit-related assurance services
0.3
0.3
\u2013 Other non-assurance services
0.1
0.1
Total non-audit service fees
0.4
0.4
", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-348": { "value": "Auditors\u2019 remuneration
31 December 31 December
2023 2022
\u00a3m \u00a3m
Audit fees
\u2013 Fees payable to the Company\u2019s auditors for the audit of the Parent Company and consolidated
financial statements
0.5
0.5
\u2013 Fees payable to the Company\u2019s auditors and its associates for the statutory audit of the
financial statements of subsidiaries of the Company
0.5
0.3
Total audit fees
1.0
0.8
Non-audit service fees
\u2013 Audit-related assurance services
0.3
0.3
\u2013 Other non-assurance services
0.1
0.1
Total non-audit service fees
0.4
0.4
", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-313": { "value": "
5. Employees
The average monthly number of employees (including Directors) during the year was:
2023 2022
Number Number
UK
666
686
FlexiPay
81
20
US
203
177
Other
9
10
959
893
In addition to the employees above, the average monthly number of contractors during the year was 115 (2022: 142).
Employment costs (including Directors\u2019 emoluments) during the year were:
31 December 31 December
2023 2022
\u00a3m \u00a3m
Wages and salaries
80.9
72.2
Social security costs
7.8
7.6
Pension costs
2.2
1.9
Share-based payments
5.6
4.7
96.5
86.4
Contractor costs
9.2
12.0
Less: capitalised development costs
(11.3)
(12.5)
Employment costs net of capitalised development costs
94.4
85.9
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-315": { "value": "
6. Income tax charge/(credit)
The Group is subject to all taxes applicable to a commercial company in its countries of operation. The UK (losses)/
profits of the Company are subject to UK income tax at the standard corporation tax rate of 25% (23.5% is applied to
the table below for 2023 as a blended rate for the year, as the increase in the statutory corporation tax rate to 25% was
effective from 1 April 2023) (2022: 19%).
31 December 31 December
2023 2022
\u00a3m \u00a3m
Current tax
UK
Current tax on (losses)/profits for the year
0.3
0.3
Adjustment in respect of prior years
(2.0)
(0.3)
(1.7)
\u2014
US and Other
Current tax on (losses)/profits for the year
0.3
0.4
Adjustment in respect of prior years
(0.1)
0.5
0.2
0.9
Total current tax (credit)/charge
(1.5)
0.9
Deferred tax
UK
Deferred tax on (losses)/profits for the year
\u2014
\u2014
Adjustment in respect of prior years
\u2014
\u2014
\u2014
\u2014
US and Other
Deferred tax on (losses)/profits for the year
6.6
(6.9)
Adjustments in respect of prior years
\u2014
\u2014
6.6
(6.9)
Total deferred tax charge/(credit)
6.6
(6.9)
Total tax charge/(credit)
5.1
(6.0)
The above current tax charge represents the expected tax on the Research and Development Expenditure Credit
(\u201cRDEC\u201d) receivable for 2023 and US state taxes. In the prior year, the tax charge represents the tax liability on the
Group\u2019s taxable profit, including state taxes, and the amount of tax deducted from the RDEC receivable for 2022.
The adjustment in respect of prior years in the UK relates to an expected tax refund from HMRC of \u00a32.0 million
following the resubmission of a tax return for 2021. The deferred tax movement represents the write off of the deferred
tax asset in respect of uncertainty related to the use of US losses.
The Group charge/(credit) for the year can be reconciled to the loss before tax shown per the consolidated statement
of comprehensive income as follows.
Factors affecting the tax charge/(credit) for the year
31 December 31 December
2023 2022
\u00a3m \u00a3m
Loss before taxation
(33.2)
(12.9)
Taxation on loss at 23.5% (2022: 19%)
(7.8)
(2.4)
Effects of:
Research and development
0.3
0.3
Effect of foreign tax rates
0.3
0.3
Non-taxable/non-deductible expenses
0.7
1.0
Unrecognised timing differences
1.7
5.3
Unrecognised tax losses accumulated/(utilised)
5.6
(4.0)
Adjustment in respect of prior years
(2.1)
0.2
Deferred tax assets derecognised/(recognised)
6.6
(6.9)
Impairment charge
(0.2)
0.2
Total tax charge/(credit)
5.1
(6.0)
The Group is taxed at different rates depending on the country in which the profits arise. The key applicable tax rates
include the UK 23.5%, the US 21%, Germany 30% and the Netherlands 25%. The effective tax rate for the year was
-15.4% (2022: 46.5%).
The statutory UK corporation tax rate is currently 25% (effective 1 April 2023). There is a blended rate in the UK of
23.5% for 2023.
The Group has derecognised the deferred tax asset relating to the use of the historic tax losses in the US (2022: asset
recognised of \u00a36.9 million in respect of \u00a332.9 million of the US federal losses).
The Group utilised tax losses in the US for the first time in 2021. The Group\u2019s existing transfer pricing arrangements
between the UK and US currently entitle the US to earn an agreed profit margin. Following the granting of a provisional
SBA license in the US, the nature of the transfer pricing arrangements between the UK and US are expected to change.
This, together with anticipated near-term trading losses in the US means that there are not expected to be taxable
profits to utilise brought forward trading losses in the near term. Accordingly the deferred tax asset associated with
brought forward US trading losses has been derecognised.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment
(1.5)
(2.8)
Carry forward losses (UK)
1.5
2.8
Carry forward losses (US)
\u2014
6.9
Recognised deferred tax
\u2014
6.9
Unrecognised deferred tax
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment
22.8
17.4
Carry forward losses
183.4
133.3
Deferred stock options
20.5
18.5
US R&D credit
2.2
2.3
US fair value adjustments
40.7
47.1
Other
0.4
0.3
Unrecognised deferred tax
270.0
218.9
1
1. Balances presented in table above are gross timing differences and are not tax effected.
Based on the temporary differences, there are total unrecognised deferred tax assets of \u00a362.2 million (2022:
\u00a350.1 million).
The Group has unrelieved tax losses of \u00a3183.4 million (2022: \u00a3177.0 million) that are available for offset against future
taxable profits. Of these, there are \u00a3183.4 million (2022: \u00a3133.3 million) of unrecognised tax losses for deferred tax
purposes. The difference between these two loss balances was recognised as a deferred tax asset. There are \u00a368.0
million of losses carried forward in the US of which \u00a34.1 million will expire in 2035, \u00a322.6 million will expire in 2036 and
the remaining balance of \u00a341.3 million have no expiry period.
There are \u00a396.1 million of German losses (of which \u00a348.3 million relate to federal losses and \u00a347.8 million relate to trade
tax losses) that can no longer be used as the tax residence of the German-incorporated entities has changed to the
UK. There are \u00a3115.4 million losses which relate to the UK.
Factors affecting the tax charge in future years
Factors that may affect the Group\u2019s future tax charge include the geographic location of the Group\u2019s earnings
(including changes in transfer pricing arrangements), the tax rates in those locations, changes in tax legislation and the
use of brought-forward tax losses. The calculation of the Group\u2019s total tax charge involves a degree of estimation and
judgement with respect to the recognition of any deferred tax asset.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-349": { "value": "6. Income tax charge/(credit) The Group is subject to all taxes applicable to a commercial company in its countries of operation. The UK (losses)/ profits of the Company are subject to UK income tax at the standard corporation tax rate of 25% (23.5% is applied to the table below for 2023 as a blended rate for the year, as the increase in the statutory corporation tax rate to 25% was effective from 1 April 2023) (2022: 19%).
31 December 31 December
2023 2022
\u00a3m \u00a3m
Current tax
UK
Current tax on (losses)/profits for the year
0.3
0.3
Adjustment in respect of prior years
(2.0)
(0.3)
(1.7)
\u2014
US and Other
Current tax on (losses)/profits for the year
0.3
0.4
Adjustment in respect of prior years
(0.1)
0.5
0.2
0.9
Total current tax (credit)/charge
(1.5)
0.9
Deferred tax
UK
Deferred tax on (losses)/profits for the year
\u2014
\u2014
Adjustment in respect of prior years
\u2014
\u2014
\u2014
\u2014
US and Other
Deferred tax on (losses)/profits for the year
6.6
(6.9)
Adjustments in respect of prior years
\u2014
\u2014
6.6
(6.9)
Total deferred tax charge/(credit)
6.6
(6.9)
Total tax charge/(credit)
5.1
(6.0)
The above current tax charge represents the expected tax on the Research and Development Expenditure Credit (\u201cRDEC\u201d) receivable for 2023 and US state taxes. In the prior year, the tax charge represents the tax liability on the Group\u2019s taxable profit, including state taxes, and the amount of tax deducted from the RDEC receivable for 2022. The adjustment in respect of prior years in the UK relates to an expected tax refund from HMRC of \u00a32.0 million following the resubmission of a tax return for 2021. The deferred tax movement represents the write off of the deferred tax asset in respect of uncertainty related to the use of US losses. The Group charge/(credit) for the year can be reconciled to the loss before tax shown per the consolidated statement of comprehensive income as follows. Factors affecting the tax charge/(credit) for the year
31 December 31 December
2023 2022
\u00a3m \u00a3m
Loss before taxation
(33.2)
(12.9)
Taxation on loss at 23.5% (2022: 19%)
(7.8)
(2.4)
Effects of:
Research and development
0.3
0.3
Effect of foreign tax rates
0.3
0.3
Non-taxable/non-deductible expenses
0.7
1.0
Unrecognised timing differences
1.7
5.3
Unrecognised tax losses accumulated/(utilised)
5.6
(4.0)
Adjustment in respect of prior years
(2.1)
0.2
Deferred tax assets derecognised/(recognised)
6.6
(6.9)
Impairment charge
(0.2)
0.2
Total tax charge/(credit)
5.1
(6.0)
The Group is taxed at different rates depending on the country in which the profits arise. The key applicable tax rates include the UK 23.5%, the US 21%, Germany 30% and the Netherlands 25%. The effective tax rate for the year was -15.4% (2022: 46.5%). The statutory UK corporation tax rate is currently 25% (effective 1 April 2023). There is a blended rate in the UK of 23.5% for 2023. The Group has derecognised the deferred tax asset relating to the use of the historic tax losses in the US (2022: asset recognised of \u00a36.9 million in respect of \u00a332.9 million of the US federal losses). The Group utilised tax losses in the US for the first time in 2021. The Group\u2019s existing transfer pricing arrangements between the UK and US currently entitle the US to earn an agreed profit margin. Following the granting of a provisional SBA license in the US, the nature of the transfer pricing arrangements between the UK and US are expected to change. This, together with anticipated near-term trading losses in the US means that there are not expected to be taxable profits to utilise brought forward trading losses in the near term. Accordingly the deferred tax asset associated with brought forward US trading losses has been derecognised.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment
(1.5)
(2.8)
Carry forward losses (UK)
1.5
2.8
Carry forward losses (US)
\u2014
6.9
Recognised deferred tax
\u2014
6.9
Unrecognised deferred tax
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment
22.8
17.4
Carry forward losses
183.4
133.3
Deferred stock options
20.5
18.5
US R&D credit
2.2
2.3
US fair value adjustments
40.7
47.1
Other
0.4
0.3
Unrecognised deferred tax
270.0
218.9
1 1. Balances presented in table above are gross timing differences and are not tax effected. Based on the temporary differences, there are total unrecognised deferred tax assets of \u00a362.2 million (2022: \u00a350.1 million). The Group has unrelieved tax losses of \u00a3183.4 million (2022: \u00a3177.0 million) that are available for offset against future taxable profits. Of these, there are \u00a3183.4 million (2022: \u00a3133.3 million) of unrecognised tax losses for deferred tax purposes. The difference between these two loss balances was recognised as a deferred tax asset. There are \u00a368.0 million of losses carried forward in the US of which \u00a34.1 million will expire in 2035, \u00a322.6 million will expire in 2036 and the remaining balance of \u00a341.3 million have no expiry period. There are \u00a396.1 million of German losses (of which \u00a348.3 million relate to federal losses and \u00a347.8 million relate to trade tax losses) that can no longer be used as the tax residence of the German-incorporated entities has changed to the UK. There are \u00a3115.4 million losses which relate to the UK. Factors affecting the tax charge in future years Factors that may affect the Group\u2019s future tax charge include the geographic location of the Group\u2019s earnings (including changes in transfer pricing arrangements), the tax rates in those locations, changes in tax legislation and the use of brought-forward tax losses. The calculation of the Group\u2019s total tax charge involves a degree of estimation and judgement with respect to the recognition of any deferred tax asset. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-396": { "value": "6. Income tax charge/(credit) The Group is subject to all taxes applicable to a commercial company in its countries of operation. The UK (losses)/ profits of the Company are subject to UK income tax at the standard corporation tax rate of 25% (23.5% is applied to the table below for 2023 as a blended rate for the year, as the increase in the statutory corporation tax rate to 25% was effective from 1 April 2023) (2022: 19%).
31 December 31 December
2023 2022
\u00a3m \u00a3m
Current tax
UK
Current tax on (losses)/profits for the year
0.3
0.3
Adjustment in respect of prior years
(2.0)
(0.3)
(1.7)
\u2014
US and Other
Current tax on (losses)/profits for the year
0.3
0.4
Adjustment in respect of prior years
(0.1)
0.5
0.2
0.9
Total current tax (credit)/charge
(1.5)
0.9
Deferred tax
UK
Deferred tax on (losses)/profits for the year
\u2014
\u2014
Adjustment in respect of prior years
\u2014
\u2014
\u2014
\u2014
US and Other
Deferred tax on (losses)/profits for the year
6.6
(6.9)
Adjustments in respect of prior years
\u2014
\u2014
6.6
(6.9)
Total deferred tax charge/(credit)
6.6
(6.9)
Total tax charge/(credit)
5.1
(6.0)
The above current tax charge represents the expected tax on the Research and Development Expenditure Credit (\u201cRDEC\u201d) receivable for 2023 and US state taxes. In the prior year, the tax charge represents the tax liability on the Group\u2019s taxable profit, including state taxes, and the amount of tax deducted from the RDEC receivable for 2022. The adjustment in respect of prior years in the UK relates to an expected tax refund from HMRC of \u00a32.0 million following the resubmission of a tax return for 2021. The deferred tax movement represents the write off of the deferred tax asset in respect of uncertainty related to the use of US losses. The Group charge/(credit) for the year can be reconciled to the loss before tax shown per the consolidated statement of comprehensive income as follows. Factors affecting the tax charge/(credit) for the year
31 December 31 December
2023 2022
\u00a3m \u00a3m
Loss before taxation
(33.2)
(12.9)
Taxation on loss at 23.5% (2022: 19%)
(7.8)
(2.4)
Effects of:
Research and development
0.3
0.3
Effect of foreign tax rates
0.3
0.3
Non-taxable/non-deductible expenses
0.7
1.0
Unrecognised timing differences
1.7
5.3
Unrecognised tax losses accumulated/(utilised)
5.6
(4.0)
Adjustment in respect of prior years
(2.1)
0.2
Deferred tax assets derecognised/(recognised)
6.6
(6.9)
Impairment charge
(0.2)
0.2
Total tax charge/(credit)
5.1
(6.0)
The Group is taxed at different rates depending on the country in which the profits arise. The key applicable tax rates include the UK 23.5%, the US 21%, Germany 30% and the Netherlands 25%. The effective tax rate for the year was -15.4% (2022: 46.5%). The statutory UK corporation tax rate is currently 25% (effective 1 April 2023). There is a blended rate in the UK of 23.5% for 2023. The Group has derecognised the deferred tax asset relating to the use of the historic tax losses in the US (2022: asset recognised of \u00a36.9 million in respect of \u00a332.9 million of the US federal losses). The Group utilised tax losses in the US for the first time in 2021. The Group\u2019s existing transfer pricing arrangements between the UK and US currently entitle the US to earn an agreed profit margin. Following the granting of a provisional SBA license in the US, the nature of the transfer pricing arrangements between the UK and US are expected to change. This, together with anticipated near-term trading losses in the US means that there are not expected to be taxable profits to utilise brought forward trading losses in the near term. Accordingly the deferred tax asset associated with brought forward US trading losses has been derecognised.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment
(1.5)
(2.8)
Carry forward losses (UK)
1.5
2.8
Carry forward losses (US)
\u2014
6.9
Recognised deferred tax
\u2014
6.9
Unrecognised deferred tax
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment
22.8
17.4
Carry forward losses
183.4
133.3
Deferred stock options
20.5
18.5
US R&D credit
2.2
2.3
US fair value adjustments
40.7
47.1
Other
0.4
0.3
Unrecognised deferred tax
270.0
218.9
1 1. Balances presented in table above are gross timing differences and are not tax effected. Based on the temporary differences, there are total unrecognised deferred tax assets of \u00a362.2 million (2022: \u00a350.1 million). The Group has unrelieved tax losses of \u00a3183.4 million (2022: \u00a3177.0 million) that are available for offset against future taxable profits. Of these, there are \u00a3183.4 million (2022: \u00a3133.3 million) of unrecognised tax losses for deferred tax purposes. The difference between these two loss balances was recognised as a deferred tax asset. There are \u00a368.0 million of losses carried forward in the US of which \u00a34.1 million will expire in 2035, \u00a322.6 million will expire in 2036 and the remaining balance of \u00a341.3 million have no expiry period. There are \u00a396.1 million of German losses (of which \u00a348.3 million relate to federal losses and \u00a347.8 million relate to trade tax losses) that can no longer be used as the tax residence of the German-incorporated entities has changed to the UK. There are \u00a3115.4 million losses which relate to the UK. Factors affecting the tax charge in future years Factors that may affect the Group\u2019s future tax charge include the geographic location of the Group\u2019s earnings (including changes in transfer pricing arrangements), the tax rates in those locations, changes in tax legislation and the use of brought-forward tax losses. The calculation of the Group\u2019s total tax charge involves a degree of estimation and judgement with respect to the recognition of any deferred tax asset. 12. Trade and other payables
31 December 31 December
2023 2022
\u00a3m \u00a3m
Trade payables
2.4
2.5
Other taxes and social security costs
4.2
5.0
Other creditors1
32.6
9.7
Accruals and deferred income
15.1
14.6
54.3
31.8
1. Other creditors includes \u00a330.7 million (2022: \u00a37.5 million) due to the British Business Bank (BBB) primarily related to scheme lender fees collected from investors associated with government-guaranteed products. The Directors consider that the carrying amount of trade and other payables approximates to their fair value. 13. Provisions and other liabilities
Dilapidation Loan repurchase Restructuring Other\u200aTotal
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
0.6
2.2
0.2
1.1
4.1
Exchange differences
\u2014
0.1
\u2014
0.1
0.2
Additional provision/liability
0.5
\u2014
\u2014
0.5
1.0
Amount utilised
\u2014
(0.9)
(0.2)
(0.2)
(1.3)
Amount reversed
\u2014
(0.9)
\u2014
(1.0)
(1.9)
At 31 December 2022
1.1
0.5
\u2014
0.5
2.1
Exchange differences
\u2014
\u2014
\u2014
\u2014
\u2014
Additional provision/liability
\u2014
0.2
\u2014
1.2
1.4
Amount utilised
\u2014
(0.4)
\u2014
(0.3)
(0.7)
Amount reversed
\u2014
(0.2)
\u2014
\u2014
(0.2)
At 31 December 2023
1.1
0.1
\u2014
1.4
2.6
\u200a1 1 1. Other provisions includes provisions for operational buybacks in the comparative period. \u00a31.4 million (2022: \u00a30.3 million) of expected credit loss impairment allowance related to undrawn FlexiPay lines of credit is included within other. See notes 14 and 25.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Current provisions and other liabilities
1.5
1.0
Non-current provisions and other liabilities
1.1
1.1
2.6
2.1
The dilapidation provision represents an estimated cost for dismantling the customisation of offices and restoring the leasehold premises to its original state at the end of the tenancy period. The provision is expected to be utilised by 2025 ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-391": { "value": "6. Income tax charge/(credit) The Group is subject to all taxes applicable to a commercial company in its countries of operation. The UK (losses)/ profits of the Company are subject to UK income tax at the standard corporation tax rate of 25% (23.5% is applied to the table below for 2023 as a blended rate for the year, as the increase in the statutory corporation tax rate to 25% was effective from 1 April 2023) (2022: 19%).
31 December 31 December
2023 2022
\u00a3m \u00a3m
Current tax
UK
Current tax on (losses)/profits for the year
0.3
0.3
Adjustment in respect of prior years
(2.0)
(0.3)
(1.7)
\u2014
US and Other
Current tax on (losses)/profits for the year
0.3
0.4
Adjustment in respect of prior years
(0.1)
0.5
0.2
0.9
Total current tax (credit)/charge
(1.5)
0.9
Deferred tax
UK
Deferred tax on (losses)/profits for the year
\u2014
\u2014
Adjustment in respect of prior years
\u2014
\u2014
\u2014
\u2014
US and Other
Deferred tax on (losses)/profits for the year
6.6
(6.9)
Adjustments in respect of prior years
\u2014
\u2014
6.6
(6.9)
Total deferred tax charge/(credit)
6.6
(6.9)
Total tax charge/(credit)
5.1
(6.0)
The above current tax charge represents the expected tax on the Research and Development Expenditure Credit (\u201cRDEC\u201d) receivable for 2023 and US state taxes. In the prior year, the tax charge represents the tax liability on the Group\u2019s taxable profit, including state taxes, and the amount of tax deducted from the RDEC receivable for 2022. The adjustment in respect of prior years in the UK relates to an expected tax refund from HMRC of \u00a32.0 million following the resubmission of a tax return for 2021. The deferred tax movement represents the write off of the deferred tax asset in respect of uncertainty related to the use of US losses. The Group charge/(credit) for the year can be reconciled to the loss before tax shown per the consolidated statement of comprehensive income as follows. Factors affecting the tax charge/(credit) for the year
31 December 31 December
2023 2022
\u00a3m \u00a3m
Loss before taxation
(33.2)
(12.9)
Taxation on loss at 23.5% (2022: 19%)
(7.8)
(2.4)
Effects of:
Research and development
0.3
0.3
Effect of foreign tax rates
0.3
0.3
Non-taxable/non-deductible expenses
0.7
1.0
Unrecognised timing differences
1.7
5.3
Unrecognised tax losses accumulated/(utilised)
5.6
(4.0)
Adjustment in respect of prior years
(2.1)
0.2
Deferred tax assets derecognised/(recognised)
6.6
(6.9)
Impairment charge
(0.2)
0.2
Total tax charge/(credit)
5.1
(6.0)
The Group is taxed at different rates depending on the country in which the profits arise. The key applicable tax rates include the UK 23.5%, the US 21%, Germany 30% and the Netherlands 25%. The effective tax rate for the year was -15.4% (2022: 46.5%). The statutory UK corporation tax rate is currently 25% (effective 1 April 2023). There is a blended rate in the UK of 23.5% for 2023. The Group has derecognised the deferred tax asset relating to the use of the historic tax losses in the US (2022: asset recognised of \u00a36.9 million in respect of \u00a332.9 million of the US federal losses). The Group utilised tax losses in the US for the first time in 2021. The Group\u2019s existing transfer pricing arrangements between the UK and US currently entitle the US to earn an agreed profit margin. Following the granting of a provisional SBA license in the US, the nature of the transfer pricing arrangements between the UK and US are expected to change. This, together with anticipated near-term trading losses in the US means that there are not expected to be taxable profits to utilise brought forward trading losses in the near term. Accordingly the deferred tax asset associated with brought forward US trading losses has been derecognised.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment
(1.5)
(2.8)
Carry forward losses (UK)
1.5
2.8
Carry forward losses (US)
\u2014
6.9
Recognised deferred tax
\u2014
6.9
Unrecognised deferred tax
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment
22.8
17.4
Carry forward losses
183.4
133.3
Deferred stock options
20.5
18.5
US R&D credit
2.2
2.3
US fair value adjustments
40.7
47.1
Other
0.4
0.3
Unrecognised deferred tax
270.0
218.9
1 1. Balances presented in table above are gross timing differences and are not tax effected. Based on the temporary differences, there are total unrecognised deferred tax assets of \u00a362.2 million (2022: \u00a350.1 million). The Group has unrelieved tax losses of \u00a3183.4 million (2022: \u00a3177.0 million) that are available for offset against future taxable profits. Of these, there are \u00a3183.4 million (2022: \u00a3133.3 million) of unrecognised tax losses for deferred tax purposes. The difference between these two loss balances was recognised as a deferred tax asset. There are \u00a368.0 million of losses carried forward in the US of which \u00a34.1 million will expire in 2035, \u00a322.6 million will expire in 2036 and the remaining balance of \u00a341.3 million have no expiry period. There are \u00a396.1 million of German losses (of which \u00a348.3 million relate to federal losses and \u00a347.8 million relate to trade tax losses) that can no longer be used as the tax residence of the German-incorporated entities has changed to the UK. There are \u00a3115.4 million losses which relate to the UK. Factors affecting the tax charge in future years Factors that may affect the Group\u2019s future tax charge include the geographic location of the Group\u2019s earnings (including changes in transfer pricing arrangements), the tax rates in those locations, changes in tax legislation and the use of brought-forward tax losses. The calculation of the Group\u2019s total tax charge involves a degree of estimation and judgement with respect to the recognition of any deferred tax asset. 10. SME loans and lines of credit
31 December 31 December
2023 2022
\u00a3m \u00a3m
Non-current
SME loans (other) \u2013 amortised cost
6.7
24.8
Investment in trusts and co-investments \u2013 FVTPL
25.2
28.7
Total non-current
31.9
53.5
Current
Lines of credit \u2013 amortised cost
50.0
16.0
SME loans (other) \u2013 FVTPL
0.9
20.9
SME loans (warehouse) \u2013 FVTPL
1.3
2.4
SME loans (securitised) \u2013 FVTPL
16.4
45.8
Total current
68.6
85.1
Total
100.5
138.6
11. Trade and other receivables
31 December 31 December
2023 2022
\u00a3m \u00a3m
Other receivables
1.4
3.4
Non-current trade and other receivables
1.4
3.4
Trade receivables
0.4
0.4
Other receivables
7.3
5.3
Prepayments
5.2
3.7
Accrued income
5.3
4.8
Rent and other deposits
2.2
2.3
Current trade and other receivables
20.4
16.5
21.8
19.9
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables described earlier. No trade receivables were overdue or impaired. Included in rent and other deposits are \u00a31.6 million of rental deposits (2022: \u00a31.3 million) in respect of the Group\u2019s property leases which expire over the next five years. The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherAssetsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-379": { "value": "6. Income tax charge/(credit) The Group is subject to all taxes applicable to a commercial company in its countries of operation. The UK (losses)/ profits of the Company are subject to UK income tax at the standard corporation tax rate of 25% (23.5% is applied to the table below for 2023 as a blended rate for the year, as the increase in the statutory corporation tax rate to 25% was effective from 1 April 2023) (2022: 19%).
31 December 31 December
2023 2022
\u00a3m \u00a3m
Current tax
UK
Current tax on (losses)/profits for the year
0.3
0.3
Adjustment in respect of prior years
(2.0)
(0.3)
(1.7)
\u2014
US and Other
Current tax on (losses)/profits for the year
0.3
0.4
Adjustment in respect of prior years
(0.1)
0.5
0.2
0.9
Total current tax (credit)/charge
(1.5)
0.9
Deferred tax
UK
Deferred tax on (losses)/profits for the year
\u2014
\u2014
Adjustment in respect of prior years
\u2014
\u2014
\u2014
\u2014
US and Other
Deferred tax on (losses)/profits for the year
6.6
(6.9)
Adjustments in respect of prior years
\u2014
\u2014
6.6
(6.9)
Total deferred tax charge/(credit)
6.6
(6.9)
Total tax charge/(credit)
5.1
(6.0)
The above current tax charge represents the expected tax on the Research and Development Expenditure Credit (\u201cRDEC\u201d) receivable for 2023 and US state taxes. In the prior year, the tax charge represents the tax liability on the Group\u2019s taxable profit, including state taxes, and the amount of tax deducted from the RDEC receivable for 2022. The adjustment in respect of prior years in the UK relates to an expected tax refund from HMRC of \u00a32.0 million following the resubmission of a tax return for 2021. The deferred tax movement represents the write off of the deferred tax asset in respect of uncertainty related to the use of US losses. The Group charge/(credit) for the year can be reconciled to the loss before tax shown per the consolidated statement of comprehensive income as follows. Factors affecting the tax charge/(credit) for the year
31 December 31 December
2023 2022
\u00a3m \u00a3m
Loss before taxation
(33.2)
(12.9)
Taxation on loss at 23.5% (2022: 19%)
(7.8)
(2.4)
Effects of:
Research and development
0.3
0.3
Effect of foreign tax rates
0.3
0.3
Non-taxable/non-deductible expenses
0.7
1.0
Unrecognised timing differences
1.7
5.3
Unrecognised tax losses accumulated/(utilised)
5.6
(4.0)
Adjustment in respect of prior years
(2.1)
0.2
Deferred tax assets derecognised/(recognised)
6.6
(6.9)
Impairment charge
(0.2)
0.2
Total tax charge/(credit)
5.1
(6.0)
The Group is taxed at different rates depending on the country in which the profits arise. The key applicable tax rates include the UK 23.5%, the US 21%, Germany 30% and the Netherlands 25%. The effective tax rate for the year was -15.4% (2022: 46.5%). The statutory UK corporation tax rate is currently 25% (effective 1 April 2023). There is a blended rate in the UK of 23.5% for 2023. The Group has derecognised the deferred tax asset relating to the use of the historic tax losses in the US (2022: asset recognised of \u00a36.9 million in respect of \u00a332.9 million of the US federal losses). The Group utilised tax losses in the US for the first time in 2021. The Group\u2019s existing transfer pricing arrangements between the UK and US currently entitle the US to earn an agreed profit margin. Following the granting of a provisional SBA license in the US, the nature of the transfer pricing arrangements between the UK and US are expected to change. This, together with anticipated near-term trading losses in the US means that there are not expected to be taxable profits to utilise brought forward trading losses in the near term. Accordingly the deferred tax asset associated with brought forward US trading losses has been derecognised.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment
(1.5)
(2.8)
Carry forward losses (UK)
1.5
2.8
Carry forward losses (US)
\u2014
6.9
Recognised deferred tax
\u2014
6.9
Unrecognised deferred tax
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment
22.8
17.4
Carry forward losses
183.4
133.3
Deferred stock options
20.5
18.5
US R&D credit
2.2
2.3
US fair value adjustments
40.7
47.1
Other
0.4
0.3
Unrecognised deferred tax
270.0
218.9
1 1. Balances presented in table above are gross timing differences and are not tax effected. Based on the temporary differences, there are total unrecognised deferred tax assets of \u00a362.2 million (2022: \u00a350.1 million). The Group has unrelieved tax losses of \u00a3183.4 million (2022: \u00a3177.0 million) that are available for offset against future taxable profits. Of these, there are \u00a3183.4 million (2022: \u00a3133.3 million) of unrecognised tax losses for deferred tax purposes. The difference between these two loss balances was recognised as a deferred tax asset. There are \u00a368.0 million of losses carried forward in the US of which \u00a34.1 million will expire in 2035, \u00a322.6 million will expire in 2036 and the remaining balance of \u00a341.3 million have no expiry period. There are \u00a396.1 million of German losses (of which \u00a348.3 million relate to federal losses and \u00a347.8 million relate to trade tax losses) that can no longer be used as the tax residence of the German-incorporated entities has changed to the UK. There are \u00a3115.4 million losses which relate to the UK. Factors affecting the tax charge in future years Factors that may affect the Group\u2019s future tax charge include the geographic location of the Group\u2019s earnings (including changes in transfer pricing arrangements), the tax rates in those locations, changes in tax legislation and the use of brought-forward tax losses. The calculation of the Group\u2019s total tax charge involves a degree of estimation and judgement with respect to the recognition of any deferred tax asset. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTaxReceivablesAndPayablesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-316": { "value": "
7. Loss per share
Basic loss per share amounts are calculated by dividing the loss for the year attributable to ordinary equity holders of
the Company by the weighted average number of ordinary shares outstanding during the year.
For diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential ordinary shares. The dilutive potential ordinary shares include those share options granted to
employees under the Group\u2019s share-based compensation schemes which do not have an exercise price or where the
exercise price is less than the average market price of the Company\u2019s ordinary shares during the year.
There is no difference in the weighted average number of shares used in the calculation of basic and diluted loss per
share as the effect of all potentially dilutive shares outstanding was anti-dilutive.
The following table reflects the loss and share data used in the basic and diluted loss per share computations:
31 December 31 December
2023 2022
Loss for the year (\u00a3m)
(38.3)
(6.9)
Weighted average number of ordinary shares in issue (million)
344.4
348.6
Basic and diluted loss per share
(11.1)p
(2.0)p
", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-318": { "value": "
8. Intangible assets
Capitalised
development Computer Other
costs software intangibles Total
\u00a3m \u00a3m \u00a3m \u00a3m
Cost
At 1 January 2022
49.0
0.9
1.2
51.1
Exchange differences
1.9
\u2014
\u2014
1.9
Additions
12.7
\u2014
\u2014
12.7
Disposals
(8.8)
(0.1)
\u2014
(8.9)
At 31 December 2022
54.8
0.8
1.2
56.8
At 1 January 2023
54.8
0.8
1.2
56.8
Exchange differences
(0.8)
\u2014
\u2014
(0.8)
Additions
11.3
0.2
\u2014
11.5
Disposals
(4.1)
(0.6)
\u2014
(4.7)
At 31 December 2023
61.2
0.4
1.2
62.8
Accumulated amortisation
At 1 January 2022
24.4
0.6
1.2
26.2
Exchange differences
1.2
\u2014
\u2014
1.2
Charge for the year
10.0
0.1
\u2014
10.1
Disposals
(8.8)
(0.1)
\u2014
(8.9)
At 31 December 2022
26.8
0.6
1.2
28.6
At 1 January 2023
26.8
0.6
1.2
28.6
Exchange differences
(0.5)
0.1
\u2014
(0.4)
Charge for the year
12.3
0.1
\u2014
12.4
Impairment
3.9
\u2014
\u2014
3.9
Disposals
(4.1)
(0.6)
\u2014
(4.7)
At 31 December 2023
38.4
0.2
1.2
39.8
Carrying amount
At 31 December 2023
22.8
0.2
\u2014
23.0
At 31 December 2022
28.0
0.2
\u2014
28.2
Intangible assets of \u00a33.9 million (2022: \u00a3nil) predominantly related to the US business have been fully impaired. This is
as a result of the annual impairment review assessment of each cash generating unit. Given the uncertainty as to the
near-term cash flows of the US business, the value in use assessment did not support the non-financial assets and the
capitalised development costs of the US were impaired.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-351": { "value": "8. Intangible assets
Capitalised
development Computer Other
costs software intangibles Total
\u00a3m \u00a3m \u00a3m \u00a3m
Cost
At 1 January 2022
49.0
0.9
1.2
51.1
Exchange differences
1.9
\u2014
\u2014
1.9
Additions
12.7
\u2014
\u2014
12.7
Disposals
(8.8)
(0.1)
\u2014
(8.9)
At 31 December 2022
54.8
0.8
1.2
56.8
At 1 January 2023
54.8
0.8
1.2
56.8
Exchange differences
(0.8)
\u2014
\u2014
(0.8)
Additions
11.3
0.2
\u2014
11.5
Disposals
(4.1)
(0.6)
\u2014
(4.7)
At 31 December 2023
61.2
0.4
1.2
62.8
Accumulated amortisation
At 1 January 2022
24.4
0.6
1.2
26.2
Exchange differences
1.2
\u2014
\u2014
1.2
Charge for the year
10.0
0.1
\u2014
10.1
Disposals
(8.8)
(0.1)
\u2014
(8.9)
At 31 December 2022
26.8
0.6
1.2
28.6
At 1 January 2023
26.8
0.6
1.2
28.6
Exchange differences
(0.5)
0.1
\u2014
(0.4)
Charge for the year
12.3
0.1
\u2014
12.4
Impairment
3.9
\u2014
\u2014
3.9
Disposals
(4.1)
(0.6)
\u2014
(4.7)
At 31 December 2023
38.4
0.2
1.2
39.8
Carrying amount
At 31 December 2023
22.8
0.2
\u2014
23.0
At 31 December 2022
28.0
0.2
\u2014
28.2
Intangible assets of \u00a33.9 million (2022: \u00a3nil) predominantly related to the US business have been fully impaired. This is as a result of the annual impairment review assessment of each cash generating unit. Given the uncertainty as to the near-term cash flows of the US business, the value in use assessment did not support the non-financial assets and the capitalised development costs of the US were impaired.", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-317": { "value": "
9. Property, plant and equipment, right-of-use assets and lease liabilities
The Group has right-of-use assets which comprise property leases held by the Group. Information about leases for
which the Group is a lessee is presented below.
Analysis of property, plant and equipment between owned and leased assets
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment (owned)
1.7
2.7
Right-of-use assets
3.3
7.3
5.0
10.0
Reconciliation of amount recognised in the balance sheet
Right-of-use
Leasehold Computer Furniture assets
improvements equipment and fixtures (property) Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost
At 1 January 2022
4.7
2.7
1.9
31.0
40.3
Disposals
\u2014
(0.8)
\u2014
\u2014
(0.8)
Additions
0.5
1.0
0.1
0.7
2.3
Exchange differences
\u2014
0.1
0.1
1.0
1.2
At 31 December 2022
5.2
3.0
2.1
32.7
43.0
At 1 January 2023
5.2
3.0
2.1
32.7
43.0
Disposals
\u2014
(1.1)
\u2014
\u2014
(1.1)
Additions
\u2014
0.7
\u2014
0.2
0.9
Exchange differences
\u2014
\u2014
\u2014
(0.6)
(0.6)
Derecognition of right-of-use assets
\u2014
\u2014
\u2014
\u2014
\u2014
At 31 December 2023
5.2
2.6
2.1
32.3
42.2
Accumulated depreciation
At 1 January 2022
3.2
1.9
1.5
19.6
26.2
Disposals
\u2014
(0.8)
\u2014
\u2014
(0.8)
Charge for the year
0.7
0.7
0.2
3.5
5.1
Impairment
\u2014
\u2014
\u2014
1.8
1.8
Exchange differences
\u2014
0.1
0.1
0.5
0.7
At 31 December 2022
3.9
1.9
1.8
25.4
33.0
At 1 January 2023
3.9
1.9
1.8
25.4
33.0
Disposals
\u2014
(1.1)
\u2014
\u2014
(1.1)
Charge for the year
0.7
0.8
0.1
2.7
4.3
Impairment
\u2014
0.1
0.1
1.3
1.5
Exchange differences
(0.1)
\u2014
\u2014
(0.4)
(0.5)
Derecognition of right-of-use assets
\u2014
\u2014
\u2014
\u2014
\u2014
At 31 December 2023
4.5
1.7
2.0
29.0
37.2
Carrying amount
At 31 December 2023
0.7
0.9
0.1
3.3
5.0
At 31 December 2022
1.3
1.1
0.3
7.3
10.0
1
1
1. Leasehold improvement and right-of-use asset additions in the year are non-cash in nature.
Certain right-of-use assets related to the US San Francisco office have been sublet under an operating sublease. Due
to a further weakening of the San Francisco commercial property market, the estimated cash flows on the sublet no
longer support the carrying value of the asset. As a result, an impairment of \u00a31.3 million was recognised in the year
ended 31 December 2023 (2022: \u00a31.8 million).
Property, plant and equipment of \u00a30.2 million (2022: \u00a3nil) related to the US business has been fully impaired. See note
8 for further details of the driver of this impairment.
Lease liabilities
Amounts recognised on the balance sheet were as follows:
31 December 31 December
2023 2022
\u00a3m \u00a3m
Current
7.2
7.2
Non-current
5.4
12.6
Total
12.6
19.8
Amounts recognised in the statement of comprehensive income were as follows:
31 December 31 December
2023 2022
\u00a3m \u00a3m
Depreciation charge of right-of-use assets (property)
2.7
3.5
Interest expense (included in operating expenses)
0.6
0.9
Expense relating to short-term leases and leases of low-value assets
0.4
0.4
The total cash outflow for leases (excluding short-term and low-value leases) in 2023 was \u00a37.2 million (2022: \u00a37.3 million).
A maturity analysis illustrating the undiscounted contractual cash flows of lease liabilities is included within the liquidity
risk disclosure within note 14.
As at 31 December 2023, the potential future undiscounted cash outflows that have not been included in the
lease liability, due to lack of reasonable certainty the lease extension options might be exercised, amounted to \u00a3nil
(2022: \u00a3nil).
", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-350": { "value": "The Group has right-of-use assets which comprise property leases held by the Group. Information about leases for which the Group is a lessee is presented below. Analysis of property, plant and equipment between owned and leased assets
31 December 31 December
2023 2022
\u00a3m \u00a3m
Property, plant and equipment (owned)
1.7
2.7
Right-of-use assets
3.3
7.3
5.0
10.0
Reconciliation of amount recognised in the balance sheet
Right-of-use
Leasehold Computer Furniture assets
improvements equipment and fixtures (property) Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cost
At 1 January 2022
4.7
2.7
1.9
31.0
40.3
Disposals
\u2014
(0.8)
\u2014
\u2014
(0.8)
Additions
0.5
1.0
0.1
0.7
2.3
Exchange differences
\u2014
0.1
0.1
1.0
1.2
At 31 December 2022
5.2
3.0
2.1
32.7
43.0
At 1 January 2023
5.2
3.0
2.1
32.7
43.0
Disposals
\u2014
(1.1)
\u2014
\u2014
(1.1)
Additions
\u2014
0.7
\u2014
0.2
0.9
Exchange differences
\u2014
\u2014
\u2014
(0.6)
(0.6)
Derecognition of right-of-use assets
\u2014
\u2014
\u2014
\u2014
\u2014
At 31 December 2023
5.2
2.6
2.1
32.3
42.2
Accumulated depreciation
At 1 January 2022
3.2
1.9
1.5
19.6
26.2
Disposals
\u2014
(0.8)
\u2014
\u2014
(0.8)
Charge for the year
0.7
0.7
0.2
3.5
5.1
Impairment
\u2014
\u2014
\u2014
1.8
1.8
Exchange differences
\u2014
0.1
0.1
0.5
0.7
At 31 December 2022
3.9
1.9
1.8
25.4
33.0
At 1 January 2023
3.9
1.9
1.8
25.4
33.0
Disposals
\u2014
(1.1)
\u2014
\u2014
(1.1)
Charge for the year
0.7
0.8
0.1
2.7
4.3
Impairment
\u2014
0.1
0.1
1.3
1.5
Exchange differences
(0.1)
\u2014
\u2014
(0.4)
(0.5)
Derecognition of right-of-use assets
\u2014
\u2014
\u2014
\u2014
\u2014
At 31 December 2023
4.5
1.7
2.0
29.0
37.2
Carrying amount
At 31 December 2023
0.7
0.9
0.1
3.3
5.0
At 31 December 2022
1.3
1.1
0.3
7.3
10.0
1 1 1. Leasehold improvement and right-of-use asset additions in the year are non-cash in nature. Certain right-of-use assets related to the US San Francisco office have been sublet under an operating sublease. Due to a further weakening of the San Francisco commercial property market, the estimated cash flows on the sublet no longer support the carrying value of the asset. As a result, an impairment of \u00a31.3 million was recognised in the year ended 31 December 2023 (2022: \u00a31.8 million). Property, plant and equipment of \u00a30.2 million (2022: \u00a3nil) related to the US business has been fully impaired. See note 8 for further details of the driver of this impairment. ", "dimensions": { "concept": "ifrs-full:DisclosureOfQuantitativeInformationAboutRightofuseAssetsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-352": { "value": "Lease liabilities Amounts recognised on the balance sheet were as follows:
31 December 31 December
2023 2022
\u00a3m \u00a3m
Current
7.2
7.2
Non-current
5.4
12.6
Total
12.6
19.8
Amounts recognised in the statement of comprehensive income were as follows:
31 December 31 December
2023 2022
\u00a3m \u00a3m
Depreciation charge of right-of-use assets (property)
2.7
3.5
Interest expense (included in operating expenses)
0.6
0.9
Expense relating to short-term leases and leases of low-value assets
0.4
0.4
The total cash outflow for leases (excluding short-term and low-value leases) in 2023 was \u00a37.2 million (2022: \u00a37.3 million). A maturity analysis illustrating the undiscounted contractual cash flows of lease liabilities is included within the liquidity risk disclosure within note 14. As at 31 December 2023, the potential future undiscounted cash outflows that have not been included in the lease liability, due to lack of reasonable certainty the lease extension options might be exercised, amounted to \u00a3nil (2022: \u00a3nil). 21. Operating lease arrangements As disclosed in notes 1 and 9, leases of low-value items or short-term leases continue to be treated as operating leases.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Lease payments under operating leases recognised as an expense in the year
0.4
0.3
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases of \u00a30.3 million (2022: \u00a30.7 million). Operating lease payments represent payments for lease assets that are individually considered low value.", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-319": { "value": "
10. SME loans and lines of credit
31 December 31 December
2023 2022
\u00a3m \u00a3m
Non-current
SME loans (other) \u2013 amortised cost
6.7
24.8
Investment in trusts and co-investments \u2013 FVTPL
25.2
28.7
Total non-current
31.9
53.5
Current
Lines of credit \u2013 amortised cost
50.0
16.0
SME loans (other) \u2013 FVTPL
0.9
20.9
SME loans (warehouse) \u2013 FVTPL
1.3
2.4
SME loans (securitised) \u2013 FVTPL
16.4
45.8
Total current
68.6
85.1
Total
100.5
138.6
14. Financial risk management The Board of Directors has overall responsibility for the establishment and oversight of the Group\u2019s risk management framework. The risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and ensure any limits are adhered to. The Group\u2019s activities are reviewed regularly and potential risks are considered. Risk factors The Group has exposure to the following risks from its use of financial instruments: 5 credit risk; 5 liquidity risk; and 5 market risk (including foreign exchange risk, interest rate risk and other price risk).
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
5 SME loans;
5 investments in trusts and co-investments;
5 lines of credit;
5 trade and other receivables;
5 cash and cash equivalents;
5 trade and other payables;
5 bank borrowings;
5 bonds;
5 lease liabilities; and
5 loan repurchase liabilities.
Categorisation of financial assets and financial liabilities
The tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument as
at 31 December 2023:
Fair
value through Amortised
profit and loss cost Other Total
Assets \u00a3m \u00a3m \u00a3m \u00a3m
SME loans (other)
0.9
6.7
\u2014
7.6
SME loans (warehouse)
1.3
\u2014
\u2014
1.3
SME loans (securitised)
16.4
\u2014
\u2014
16.4
Lines of credit
\u2014
50.0
\u2014
50.0
Investment in trusts and co-investments
25.2
\u2014
\u2014
25.2
Trade and other receivables
0.8
15.8
\u2014
16.6
Cash and cash equivalents
150.1
71.3
\u2014
221.4
194.7
143.8
\u2014
338.5
Fair
value through Amortised
profit and loss cost Other Total
Liabilities \u00a3m \u00a3m \u00a3m \u00a3m
Trade and other payables
\u2014
(35.0)
\u2014
(35.0)
Loan repurchase liability
\u2014
\u2014
(0.1)
(0.1)
Bank borrowings
\u2014
(56.9)
\u2014
(56.9)
Bonds
\u2014
\u2014
\u2014
\u2014
Lease liabilities
\u2014
(12.6)
\u2014
(12.6)
\u2014
(104.5)
(0.1)
(104.6)
The tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument as at 31 December 2022:
Fair
value through Amortised
profit and loss cost Other Total
Assets \u00a3m \u00a3m \u00a3m \u00a3m
SME loans (other)
20.9
24.8
\u2014
45.7
SME loans (warehouse)
2.4
\u2014
\u2014
2.4
SME loans (securitised)
45.8
\u2014
\u2014
45.8
Lines of credit
\u2014
16.0
\u2014
16.0
Investment in trusts and co-investments
28.7
\u2014
\u2014
28.7
Trade and other receivables
\u2014
16.2
\u2014
16.2
Cash and cash equivalents
121.6
56.1
\u2014
177.7
219.4
113.1
\u2014
332.5
Fair
value through Amortised
profit and loss cost Other Total
Liabilities \u00a3m \u00a3m \u00a3m \u00a3m
Trade and other payables
\u2014
(12.2)
\u2014
(12.2)
Loan repurchase liability
\u2014
\u2014
(0.5)
(0.5)
Bank borrowings
\u2014
(22.6)
\u2014
(22.6)
Bonds
\u2014
(23.7)
\u2014
(23.7)
Lease liabilities
\u2014
(19.8)
\u2014
(19.8)
\u2014
(78.3)
(0.5)
(78.8)
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, certain SME loans (other), FlexiPay lines of credit, bank borrowings, lease liabilities, certain bonds and trade and other payables. Due to their nature, the carrying value of each of the above financial instruments approximates to their fair value. Other financial instruments Loan repurchase liabilities are measured at the amount of loss allowance determined under IFRS 9. Financial instruments measured at fair value IFRS 13 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement. Disclosure of fair value measurements by level is according to the following fair value measurement hierarchy: 5 level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; 5 level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly or indirectly; and 5 level 3 inputs are unobservable inputs for the assets or liabilities. The fair value of financial instruments that are not traded in an active market (for example, investments in SME loans) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3. An assessment that the level applied to financial instruments is appropriate and whether a transfer between levels is required is undertaken at the end of each accounting period. There were no transfers between levels during the year or prior year. The Finance department of the Group performs the valuations of items required for financial reporting purposes, including level 3 fair values. This team reports to the Chief Financial Officer (\u201cCFO\u201d). Discussions of valuation processes and results are held regularly at Balance Sheet Management and Investment Valuation Committees along with regular updates provided to the Audit Committee.
Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(level 1) (level 2) (level 3) Total
31 December 2023 \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
SME loans (warehouse)
\u2014
\u2014
1.3
1.3
SME loans (securitised)
\u2014
\u2014
16.4
16.4
SME loans (other)
\u2014
\u2014
0.9
0.9
Investment in trusts and co-investments
\u2014
\u2014
25.2
25.2
Trade and other receivables
0.8
\u2014
\u2014
0.8
Cash and cash equivalents
150.1
\u2014
\u2014
150.1
150.9
\u2014
43.8
194.7
Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(level 1) (level 2) (level 3) Total
31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
SME loans (warehouse)
\u2014
\u2014
2.4
2.4
SME loans (securitised)
\u2014
\u2014
45.8
45.8
SME loans (other)
\u2014
\u2014
20.9
20.9
Investment in trusts and co-investments
\u2014
\u2014
28.7
28.7
Cash and cash equivalents
121.6
\u2014
\u2014
121.6
121.6
\u2014
97.8
219.4
The fair value of all SME loans held at fair value has been estimated by discounting future cash flows of the loans using
discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date.
The estimated fair value and carrying amount of the SME loans (warehouse) was \u00a31.3 million at 31 December 2023
(2022: \u00a32.4 million).
The fair value of SME loans (securitised) represents loan assets in the securitisation vehicles and legacy loans
of this nature. The estimated fair value and carrying amount of the SME loans (securitised) was \u00a316.4 million at
31 December 2023 (2022: \u00a345.8 million).
Investment in trusts and co-investments represents the Group\u2019s investment in the trusts and other vehicles used to
fund CBILS, RLS and certain commercial loans and is measured at fair value through profit and loss. The government-
owned British Business Bank will guarantee up to 80% of the balance of CBILS loans in the event of default
(and between 70% and 80% of RLS loans). The estimated fair value and carrying amount of the investment in trusts
and co-investments was \u00a325.2 million at 31 December 2023 (2022: \u00a328.7 million).
The fair value of SME loans (other) represents loan assets temporarily funded by the Group in relation to the
commercial loans. The estimated fair value and carrying amount of the SME loans (other) was \u00a30.9 million
(2022: \u00a320.9 million).
The most relevant significant unobservable inputs relate to the default rate estimate and discount rates applied to the
fair value calculation. However, it was determined that the reasonably possible range of outcomes from these inputs
into the estimates are not material to the accounts.
Since 31 December 2022, the assumptions related to estimating fair value have been revised. The expected increases
in defaults due to the macro environment of inflationary cost pressures experienced by small businesses and their
customers in the year did not materialise to the extent expected as base rates peaked and plateaued and borrowers
remained resilient. This has led to favourable observed performance with lower defaults and stable recoveries relative
to expectations on many of the portfolios particularly the legacy SME loans (securitised) in the US. The expectation of
a macro stress is now expected to occur later and grow at a slower pace, with a more marked impact in the UK from
forward looking assumption changes than in the US. This has led to a lower lifetime cumulative default expectation and
a higher relative estimation of fair value compared to the carrying value of the loans than at 31 December 2022.
With respect to investments in trusts and co-investments, where the Group holds a small pari-passu co-investment
structured through leveraged warehouse vehicles which are majority owned by the majority equity investor, the
increase in interest rates over the last year decreased the estimated fair value in certain of these structures which were
not hedged. This was caused by floating rate interest paid on senior borrowing facilities within the vehicle expected
to decrease the returns to the equity holders compared to previous expectations. The nature of the vehicles is such
that, while the loans may be government guaranteed, an uptick in defaults in combination with higher borrowing costs
will still reduce the lifetime return to the equity holder and the inbuilt mechanisms of the vehicles which prioritise
protection of repayments to the senior lender could lead to cash flowing to the equity holder later and as a result the
estimated fair value of the investment has decreased.
RLS and certain commercial loans which the Group holds through investments in trusts, have additionally underperformed
against expectations, even relative to unstressed assumptions. A revision to the underlying performance assumptions of
this cohort of loans partially offset the favourable performance of CBILS loans and the favourable changes in UK macro
assumptions.
There has additionally been increases in discount rates used to discount the estimated cash flows in the year, primarily
driven by increases in the risk free rate, due to central bank interest rate rises in order to curb inflationary pressures.
This, in turn, has led to a lower relative estimation of fair value compared to carrying value of the loans.
The result of the various factors outlined above is an \u00a38.7 million net fair value gain during the year primarily driven by
favourable performance of legacy securitisation loans relative to expectations of stressed performance over the year,
however as these loans continue to amortise they are expected to become less sensitive to estimation uncertainty.
Sensitivities to unobservable assumptions in the valuation of SME loans and money market funds within cash and cash
equivalents are not disclosed as reasonably possible changes in the current assumptions inclusive of default rates,
discount rates and recovery rates would not be expected to result in material changes in the carrying values.
Fair value movements on SME loans (warehouse), SME loans (securitised), SME loans (other), investments in trusts and
bonds (unrated) are recognised through the profit and loss account in fair value gains/(losses).
A reconciliation of the movement in level 3 financial instruments is shown as follows:
Investment
SME loans SME loans Bonds in trusts and SME
(warehouse) (securitised) (unrated) co-investments loans (other)
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
3.2
148.1
(12.8)
39.1
\u2014
Additions
\u2014
\u2014
\u2014
6.4
22.6
Repayments
(2.8)
(86.8)
16.3
(10.0)
(0.8)
Disposal
\u2014
(39.5)
\u2014
\u2014
\u2014
Net gain/(loss) on the change in fair value of
financial instruments at fair value through profit and
loss
2.0
14.7
(3.5)
(7.0)
(1.4)
Foreign exchange gain
\u2014
9.3
\u2014
0.2
0.5
At 31 December 2022
2.4
45.8
\u2014
28.7
20.9
Additions
\u2014
\u2014
\u2014
1.8
11.9
Repayments
(2.0)
(35.0)
\u2014
(6.6)
(0.6)
Disposal
\u2014
\u2014
\u2014
\u2014
(30.4)
Net gain/(loss) on the change in fair value of
financial instruments at fair value through profit and
loss
1.0
6.8
\u2014
1.3
(0.4)
Foreign exchange loss
(0.1)
(1.2)
\u2014
\u2014
(0.5)
At 31 December 2023
1.3
16.4
\u2014
25.2
0.9
Financial risk factors Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group\u2019s receivables from customers and cash and cash equivalents held at banks. The Group\u2019s maximum exposure to credit risk by class of financial asset is as follows:
31 December 31 December
2023 2022
\u00a3m \u00a3m
Non-current
SME loans (other)
6.7
24.8
Investment in trusts and co-investments
25.2
28.7
Trade and other receivables:
\u2013 Other receivables
1.4
3.4
Current
Lines of credit
50.0
16.0
SME loans (other)
0.9
20.9
SME loans (warehouse)
1.3
2.4
SME loans (securitised)
16.4
45.8
Trade and other receivables:
\u2013 Trade receivables
0.4
0.4
\u2013 Other receivables
7.3
5.3
\u2013 Accrued income
5.3
4.8
\u2013 Rent and other deposits
2.2
2.3
Cash and cash equivalents
221.4
17 7.7
Total gross credit risk exposure
338.5
332.5
Less bank borrowings and bond liabilities
(56.9)
(46.3)
Total net credit risk exposure
281.6
286.2
1 1. Included within bank borrowings are \u00a32.2 million (2022: \u00a322.6 million) in relation to draw downs on the PPPLF and \u00a354.7 million related to the FlexiPay warehouse In addition, the Group is subject to financial guarantees it has issued to buy back loans detailed in the loan repurchase liability in note 13. The Group\u2019s maximum exposure to credit risk on financial guarantees were every eligible loan required to be bought back would be \u00a30.4 million (2022: \u00a32.8 million). An expected credit loss allowance related to undrawn lines of credit on the FlexiPay product of \u00a31.4 million (2022: \u00a30.3 million) is held within provisions and other liabilities. The Group\u2019s maximum exposure to credit risk on the undrawn lines of credit if they were all to be fully drawn would be \u00a3157.3 million (2022: \u00a341.6 million). SME loans (warehouse) and SME loans (securitised) relate to the underlying pool of SME loans from the legacy warehouses and SPVs that have since been purchased or novated into other Funding Circle entities, but remain held at FVTPL with the business model of holding the loans for sale. Whilst there is credit risk from the loans defaulting, certain of these SME loans (securitised) and the third party bonds that remain in SPVs are held within bankruptcy remote vehicles. If the SME loans were to all default, then the bank debt or third party bonds do not receive their money back. Therefore, the overall exposure to the Group for these investments is the Group\u2019s net investment in the SME loans which is after taking account of the bank debt and third party bonds. SME loans (other) includes \u00a30.9 million (2022: \u00a320.9 million) loans originated by the Group with the intention of selling onwards, which are held at FVTPL and are therefore disclosed as current. Under IFRS 9, the Group is required to provide for loans measured at amortised cost under the expected credit loss (\u201cECL\u201d) model. The impairment related to each loan is based on the ECLs associated with the probability of default of that loan in the next 12 months unless there has been a significant increase in credit risk of that loan since origination. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the loan investment exceed 30 days, in line with the rebuttable presumption per IFRS 9. The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the loan is considered to be credit impaired. In some circumstances where loans are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit impaired (\u201cPOCI\u201d); this element of the impairment is therefore based on lifetime ECLs. Lines of credit utilises the same default definition and probability of default under IFRS 9, however, they are assessed based on 12-month probability of default at the overall available line of credit level, estimating the expected utilisation of the line of credit at the estimated point of default. The expected credit loss impairment associated with undrawn lines of credit is disclosed within other liabilities in note 13 and in note 25. SME loans (other) includes PPP loans funded by the use of the PPPLF. The loans are guaranteed by the US government in the event of default and the loans are anticipated to be forgiven. At the point of default and subsequent collection of the guarantee or point of forgiveness, the loan and the respective borrowings under the PPPLF are extinguished. SME loans (other) also includes loans which have been brought back from investors and are held at amortised cost. Lines of credit comprises \u00a350.0 million (2022: \u00a316.0 million) of drawn amounts through the FlexiPay product net of expected credit loss impairment. The gross principal value of SME loans (other) is \u00a321.4 million (2022: \u00a339.6 million) and drawn lines of credit held at amortised cost is \u00a355.4 million (2022: \u00a317.6 million), totalling \u00a376.8 million (2022: \u00a357.2 million), and an allowance for expected credit losses of \u00a314.7 million (2022: \u00a314.8 million) and \u00a35.4 million (2022: \u00a31.6 million) respectively, totalling \u00a320.1 million (2022: \u00a316.4 million), is held against these loans and drawn lines of credit as detailed below. An impairment charge of \u00a33.3 million (2022: impairment credit of \u00a30.9 million) was recognised through the statement of comprehensive income in the year to 31 December 2023 within (provision)/credit for expected credit losses in the income statement related to drawn lines of credit and SME loans (other). Additionally, an expected credit loss impairment charge was recognised relating to undrawn FlexiPay lines of credit of \u00a31.1 million (31 December 2022: \u00a30.3 million) and an expected credit loss impairment credit of \u00a30.4 million (31 December 2022: credit of \u00a30.9 million) related to the loan repurchase liability were recognised as detailed in notes 13 and 14. The Group bands each loan investment at origination using an internal risk rating and assesses credit losses on a collective portfolio basis by product. Credit risk grades are not reported to management on an ongoing basis and the only borrower specific information that is produced and used is past due status. There is no significant concentration of credit risk to specific industries or geographical regions.
Performing: Underperforming: Non-performing: POCI:
12-month Lifetime Lifetime Lifetime
ECL ECL ECL ECL Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
0.6
0.3
1.1
13.3
15.3
Impairment against new lending and purchased assets
0.1
\u2014
\u2014
1.1
1.2
Exchange differences
0.1
\u2014
0.1
1.0
1.2
Impairment against loans transferred from/(to) performing
(0.1)
0.3
0.3
\u2014
0.5
Loans repaid
(0.3)
(0.3)
(0.5)
(1.2)
(2.3)
Change in probability of default or loss given
0.7
\u2014
(0.1)
(0.1)
0.5
default assumptions
At 31 December 2022
1.1
0.3
0.9
14.1
16.4
Impairment against new lending and purchased assets
12.6
0.1
0.1
0.6
13.4
Exchange differences
\u2014
\u2014
\u2014
(0.5)
(0.5)
Impairment against loans transferred from/(to) performing
(0.3)
0.5
2.5
\u2014
2.7
Loans repaid
(10.5)
\u2014
(0.2)
(0.9)
(11.6)
Change in probability of default or loss given
(1.3)
0.1
0.4
0.5
(0.3)
default assumptions
At 31 December 2023
1.6
1.0
3.7
13.8
20.1
Basis for Gross lines Provision
Expected credit recognition of of credit and for expected Net carrying
loss coverage expected credit SME loans (other) credit loss amount
% loss impairment \u00a3m \u00a3m \u00a3m
As at 31 December 2022
Performing (due in 30 days or less)
2.7 12 month ECL
39.2
(1.1)
38.1
Underperforming (31\u201390 days overdue)
36.5
Lifetime ECL
0.7
(0.3)
0.4
Non-performing (90+ days overdue)
43.1
Lifetime ECL
2.3
(0.9)
1.4
POCI (90+ days overdue)
94.2
Lifetime ECL
15.0
(14.1)
0.9
Total
57.2
(16.4)
40.8
As at 31 December 2023
Performing (due in 30 days or less)
2.9 12 month ECL
55.8
(1.6)
54.2
Underperforming (31\u201390 days overdue)
50.0
Lifetime ECL
2.0
(1.0)
1.0
Non-performing (90+ days overdue)
86.0
Lifetime ECL
4.3
(3.7)
0.6
POCI (90+ days overdue)
93.9
Lifetime ECL
14.7
(13.8)
0.9
Total
76.8
(20.1)
56.7
Basis for Provision
Expected credit recognition of Gross lines for expected Net carrying
loss coverage expected credit of credit credit loss amount
Of which is drawn FlexiPay lines of credit % loss impairment \u00a3m \u00a3m \u00a3m
As at 31 December 2022
Performing (due in 30 days or less)
5.3 12 month ECL
16.5
(0.8)
15.7
Underperforming (31\u201390 days overdue)
48.4
Lifetime ECL
0.5
(0.3)
0.2
Non-performing (90+ days overdue)
85.0
Lifetime ECL
0.6
(0.5)
0.1
POCI (90+ days overdue)
\u2014
Lifetime ECL
\u2014
\u2014
\u2014
Total
17.6
(1.6)
16.0
As at 31 December 2023
Performing (due in 30 days or less)
2.7 12 month ECL
50.3
(1.4)
48.9
Underperforming (31\u201390 days overdue)
54.5
Lifetime ECL
1.9
(1.0)
0.9
Non-performing (90+ days overdue)
93.6
Lifetime ECL
3.2
(3.0)
0.2
POCI (90+ days overdue)
\u2014
Lifetime ECL
\u2014
\u2014
\u2014
Total
55.4
(5.4)
50.0
The risk and finance functions of the Group monitor the performance of the FlexiPay Lines of credit and SME loans (other) and calculate the ECL estimate required for financial reporting purposes. These teams report to the Chief Financial Officer (\u201cCFO\u201d) and Chief Risk Officer (\u201cCRO\u201d). Discussions of estimates processes and results are held regularly at Balance Sheet Management and Investment Valuation Committees along with regular updates provided to the Audit Committee. The allowance for expected credit losses is based on the Group\u2019s past experience of delinquencies and loss trends, as well as forward-looking information in the form of macroeconomic scenarios governed by an impairment committee, which considers macroeconomic forecasts such as changes in interest rates, GDP and inflation which are incorporated into scenarios and probability weighted. Estimation is required in assessing individual loans and when applying statistical models for collective assessments, using historical trends from past performance as well as forward-looking information including macroeconomic forecasts in each market together with the impact on loan defaults. A sensitivity to these assumptions on the estimated ECL is disclosed within note 2. Trade receivables represent the invoiced amounts in respect of servicing fees due from institutional investors. The risk of financial loss is deemed minimal because the counterparties are well established financial institutions. Ongoing credit evaluation is performed on the financial condition of other receivables and, where appropriate, a provision for expected credit losses is recorded in the financial statements. Other receivables include net investment in subleases of offices representing the present value of future sublease payments receivable. Where appropriate, impairment is recorded where the receivable is in doubt. Individual risk limits for banks and financial institutions are set by the Group with reference to external rating agencies. The Group\u2019s treasury policy has set limits and quantities that the Group must remain within. No credit or counterparty limits were exceeded during the year. The Group\u2019s cash and cash equivalents split by S&P counterparty rating were A/A- rated: \u00a371.3 million (2022: \u00a356.2 million), A+ or better rated: \u00a3150.1 million (2022: \u00a3121.5 million) and below A- rated: \u00a3nil (2022: \u00a3nil). Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group\u2019s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient financial resources to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group\u2019s position. The Group\u2019s liquidity position is monitored and reviewed on an ongoing basis by the Directors. The amounts disclosed in the following tables are the contractual undiscounted cash flows. The liquidity requirements of the bonds in the prior year were met from cash flows generated by the investment in SME loans (securitised) and the liquidity requirements of bank borrowings are met from cash flows generated by investment in SME loans (other) and FlexiPay lines of credit. The maturity analysis of financial instruments at 31 December 2023 and 31 December 2022 is as follows:
Between Total
Less than 3 months Between 1 Over undiscounted Impact of Carrying
3 months and 1 year and 5 years 5 years cash flows discounting\u200aamount
At 31 December 2023 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial liabilities
Trade and other payables
(34.8)
\u2014
(0.2)
\u2014
(35.0)
\u2014
(35.0)
Bank borrowings
\u2014
(54.7)
(2.2)
\u2014
(56.9)
\u2014
(56.9)
Bonds
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Loan repurchase liability
(0.1)
\u2014
\u2014
\u2014
(0.1)
\u2014
(0.1)
Lease liabilities
(1.8)
(5.5)
(5.9)
\u2014
(13.2)
0.6
(12.6)
(36.7)
(60.2)
(8.3)
\u2014
(105.2)
0.6
(104.6)
2 1
Between Total
Less than 3 months Between 1 Over undiscounted Impact of Carrying
3 months and 1 year and 5 years 5 years cash flows discounting\u200aamount
At 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial liabilities
Trade and other payables
(12.2)
\u2014
\u2014
\u2014
(12.2)
\u2014
(12.2)
Bank borrowings
\u2014
\u2014
(22.6)
\u2014
(22.6)
\u2014
(22.6)
Bonds
(5.1)
(12.5)
(6.4)
\u2014
(24.0)
0.3
(23.7)
Loan repurchase liability
(0.5)
\u2014
\u2014
\u2014
(0.5)
\u2014
(0.5)
Lease liabilities
(1.7)
(5.6)
(13.7)
\u2014
(21.0)
1.2
(19.8)
(19.5)
(18.1)
(42.7)
\u2014
(80.3)
1.5
(78.8)
2 1 1. Financial guarantees provided for in the loan repurchase liability are allocated to the earliest period in which the guarantee could possibly be called. 2. Included within the impact of discounting on bonds is \u00a3nil of deferred bond issuance costs (2022: \u00a30.3 million). Bank borrowings consist of drawn amounts in the US of $2.8 million (2022: $27.3 million) on the PPP Liquidity Facility available from the Federal Reserve Bank at a fixed interest rate of 0.35%. They also comprise the drawn balance on a committed lending facility in the FlexiPay warehouse of \u00a354.7 million (2022: \u00a3nil) at a floating rate of interest based on SONIA plus a margin. Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group\u2019s market risk arises from open positions in interest-bearing assets and liabilities, to the extent that these are exposed to general and specific market movements. a) Other price risk The fair value of the SME loans which are held at fair value through profit and loss can fluctuate depending on market pricing of relative interest rates and credit risk. This is reflected in the discount rate used to derive a valuation for the loan assets. The discount rates used in the valuation of the assets measured at fair value through profit and loss are not considered to be a material source of estimation uncertainty and a sensitivity analysis has not been disclosed. b) Interest rate risk The Group is exposed to interest rate risk in relation to financial liabilities through drawn committed borrowing facilities and on financial assets through investment in SME loans. Non-trading interest rate risk The Group\u2019s interest risk on financial instruments is limited to interest receivable on loan note investments, cash and cash equivalent balances and interest on bonds and bank borrowings. The maturities of financial instruments subject to interest rate risk are as follows:
Less than 3 months
Between 3 months and 1 year
Between 1 and 5 years
2023 2022 2023 2022 2023 2022
At 31 December \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Fixed rate
SME loans (other)
1.1
0.9
0.6
0.4
5.9
44.4
Investment in trusts and
co-investments
\u2014
\u2014
\u2014
\u2014
25.2
28.7
Lines of credit
50.0
16.0
\u2014
\u2014
\u2014
\u2014
SME loans (warehouse)
0.1
0.1
0.5
0.1
0.7
2.2
SME loans (securitised)
0.5
0.1
13.0
4.0
2.9
41.7
Bank borrowings
\u2014
\u2014
\u2014
\u2014
(2.2)
(22.6)
Bonds
\u2014
\u2014
\u2014
\u2014
\u2014
(23.7)
Floating rate
Cash and cash equivalents
221.4
177.7
\u2014
\u2014
\u2014
\u2014
Bank borrowings2
\u2014
\u2014
(54.7)
\u2014
\u2014
\u2014
273.1
194.8
(40.6)
4.5
32.5
70.7
2 1 1 2 1 1. The SME loans (warehouse) and SME loans (securitised) are classified as current on the balance sheet, reflecting that the position is held to sell. The above table represents the contractual maturities. 2. The fixed rate bank borrowings and SME loans (other) include the Group\u2019s drawing of the PPP Liquidity Facility in the US in order to fund PPP loan originations. These are classified as non-current on the balance sheet, and the above table represents the contractual maturities, although the PPP loans could be forgiven by the SBA and the associated liability could be repaid from the proceeds within 12 months of the balance sheet date. The floating rate bank borrowings represent the facility in the FlexiPay warehouse used to originate lines of credit. There are no financial assets with a maturity of over five years. Interest rate risk sensitivity analysis \u2013 non-trading interest (fixed rate) Interest on SME loans and on the PPPLF borrowings and bond liabilities (in the US) is fixed until the maturity of the investment and is not impacted by market rate changes. All remaining US bond liabilities were repaid during the year to 31 December 2023. The level of future interest rate receivable would be similar to that received in the year and the impact of movements in interest rates on the value of the assets is considered immaterial to the Group\u2019s overall performance for the year. Interest rate risk sensitivity analysis \u2013 non-trading interest (floating rate) Interest on cash and cash equivalent balances is subject to movements in base rates. The Directors monitor interest rate risk and note that there have recently been sustained rate rises observed. The Directors believe that any reasonable increase in the base rate would not significantly impact the Group\u2019s cash. Interest on bonds (in the UK) was subject to movements in the Sterling Overnight Index Average Rate (\u201cSONIA\u201d). However, the Group had mitigated the risk of increases in interest rates through the use of interest rate caps and the bonds were fully repaid during the previous year ended 31 December 2022. Interest on bank borrowings related to the FlexiPay lines of credit are subject to movements in SONIA. The Group has partially protected itself through the use of an interest rate cap with a strike price of 6.5% and a notional amount that increases in line with the projected drawdowns on the senior borrowing facility. The fair value of the interest rate cap is not material to the Group. If SONIA were to increase by 100 bps, based on the drawn balance at 31 December 2023, the annualised interest expense recognised in borrowing costs would increase by \u00a30.5 million (including any impact of the interest rate cap). Additionally, while the fees charged on FlexiPay lines of credit are fixed for the duration of individual drawdowns, due to the short-term and revolving nature of the product, the Group can reprice the fees charged on drawdowns at short notice in order to manage interest rate risk of the floating rate borrowings. Some of the Group\u2019s investment in trusts are through warehouse vehicles where the Group is a minority equity investor. The senior borrowing facilities utilised in these vehicles receive interest on borrowings in priority to payments to the equity investors at SONIA plus a margin. As a result of the increase in SONIA and anticipated future increases, the increased borrowing costs have reduced the expected cash returns to the equity investors of the investment held at fair value through profit and loss. The impact is recognised in fair value gains and losses in the statement of comprehensive income. Some, but not all of the vehicles, had interest rate caps or interest rate swaps within their structures which can mitigate the impact of future rate rises. The remaining leveraged warehouse vehicles, which previously did not hold hedging instruments, entered into cap or swap agreements during the year ended 31 December 2023. The fair value of investments in trusts and co-investments are no longer considered to be sensitive to further increases in SONIA or the projected SONIA rates as a result of hedging in place. c) Sensitivity analysis IFRS 7 requires disclosure of sensitivity analysis for each type of market risk to which the entity is exposed at the report date showing how profit or loss and equity would have been affected by changing the relevant risk variables that were reasonably possible at that date. As discussed above, the Group does not have significant exposure to price or cash flow risk and therefore no sensitivity analysis for those risks has been disclosed. d) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, the UK pound and the euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group\u2019s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group. Apart from these particular cash flows, the Group aims to fund expenses and investments in the respective currency and to manage foreign exchange risk at a local level by matching the currency in which income is generated and expenses are incurred .
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
The table below sets out the Group\u2019s currency exposures from financial assets and liabilities held by Group companies
in currencies other than their functional currencies and resulting in exchange movements in the income statement and
balance sheet.
31 December 2023
31 December 2022
USD GBP EUR Total USD GBP EUR Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cash and cash equivalents
0.2
\u2014
\u2014
0.2
0.2
\u2014
\u2014
0.2
Intra-group assets
\u2014
\u2014
0.2
0.2
\u2014
\u2014
1.0
1.0
Intra-group liabilities
(45.5)
\u2014
(0.3)
(45.8)
(16.5)
\u2014
(0.8)
(17.3)
The Group assessed the sensitivity to a 10% depreciation and 10% appreciation in pound sterling against the relevant
foreign currencies. While 5% is the sensitivity rate used when reporting foreign currency risk internally to senior
management personnel, in light of recent fluctuations in foreign exchange rates, 10% represents management\u2019s
current assessment of a reasonably possible change in foreign exchange rates. The sensitivity analysis to the income
statement includes only outstanding foreign currency-denominated monetary items and adjusts their translation at
the year end for a 10% change in foreign currency rates. The sensitivity analysis illustrates the impact on the foreign
currency translation reserve within equity of the retranslation of quasi-equity loans to foreign operations within the
Group and net investment in foreign operations of the Group.
The Group\u2019s sensitivity to fluctuations in foreign currencies is related to the US dollar and euro amounts held in the
Parent Company.
Appreciation in pound sterling
Depreciation in pound sterling
Income Income Income Income
statement Equity statement Equity statement Equity statement Equity
2023 2023 2022 2022 2023 2023 2022 2022
At 31 December \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
US dollars
\u2014
(3.0)
\u2014
(3.6)
\u2014
3.7
\u2014
4.4
Euros
\u2014
0.9
\u2014
0.6
\u2014
(1.1)
\u2014
(0.7)
\u2014
(2.1)
\u2014
(3.0)
\u2014
2.6
\u2014
3.7
Impairment of net investment in subleases:
Certain right-of-use assets related to the US San Francisco office have been sublet under a financing sublease
and are represented as net investments in subleases within other receivables. Due to a reduction in market values
since inception of the sublet, the estimated cash flows expected on expiry of the existing sublet and expectations
of further sublet are lower and as a result an impairment of \u00a30.8 million was recognised in the six months ended
31 December 2023 (31 December 2022: \u00a3nil). The impairment is disclosed in the condensed consolidated statement of
comprehensive income within depreciation, amortisation and impairment.
Capital management
The Group considers its capital to comprise its ordinary share capital, share premium, foreign exchange reserve, share
options reserve and retained earnings. Quantitative detail is shown in the consolidated statement of changes in equity.
The Directors\u2019 objective when managing capital is to safeguard the Group\u2019s ability to continue as a going concern in
order to provide returns for the shareholders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
The Directors monitor a number of KPIs at both the Group and individual subsidiary level on a monthly basis. As part of
the budgetary process, targets are set with respect to operating expenses in order to effectively manage the activities
of the Group. Performance is reviewed on a regular basis and appropriate actions are taken as required. These internal
measures indicate the performance of the business against budget/forecast and confirm whether the Group has
adequate resources to meet its working capital requirements.
The Group is subject to externally imposed capital requirements by the Financial Conduct Authority but these are lower
than internally set requirements. During the period, the Group complied with all externally imposed requirements.
Sources of estimation uncertainty and critical judgements that may result in a material adjustment in future periods are
outlined in note 2.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-353": { "value": "10. SME loans and lines of credit
31 December 31 December
2023 2022
\u00a3m \u00a3m
Non-current
SME loans (other) \u2013 amortised cost
6.7
24.8
Investment in trusts and co-investments \u2013 FVTPL
25.2
28.7
Total non-current
31.9
53.5
Current
Lines of credit \u2013 amortised cost
50.0
16.0
SME loans (other) \u2013 FVTPL
0.9
20.9
SME loans (warehouse) \u2013 FVTPL
1.3
2.4
SME loans (securitised) \u2013 FVTPL
16.4
45.8
Total current
68.6
85.1
Total
100.5
138.6
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-320": { "value": "
11. Trade and other receivables
31 December 31 December
2023 2022
\u00a3m \u00a3m
Other receivables
1.4
3.4
Non-current trade and other receivables
1.4
3.4
Trade receivables
0.4
0.4
Other receivables
7.3
5.3
Prepayments
5.2
3.7
Accrued income
5.3
4.8
Rent and other deposits
2.2
2.3
Current trade and other receivables
20.4
16.5
21.8
19.9
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables
described earlier.
No trade receivables were overdue or impaired.
Included in rent and other deposits are \u00a31.6 million of rental deposits (2022: \u00a31.3 million) in respect of the Group\u2019s
property leases which expire over the next five years.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-354": { "value": "
31 December 31 December
2023 2022
\u00a3m \u00a3m
Other receivables
1.4
3.4
Non-current trade and other receivables
1.4
3.4
Trade receivables
0.4
0.4
Other receivables
7.3
5.3
Prepayments
5.2
3.7
Accrued income
5.3
4.8
Rent and other deposits
2.2
2.3
Current trade and other receivables
20.4
16.5
21.8
19.9
", "dimensions": { "concept": "ifrs-full:DisclosureOfPrepaymentsAndOtherAssetsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-322": { "value": "12. Trade and other payables
31 December 31 December
2023 2022
\u00a3m \u00a3m
Trade payables
2.4
2.5
Other taxes and social security costs
4.2
5.0
Other creditors1
32.6
9.7
Accruals and deferred income
15.1
14.6
54.3
31.8
1. Other creditors includes \u00a330.7 million (2022: \u00a37.5 million) due to the British Business Bank (BBB) primarily related to scheme lender fees collected from investors associated with government-guaranteed products. The Directors consider that the carrying amount of trade and other payables approximates to their fair value. ", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-355": { "value": "
31 December 31 December
2023 2022
\u00a3m \u00a3m
Trade payables
2.4
2.5
Other taxes and social security costs
4.2
5.0
Other creditors1
32.6
9.7
Accruals and deferred income
15.1
14.6
54.3
31.8
1. Other creditors includes \u00a330.7 million (2022: \u00a37.5 million) due to the British Business Bank (BBB) primarily related to scheme lender fees collected from investors
associated with government-guaranteed products.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-321": { "value": "
13. Provisions and other liabilities
Dilapidation Loan repurchase Restructuring Other\u200aTotal
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
0.6
2.2
0.2
1.1
4.1
Exchange differences
\u2014
0.1
\u2014
0.1
0.2
Additional provision/liability
0.5
\u2014
\u2014
0.5
1.0
Amount utilised
\u2014
(0.9)
(0.2)
(0.2)
(1.3)
Amount reversed
\u2014
(0.9)
\u2014
(1.0)
(1.9)
At 31 December 2022
1.1
0.5
\u2014
0.5
2.1
Exchange differences
\u2014
\u2014
\u2014
\u2014
\u2014
Additional provision/liability
\u2014
0.2
\u2014
1.2
1.4
Amount utilised
\u2014
(0.4)
\u2014
(0.3)
(0.7)
Amount reversed
\u2014
(0.2)
\u2014
\u2014
(0.2)
At 31 December 2023
1.1
0.1
\u2014
1.4
2.6
\u200a1
1
1. Other provisions includes provisions for operational buybacks in the comparative period. \u00a31.4 million (2022: \u00a30.3 million) of expected credit loss impairment
allowance related to undrawn FlexiPay lines of credit is included within other. See notes 14 and 25.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Current provisions and other liabilities
1.5
1.0
Non-current provisions and other liabilities
1.1
1.1
2.6
2.1
The dilapidation provision represents an estimated cost for dismantling the customisation of offices and restoring
the leasehold premises to its original state at the end of the tenancy period. The provision is expected to be
utilised by 2025 .
", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-356": { "value": "13. Provisions and other liabilities
Dilapidation Loan repurchase Restructuring Other\u200aTotal
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
0.6
2.2
0.2
1.1
4.1
Exchange differences
\u2014
0.1
\u2014
0.1
0.2
Additional provision/liability
0.5
\u2014
\u2014
0.5
1.0
Amount utilised
\u2014
(0.9)
(0.2)
(0.2)
(1.3)
Amount reversed
\u2014
(0.9)
\u2014
(1.0)
(1.9)
At 31 December 2022
1.1
0.5
\u2014
0.5
2.1
Exchange differences
\u2014
\u2014
\u2014
\u2014
\u2014
Additional provision/liability
\u2014
0.2
\u2014
1.2
1.4
Amount utilised
\u2014
(0.4)
\u2014
(0.3)
(0.7)
Amount reversed
\u2014
(0.2)
\u2014
\u2014
(0.2)
At 31 December 2023
1.1
0.1
\u2014
1.4
2.6
\u200a1 1 1. Other provisions includes provisions for operational buybacks in the comparative period. \u00a31.4 million (2022: \u00a30.3 million) of expected credit loss impairment allowance related to undrawn FlexiPay lines of credit is included within other. See notes 14 and 25.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Current provisions and other liabilities
1.5
1.0
Non-current provisions and other liabilities
1.1
1.1
2.6
2.1
The dilapidation provision represents an estimated cost for dismantling the customisation of offices and restoring the leasehold premises to its original state at the end of the tenancy period. The provision is expected to be utilised by 2025 . 25. Contingent liabilities and commitments As part of the ongoing business, the Group has operational requirements with its investors. At any point in time, it is possible that a particular investor may expect the Group to buy back their loan if the terms of business had not been fully complied with. Where a loan is bought back it is presented within SME loans (other) on the face of the consolidated balance sheet and held at amortised cost under IFRS 9. In common with other businesses, the Group is involved from time to time in disputes in the ordinary course of business. There are no active cases expected to have a material adverse financial impact on the Group. The Group has commitments related to undrawn amounts on issued FlexiPay lines of credit. At 31 December 2023, there were undrawn commitments of \u00a3157.3 million (2022: \u00a341.6 million). An expected credit loss impairment allowance is held within other provisions by the Group of \u00a31.4 million (2022: \u00a30.3 million) in relation to the estimated credit losses the Group may be exposed to on these undrawn lines of credit.", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-397": { "value": "
14. Financial risk management
The Board of Directors has overall responsibility for the establishment and oversight of the Group\u2019s risk
management framework.
The risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate
risk limits and controls and to monitor risks and ensure any limits are adhered to. The Group\u2019s activities are reviewed
regularly and potential risks are considered.
Risk factors
The Group has exposure to the following risks from its use of financial instruments:
5 credit risk;
5 liquidity risk; and
5 market risk (including foreign exchange risk, interest rate risk and other price risk).
Principal financial instruments The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows: 5 SME loans; 5 investments in trusts and co-investments; 5 lines of credit; 5 trade and other receivables; 5 cash and cash equivalents; 5 trade and other payables; 5 bank borrowings; 5 bonds; 5 lease liabilities; and 5 loan repurchase liabilities. Categorisation of financial assets and financial liabilities The tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument as at 31 December 2023:
Fair
value through Amortised
profit and loss cost Other Total
Assets \u00a3m \u00a3m \u00a3m \u00a3m
SME loans (other)
0.9
6.7
\u2014
7.6
SME loans (warehouse)
1.3
\u2014
\u2014
1.3
SME loans (securitised)
16.4
\u2014
\u2014
16.4
Lines of credit
\u2014
50.0
\u2014
50.0
Investment in trusts and co-investments
25.2
\u2014
\u2014
25.2
Trade and other receivables
0.8
15.8
\u2014
16.6
Cash and cash equivalents
150.1
71.3
\u2014
221.4
194.7
143.8
\u2014
338.5
Fair
value through Amortised
profit and loss cost Other Total
Liabilities \u00a3m \u00a3m \u00a3m \u00a3m
Trade and other payables
\u2014
(35.0)
\u2014
(35.0)
Loan repurchase liability
\u2014
\u2014
(0.1)
(0.1)
Bank borrowings
\u2014
(56.9)
\u2014
(56.9)
Bonds
\u2014
\u2014
\u2014
\u2014
Lease liabilities
\u2014
(12.6)
\u2014
(12.6)
\u2014
(104.5)
(0.1)
(104.6)
The tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument as at 31 December 2022:
Fair
value through Amortised
profit and loss cost Other Total
Assets \u00a3m \u00a3m \u00a3m \u00a3m
SME loans (other)
20.9
24.8
\u2014
45.7
SME loans (warehouse)
2.4
\u2014
\u2014
2.4
SME loans (securitised)
45.8
\u2014
\u2014
45.8
Lines of credit
\u2014
16.0
\u2014
16.0
Investment in trusts and co-investments
28.7
\u2014
\u2014
28.7
Trade and other receivables
\u2014
16.2
\u2014
16.2
Cash and cash equivalents
121.6
56.1
\u2014
177.7
219.4
113.1
\u2014
332.5
Fair
value through Amortised
profit and loss cost Other Total
Liabilities \u00a3m \u00a3m \u00a3m \u00a3m
Trade and other payables
\u2014
(12.2)
\u2014
(12.2)
Loan repurchase liability
\u2014
\u2014
(0.5)
(0.5)
Bank borrowings
\u2014
(22.6)
\u2014
(22.6)
Bonds
\u2014
(23.7)
\u2014
(23.7)
Lease liabilities
\u2014
(19.8)
\u2014
(19.8)
\u2014
(78.3)
(0.5)
(78.8)
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, certain SME loans (other), FlexiPay lines of credit, bank borrowings, lease liabilities, certain bonds and trade and other payables. Due to their nature, the carrying value of each of the above financial instruments approximates to their fair value. Other financial instruments Loan repurchase liabilities are measured at the amount of loss allowance determined under IFRS 9. Financial instruments measured at fair value IFRS 13 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement. Disclosure of fair value measurements by level is according to the following fair value measurement hierarchy: 5 level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; 5 level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly or indirectly; and 5 level 3 inputs are unobservable inputs for the assets or liabilities. The fair value of financial instruments that are not traded in an active market (for example, investments in SME loans) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3. An assessment that the level applied to financial instruments is appropriate and whether a transfer between levels is required is undertaken at the end of each accounting period. There were no transfers between levels during the year or prior year. The Finance department of the Group performs the valuations of items required for financial reporting purposes, including level 3 fair values. This team reports to the Chief Financial Officer (\u201cCFO\u201d). Discussions of valuation processes and results are held regularly at Balance Sheet Management and Investment Valuation Committees along with regular updates provided to the Audit Committee.
Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(level 1) (level 2) (level 3) Total
31 December 2023 \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
SME loans (warehouse)
\u2014
\u2014
1.3
1.3
SME loans (securitised)
\u2014
\u2014
16.4
16.4
SME loans (other)
\u2014
\u2014
0.9
0.9
Investment in trusts and co-investments
\u2014
\u2014
25.2
25.2
Trade and other receivables
0.8
\u2014
\u2014
0.8
Cash and cash equivalents
150.1
\u2014
\u2014
150.1
150.9
\u2014
43.8
194.7
Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(level 1) (level 2) (level 3) Total
31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
SME loans (warehouse)
\u2014
\u2014
2.4
2.4
SME loans (securitised)
\u2014
\u2014
45.8
45.8
SME loans (other)
\u2014
\u2014
20.9
20.9
Investment in trusts and co-investments
\u2014
\u2014
28.7
28.7
Cash and cash equivalents
121.6
\u2014
\u2014
121.6
121.6
\u2014
97.8
219.4
The fair value of all SME loans held at fair value has been estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the SME loans (warehouse) was \u00a31.3 million at 31 December 2023 (2022: \u00a32.4 million). The fair value of SME loans (securitised) represents loan assets in the securitisation vehicles and legacy loans of this nature. The estimated fair value and carrying amount of the SME loans (securitised) was \u00a316.4 million at 31 December 2023 (2022: \u00a345.8 million). Investment in trusts and co-investments represents the Group\u2019s investment in the trusts and other vehicles used to fund CBILS, RLS and certain commercial loans and is measured at fair value through profit and loss. The government- owned British Business Bank will guarantee up to 80% of the balance of CBILS loans in the event of default (and between 70% and 80% of RLS loans). The estimated fair value and carrying amount of the investment in trusts and co-investments was \u00a325.2 million at 31 December 2023 (2022: \u00a328.7 million). The fair value of SME loans (other) represents loan assets temporarily funded by the Group in relation to the commercial loans. The estimated fair value and carrying amount of the SME loans (other) was \u00a30.9 million (2022: \u00a320.9 million). The most relevant significant unobservable inputs relate to the default rate estimate and discount rates applied to the fair value calculation. However, it was determined that the reasonably possible range of outcomes from these inputs into the estimates are not material to the accounts. Since 31 December 2022, the assumptions related to estimating fair value have been revised. The expected increases in defaults due to the macro environment of inflationary cost pressures experienced by small businesses and their customers in the year did not materialise to the extent expected as base rates peaked and plateaued and borrowers remained resilient. This has led to favourable observed performance with lower defaults and stable recoveries relative to expectations on many of the portfolios particularly the legacy SME loans (securitised) in the US. The expectation of a macro stress is now expected to occur later and grow at a slower pace, with a more marked impact in the UK from forward looking assumption changes than in the US. This has led to a lower lifetime cumulative default expectation and a higher relative estimation of fair value compared to the carrying value of the loans than at 31 December 2022. With respect to investments in trusts and co-investments, where the Group holds a small pari-passu co-investment structured through leveraged warehouse vehicles which are majority owned by the majority equity investor, the increase in interest rates over the last year decreased the estimated fair value in certain of these structures which were not hedged. This was caused by floating rate interest paid on senior borrowing facilities within the vehicle expected to decrease the returns to the equity holders compared to previous expectations. The nature of the vehicles is such that, while the loans may be government guaranteed, an uptick in defaults in combination with higher borrowing costs will still reduce the lifetime return to the equity holder and the inbuilt mechanisms of the vehicles which prioritise protection of repayments to the senior lender could lead to cash flowing to the equity holder later and as a result the estimated fair value of the investment has decreased. RLS and certain commercial loans which the Group holds through investments in trusts, have additionally underperformed against expectations, even relative to unstressed assumptions. A revision to the underlying performance assumptions of this cohort of loans partially offset the favourable performance of CBILS loans and the favourable changes in UK macro assumptions. There has additionally been increases in discount rates used to discount the estimated cash flows in the year, primarily driven by increases in the risk free rate, due to central bank interest rate rises in order to curb inflationary pressures. This, in turn, has led to a lower relative estimation of fair value compared to carrying value of the loans. The result of the various factors outlined above is an \u00a38.7 million net fair value gain during the year primarily driven by favourable performance of legacy securitisation loans relative to expectations of stressed performance over the year, however as these loans continue to amortise they are expected to become less sensitive to estimation uncertainty. Sensitivities to unobservable assumptions in the valuation of SME loans and money market funds within cash and cash equivalents are not disclosed as reasonably possible changes in the current assumptions inclusive of default rates, discount rates and recovery rates would not be expected to result in material changes in the carrying values. Fair value movements on SME loans (warehouse), SME loans (securitised), SME loans (other), investments in trusts and bonds (unrated) are recognised through the profit and loss account in fair value gains/(losses). A reconciliation of the movement in level 3 financial instruments is shown as follows:
Investment
SME loans SME loans Bonds in trusts and SME
(warehouse) (securitised) (unrated) co-investments loans (other)
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
3.2
148.1
(12.8)
39.1
\u2014
Additions
\u2014
\u2014
\u2014
6.4
22.6
Repayments
(2.8)
(86.8)
16.3
(10.0)
(0.8)
Disposal
\u2014
(39.5)
\u2014
\u2014
\u2014
Net gain/(loss) on the change in fair value of
financial instruments at fair value through profit and
loss
2.0
14.7
(3.5)
(7.0)
(1.4)
Foreign exchange gain
\u2014
9.3
\u2014
0.2
0.5
At 31 December 2022
2.4
45.8
\u2014
28.7
20.9
Additions
\u2014
\u2014
\u2014
1.8
11.9
Repayments
(2.0)
(35.0)
\u2014
(6.6)
(0.6)
Disposal
\u2014
\u2014
\u2014
\u2014
(30.4)
Net gain/(loss) on the change in fair value of
financial instruments at fair value through profit and
loss
1.0
6.8
\u2014
1.3
(0.4)
Foreign exchange loss
(0.1)
(1.2)
\u2014
\u2014
(0.5)
At 31 December 2023
1.3
16.4
\u2014
25.2
0.9
Financial risk factors Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group\u2019s receivables from customers and cash and cash equivalents held at banks. The Group\u2019s maximum exposure to credit risk by class of financial asset is as follows:
31 December 31 December
2023 2022
\u00a3m \u00a3m
Non-current
SME loans (other)
6.7
24.8
Investment in trusts and co-investments
25.2
28.7
Trade and other receivables:
\u2013 Other receivables
1.4
3.4
Current
Lines of credit
50.0
16.0
SME loans (other)
0.9
20.9
SME loans (warehouse)
1.3
2.4
SME loans (securitised)
16.4
45.8
Trade and other receivables:
\u2013 Trade receivables
0.4
0.4
\u2013 Other receivables
7.3
5.3
\u2013 Accrued income
5.3
4.8
\u2013 Rent and other deposits
2.2
2.3
Cash and cash equivalents
221.4
17 7.7
Total gross credit risk exposure
338.5
332.5
Less bank borrowings and bond liabilities
(56.9)
(46.3)
Total net credit risk exposure
281.6
286.2
1 1. Included within bank borrowings are \u00a32.2 million (2022: \u00a322.6 million) in relation to draw downs on the PPPLF and \u00a354.7 million related to the FlexiPay warehouse .
In addition, the Group is subject to financial guarantees it has issued to buy back loans detailed in the loan repurchase
liability in note 13. The Group\u2019s maximum exposure to credit risk on financial guarantees were every eligible loan
required to be bought back would be \u00a30.4 million (2022: \u00a32.8 million).
An expected credit loss allowance related to undrawn lines of credit on the FlexiPay product of \u00a31.4 million
(2022: \u00a30.3 million) is held within provisions and other liabilities. The Group\u2019s maximum exposure to credit risk
on the undrawn lines of credit if they were all to be fully drawn would be \u00a3157.3 million (2022: \u00a341.6 million).
SME loans (warehouse) and SME loans (securitised) relate to the underlying pool of SME loans from the legacy
warehouses and SPVs that have since been purchased or novated into other Funding Circle entities, but remain held at
FVTPL with the business model of holding the loans for sale. Whilst there is credit risk from the loans defaulting, certain
of these SME loans (securitised) and the third party bonds that remain in SPVs are held within bankruptcy remote
vehicles. If the SME loans were to all default, then the bank debt or third party bonds do not receive their money back.
Therefore, the overall exposure to the Group for these investments is the Group\u2019s net investment in the SME loans
which is after taking account of the bank debt and third party bonds.
SME loans (other) includes \u00a30.9 million (2022: \u00a320.9 million) loans originated by the Group with the intention of selling
onwards, which are held at FVTPL and are therefore disclosed as current.
Under IFRS 9, the Group is required to provide for loans measured at amortised cost under the expected credit loss
(\u201cECL\u201d) model. The impairment related to each loan is based on the ECLs associated with the probability of default of
that loan in the next 12 months unless there has been a significant increase in credit risk of that loan since origination.
The Group assumes there has been a significant increase in credit risk if outstanding amounts on the loan investment
exceed 30 days, in line with the rebuttable presumption per IFRS 9.
The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts
exceeding a 90-day due date, which reflects the point at which the loan is considered to be credit impaired. In some
circumstances where loans are bought back by the Group, the financial asset associated with the purchase meets the
definition of purchased or originated credit impaired (\u201cPOCI\u201d); this element of the impairment is therefore based on
lifetime ECLs.
Lines of credit utilises the same default definition and probability of default under IFRS 9, however, they are assessed
based on 12-month probability of default at the overall available line of credit level, estimating the expected utilisation
of the line of credit at the estimated point of default. The expected credit loss impairment associated with undrawn
lines of credit is disclosed within other liabilities in note 13 and in note 25.
SME loans (other) includes PPP loans funded by the use of the PPPLF. The loans are guaranteed by the US government
in the event of default and the loans are anticipated to be forgiven. At the point of default and subsequent collection of
the guarantee or point of forgiveness, the loan and the respective borrowings under the PPPLF are extinguished. SME
loans (other) also includes loans which have been brought back from investors and are held at amortised cost.
Lines of credit comprises \u00a350.0 million (2022: \u00a316.0 million) of drawn amounts through the FlexiPay product net of
expected credit loss impairment.
The gross principal value of SME loans (other) is \u00a321.4 million (2022: \u00a339.6 million) and drawn lines of credit held at
amortised cost is \u00a355.4 million (2022: \u00a317.6 million), totalling \u00a376.8 million (2022: \u00a357.2 million), and an allowance for
expected credit losses of \u00a314.7 million (2022: \u00a314.8 million) and \u00a35.4 million (2022: \u00a31.6 million) respectively, totalling
\u00a320.1 million (2022: \u00a316.4 million), is held against these loans and drawn lines of credit as detailed below.
An impairment charge of \u00a33.3 million (2022: impairment credit of \u00a30.9 million) was recognised through the statement
of comprehensive income in the year to 31 December 2023 within (provision)/credit for expected credit losses in the
income statement related to drawn lines of credit and SME loans (other).
Additionally, an expected credit loss impairment charge was recognised relating to undrawn FlexiPay lines of
credit of \u00a31.1 million (31 December 2022: \u00a30.3 million) and an expected credit loss impairment credit of \u00a30.4 million
(31 December 2022: credit of \u00a30.9 million) related to the loan repurchase liability were recognised as detailed in notes
13 and 14.
The Group bands each loan investment at origination using an internal risk rating and assesses credit losses on a
collective portfolio basis by product. Credit risk grades are not reported to management on an ongoing basis and the
only borrower specific information that is produced and used is past due status. There is no significant concentration
of credit risk to specific industries or geographical regions.
Performing: Underperforming: Non-performing: POCI:
12-month Lifetime Lifetime Lifetime
ECL ECL ECL ECL Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
0.6
0.3
1.1
13.3
15.3
Impairment against new lending and purchased assets
0.1
\u2014
\u2014
1.1
1.2
Exchange differences
0.1
\u2014
0.1
1.0
1.2
Impairment against loans transferred from/(to) performing
(0.1)
0.3
0.3
\u2014
0.5
Loans repaid
(0.3)
(0.3)
(0.5)
(1.2)
(2.3)
Change in probability of default or loss given
0.7
\u2014
(0.1)
(0.1)
0.5
default assumptions
At 31 December 2022
1.1
0.3
0.9
14.1
16.4
Impairment against new lending and purchased assets
12.6
0.1
0.1
0.6
13.4
Exchange differences
\u2014
\u2014
\u2014
(0.5)
(0.5)
Impairment against loans transferred from/(to) performing
(0.3)
0.5
2.5
\u2014
2.7
Loans repaid
(10.5)
\u2014
(0.2)
(0.9)
(11.6)
Change in probability of default or loss given
(1.3)
0.1
0.4
0.5
(0.3)
default assumptions
At 31 December 2023
1.6
1.0
3.7
13.8
20.1
Basis for Gross lines Provision
Expected credit recognition of of credit and for expected Net carrying
loss coverage expected credit SME loans (other) credit loss amount
% loss impairment \u00a3m \u00a3m \u00a3m
As at 31 December 2022
Performing (due in 30 days or less)
2.7 12 month ECL
39.2
(1.1)
38.1
Underperforming (31\u201390 days overdue)
36.5
Lifetime ECL
0.7
(0.3)
0.4
Non-performing (90+ days overdue)
43.1
Lifetime ECL
2.3
(0.9)
1.4
POCI (90+ days overdue)
94.2
Lifetime ECL
15.0
(14.1)
0.9
Total
57.2
(16.4)
40.8
As at 31 December 2023
Performing (due in 30 days or less)
2.9 12 month ECL
55.8
(1.6)
54.2
Underperforming (31\u201390 days overdue)
50.0
Lifetime ECL
2.0
(1.0)
1.0
Non-performing (90+ days overdue)
86.0
Lifetime ECL
4.3
(3.7)
0.6
POCI (90+ days overdue)
93.9
Lifetime ECL
14.7
(13.8)
0.9
Total
76.8
(20.1)
56.7
Basis for Provision
Expected credit recognition of Gross lines for expected Net carrying
loss coverage expected credit of credit credit loss amount
Of which is drawn FlexiPay lines of credit % loss impairment \u00a3m \u00a3m \u00a3m
As at 31 December 2022
Performing (due in 30 days or less)
5.3 12 month ECL
16.5
(0.8)
15.7
Underperforming (31\u201390 days overdue)
48.4
Lifetime ECL
0.5
(0.3)
0.2
Non-performing (90+ days overdue)
85.0
Lifetime ECL
0.6
(0.5)
0.1
POCI (90+ days overdue)
\u2014
Lifetime ECL
\u2014
\u2014
\u2014
Total
17.6
(1.6)
16.0
As at 31 December 2023
Performing (due in 30 days or less)
2.7 12 month ECL
50.3
(1.4)
48.9
Underperforming (31\u201390 days overdue)
54.5
Lifetime ECL
1.9
(1.0)
0.9
Non-performing (90+ days overdue)
93.6
Lifetime ECL
3.2
(3.0)
0.2
POCI (90+ days overdue)
\u2014
Lifetime ECL
\u2014
\u2014
\u2014
Total
55.4
(5.4)
50.0
The risk and finance functions of the Group monitor the performance of the FlexiPay Lines of credit and SME loans (other) and calculate the ECL estimate required for financial reporting purposes. These teams report to the Chief Financial Officer (\u201cCFO\u201d) and Chief Risk Officer (\u201cCRO\u201d). Discussions of estimates processes and results are held regularly at Balance Sheet Management and Investment Valuation Committees along with regular updates provided to the Audit Committee. The allowance for expected credit losses is based on the Group\u2019s past experience of delinquencies and loss trends, as well as forward-looking information in the form of macroeconomic scenarios governed by an impairment committee, which considers macroeconomic forecasts such as changes in interest rates, GDP and inflation which are incorporated into scenarios and probability weighted. Estimation is required in assessing individual loans and when applying statistical models for collective assessments, using historical trends from past performance as well as forward-looking information including macroeconomic forecasts in each market together with the impact on loan defaults. A sensitivity to these assumptions on the estimated ECL is disclosed within note 2. Trade receivables represent the invoiced amounts in respect of servicing fees due from institutional investors. The risk of financial loss is deemed minimal because the counterparties are well established financial institutions. Ongoing credit evaluation is performed on the financial condition of other receivables and, where appropriate, a provision for expected credit losses is recorded in the financial statements. Other receivables include net investment in subleases of offices representing the present value of future sublease payments receivable. Where appropriate, impairment is recorded where the receivable is in doubt. Individual risk limits for banks and financial institutions are set by the Group with reference to external rating agencies. The Group\u2019s treasury policy has set limits and quantities that the Group must remain within. No credit or counterparty limits were exceeded during the year. The Group\u2019s cash and cash equivalents split by S&P counterparty rating were A/A- rated: \u00a371.3 million (2022: \u00a356.2 million), A+ or better rated: \u00a3150.1 million (2022: \u00a3121.5 million) and below A- rated: \u00a3nil (2022: \u00a3nil). Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group\u2019s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient financial resources to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group\u2019s position. The Group\u2019s liquidity position is monitored and reviewed on an ongoing basis by the Directors. The amounts disclosed in the following tables are the contractual undiscounted cash flows. The liquidity requirements of the bonds in the prior year were met from cash flows generated by the investment in SME loans (securitised) and the liquidity requirements of bank borrowings are met from cash flows generated by investment in SME loans (other) and FlexiPay lines of credit. The maturity analysis of financial instruments at 31 December 2023 and 31 December 2022 is as follows:
Between Total
Less than 3 months Between 1 Over undiscounted Impact of Carrying
3 months and 1 year and 5 years 5 years cash flows discounting\u200aamount
At 31 December 2023 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial liabilities
Trade and other payables
(34.8)
\u2014
(0.2)
\u2014
(35.0)
\u2014
(35.0)
Bank borrowings
\u2014
(54.7)
(2.2)
\u2014
(56.9)
\u2014
(56.9)
Bonds
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Loan repurchase liability
(0.1)
\u2014
\u2014
\u2014
(0.1)
\u2014
(0.1)
Lease liabilities
(1.8)
(5.5)
(5.9)
\u2014
(13.2)
0.6
(12.6)
(36.7)
(60.2)
(8.3)
\u2014
(105.2)
0.6
(104.6)
2 1
Between Total
Less than 3 months Between 1 Over undiscounted Impact of Carrying
3 months and 1 year and 5 years 5 years cash flows discounting\u200aamount
At 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial liabilities
Trade and other payables
(12.2)
\u2014
\u2014
\u2014
(12.2)
\u2014
(12.2)
Bank borrowings
\u2014
\u2014
(22.6)
\u2014
(22.6)
\u2014
(22.6)
Bonds
(5.1)
(12.5)
(6.4)
\u2014
(24.0)
0.3
(23.7)
Loan repurchase liability
(0.5)
\u2014
\u2014
\u2014
(0.5)
\u2014
(0.5)
Lease liabilities
(1.7)
(5.6)
(13.7)
\u2014
(21.0)
1.2
(19.8)
(19.5)
(18.1)
(42.7)
\u2014
(80.3)
1.5
(78.8)
2 1 1. Financial guarantees provided for in the loan repurchase liability are allocated to the earliest period in which the guarantee could possibly be called. 2. Included within the impact of discounting on bonds is \u00a3nil of deferred bond issuance costs (2022: \u00a30.3 million). Bank borrowings consist of drawn amounts in the US of $2.8 million (2022: $27.3 million) on the PPP Liquidity Facility available from the Federal Reserve Bank at a fixed interest rate of 0.35%. They also comprise the drawn balance on a committed lending facility in the FlexiPay warehouse of \u00a354.7 million (2022: \u00a3nil) at a floating rate of interest based on SONIA plus a margin. Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group\u2019s market risk arises from open positions in interest-bearing assets and liabilities, to the extent that these are exposed to general and specific market movements. a) Other price risk The fair value of the SME loans which are held at fair value through profit and loss can fluctuate depending on market pricing of relative interest rates and credit risk. This is reflected in the discount rate used to derive a valuation for the loan assets. The discount rates used in the valuation of the assets measured at fair value through profit and loss are not considered to be a material source of estimation uncertainty and a sensitivity analysis has not been disclosed. b) Interest rate risk The Group is exposed to interest rate risk in relation to financial liabilities through drawn committed borrowing facilities and on financial assets through investment in SME loans. Non-trading interest rate risk The Group\u2019s interest risk on financial instruments is limited to interest receivable on loan note investments, cash and cash equivalent balances and interest on bonds and bank borrowings. The maturities of financial instruments subject to interest rate risk are as follows:
Less than 3 months
Between 3 months and 1 year
Between 1 and 5 years
2023 2022 2023 2022 2023 2022
At 31 December \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Fixed rate
SME loans (other)
1.1
0.9
0.6
0.4
5.9
44.4
Investment in trusts and
co-investments
\u2014
\u2014
\u2014
\u2014
25.2
28.7
Lines of credit
50.0
16.0
\u2014
\u2014
\u2014
\u2014
SME loans (warehouse)
0.1
0.1
0.5
0.1
0.7
2.2
SME loans (securitised)
0.5
0.1
13.0
4.0
2.9
41.7
Bank borrowings
\u2014
\u2014
\u2014
\u2014
(2.2)
(22.6)
Bonds
\u2014
\u2014
\u2014
\u2014
\u2014
(23.7)
Floating rate
Cash and cash equivalents
221.4
177.7
\u2014
\u2014
\u2014
\u2014
Bank borrowings2
\u2014
\u2014
(54.7)
\u2014
\u2014
\u2014
273.1
194.8
(40.6)
4.5
32.5
70.7
2 1 1 2 1 1. The SME loans (warehouse) and SME loans (securitised) are classified as current on the balance sheet, reflecting that the position is held to sell. The above table represents the contractual maturities. 2. The fixed rate bank borrowings and SME loans (other) include the Group\u2019s drawing of the PPP Liquidity Facility in the US in order to fund PPP loan originations. These are classified as non-current on the balance sheet, and the above table represents the contractual maturities, although the PPP loans could be forgiven by the SBA and the associated liability could be repaid from the proceeds within 12 months of the balance sheet date. The floating rate bank borrowings represent the facility in the FlexiPay warehouse used to originate lines of credit. There are no financial assets with a maturity of over five years. Interest rate risk sensitivity analysis \u2013 non-trading interest (fixed rate) Interest on SME loans and on the PPPLF borrowings and bond liabilities (in the US) is fixed until the maturity of the investment and is not impacted by market rate changes. All remaining US bond liabilities were repaid during the year to 31 December 2023. The level of future interest rate receivable would be similar to that received in the year and the impact of movements in interest rates on the value of the assets is considered immaterial to the Group\u2019s overall performance for the year. Interest rate risk sensitivity analysis \u2013 non-trading interest (floating rate) Interest on cash and cash equivalent balances is subject to movements in base rates. The Directors monitor interest rate risk and note that there have recently been sustained rate rises observed. The Directors believe that any reasonable increase in the base rate would not significantly impact the Group\u2019s cash. Interest on bonds (in the UK) was subject to movements in the Sterling Overnight Index Average Rate (\u201cSONIA\u201d). However, the Group had mitigated the risk of increases in interest rates through the use of interest rate caps and the bonds were fully repaid during the previous year ended 31 December 2022. Interest on bank borrowings related to the FlexiPay lines of credit are subject to movements in SONIA. The Group has partially protected itself through the use of an interest rate cap with a strike price of 6.5% and a notional amount that increases in line with the projected drawdowns on the senior borrowing facility. The fair value of the interest rate cap is not material to the Group. If SONIA were to increase by 100 bps, based on the drawn balance at 31 December 2023, the annualised interest expense recognised in borrowing costs would increase by \u00a30.5 million (including any impact of the interest rate cap). Additionally, while the fees charged on FlexiPay lines of credit are fixed for the duration of individual drawdowns, due to the short-term and revolving nature of the product, the Group can reprice the fees charged on drawdowns at short notice in order to manage interest rate risk of the floating rate borrowings. Some of the Group\u2019s investment in trusts are through warehouse vehicles where the Group is a minority equity investor. The senior borrowing facilities utilised in these vehicles receive interest on borrowings in priority to payments to the equity investors at SONIA plus a margin. As a result of the increase in SONIA and anticipated future increases, the increased borrowing costs have reduced the expected cash returns to the equity investors of the investment held at fair value through profit and loss. The impact is recognised in fair value gains and losses in the statement of comprehensive income. Some, but not all of the vehicles, had interest rate caps or interest rate swaps within their structures which can mitigate the impact of future rate rises. The remaining leveraged warehouse vehicles, which previously did not hold hedging instruments, entered into cap or swap agreements during the year ended 31 December 2023. The fair value of investments in trusts and co-investments are no longer considered to be sensitive to further increases in SONIA or the projected SONIA rates as a result of hedging in place. c) Sensitivity analysis IFRS 7 requires disclosure of sensitivity analysis for each type of market risk to which the entity is exposed at the report date showing how profit or loss and equity would have been affected by changing the relevant risk variables that were reasonably possible at that date. As discussed above, the Group does not have significant exposure to price or cash flow risk and therefore no sensitivity analysis for those risks has been disclosed. d) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, the UK pound and the euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group\u2019s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group. Apart from these particular cash flows, the Group aims to fund expenses and investments in the respective currency and to manage foreign exchange risk at a local level by matching the currency in which income is generated and expenses are incurred The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. The table below sets out the Group\u2019s currency exposures from financial assets and liabilities held by Group companies in currencies other than their functional currencies and resulting in exchange movements in the income statement and balance sheet.
31 December 2023
31 December 2022
USD GBP EUR Total USD GBP EUR Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cash and cash equivalents
0.2
\u2014
\u2014
0.2
0.2
\u2014
\u2014
0.2
Intra-group assets
\u2014
\u2014
0.2
0.2
\u2014
\u2014
1.0
1.0
Intra-group liabilities
(45.5)
\u2014
(0.3)
(45.8)
(16.5)
\u2014
(0.8)
(17.3)
The Group assessed the sensitivity to a 10% depreciation and 10% appreciation in pound sterling against the relevant foreign currencies. While 5% is the sensitivity rate used when reporting foreign currency risk internally to senior management personnel, in light of recent fluctuations in foreign exchange rates, 10% represents management\u2019s current assessment of a reasonably possible change in foreign exchange rates. The sensitivity analysis to the income statement includes only outstanding foreign currency-denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates. The sensitivity analysis illustrates the impact on the foreign currency translation reserve within equity of the retranslation of quasi-equity loans to foreign operations within the Group and net investment in foreign operations of the Group. The Group\u2019s sensitivity to fluctuations in foreign currencies is related to the US dollar and euro amounts held in the Parent Company.
Appreciation in pound sterling
Depreciation in pound sterling
Income Income Income Income
statement Equity statement Equity statement Equity statement Equity
2023 2023 2022 2022 2023 2023 2022 2022
At 31 December \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
US dollars
\u2014
(3.0)
\u2014
(3.6)
\u2014
3.7
\u2014
4.4
Euros
\u2014
0.9
\u2014
0.6
\u2014
(1.1)
\u2014
(0.7)
\u2014
(2.1)
\u2014
(3.0)
\u2014
2.6
\u2014
3.7
Impairment of net investment in subleases: Certain right-of-use assets related to the US San Francisco office have been sublet under a financing sublease and are represented as net investments in subleases within other receivables. Due to a reduction in market values since inception of the sublet, the estimated cash flows expected on expiry of the existing sublet and expectations of further sublet are lower and as a result an impairment of \u00a30.8 million was recognised in the six months ended 31 December 2023 (31 December 2022: \u00a3nil). The impairment is disclosed in the condensed consolidated statement of comprehensive income within depreciation, amortisation and impairment. Capital management The Group considers its capital to comprise its ordinary share capital, share premium, foreign exchange reserve, share options reserve and retained earnings. Quantitative detail is shown in the consolidated statement of changes in equity. The Directors\u2019 objective when managing capital is to safeguard the Group\u2019s ability to continue as a going concern in order to provide returns for the shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Directors monitor a number of KPIs at both the Group and individual subsidiary level on a monthly basis. As part of the budgetary process, targets are set with respect to operating expenses in order to effectively manage the activities of the Group. Performance is reviewed on a regular basis and appropriate actions are taken as required. These internal measures indicate the performance of the business against budget/forecast and confirm whether the Group has adequate resources to meet its working capital requirements. The Group is subject to externally imposed capital requirements by the Financial Conduct Authority but these are lower than internally set requirements. During the period, the Group complied with all externally imposed requirements. Sources of estimation uncertainty and critical judgements that may result in a material adjustment in future periods are outlined in note 2.", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-357": { "value": "
Financial instruments measured at fair value
IFRS 13 requires certain disclosures which require the classification of financial assets and financial liabilities
measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair
value measurement.
Disclosure of fair value measurements by level is according to the following fair value measurement hierarchy:
5 level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
5 level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the assets or
liabilities, either directly or indirectly; and
5 level 3 inputs are unobservable inputs for the assets or liabilities.
The fair value of financial instruments that are not traded in an active market (for example, investments in SME loans)
is determined by using valuation techniques. These valuation techniques maximise the use of observable market data
where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs are
not based on observable market data, the instrument is included in level 3. An assessment that the level applied to
financial instruments is appropriate and whether a transfer between levels is required is undertaken at the end of each
accounting period. There were no transfers between levels during the year or prior year.
The Finance department of the Group performs the valuations of items required for financial reporting purposes,
including level 3 fair values. This team reports to the Chief Financial Officer (\u201cCFO\u201d). Discussions of valuation processes
and results are held regularly at Balance Sheet Management and Investment Valuation Committees along with regular
updates provided to the Audit Committee.
Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(level 1) (level 2) (level 3) Total
31 December 2023 \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
SME loans (warehouse)
\u2014
\u2014
1.3
1.3
SME loans (securitised)
\u2014
\u2014
16.4
16.4
SME loans (other)
\u2014
\u2014
0.9
0.9
Investment in trusts and co-investments
\u2014
\u2014
25.2
25.2
Trade and other receivables
0.8
\u2014
\u2014
0.8
Cash and cash equivalents
150.1
\u2014
\u2014
150.1
150.9
\u2014
43.8
194.7
Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(level 1) (level 2) (level 3) Total
31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
SME loans (warehouse)
\u2014
\u2014
2.4
2.4
SME loans (securitised)
\u2014
\u2014
45.8
45.8
SME loans (other)
\u2014
\u2014
20.9
20.9
Investment in trusts and co-investments
\u2014
\u2014
28.7
28.7
Cash and cash equivalents
121.6
\u2014
\u2014
121.6
121.6
\u2014
97.8
219.4
The fair value of all SME loans held at fair value has been estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the SME loans (warehouse) was \u00a31.3 million at 31 December 2023 (2022: \u00a32.4 million). The fair value of SME loans (securitised) represents loan assets in the securitisation vehicles and legacy loans of this nature. The estimated fair value and carrying amount of the SME loans (securitised) was \u00a316.4 million at 31 December 2023 (2022: \u00a345.8 million). Investment in trusts and co-investments represents the Group\u2019s investment in the trusts and other vehicles used to fund CBILS, RLS and certain commercial loans and is measured at fair value through profit and loss. The government- owned British Business Bank will guarantee up to 80% of the balance of CBILS loans in the event of default (and between 70% and 80% of RLS loans). The estimated fair value and carrying amount of the investment in trusts and co-investments was \u00a325.2 million at 31 December 2023 (2022: \u00a328.7 million). The fair value of SME loans (other) represents loan assets temporarily funded by the Group in relation to the commercial loans. The estimated fair value and carrying amount of the SME loans (other) was \u00a30.9 million (2022: \u00a320.9 million). The most relevant significant unobservable inputs relate to the default rate estimate and discount rates applied to the fair value calculation. However, it was determined that the reasonably possible range of outcomes from these inputs into the estimates are not material to the accounts. Since 31 December 2022, the assumptions related to estimating fair value have been revised. The expected increases in defaults due to the macro environment of inflationary cost pressures experienced by small businesses and their customers in the year did not materialise to the extent expected as base rates peaked and plateaued and borrowers remained resilient. This has led to favourable observed performance with lower defaults and stable recoveries relative to expectations on many of the portfolios particularly the legacy SME loans (securitised) in the US. The expectation of a macro stress is now expected to occur later and grow at a slower pace, with a more marked impact in the UK from forward looking assumption changes than in the US. This has led to a lower lifetime cumulative default expectation and a higher relative estimation of fair value compared to the carrying value of the loans than at 31 December 2022. With respect to investments in trusts and co-investments, where the Group holds a small pari-passu co-investment structured through leveraged warehouse vehicles which are majority owned by the majority equity investor, the increase in interest rates over the last year decreased the estimated fair value in certain of these structures which were not hedged. This was caused by floating rate interest paid on senior borrowing facilities within the vehicle expected to decrease the returns to the equity holders compared to previous expectations. The nature of the vehicles is such that, while the loans may be government guaranteed, an uptick in defaults in combination with higher borrowing costs will still reduce the lifetime return to the equity holder and the inbuilt mechanisms of the vehicles which prioritise protection of repayments to the senior lender could lead to cash flowing to the equity holder later and as a result the estimated fair value of the investment has decreased. RLS and certain commercial loans which the Group holds through investments in trusts, have additionally underperformed against expectations, even relative to unstressed assumptions. A revision to the underlying performance assumptions of this cohort of loans partially offset the favourable performance of CBILS loans and the favourable changes in UK macro assumptions. There has additionally been increases in discount rates used to discount the estimated cash flows in the year, primarily driven by increases in the risk free rate, due to central bank interest rate rises in order to curb inflationary pressures. This, in turn, has led to a lower relative estimation of fair value compared to carrying value of the loans. The result of the various factors outlined above is an \u00a38.7 million net fair value gain during the year primarily driven by favourable performance of legacy securitisation loans relative to expectations of stressed performance over the year, however as these loans continue to amortise they are expected to become less sensitive to estimation uncertainty. Sensitivities to unobservable assumptions in the valuation of SME loans and money market funds within cash and cash equivalents are not disclosed as reasonably possible changes in the current assumptions inclusive of default rates, discount rates and recovery rates would not be expected to result in material changes in the carrying values. Fair value movements on SME loans (warehouse), SME loans (securitised), SME loans (other), investments in trusts and bonds (unrated) are recognised through the profit and loss account in fair value gains/(losses).
A reconciliation of the movement in level 3 financial instruments is shown as follows:
Investment
SME loans SME loans Bonds in trusts and SME
(warehouse) (securitised) (unrated) co-investments loans (other)
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
3.2
148.1
(12.8)
39.1
\u2014
Additions
\u2014
\u2014
\u2014
6.4
22.6
Repayments
(2.8)
(86.8)
16.3
(10.0)
(0.8)
Disposal
\u2014
(39.5)
\u2014
\u2014
\u2014
Net gain/(loss) on the change in fair value of
financial instruments at fair value through profit and
loss
2.0
14.7
(3.5)
(7.0)
(1.4)
Foreign exchange gain
\u2014
9.3
\u2014
0.2
0.5
At 31 December 2022
2.4
45.8
\u2014
28.7
20.9
Additions
\u2014
\u2014
\u2014
1.8
11.9
Repayments
(2.0)
(35.0)
\u2014
(6.6)
(0.6)
Disposal
\u2014
\u2014
\u2014
\u2014
(30.4)
Net gain/(loss) on the change in fair value of
financial instruments at fair value through profit and
loss
1.0
6.8
\u2014
1.3
(0.4)
Foreign exchange loss
(0.1)
(1.2)
\u2014
\u2014
(0.5)
At 31 December 2023
1.3
16.4
\u2014
25.2
0.9
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-380": { "value": "Financial instruments measured at fair value IFRS 13 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement. Disclosure of fair value measurements by level is according to the following fair value measurement hierarchy: 5 level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; 5 level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly or indirectly; and 5 level 3 inputs are unobservable inputs for the assets or liabilities. The fair value of financial instruments that are not traded in an active market (for example, investments in SME loans) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3. An assessment that the level applied to financial instruments is appropriate and whether a transfer between levels is required is undertaken at the end of each accounting period. There were no transfers between levels during the year or prior year. The Finance department of the Group performs the valuations of items required for financial reporting purposes, including level 3 fair values. This team reports to the Chief Financial Officer (\u201cCFO\u201d). Discussions of valuation processes and results are held regularly at Balance Sheet Management and Investment Valuation Committees along with regular updates provided to the Audit Committee.
Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(level 1) (level 2) (level 3) Total
31 December 2023 \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
SME loans (warehouse)
\u2014
\u2014
1.3
1.3
SME loans (securitised)
\u2014
\u2014
16.4
16.4
SME loans (other)
\u2014
\u2014
0.9
0.9
Investment in trusts and co-investments
\u2014
\u2014
25.2
25.2
Trade and other receivables
0.8
\u2014
\u2014
0.8
Cash and cash equivalents
150.1
\u2014
\u2014
150.1
150.9
\u2014
43.8
194.7
Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(level 1) (level 2) (level 3) Total
31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m
Financial assets
SME loans (warehouse)
\u2014
\u2014
2.4
2.4
SME loans (securitised)
\u2014
\u2014
45.8
45.8
SME loans (other)
\u2014
\u2014
20.9
20.9
Investment in trusts and co-investments
\u2014
\u2014
28.7
28.7
Cash and cash equivalents
121.6
\u2014
\u2014
121.6
121.6
\u2014
97.8
219.4
The fair value of all SME loans held at fair value has been estimated by discounting future cash flows of the loans using discount rates that reflect the changes in market interest rates and observed market conditions at the reporting date. The estimated fair value and carrying amount of the SME loans (warehouse) was \u00a31.3 million at 31 December 2023 (2022: \u00a32.4 million). The fair value of SME loans (securitised) represents loan assets in the securitisation vehicles and legacy loans of this nature. The estimated fair value and carrying amount of the SME loans (securitised) was \u00a316.4 million at 31 December 2023 (2022: \u00a345.8 million). Investment in trusts and co-investments represents the Group\u2019s investment in the trusts and other vehicles used to fund CBILS, RLS and certain commercial loans and is measured at fair value through profit and loss. The government- owned British Business Bank will guarantee up to 80% of the balance of CBILS loans in the event of default (and between 70% and 80% of RLS loans). The estimated fair value and carrying amount of the investment in trusts and co-investments was \u00a325.2 million at 31 December 2023 (2022: \u00a328.7 million). The fair value of SME loans (other) represents loan assets temporarily funded by the Group in relation to the commercial loans. The estimated fair value and carrying amount of the SME loans (other) was \u00a30.9 million (2022: \u00a320.9 million). The most relevant significant unobservable inputs relate to the default rate estimate and discount rates applied to the fair value calculation. However, it was determined that the reasonably possible range of outcomes from these inputs into the estimates are not material to the accounts. Since 31 December 2022, the assumptions related to estimating fair value have been revised. The expected increases in defaults due to the macro environment of inflationary cost pressures experienced by small businesses and their customers in the year did not materialise to the extent expected as base rates peaked and plateaued and borrowers remained resilient. This has led to favourable observed performance with lower defaults and stable recoveries relative to expectations on many of the portfolios particularly the legacy SME loans (securitised) in the US. The expectation of a macro stress is now expected to occur later and grow at a slower pace, with a more marked impact in the UK from forward looking assumption changes than in the US. This has led to a lower lifetime cumulative default expectation and a higher relative estimation of fair value compared to the carrying value of the loans than at 31 December 2022. With respect to investments in trusts and co-investments, where the Group holds a small pari-passu co-investment structured through leveraged warehouse vehicles which are majority owned by the majority equity investor, the increase in interest rates over the last year decreased the estimated fair value in certain of these structures which were not hedged. This was caused by floating rate interest paid on senior borrowing facilities within the vehicle expected to decrease the returns to the equity holders compared to previous expectations. The nature of the vehicles is such that, while the loans may be government guaranteed, an uptick in defaults in combination with higher borrowing costs will still reduce the lifetime return to the equity holder and the inbuilt mechanisms of the vehicles which prioritise protection of repayments to the senior lender could lead to cash flowing to the equity holder later and as a result the estimated fair value of the investment has decreased. RLS and certain commercial loans which the Group holds through investments in trusts, have additionally underperformed against expectations, even relative to unstressed assumptions. A revision to the underlying performance assumptions of this cohort of loans partially offset the favourable performance of CBILS loans and the favourable changes in UK macro assumptions. There has additionally been increases in discount rates used to discount the estimated cash flows in the year, primarily driven by increases in the risk free rate, due to central bank interest rate rises in order to curb inflationary pressures. This, in turn, has led to a lower relative estimation of fair value compared to carrying value of the loans. The result of the various factors outlined above is an \u00a38.7 million net fair value gain during the year primarily driven by favourable performance of legacy securitisation loans relative to expectations of stressed performance over the year, however as these loans continue to amortise they are expected to become less sensitive to estimation uncertainty. Sensitivities to unobservable assumptions in the valuation of SME loans and money market funds within cash and cash equivalents are not disclosed as reasonably possible changes in the current assumptions inclusive of default rates, discount rates and recovery rates would not be expected to result in material changes in the carrying values. Fair value movements on SME loans (warehouse), SME loans (securitised), SME loans (other), investments in trusts and bonds (unrated) are recognised through the profit and loss account in fair value gains/(losses). A reconciliation of the movement in level 3 financial instruments is shown as follows:
Investment
SME loans SME loans Bonds in trusts and SME
(warehouse) (securitised) (unrated) co-investments loans (other)
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
3.2
148.1
(12.8)
39.1
\u2014
Additions
\u2014
\u2014
\u2014
6.4
22.6
Repayments
(2.8)
(86.8)
16.3
(10.0)
(0.8)
Disposal
\u2014
(39.5)
\u2014
\u2014
\u2014
Net gain/(loss) on the change in fair value of
financial instruments at fair value through profit and
loss
2.0
14.7
(3.5)
(7.0)
(1.4)
Foreign exchange gain
\u2014
9.3
\u2014
0.2
0.5
At 31 December 2022
2.4
45.8
\u2014
28.7
20.9
Additions
\u2014
\u2014
\u2014
1.8
11.9
Repayments
(2.0)
(35.0)
\u2014
(6.6)
(0.6)
Disposal
\u2014
\u2014
\u2014
\u2014
(30.4)
Net gain/(loss) on the change in fair value of
financial instruments at fair value through profit and
loss
1.0
6.8
\u2014
1.3
(0.4)
Foreign exchange loss
(0.1)
(1.2)
\u2014
\u2014
(0.5)
At 31 December 2023
1.3
16.4
\u2014
25.2
0.9
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-358": { "value": "Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group\u2019s receivables from customers and cash and cash equivalents held at banks. The Group\u2019s maximum exposure to credit risk by class of financial asset is as follows:
31 December 31 December
2023 2022
\u00a3m \u00a3m
Non-current
SME loans (other)
6.7
24.8
Investment in trusts and co-investments
25.2
28.7
Trade and other receivables:
\u2013 Other receivables
1.4
3.4
Current
Lines of credit
50.0
16.0
SME loans (other)
0.9
20.9
SME loans (warehouse)
1.3
2.4
SME loans (securitised)
16.4
45.8
Trade and other receivables:
\u2013 Trade receivables
0.4
0.4
\u2013 Other receivables
7.3
5.3
\u2013 Accrued income
5.3
4.8
\u2013 Rent and other deposits
2.2
2.3
Cash and cash equivalents
221.4
17 7.7
Total gross credit risk exposure
338.5
332.5
Less bank borrowings and bond liabilities
(56.9)
(46.3)
Total net credit risk exposure
281.6
286.2
1 1. Included within bank borrowings are \u00a32.2 million (2022: \u00a322.6 million) in relation to draw downs on the PPPLF and \u00a354.7 million related to the FlexiPay warehouse . In addition, the Group is subject to financial guarantees it has issued to buy back loans detailed in the loan repurchase liability in note 13. The Group\u2019s maximum exposure to credit risk on financial guarantees were every eligible loan required to be bought back would be \u00a30.4 million (2022: \u00a32.8 million). An expected credit loss allowance related to undrawn lines of credit on the FlexiPay product of \u00a31.4 million (2022: \u00a30.3 million) is held within provisions and other liabilities. The Group\u2019s maximum exposure to credit risk on the undrawn lines of credit if they were all to be fully drawn would be \u00a3157.3 million (2022: \u00a341.6 million). SME loans (warehouse) and SME loans (securitised) relate to the underlying pool of SME loans from the legacy warehouses and SPVs that have since been purchased or novated into other Funding Circle entities, but remain held at FVTPL with the business model of holding the loans for sale. Whilst there is credit risk from the loans defaulting, certain of these SME loans (securitised) and the third party bonds that remain in SPVs are held within bankruptcy remote vehicles. If the SME loans were to all default, then the bank debt or third party bonds do not receive their money back. Therefore, the overall exposure to the Group for these investments is the Group\u2019s net investment in the SME loans which is after taking account of the bank debt and third party bonds. SME loans (other) includes \u00a30.9 million (2022: \u00a320.9 million) loans originated by the Group with the intention of selling onwards, which are held at FVTPL and are therefore disclosed as current. Under IFRS 9, the Group is required to provide for loans measured at amortised cost under the expected credit loss (\u201cECL\u201d) model. The impairment related to each loan is based on the ECLs associated with the probability of default of that loan in the next 12 months unless there has been a significant increase in credit risk of that loan since origination. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the loan investment exceed 30 days, in line with the rebuttable presumption per IFRS 9. The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the loan is considered to be credit impaired. In some circumstances where loans are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit impaired (\u201cPOCI\u201d); this element of the impairment is therefore based on lifetime ECLs. Lines of credit utilises the same default definition and probability of default under IFRS 9, however, they are assessed based on 12-month probability of default at the overall available line of credit level, estimating the expected utilisation of the line of credit at the estimated point of default. The expected credit loss impairment associated with undrawn lines of credit is disclosed within other liabilities in note 13 and in note 25. SME loans (other) includes PPP loans funded by the use of the PPPLF. The loans are guaranteed by the US government in the event of default and the loans are anticipated to be forgiven. At the point of default and subsequent collection of the guarantee or point of forgiveness, the loan and the respective borrowings under the PPPLF are extinguished. SME loans (other) also includes loans which have been brought back from investors and are held at amortised cost. Lines of credit comprises \u00a350.0 million (2022: \u00a316.0 million) of drawn amounts through the FlexiPay product net of expected credit loss impairment. The gross principal value of SME loans (other) is \u00a321.4 million (2022: \u00a339.6 million) and drawn lines of credit held at amortised cost is \u00a355.4 million (2022: \u00a317.6 million), totalling \u00a376.8 million (2022: \u00a357.2 million), and an allowance for expected credit losses of \u00a314.7 million (2022: \u00a314.8 million) and \u00a35.4 million (2022: \u00a31.6 million) respectively, totalling \u00a320.1 million (2022: \u00a316.4 million), is held against these loans and drawn lines of credit as detailed below. An impairment charge of \u00a33.3 million (2022: impairment credit of \u00a30.9 million) was recognised through the statement of comprehensive income in the year to 31 December 2023 within (provision)/credit for expected credit losses in the income statement related to drawn lines of credit and SME loans (other). Additionally, an expected credit loss impairment charge was recognised relating to undrawn FlexiPay lines of credit of \u00a31.1 million (31 December 2022: \u00a30.3 million) and an expected credit loss impairment credit of \u00a30.4 million (31 December 2022: credit of \u00a30.9 million) related to the loan repurchase liability were recognised as detailed in notes 13 and 14. The Group bands each loan investment at origination using an internal risk rating and assesses credit losses on a collective portfolio basis by product. Credit risk grades are not reported to management on an ongoing basis and the only borrower specific information that is produced and used is past due status. There is no significant concentration of credit risk to specific industries or geographical regions.
Performing: Underperforming: Non-performing: POCI:
12-month Lifetime Lifetime Lifetime
ECL ECL ECL ECL Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
0.6
0.3
1.1
13.3
15.3
Impairment against new lending and purchased assets
0.1
\u2014
\u2014
1.1
1.2
Exchange differences
0.1
\u2014
0.1
1.0
1.2
Impairment against loans transferred from/(to) performing
(0.1)
0.3
0.3
\u2014
0.5
Loans repaid
(0.3)
(0.3)
(0.5)
(1.2)
(2.3)
Change in probability of default or loss given
0.7
\u2014
(0.1)
(0.1)
0.5
default assumptions
At 31 December 2022
1.1
0.3
0.9
14.1
16.4
Impairment against new lending and purchased assets
12.6
0.1
0.1
0.6
13.4
Exchange differences
\u2014
\u2014
\u2014
(0.5)
(0.5)
Impairment against loans transferred from/(to) performing
(0.3)
0.5
2.5
\u2014
2.7
Loans repaid
(10.5)
\u2014
(0.2)
(0.9)
(11.6)
Change in probability of default or loss given
(1.3)
0.1
0.4
0.5
(0.3)
default assumptions
At 31 December 2023
1.6
1.0
3.7
13.8
20.1
Basis for Gross lines Provision
Expected credit recognition of of credit and for expected Net carrying
loss coverage expected credit SME loans (other) credit loss amount
% loss impairment \u00a3m \u00a3m \u00a3m
As at 31 December 2022
Performing (due in 30 days or less)
2.7 12 month ECL
39.2
(1.1)
38.1
Underperforming (31\u201390 days overdue)
36.5
Lifetime ECL
0.7
(0.3)
0.4
Non-performing (90+ days overdue)
43.1
Lifetime ECL
2.3
(0.9)
1.4
POCI (90+ days overdue)
94.2
Lifetime ECL
15.0
(14.1)
0.9
Total
57.2
(16.4)
40.8
As at 31 December 2023
Performing (due in 30 days or less)
2.9 12 month ECL
55.8
(1.6)
54.2
Underperforming (31\u201390 days overdue)
50.0
Lifetime ECL
2.0
(1.0)
1.0
Non-performing (90+ days overdue)
86.0
Lifetime ECL
4.3
(3.7)
0.6
POCI (90+ days overdue)
93.9
Lifetime ECL
14.7
(13.8)
0.9
Total
76.8
(20.1)
56.7
Basis for Provision
Expected credit recognition of Gross lines for expected Net carrying
loss coverage expected credit of credit credit loss amount
Of which is drawn FlexiPay lines of credit % loss impairment \u00a3m \u00a3m \u00a3m
As at 31 December 2022
Performing (due in 30 days or less)
5.3 12 month ECL
16.5
(0.8)
15.7
Underperforming (31\u201390 days overdue)
48.4
Lifetime ECL
0.5
(0.3)
0.2
Non-performing (90+ days overdue)
85.0
Lifetime ECL
0.6
(0.5)
0.1
POCI (90+ days overdue)
\u2014
Lifetime ECL
\u2014
\u2014
\u2014
Total
17.6
(1.6)
16.0
As at 31 December 2023
Performing (due in 30 days or less)
2.7 12 month ECL
50.3
(1.4)
48.9
Underperforming (31\u201390 days overdue)
54.5
Lifetime ECL
1.9
(1.0)
0.9
Non-performing (90+ days overdue)
93.6
Lifetime ECL
3.2
(3.0)
0.2
POCI (90+ days overdue)
\u2014
Lifetime ECL
\u2014
\u2014
\u2014
Total
55.4
(5.4)
50.0
The risk and finance functions of the Group monitor the performance of the FlexiPay Lines of credit and SME loans
(other) and calculate the ECL estimate required for financial reporting purposes. These teams report to the Chief
Financial Officer (\u201cCFO\u201d) and Chief Risk Officer (\u201cCRO\u201d). Discussions of estimates processes and results are held
regularly at Balance Sheet Management and Investment Valuation Committees along with regular updates provided to
the Audit Committee.
The allowance for expected credit losses is based on the Group\u2019s past experience of delinquencies and loss trends, as
well as forward-looking information in the form of macroeconomic scenarios governed by an impairment committee,
which considers macroeconomic forecasts such as changes in interest rates, GDP and inflation which are incorporated
into scenarios and probability weighted.
Estimation is required in assessing individual loans and when applying statistical models for collective assessments,
using historical trends from past performance as well as forward-looking information including macroeconomic
forecasts in each market together with the impact on loan defaults. A sensitivity to these assumptions on the estimated
ECL is disclosed within note 2.
Trade receivables represent the invoiced amounts in respect of servicing fees due from institutional investors. The risk
of financial loss is deemed minimal because the counterparties are well established financial institutions.
Ongoing credit evaluation is performed on the financial condition of other receivables and, where appropriate,
a provision for expected credit losses is recorded in the financial statements.
Other receivables include net investment in subleases of offices representing the present value of future sublease
payments receivable. Where appropriate, impairment is recorded where the receivable is in doubt.
Individual risk limits for banks and financial institutions are set by the Group with reference to external rating agencies.
The Group\u2019s treasury policy has set limits and quantities that the Group must remain within. No credit or counterparty
limits were exceeded during the year. The Group\u2019s cash and cash equivalents split by S&P counterparty rating were
A/A- rated: \u00a371.3 million (2022: \u00a356.2 million), A+ or better rated: \u00a3150.1 million (2022: \u00a3121.5 million) and below A-
rated: \u00a3nil (2022: \u00a3nil).
", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-381": { "value": "An expected credit loss allowance related to undrawn lines of credit on the FlexiPay product of \u00a31.4 million (2022: \u00a30.3 million) is held within provisions and other liabilities. The Group\u2019s maximum exposure to credit risk on the undrawn lines of credit if they were all to be fully drawn would be \u00a3157.3 million (2022: \u00a341.6 million). SME loans (warehouse) and SME loans (securitised) relate to the underlying pool of SME loans from the legacy warehouses and SPVs that have since been purchased or novated into other Funding Circle entities, but remain held at FVTPL with the business model of holding the loans for sale. Whilst there is credit risk from the loans defaulting, certain of these SME loans (securitised) and the third party bonds that remain in SPVs are held within bankruptcy remote vehicles. If the SME loans were to all default, then the bank debt or third party bonds do not receive their money back. Therefore, the overall exposure to the Group for these investments is the Group\u2019s net investment in the SME loans which is after taking account of the bank debt and third party bonds. SME loans (other) includes \u00a30.9 million (2022: \u00a320.9 million) loans originated by the Group with the intention of selling onwards, which are held at FVTPL and are therefore disclosed as current. Under IFRS 9, the Group is required to provide for loans measured at amortised cost under the expected credit loss (\u201cECL\u201d) model. The impairment related to each loan is based on the ECLs associated with the probability of default of that loan in the next 12 months unless there has been a significant increase in credit risk of that loan since origination. The Group assumes there has been a significant increase in credit risk if outstanding amounts on the loan investment exceed 30 days, in line with the rebuttable presumption per IFRS 9. The Group defines a default, classified within non-performing, as a loan investment with any outstanding amounts exceeding a 90-day due date, which reflects the point at which the loan is considered to be credit impaired. In some circumstances where loans are bought back by the Group, the financial asset associated with the purchase meets the definition of purchased or originated credit impaired (\u201cPOCI\u201d); this element of the impairment is therefore based on lifetime ECLs. Lines of credit utilises the same default definition and probability of default under IFRS 9, however, they are assessed based on 12-month probability of default at the overall available line of credit level, estimating the expected utilisation of the line of credit at the estimated point of default. The expected credit loss impairment associated with undrawn lines of credit is disclosed within other liabilities in note 13 and in note 25. SME loans (other) includes PPP loans funded by the use of the PPPLF. The loans are guaranteed by the US government in the event of default and the loans are anticipated to be forgiven. At the point of default and subsequent collection of the guarantee or point of forgiveness, the loan and the respective borrowings under the PPPLF are extinguished. SME loans (other) also includes loans which have been brought back from investors and are held at amortised cost. Lines of credit comprises \u00a350.0 million (2022: \u00a316.0 million) of drawn amounts through the FlexiPay product net of expected credit loss impairment. The gross principal value of SME loans (other) is \u00a321.4 million (2022: \u00a339.6 million) and drawn lines of credit held at amortised cost is \u00a355.4 million (2022: \u00a317.6 million), totalling \u00a376.8 million (2022: \u00a357.2 million), and an allowance for expected credit losses of \u00a314.7 million (2022: \u00a314.8 million) and \u00a35.4 million (2022: \u00a31.6 million) respectively, totalling \u00a320.1 million (2022: \u00a316.4 million), is held against these loans and drawn lines of credit as detailed below. An impairment charge of \u00a33.3 million (2022: impairment credit of \u00a30.9 million) was recognised through the statement of comprehensive income in the year to 31 December 2023 within (provision)/credit for expected credit losses in the income statement related to drawn lines of credit and SME loans (other). Additionally, an expected credit loss impairment charge was recognised relating to undrawn FlexiPay lines of credit of \u00a31.1 million (31 December 2022: \u00a30.3 million) and an expected credit loss impairment credit of \u00a30.4 million (31 December 2022: credit of \u00a30.9 million) related to the loan repurchase liability were recognised as detailed in notes 13 and 14. The Group bands each loan investment at origination using an internal risk rating and assesses credit losses on a collective portfolio basis by product. Credit risk grades are not reported to management on an ongoing basis and the only borrower specific information that is produced and used is past due status. There is no significant concentration of credit risk to specific industries or geographical regions.
Performing: Underperforming: Non-performing: POCI:
12-month Lifetime Lifetime Lifetime
ECL ECL ECL ECL Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
At 1 January 2022
0.6
0.3
1.1
13.3
15.3
Impairment against new lending and purchased assets
0.1
\u2014
\u2014
1.1
1.2
Exchange differences
0.1
\u2014
0.1
1.0
1.2
Impairment against loans transferred from/(to) performing
(0.1)
0.3
0.3
\u2014
0.5
Loans repaid
(0.3)
(0.3)
(0.5)
(1.2)
(2.3)
Change in probability of default or loss given
0.7
\u2014
(0.1)
(0.1)
0.5
default assumptions
At 31 December 2022
1.1
0.3
0.9
14.1
16.4
Impairment against new lending and purchased assets
12.6
0.1
0.1
0.6
13.4
Exchange differences
\u2014
\u2014
\u2014
(0.5)
(0.5)
Impairment against loans transferred from/(to) performing
(0.3)
0.5
2.5
\u2014
2.7
Loans repaid
(10.5)
\u2014
(0.2)
(0.9)
(11.6)
Change in probability of default or loss given
(1.3)
0.1
0.4
0.5
(0.3)
default assumptions
At 31 December 2023
1.6
1.0
3.7
13.8
20.1
Basis for Gross lines Provision
Expected credit recognition of of credit and for expected Net carrying
loss coverage expected credit SME loans (other) credit loss amount
% loss impairment \u00a3m \u00a3m \u00a3m
As at 31 December 2022
Performing (due in 30 days or less)
2.7 12 month ECL
39.2
(1.1)
38.1
Underperforming (31\u201390 days overdue)
36.5
Lifetime ECL
0.7
(0.3)
0.4
Non-performing (90+ days overdue)
43.1
Lifetime ECL
2.3
(0.9)
1.4
POCI (90+ days overdue)
94.2
Lifetime ECL
15.0
(14.1)
0.9
Total
57.2
(16.4)
40.8
As at 31 December 2023
Performing (due in 30 days or less)
2.9 12 month ECL
55.8
(1.6)
54.2
Underperforming (31\u201390 days overdue)
50.0
Lifetime ECL
2.0
(1.0)
1.0
Non-performing (90+ days overdue)
86.0
Lifetime ECL
4.3
(3.7)
0.6
POCI (90+ days overdue)
93.9
Lifetime ECL
14.7
(13.8)
0.9
Total
76.8
(20.1)
56.7
Basis for Provision
Expected credit recognition of Gross lines for expected Net carrying
loss coverage expected credit of credit credit loss amount
Of which is drawn FlexiPay lines of credit % loss impairment \u00a3m \u00a3m \u00a3m
As at 31 December 2022
Performing (due in 30 days or less)
5.3 12 month ECL
16.5
(0.8)
15.7
Underperforming (31\u201390 days overdue)
48.4
Lifetime ECL
0.5
(0.3)
0.2
Non-performing (90+ days overdue)
85.0
Lifetime ECL
0.6
(0.5)
0.1
POCI (90+ days overdue)
\u2014
Lifetime ECL
\u2014
\u2014
\u2014
Total
17.6
(1.6)
16.0
As at 31 December 2023
Performing (due in 30 days or less)
2.7 12 month ECL
50.3
(1.4)
48.9
Underperforming (31\u201390 days overdue)
54.5
Lifetime ECL
1.9
(1.0)
0.9
Non-performing (90+ days overdue)
93.6
Lifetime ECL
3.2
(3.0)
0.2
POCI (90+ days overdue)
\u2014
Lifetime ECL
\u2014
\u2014
\u2014
Total
55.4
(5.4)
50.0
The risk and finance functions of the Group monitor the performance of the FlexiPay Lines of credit and SME loans (other) and calculate the ECL estimate required for financial reporting purposes. These teams report to the Chief Financial Officer (\u201cCFO\u201d) and Chief Risk Officer (\u201cCRO\u201d). Discussions of estimates processes and results are held regularly at Balance Sheet Management and Investment Valuation Committees along with regular updates provided to the Audit Committee. The allowance for expected credit losses is based on the Group\u2019s past experience of delinquencies and loss trends, as well as forward-looking information in the form of macroeconomic scenarios governed by an impairment committee, which considers macroeconomic forecasts such as changes in interest rates, GDP and inflation which are incorporated into scenarios and probability weighted. Estimation is required in assessing individual loans and when applying statistical models for collective assessments, using historical trends from past performance as well as forward-looking information including macroeconomic forecasts in each market together with the impact on loan defaults. A sensitivity to these assumptions on the estimated ECL is disclosed within note 2. Trade receivables represent the invoiced amounts in respect of servicing fees due from institutional investors. The risk of financial loss is deemed minimal because the counterparties are well established financial institutions. Ongoing credit evaluation is performed on the financial condition of other receivables and, where appropriate, a provision for expected credit losses is recorded in the financial statements. Other receivables include net investment in subleases of offices representing the present value of future sublease payments receivable. Where appropriate, impairment is recorded where the receivable is in doubt. Individual risk limits for banks and financial institutions are set by the Group with reference to external rating agencies. The Group\u2019s treasury policy has set limits and quantities that the Group must remain within. No credit or counterparty limits were exceeded during the year. The Group\u2019s cash and cash equivalents split by S&P counterparty rating were A/A- rated: \u00a371.3 million (2022: \u00a356.2 million), A+ or better rated: \u00a3150.1 million (2022: \u00a3121.5 million) and below A- rated: \u00a3nil (2022: \u00a3nil). ", "dimensions": { "concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-359": { "value": "Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group\u2019s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient financial resources to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group\u2019s position. The Group\u2019s liquidity position is monitored and reviewed on an ongoing basis by the Directors. The amounts disclosed in the following tables are the contractual undiscounted cash flows. The liquidity requirements of the bonds in the prior year were met from cash flows generated by the investment in SME loans (securitised) and the liquidity requirements of bank borrowings are met from cash flows generated by investment in SME loans (other) and FlexiPay lines of credit. The maturity analysis of financial instruments at 31 December 2023 and 31 December 2022 is as follows:
Between Total
Less than 3 months Between 1 Over undiscounted Impact of Carrying
3 months and 1 year and 5 years 5 years cash flows discounting\u200aamount
At 31 December 2023 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial liabilities
Trade and other payables
(34.8)
\u2014
(0.2)
\u2014
(35.0)
\u2014
(35.0)
Bank borrowings
\u2014
(54.7)
(2.2)
\u2014
(56.9)
\u2014
(56.9)
Bonds
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Loan repurchase liability
(0.1)
\u2014
\u2014
\u2014
(0.1)
\u2014
(0.1)
Lease liabilities
(1.8)
(5.5)
(5.9)
\u2014
(13.2)
0.6
(12.6)
(36.7)
(60.2)
(8.3)
\u2014
(105.2)
0.6
(104.6)
2 1
Between Total
Less than 3 months Between 1 Over undiscounted Impact of Carrying
3 months and 1 year and 5 years 5 years cash flows discounting\u200aamount
At 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial liabilities
Trade and other payables
(12.2)
\u2014
\u2014
\u2014
(12.2)
\u2014
(12.2)
Bank borrowings
\u2014
\u2014
(22.6)
\u2014
(22.6)
\u2014
(22.6)
Bonds
(5.1)
(12.5)
(6.4)
\u2014
(24.0)
0.3
(23.7)
Loan repurchase liability
(0.5)
\u2014
\u2014
\u2014
(0.5)
\u2014
(0.5)
Lease liabilities
(1.7)
(5.6)
(13.7)
\u2014
(21.0)
1.2
(19.8)
(19.5)
(18.1)
(42.7)
\u2014
(80.3)
1.5
(78.8)
2 1 1. Financial guarantees provided for in the loan repurchase liability are allocated to the earliest period in which the guarantee could possibly be called. 2. Included within the impact of discounting on bonds is \u00a3nil of deferred bond issuance costs (2022: \u00a30.3 million). Bank borrowings consist of drawn amounts in the US of $2.8 million (2022: $27.3 million) on the PPP Liquidity Facility available from the Federal Reserve Bank at a fixed interest rate of 0.35%. They also comprise the drawn balance on a committed lending facility in the FlexiPay warehouse of \u00a354.7 million (2022: \u00a3nil) at a floating rate of interest based on SONIA plus a margin. ", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-382": { "value": "The maturity analysis of financial instruments at 31 December 2023 and 31 December 2022 is as follows:
Between Total
Less than 3 months Between 1 Over undiscounted Impact of Carrying
3 months and 1 year and 5 years 5 years cash flows discounting\u200aamount
At 31 December 2023 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial liabilities
Trade and other payables
(34.8)
\u2014
(0.2)
\u2014
(35.0)
\u2014
(35.0)
Bank borrowings
\u2014
(54.7)
(2.2)
\u2014
(56.9)
\u2014
(56.9)
Bonds
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
Loan repurchase liability
(0.1)
\u2014
\u2014
\u2014
(0.1)
\u2014
(0.1)
Lease liabilities
(1.8)
(5.5)
(5.9)
\u2014
(13.2)
0.6
(12.6)
(36.7)
(60.2)
(8.3)
\u2014
(105.2)
0.6
(104.6)
2 1
Between Total
Less than 3 months Between 1 Over undiscounted Impact of Carrying
3 months and 1 year and 5 years 5 years cash flows discounting\u200aamount
At 31 December 2022 \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Financial liabilities
Trade and other payables
(12.2)
\u2014
\u2014
\u2014
(12.2)
\u2014
(12.2)
Bank borrowings
\u2014
\u2014
(22.6)
\u2014
(22.6)
\u2014
(22.6)
Bonds
(5.1)
(12.5)
(6.4)
\u2014
(24.0)
0.3
(23.7)
Loan repurchase liability
(0.5)
\u2014
\u2014
\u2014
(0.5)
\u2014
(0.5)
Lease liabilities
(1.7)
(5.6)
(13.7)
\u2014
(21.0)
1.2
(19.8)
(19.5)
(18.1)
(42.7)
\u2014
(80.3)
1.5
(78.8)
2
1
1. Financial guarantees provided for in the loan repurchase liability are allocated to the earliest period in which the guarantee could possibly be called.
2. Included within the impact of discounting on bonds is \u00a3nil of deferred bond issuance costs (2022: \u00a30.3 million).
Bank borrowings consist of drawn amounts in the US of $2.8 million (2022: $27.3 million) on the PPP Liquidity Facility
available from the Federal Reserve Bank at a fixed interest rate of 0.35%. They also comprise the drawn balance on a
committed lending facility in the FlexiPay warehouse of \u00a354.7 million (2022: \u00a3nil) at a floating rate of interest based on
SONIA plus a margin.
", "dimensions": { "concept": "ifrs-full:MaturityAnalysisForNonderivativeFinancialLiabilities", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-360": { "value": "
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes
in market prices. The Group\u2019s market risk arises from open positions in interest-bearing assets and liabilities, to the
extent that these are exposed to general and specific market movements.
a) Other price risk
The fair value of the SME loans which are held at fair value through profit and loss can fluctuate depending on market
pricing of relative interest rates and credit risk. This is reflected in the discount rate used to derive a valuation for the
loan assets. The discount rates used in the valuation of the assets measured at fair value through profit and loss are
not considered to be a material source of estimation uncertainty and a sensitivity analysis has not been disclosed.
b) Interest rate risk
The Group is exposed to interest rate risk in relation to financial liabilities through drawn committed borrowing facilities
and on financial assets through investment in SME loans.
Non-trading interest rate risk
The Group\u2019s interest risk on financial instruments is limited to interest receivable on loan note investments, cash and
cash equivalent balances and interest on bonds and bank borrowings. The maturities of financial instruments subject
to interest rate risk are as follows:
Less than 3 months
Between 3 months and 1 year
Between 1 and 5 years
2023 2022 2023 2022 2023 2022
At 31 December \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Fixed rate
SME loans (other)
1.1
0.9
0.6
0.4
5.9
44.4
Investment in trusts and
co-investments
\u2014
\u2014
\u2014
\u2014
25.2
28.7
Lines of credit
50.0
16.0
\u2014
\u2014
\u2014
\u2014
SME loans (warehouse)
0.1
0.1
0.5
0.1
0.7
2.2
SME loans (securitised)
0.5
0.1
13.0
4.0
2.9
41.7
Bank borrowings
\u2014
\u2014
\u2014
\u2014
(2.2)
(22.6)
Bonds
\u2014
\u2014
\u2014
\u2014
\u2014
(23.7)
Floating rate
Cash and cash equivalents
221.4
177.7
\u2014
\u2014
\u2014
\u2014
Bank borrowings2
\u2014
\u2014
(54.7)
\u2014
\u2014
\u2014
273.1
194.8
(40.6)
4.5
32.5
70.7
2
1
1
2
1
1. The SME loans (warehouse) and SME loans (securitised) are classified as current on the balance sheet, reflecting that the position is held to sell. The above
table represents the contractual maturities.
2. The fixed rate bank borrowings and SME loans (other) include the Group\u2019s drawing of the PPP Liquidity Facility in the US in order to fund PPP loan originations.
These are classified as non-current on the balance sheet, and the above table represents the contractual maturities, although the PPP loans could be forgiven
by the SBA and the associated liability could be repaid from the proceeds within 12 months of the balance sheet date. The floating rate bank borrowings
represent the facility in the FlexiPay warehouse used to originate lines of credit.
There are no financial assets with a maturity of over five years. Interest rate risk sensitivity analysis \u2013 non-trading interest (fixed rate) Interest on SME loans and on the PPPLF borrowings and bond liabilities (in the US) is fixed until the maturity of the investment and is not impacted by market rate changes. All remaining US bond liabilities were repaid during the year to 31 December 2023. The level of future interest rate receivable would be similar to that received in the year and the impact of movements in interest rates on the value of the assets is considered immaterial to the Group\u2019s overall performance for the year. Interest rate risk sensitivity analysis \u2013 non-trading interest (floating rate) Interest on cash and cash equivalent balances is subject to movements in base rates. The Directors monitor interest rate risk and note that there have recently been sustained rate rises observed. The Directors believe that any reasonable increase in the base rate would not significantly impact the Group\u2019s cash. Interest on bonds (in the UK) was subject to movements in the Sterling Overnight Index Average Rate (\u201cSONIA\u201d). However, the Group had mitigated the risk of increases in interest rates through the use of interest rate caps and the bonds were fully repaid during the previous year ended 31 December 2022. Interest on bank borrowings related to the FlexiPay lines of credit are subject to movements in SONIA. The Group has partially protected itself through the use of an interest rate cap with a strike price of 6.5% and a notional amount that increases in line with the projected drawdowns on the senior borrowing facility. The fair value of the interest rate cap is not material to the Group. If SONIA were to increase by 100 bps, based on the drawn balance at 31 December 2023, the annualised interest expense recognised in borrowing costs would increase by \u00a30.5 million (including any impact of the interest rate cap). Additionally, while the fees charged on FlexiPay lines of credit are fixed for the duration of individual drawdowns, due to the short-term and revolving nature of the product, the Group can reprice the fees charged on drawdowns at short notice in order to manage interest rate risk of the floating rate borrowings. Some of the Group\u2019s investment in trusts are through warehouse vehicles where the Group is a minority equity investor. The senior borrowing facilities utilised in these vehicles receive interest on borrowings in priority to payments to the equity investors at SONIA plus a margin. As a result of the increase in SONIA and anticipated future increases, the increased borrowing costs have reduced the expected cash returns to the equity investors of the investment held at fair value through profit and loss. The impact is recognised in fair value gains and losses in the statement of comprehensive income. Some, but not all of the vehicles, had interest rate caps or interest rate swaps within their structures which can mitigate the impact of future rate rises. The remaining leveraged warehouse vehicles, which previously did not hold hedging instruments, entered into cap or swap agreements during the year ended 31 December 2023. The fair value of investments in trusts and co-investments are no longer considered to be sensitive to further increases in SONIA or the projected SONIA rates as a result of hedging in place. c) Sensitivity analysis IFRS 7 requires disclosure of sensitivity analysis for each type of market risk to which the entity is exposed at the report date showing how profit or loss and equity would have been affected by changing the relevant risk variables that were reasonably possible at that date. As discussed above, the Group does not have significant exposure to price or cash flow risk and therefore no sensitivity analysis for those risks has been disclosed. d) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, the UK pound and the euro. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group\u2019s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group. Apart from these particular cash flows, the Group aims to fund expenses and investments in the respective currency and to manage foreign exchange risk at a local level by matching the currency in which income is generated and expenses are incurred . The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. The table below sets out the Group\u2019s currency exposures from financial assets and liabilities held by Group companies in currencies other than their functional currencies and resulting in exchange movements in the income statement and balance sheet.
31 December 2023
31 December 2022
USD GBP EUR Total USD GBP EUR Total
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Cash and cash equivalents
0.2
\u2014
\u2014
0.2
0.2
\u2014
\u2014
0.2
Intra-group assets
\u2014
\u2014
0.2
0.2
\u2014
\u2014
1.0
1.0
Intra-group liabilities
(45.5)
\u2014
(0.3)
(45.8)
(16.5)
\u2014
(0.8)
(17.3)
The Group assessed the sensitivity to a 10% depreciation and 10% appreciation in pound sterling against the relevant foreign currencies. While 5% is the sensitivity rate used when reporting foreign currency risk internally to senior management personnel, in light of recent fluctuations in foreign exchange rates, 10% represents management\u2019s current assessment of a reasonably possible change in foreign exchange rates. The sensitivity analysis to the income statement includes only outstanding foreign currency-denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates. The sensitivity analysis illustrates the impact on the foreign currency translation reserve within equity of the retranslation of quasi-equity loans to foreign operations within the Group and net investment in foreign operations of the Group. The Group\u2019s sensitivity to fluctuations in foreign currencies is related to the US dollar and euro amounts held in the Parent Company.
Appreciation in pound sterling
Depreciation in pound sterling
Income Income Income Income
statement Equity statement Equity statement Equity statement Equity
2023 2023 2022 2022 2023 2023 2022 2022
At 31 December \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
US dollars
\u2014
(3.0)
\u2014
(3.6)
\u2014
3.7
\u2014
4.4
Euros
\u2014
0.9
\u2014
0.6
\u2014
(1.1)
\u2014
(0.7)
\u2014
(2.1)
\u2014
(3.0)
\u2014
2.6
\u2014
3.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-392": { "value": "
Interest rate risk sensitivity analysis \u2013 non-trading interest (fixed rate)
Interest on SME loans and on the PPPLF borrowings and bond liabilities (in the US) is fixed until the maturity of the
investment and is not impacted by market rate changes. All remaining US bond liabilities were repaid during the year
to 31 December 2023. The level of future interest rate receivable would be similar to that received in the year and
the impact of movements in interest rates on the value of the assets is considered immaterial to the Group\u2019s overall
performance for the year.
Interest rate risk sensitivity analysis \u2013 non-trading interest (floating rate)
Interest on cash and cash equivalent balances is subject to movements in base rates. The Directors monitor interest
rate risk and note that there have recently been sustained rate rises observed. The Directors believe that any
reasonable increase in the base rate would not significantly impact the Group\u2019s cash.
Interest on bonds (in the UK) was subject to movements in the Sterling Overnight Index Average Rate (\u201cSONIA\u201d).
However, the Group had mitigated the risk of increases in interest rates through the use of interest rate caps and the
bonds were fully repaid during the previous year ended 31 December 2022.
Interest on bank borrowings related to the FlexiPay lines of credit are subject to movements in SONIA. The Group has
partially protected itself through the use of an interest rate cap with a strike price of 6.5% and a notional amount that
increases in line with the projected drawdowns on the senior borrowing facility. The fair value of the interest rate cap is
not material to the Group.
If SONIA were to increase by 100 bps, based on the drawn balance at 31 December 2023, the annualised interest
expense recognised in borrowing costs would increase by \u00a30.5 million (including any impact of the interest rate cap).
Additionally, while the fees charged on FlexiPay lines of credit are fixed for the duration of individual drawdowns, due
to the short-term and revolving nature of the product, the Group can reprice the fees charged on drawdowns at short
notice in order to manage interest rate risk of the floating rate borrowings.
Some of the Group\u2019s investment in trusts are through warehouse vehicles where the Group is a minority equity investor.
The senior borrowing facilities utilised in these vehicles receive interest on borrowings in priority to payments to the
equity investors at SONIA plus a margin. As a result of the increase in SONIA and anticipated future increases, the
increased borrowing costs have reduced the expected cash returns to the equity investors of the investment held at fair
value through profit and loss. The impact is recognised in fair value gains and losses in the statement of comprehensive
income. Some, but not all of the vehicles, had interest rate caps or interest rate swaps within their structures which can
mitigate the impact of future rate rises. The remaining leveraged warehouse vehicles, which previously did not hold
hedging instruments, entered into cap or swap agreements during the year ended 31 December 2023.
The fair value of investments in trusts and co-investments are no longer considered to be sensitive to further increases
in SONIA or the projected SONIA rates as a result of hedging in place.
c) Sensitivity analysis
IFRS 7 requires disclosure of sensitivity analysis for each type of market risk to which the entity is exposed at the report
date showing how profit or loss and equity would have been affected by changing the relevant risk variables that were
reasonably possible at that date.
As discussed above, the Group does not have significant exposure to price or cash flow risk and therefore no
sensitivity analysis for those risks has been disclosed.
The Group assessed the sensitivity to a 10% depreciation and 10% appreciation in pound sterling against the relevant foreign currencies. While 5% is the sensitivity rate used when reporting foreign currency risk internally to senior management personnel, in light of recent fluctuations in foreign exchange rates, 10% represents management\u2019s current assessment of a reasonably possible change in foreign exchange rates. The sensitivity analysis to the income statement includes only outstanding foreign currency-denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates. The sensitivity analysis illustrates the impact on the foreign currency translation reserve within equity of the retranslation of quasi-equity loans to foreign operations within the Group and net investment in foreign operations of the Group. The Group\u2019s sensitivity to fluctuations in foreign currencies is related to the US dollar and euro amounts held in the Parent Company.
Appreciation in pound sterling
Depreciation in pound sterling
Income Income Income Income
statement Equity statement Equity statement Equity statement Equity
2023 2023 2022 2022 2023 2023 2022 2022
At 31 December \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
US dollars
\u2014
(3.0)
\u2014
(3.6)
\u2014
3.7
\u2014
4.4
Euros
\u2014
0.9
\u2014
0.6
\u2014
(1.1)
\u2014
(0.7)
\u2014
(2.1)
\u2014
(3.0)
\u2014
2.6
\u2014
3.7
", "dimensions": { "concept": "ifrs-full:SensitivityAnalysisForEachTypeOfMarketRisk", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-361": { "value": "Capital management The Group considers its capital to comprise its ordinary share capital, share premium, foreign exchange reserve, share options reserve and retained earnings. Quantitative detail is shown in the consolidated statement of changes in equity. The Directors\u2019 objective when managing capital is to safeguard the Group\u2019s ability to continue as a going concern in order to provide returns for the shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Directors monitor a number of KPIs at both the Group and individual subsidiary level on a monthly basis. As part of the budgetary process, targets are set with respect to operating expenses in order to effectively manage the activities of the Group. Performance is reviewed on a regular basis and appropriate actions are taken as required. These internal measures indicate the performance of the business against budget/forecast and confirm whether the Group has adequate resources to meet its working capital requirements. The Group is subject to externally imposed capital requirements by the Financial Conduct Authority but these are lower than internally set requirements. During the period, the Group complied with all externally imposed requirements. Sources of estimation uncertainty and critical judgements that may result in a material adjustment in future periods are outlined in note 2.", "dimensions": { "concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-323": { "value": "
15. Share capital
31 December 31 December 31 December 31 December
2023 2023 2022 2022
Number \u00a3 Number \u00a3
Called up, allotted and fully paid
Ordinary shares of \u00a30.001
361,303,143
361,303
361,303,143
361,303
During 2023, the Company issued nil ordinary shares of \u00a30.001 (2022: 4,683,425) shares ranking pari passu with
ordinary shares in issue in connection with employee share schemes, giving rise to a total share premium of \u00a3nil
(2022: \u00a30.1 million).
Included in the total number of ordinary shares outstanding are 16,614,054 (2022: 16,726,515) shares held by the
Group\u2019s Employee Benefit Trust, which includes 16,473,230 shares (2022: 16,471,239) that were purchased (3,290,000
purchased (2022: 17,660,340) and 3,288,009 (2022: 1,189,101) utilised to satisfy employee share option plans) and
5,428,551 (2022: 5,539,201) shares held by the Group\u2019s Share Incentive Plan Trust.
16. Share premium account
2023 2022
\u00a3m \u00a3m
At 1 January
293.1
293.0
Exercise of options \u2013 proceeds received
\u2014
0.1
At 31 December
293.1
293.1
17. Foreign exchange reserve
\u00a3m
At 1 January 2022
11.1
Exchange difference on translating the net assets of foreign operations
5.8
At 31 December 2022
16.9
Exchange difference on translating the net assets of foreign operations
(2.7)
At 31 December 2023
14.2
Exchange differences relating to the translation of the net assets of the Group\u2019s subsidiaries from their functional
currency into the Company\u2019s functional currency are recognised directly in the foreign exchange reserves within equity.
18. Accumulated losses
\u00a3m
At 1 January 2022
(35.6)
Transfer of share option costs
2.6
Purchase of own shares
(8.7)
Loss for the year
(6.9)
At 31 December 2022
(48.6)
Transfer of share option costs
3.8
Purchase of own shares
(1.8)
Loss for the year
(38.3)
At 31 December 2023
(84.9)
The transfer of share option costs is in relation to the exercise of share options during the year and their associated
costs in the share options reserve which are transferred to (accumulated losses)/retained earnings.
During the year ended 31 December 2023, \u00a31.8 million (2022: \u00a38.7 million) of ordinary shares were purchased by the
EBT for the purposes of satisfying employee share option plans. The number of shares purchased was 3.3 million and
the average purchase price was \u00a30.53 (2022: 17.6 million and \u00a30.50). All shares have a nominal value of \u00a30.001.
", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-365": { "value": "15. Share capital
31 December 31 December 31 December 31 December
2023 2023 2022 2022
Number \u00a3 Number \u00a3
Called up, allotted and fully paid
Ordinary shares of \u00a30.001
361,303,143
361,303
361,303,143
361,303
During 2023, the Company issued nil ordinary shares of \u00a30.001 (2022: 4,683,425) shares ranking pari passu with ordinary shares in issue in connection with employee share schemes, giving rise to a total share premium of \u00a3nil (2022: \u00a30.1 million). Included in the total number of ordinary shares outstanding are 16,614,054 (2022: 16,726,515) shares held by the Group\u2019s Employee Benefit Trust, which includes 16,473,230 shares (2022: 16,471,239) that were purchased (3,290,000 purchased (2022: 17,660,340) and 3,288,009 (2022: 1,189,101) utilised to satisfy employee share option plans) and 5,428,551 (2022: 5,539,201) shares held by the Group\u2019s Share Incentive Plan Trust. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-362": { "value": "16. Share premium account
2023 2022
\u00a3m \u00a3m
At 1 January
293.1
293.0
Exercise of options \u2013 proceeds received
\u2014
0.1
At 31 December
293.1
293.1
", "dimensions": { "concept": "fundingcircle:DisclosureOfSharePremiumAccount", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-363": { "value": "17. Foreign exchange reserve
\u00a3m
At 1 January 2022
11.1
Exchange difference on translating the net assets of foreign operations
5.8
At 31 December 2022
16.9
Exchange difference on translating the net assets of foreign operations
(2.7)
At 31 December 2023
14.2
Exchange differences relating to the translation of the net assets of the Group\u2019s subsidiaries from their functional currency into the Company\u2019s functional currency are recognised directly in the foreign exchange reserves within equity. ", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-364": { "value": "18. Accumulated losses
\u00a3m
At 1 January 2022
(35.6)
Transfer of share option costs
2.6
Purchase of own shares
(8.7)
Loss for the year
(6.9)
At 31 December 2022
(48.6)
Transfer of share option costs
3.8
Purchase of own shares
(1.8)
Loss for the year
(38.3)
At 31 December 2023
(84.9)
The transfer of share option costs is in relation to the exercise of share options during the year and their associated costs in the share options reserve which are transferred to (accumulated losses)/retained earnings. During the year ended 31 December 2023, \u00a31.8 million (2022: \u00a38.7 million) of ordinary shares were purchased by the EBT for the purposes of satisfying employee share option plans. The number of shares purchased was 3.3 million and the average purchase price was \u00a30.53 (2022: 17.6 million and \u00a30.50). All shares have a nominal value of \u00a30.001.", "dimensions": { "concept": "fundingcircle:DisclosureOfAccumulatedLosses", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-324": { "value": "
19. Share-based payment
The Company operates share schemes for all employees of the Group. The terms of the main current schemes from
which the Group\u2019s employees benefit are set out below.
Post-IPO employee share plans
Since the Company\u2019s admission on the London Stock Exchange to the year ended 31 December 2019, the Company
operated a single discretionary share-based long-term incentive plan (\u201cLTIP\u201d). In November 2020, the Company
introduced a Share Incentive Plan (\u201cSIP\u201d) approved by HMRC, which includes free shares, partnership shares and
matching shares. This plan is only relevant for UK-based employees; the LTIP will continue to make awards for
non-UK-based employees and employees in senior management positions.
The main features of the LTIP and SIP are set out below.
Post-IPO \u2013 LTIP
Form of LTIP Awards
The Board grants awards in the form of restricted stock units at no cost or options to acquire shares at no cost (a nil-cost option).
Performance conditions
LTIP Awards are not currently subject to performance conditions with the exception of LTIP Awards granted to
Executive Directors which are subject to performance conditions. Refer to the Remuneration Report for further details.
Any performance condition may be amended or substituted if one or more events occur which cause the Board to
reasonably consider that an amended or substituted performance condition would be more appropriate and would not
be materially less difficult to satisfy than originally intended.
Vesting and release of LTIP Awards
LTIP Awards granted to employees, excluding Executive Directors, currently vest subject to continued service only
(\u201cTime-Based Vesting\u201d) in accordance with a vesting schedule set at grant.
LTIP Awards granted to Executive Directors vest at the end of three years subject to achievement of performance
conditions. Further details are shown in the Remuneration Report.
The Board may determine at grant that an LTIP Award is subject to an additional holding period following vesting (a
\u201cHolding Period\u201d). LTIP Options will be exercisable from the date of vesting or, if applicable, the end of the Holding
Period until the tenth anniversary of the grant date, or such earlier date as the Board determines.
Cessation of employment
LTIP Options may normally be exercised to the extent vested for a period of six months after ceasing employment or 12
months after death (or such other period as the Board may determine).
Post-IPO \u2013 SIP
Form of SIP Awards
The Board grants awards in the form of free shares, partnership shares and matching shares.
Performance conditions
There are no performance conditions attached to free shares, partnership shares and matching shares.
Free shares
From 2023 onwards, only UK-based employees in senior management positions are eligible to receive Free shares.
Free shares are awarded annually with a forfeiture period of two years and a holding period of three years.
Until 2022 under SIP, all UK employees were eligible to receive up to a maximum of \u00a33,600, or 10% of annual salary if
less, of free shares per tax year. Free shares were awarded annually with a forfeiture period of two years and a holding
period of three years.
Matching shares
UK employees are invited to buy partnership shares from pre-tax salary with a maximum investment in each tax year
of \u00a31,800, or 10% of annual salary if less. Partnership shares are purchased every month. Employees can withdraw
partnership shares from the SIP at any time although there are tax advantages if the shares are retained in the SIP for
at least three years.
Up to 2022 participants were awarded one matching share for every one partnership share they purchased, and from
2023 this was increased to two matching shares for every partnership share purchased. There are tax advantages if
the matching shares are retained in the SIP for at least three years.
Whilst employed by the Company, a participant will forfeit a corresponding number of matching shares if they choose
to transfer partnership shares out of the SIP within three years of the date of purchase.
Under normal circumstances, if a participant leaves the Company before the second anniversary of the date of award,
they will forfeit their matching shares. If they leave between two and three years of the date of award, they retain
their matching shares but those shares must be removed from the SIP and any tax advantages are lost. If a participant
leaves under special circumstances, they will retain all of their matching shares, regardless of how long they have been
held in the SIP.
Pre-IPO employee share plans
EMI Options
Prior to June 2014, the Company issued options to UK subsidiary undertakings\u2019 employees under the EMI Options
Scheme. Since then, the Company is not eligible to issue under the scheme.
Unapproved Options
The Company has an Unapproved Options Scheme for all employees of the Group. In accordance with standard
vesting terms, the full award will vest four years after the vesting start date, with 25% vesting on the first anniversary
of the vesting date and 6.25% every three months thereafter. If the options remain unexercised after a period of ten
years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the
options vest.
US Options Scheme 2
Options granted under the US Options Scheme 2 are Unapproved Options granted to US employees as either non-
qualifying options or incentive stock options. The US Options Scheme 2 has the same vesting period as Unapproved
Options. If the options remain unexercised after a period of ten years from the date of grant, the options expire.
Unvested options are forfeited if the employee leaves the Group before the options vest.
All share-based incentives are subject to service conditions. Such conditions are not taken into account in the fair
value of the service received. The fair value of services received in return for share-based incentives is measured
by reference to the fair value of share-based incentives granted. The estimate of the fair value of the share-based
incentives is measured using market prices. When market prices do not exist for shares or rights to shares with similar
characteristics, fair value is determined by using a valuation technique (either the Monte Carlo or Black-Scholes pricing
model as is most appropriate for each scheme).
Charge for the year
Included in operating expenses of the Group is a charge for share-based payments and associated social security
costs of \u00a35.6 million (2022: \u00a34.7 million) that arises from transactions accounted for as equity-settled share-based
payment transactions.
Movements in share plans Details of movements in the share schemes during the year are as follows:
Free shares and
EMI Options
Unapproved Options
matching shares
LTIP Awards
US Options Scheme
Total
Number and WAEP
Number and WAEP
Number and WAEP
Number and WAEP
Number and WAEP
Number and WAEP
Number
\u00a3
Number
\u00a3
Number
\u00a3
Number
\u00a3
Number
\u00a3
Number
\u00a3
Outstanding at
1 January 2022
299,000
0.027
5,142,084
0.317
2,857,7 73
\u2014
19,340,043
\u2014
2,819,280
0.431
30,458,180
0.106
Granted during
the year
\u2014
\u2014
\u2014
\u2014
3,131,344
\u2014
11,817,920
\u2014
\u2014
\u2014
14,949,264
\u2014
Exercised during
the year
(152,700)
0.027
(129,399)
0.417
\u2014
\u2014
(3,121,272)
\u2014
(2,383)
0.410
(3,405,754)
0.017
Forfeited during
the year
(5,000)
0.027
(2,789)
1.682
(1,155,891)
\u2014
(8,175,973)
\u2014
(625)
0.440
(9,340,278)
0.001
Outstanding at
31 December 2022
141,300
0.026
5,009,896
0.314
4,833,226
\u2014
19,860,718
\u2014
2,816,272
0.431
32,661,412
0.097
\u200a1
Free shares and
EMI Options
Unapproved Options
matching shares
LTIP Awards
US Options Scheme
Total
Number and WAEP
Number and WAEP
Number and WAEP
Number and WAEP
Number and WAEP
Number and WAEP
Number
\u00a3
Number
\u00a3
Number
\u00a3
Number
\u00a3
Number
\u00a3
Number
\u00a3
Outstanding at
1 January 2023
141,300
0.026
5,009,896
0.314
4,833,226
\u2014
19,860,718
\u2014
2,816,272
0.431
32,661,412
0.097
Granted during
the year
\u2014
\u2014
\u2014
\u2014
653,742
\u2014
21,443,472
\u2014
\u2014
\u2014
22,097, 214
\u2014
Exercised during the
year
(96,000)
0.027
(386,367)
0.143
(383,116)
\u2014
(2,971,351)
\u2014
(3,034)
0.516
(3,839,868)
0.014
Forfeited during
the year
\u2014
\u2014
(938)
0.440
(711,218)
\u2014
(4,792,300)
\u2014
(40,888)
0.522
0.004
(5,545,344)
Outstanding at
31 December 2023
45,300
0.024
4,622,591
0.328
4,392,634
\u2014
33,540,539
\u2014
2,772,350
0.429
0.068
45,373,414
1. Weighted average exercise price. The following table summarises information about the share awards outstanding at 31 December 2023:
Free shares and
EMI Options
Unapproved Options
matching shares
LTIP Awards
US Options
Total
Range of exercise
Number and WARCL
1
Number and WARCL
Number and WARCL
Number and WARCL
Number and WARCL
Number and WARCL
prices
Years
Number
Number
Years
Number
Years
Years
Number
Years
Number
Years
Number
\u00a30\u2013\u00a30.008
\u2014
\u2014
2,190,017
4.4
4,392,634
\u2014
8.4
33,540,539
\u2014
\u2014
7.3
40,123,190
\u00a30.009\u2013\u00a30.176
0.4
45,300
18,438
1.1
\u2014
\u2014
\u2014
\u2014
0.4
24,302
0.5
88,040
\u00a30.177\u2013\u00a30.471
\u2014
\u2014
2,045,498
3.2
\u2014
\u2014
\u2014
\u2014
1.8
2,150,665
2.4
4,196,163
\u00a30.472\u2013\u00a31.75
\u2014
\u2014
368,638
4.5
\u2014
\u2014
\u2014
\u2014
4.5
597,383
4.5
966,021
0.4
45,300
4,622,591
3.8
4,392,634
\u2014
8.4
33,540,539
2.3
2,772,350
6.7
45,373,414
The following table summarises information about the share awards outstanding at 31 December 2022:
Free shares and
EMI Options
Unapproved Options
matching shares
LTIP Awards
US Options
Total
Range of Number and WARCL
Number and WARCL
Number and WARCL
Number and WARCL
Number and WARCL
Number and WARCL
exercise prices
Number
Years
Number
Years
Years
Number
Years
Number
Number
Years
Years
Number
\u00a30\u2013\u00a30.008
\u2014
\u2014
2,260,017
5.4
\u2014
4,833,226
7.9
19,860,718
\u2014
\u2014
6.2
26,953,961
\u00a30.009\u2013\u00a30.176
141,300
0.8
214,142
0.5
\u2014
\u2014
\u2014
\u2014
24,302
1.4
0.6
379,744
\u00a30.177\u2013\u00a30.471
\u2014
\u2014
2,167,099
4.3
\u2014
\u2014
\u2014
\u2014
2,193,087
2.8
3.5
4,360,186
\u00a30.472\u2013\u00a31.75
\u2014
\u2014
368,638
5.5
\u2014
\u2014
\u2014
\u2014
598,883
5.4
5.4
9 67, 521
141,300
0.8
5,009,896
4.7
\u2014
4,833,226
7.9
19,860,718
2,816,272
3.3
5.8
32,661,412
1 1. Weighted average remaining contractual life
Unapproved Options Scheme
There have been no Unapproved Options granted since IPO in 2018. The weighted average fair values of options
granted under the Unapproved Options Scheme and the US Options Scheme ranged between \u00a30.73 and \u00a31.80 per
option respectively in the previous year. These values were determined using the Black-Scholes valuation model. The
significant inputs into the model are as follows:
31 December
Unapproved Options Scheme 2019
Share price (various times during the year)
\u00a31.89
Exercise price
\u00a3nil\u2013\u00a30.44
Expected life
4 years
Expected volatility
48%
Risk-free interest rate (between)
0.93%\u20131.02%
Dividend yield
Nil
Forward exchange rate \u2013 US Options (between)
0.769
LTIP Awards
Since all LTIP Awards were made post-IPO, the Company has used its share price at grant date as the fair value of the
LTIP Awards granted during the year to employees.
Free shares and matching shares
The Company has used its share price at grant date as the fair value of free shares and matching shares granted during
the year to employees.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-325": { "value": "
20. Notes to the consolidated statement of cash flows
Cash outflow from operating activities
31 December
31 December 2022
2023 (re-presented)\u200a
\u00a3m \u00a3m
Loss before taxation
(33.2)
(12.9)
Adjustments for:
Depreciation of property, plant and equipment
4.3
5.1
Amortisation of intangible assets
12.4
10.1
Impairment of ROU assets and investment in sublease
6.2
1.8
Interest payable
0.6
0.9
Non-cash employee benefits expense \u2013 share-based payments and associated social
security costs
5.6
4.7
Fair value losses/(gains)
(8.7)
(4.8)
Movement in restructuring provision
\u2014
(0.2)
Movement in loan repurchase liability
(0.4)
(1.8)
Movement in other provisions
0.9
(0.1)
Share of gains of associates
(0.1)
(0.4)
Other non-cash movements
5.1
1.4
Changes in working capital
Movement in trade and other receivables
(13.5)
8.8
Movement in trade and other payables
34.7
(3.7)
Tax paid
(0.6)
(1.0)
Originations of lines of credit
(230.4)
(59.6)
Cash receipts from lines of credit
191.5
43.6
Net cash outflow from operating activities
(25.6)
(8.1)
1
1. The comparative year to 31 December 2022 has been re-presented to present \u201cInterest received\u201d which was previously a component of investing activities as a
component of operating income to mirror the re-presentation of interest on cash and cash equivalents within \u201cInterest income\u201d which was previously presented
within \u201cFinance income\u201d on the consolidated statement of comprehensive income. As a result it is not disclosed separately above.
Cash and cash equivalents
31 December 31 December
2023 2022
\u00a3m \u00a3m
Cash and cash equivalents
221.4
17 7.7
The cash and cash equivalents balance is made up of cash and money market funds. The carrying amount of
these assets is approximately equal to their fair value. Included within cash and cash equivalents above is a total of
\u00a351.8 million (2022: \u00a312.1 million) in cash which is restricted in use. Of this, \u00a31.1 million (2022: \u00a31.1 million) is restricted
in use in the event of rental payment defaults and cash held in the securitisation SPVs of \u00a3nil (2022: \u00a32.9 million) which
has been collected for onpayment to bond holders and is therefore restricted in its use. \u00a331.1 million (2022: \u00a38.1 million)
of cash is held which is restricted in use to repaying investors in CBILS and RLS loans and paying CBILS and RLS-
related costs to the UK government. A further \u00a319.6 million (2022: \u00a3nil) of cash is held which is restricted for use in the
FlexiPay warehouse.
At 31 December 2023, money market funds totalled \u00a3150.1 million (2022: \u00a3121.6 million).
Analysis of changes in liabilities from financing activities
1 January Exchange Other non-cash 31 December
2022 Cash flow movements movements 2022
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Bank borrowings
(73.2)
57.9
(7.3)
\u2014
(22.6)
Bonds
(140.3)
129.1
(8.1)
(4.4)
(23.7)
Lease liabilities
(23.9)
7.3
(1.6)
(1.6)
(19.8)
Liabilities from financing activities
(237.4)
194.3
(17.0)
(6.0)
(66.1)
1 January Exchange Other non-cash 31 December
2023 Cash flow movements movements 2023
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Bank borrowings
(22.6)
(34.9)
0.6
\u2014
(56.9)
Bonds
(23.7)
23.4
0.6
(0.3)
\u2014
Lease liabilities
(19.8)
7.2
0.6
(0.6)
(12.6)
Liabilities from financing activities
(66.1)
(4.3)
1.8
(0.9)
(69.5)
", "dimensions": { "concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-383": { "value": "Cash and cash equivalents
31 December 31 December
2023 2022
\u00a3m \u00a3m
Cash and cash equivalents
221.4
17 7.7
The cash and cash equivalents balance is made up of cash and money market funds. The carrying amount of these assets is approximately equal to their fair value. Included within cash and cash equivalents above is a total of \u00a351.8 million (2022: \u00a312.1 million) in cash which is restricted in use. Of this, \u00a31.1 million (2022: \u00a31.1 million) is restricted in use in the event of rental payment defaults and cash held in the securitisation SPVs of \u00a3nil (2022: \u00a32.9 million) which has been collected for onpayment to bond holders and is therefore restricted in its use. \u00a331.1 million (2022: \u00a38.1 million) of cash is held which is restricted in use to repaying investors in CBILS and RLS loans and paying CBILS and RLS- related costs to the UK government. A further \u00a319.6 million (2022: \u00a3nil) of cash is held which is restricted for use in the FlexiPay warehouse. At 31 December 2023, money market funds totalled \u00a3150.1 million (2022: \u00a3121.6 million). ", "dimensions": { "concept": "ifrs-full:DisclosureOfRestrictedCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-367": { "value": "Cash and cash equivalents
31 December 31 December
2023 2022
\u00a3m \u00a3m
Cash and cash equivalents
221.4
17 7.7
The cash and cash equivalents balance is made up of cash and money market funds. The carrying amount of these assets is approximately equal to their fair value. Included within cash and cash equivalents above is a total of \u00a351.8 million (2022: \u00a312.1 million) in cash which is restricted in use. Of this, \u00a31.1 million (2022: \u00a31.1 million) is restricted in use in the event of rental payment defaults and cash held in the securitisation SPVs of \u00a3nil (2022: \u00a32.9 million) which has been collected for onpayment to bond holders and is therefore restricted in its use. \u00a331.1 million (2022: \u00a38.1 million) of cash is held which is restricted in use to repaying investors in CBILS and RLS loans and paying CBILS and RLS- related costs to the UK government. A further \u00a319.6 million (2022: \u00a3nil) of cash is held which is restricted for use in the FlexiPay warehouse. At 31 December 2023, money market funds totalled \u00a3150.1 million (2022: \u00a3121.6 million). ", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-366": { "value": "Analysis of changes in liabilities from financing activities
1 January Exchange Other non-cash 31 December
2022 Cash flow movements movements 2022
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Bank borrowings
(73.2)
57.9
(7.3)
\u2014
(22.6)
Bonds
(140.3)
129.1
(8.1)
(4.4)
(23.7)
Lease liabilities
(23.9)
7.3
(1.6)
(1.6)
(19.8)
Liabilities from financing activities
(237.4)
194.3
(17.0)
(6.0)
(66.1)
1 January Exchange Other non-cash 31 December
2023 Cash flow movements movements 2023
\u00a3m \u00a3m \u00a3m \u00a3m \u00a3m
Bank borrowings
(22.6)
(34.9)
0.6
\u2014
(56.9)
Bonds
(23.7)
23.4
0.6
(0.3)
\u2014
Lease liabilities
(19.8)
7.2
0.6
(0.6)
(12.6)
Liabilities from financing activities
(66.1)
(4.3)
1.8
(0.9)
(69.5)
", "dimensions": { "concept": "ifrs-full:DisclosureOfReconciliationOfLiabilitiesArisingFromFinancingActivitiesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-326": { "value": "
21. Operating lease arrangements
As disclosed in notes 1 and 9, leases of low-value items or short-term leases continue to be treated as
operating leases.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Lease payments under operating leases recognised as an expense in the year
0.4
0.3
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under
non-cancellable operating leases of \u00a30.3 million (2022: \u00a30.7 million).
Operating lease payments represent payments for lease assets that are individually considered low value.
", "dimensions": { "concept": "fundingcircle:DisclosureOfOperatingLeaseArrangements", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-327": { "value": "
22. Dividends per share
No ordinary dividends were declared or paid in the current or previous financial years.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-330": { "value": "
23. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated
on consolidation and are not disclosed in this note.
Compensation of key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling the activities of the Group. The Group\u2019s key management personnel comprises the Global Leadership Team
(\u201cGLT\u201d), which is made up of the Executive Directors and other senior management as defined in note 3 as the chief
operating decision maker (\u201cCODM\u201d) and the Non-Executive Directors of the Group.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Salaries and short-term benefits
4.8
5.1
Equity-based compensation
2.0
1.3
Post-employment benefits
0.1
0.1
6.9
6.5
Further details on Directors\u2019 remuneration are disclosed in the Remuneration Report in the Corporate Governance
section of the Annual Report and Accounts on pages 94 to 116.
Transactions with other related parties
During the year, the Group received capital redemptions of \u00a31.1 million (2022: \u00a35.1 million) and received dividends of
\u00a30.1 million (2022: \u00a30.3 million) from entities accounted for as associates.
During the year, the Group received service fees from loans held by Knightrider Lending Designated Activity Company
of \u00a3nil (2022: \u00a30.1 million) and from Throgmorton Lending Designated Activity Company of \u00a30.3 million (2022:
\u00a30.4 million). These entities are subsidiaries of the Group\u2019s associates, as detailed in note 27.
", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-368": { "value": "23. Related party transactions Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Compensation of key management personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. The Group\u2019s key management personnel comprises the Global Leadership Team (\u201cGLT\u201d), which is made up of the Executive Directors and other senior management as defined in note 3 as the chief operating decision maker (\u201cCODM\u201d) and the Non-Executive Directors of the Group.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Salaries and short-term benefits
4.8
5.1
Equity-based compensation
2.0
1.3
Post-employment benefits
0.1
0.1
6.9
6.5
Further details on Directors\u2019 remuneration are disclosed in the Remuneration Report in the Corporate Governance section of the Annual Report and Accounts on pages 94 to 116. Transactions with other related parties During the year, the Group received capital redemptions of \u00a31.1 million (2022: \u00a35.1 million) and received dividends of \u00a30.1 million (2022: \u00a30.3 million) from entities accounted for as associates. During the year, the Group received service fees from loans held by Knightrider Lending Designated Activity Company of \u00a3nil (2022: \u00a30.1 million) and from Throgmorton Lending Designated Activity Company of \u00a30.3 million (2022: \u00a30.4 million). These entities are subsidiaries of the Group\u2019s associates, as detailed in note 27.", "dimensions": { "concept": "ifrs-full:DisclosureOfTransactionsBetweenRelatedPartiesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-384": { "value": "Compensation of key management personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. The Group\u2019s key management personnel comprises the Global Leadership Team (\u201cGLT\u201d), which is made up of the Executive Directors and other senior management as defined in note 3 as the chief operating decision maker (\u201cCODM\u201d) and the Non-Executive Directors of the Group.
31 December 31 December
2023 2022
\u00a3m \u00a3m
Salaries and short-term benefits
4.8
5.1
Equity-based compensation
2.0
1.3
Post-employment benefits
0.1
0.1
6.9
6.5
Further details on Directors\u2019 remuneration are disclosed in the Remuneration Report in the Corporate Governance section of the Annual Report and Accounts on pages 94 to 116. ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-328": { "value": "
24. Ultimate controlling party
In the opinion of the Directors, the Group does not have a single ultimate controlling party.
", "dimensions": { "concept": "fundingcircle:DisclosureOfUltimateControllingParty", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-329": { "value": "
25. Contingent liabilities and commitments
As part of the ongoing business, the Group has operational requirements with its investors. At any point in time, it
is possible that a particular investor may expect the Group to buy back their loan if the terms of business had not
been fully complied with. Where a loan is bought back it is presented within SME loans (other) on the face of the
consolidated balance sheet and held at amortised cost under IFRS 9.
In common with other businesses, the Group is involved from time to time in disputes in the ordinary course of
business. There are no active cases expected to have a material adverse financial impact on the Group.
The Group has commitments related to undrawn amounts on issued FlexiPay lines of credit. At 31 December 2023,
there were undrawn commitments of \u00a3157.3 million (2022: \u00a341.6 million). An expected credit loss impairment allowance
is held within other provisions by the Group of \u00a31.4 million (2022: \u00a30.3 million) in relation to the estimated credit losses
the Group may be exposed to on these undrawn lines of credit.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-393": { "value": "25. Contingent liabilities and commitments As part of the ongoing business, the Group has operational requirements with its investors. At any point in time, it is possible that a particular investor may expect the Group to buy back their loan if the terms of business had not been fully complied with. Where a loan is bought back it is presented within SME loans (other) on the face of the consolidated balance sheet and held at amortised cost under IFRS 9. In common with other businesses, the Group is involved from time to time in disputes in the ordinary course of business. There are no active cases expected to have a material adverse financial impact on the Group. The Group has commitments related to undrawn amounts on issued FlexiPay lines of credit. At 31 December 2023, there were undrawn commitments of \u00a3157.3 million (2022: \u00a341.6 million). An expected credit loss impairment allowance is held within other provisions by the Group of \u00a31.4 million (2022: \u00a30.3 million) in relation to the estimated credit losses the Group may be exposed to on these undrawn lines of credit.", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-385": { "value": "25. Contingent liabilities and commitments As part of the ongoing business, the Group has operational requirements with its investors. At any point in time, it is possible that a particular investor may expect the Group to buy back their loan if the terms of business had not been fully complied with. Where a loan is bought back it is presented within SME loans (other) on the face of the consolidated balance sheet and held at amortised cost under IFRS 9. In common with other businesses, the Group is involved from time to time in disputes in the ordinary course of business. There are no active cases expected to have a material adverse financial impact on the Group. The Group has commitments related to undrawn amounts on issued FlexiPay lines of credit. At 31 December 2023, there were undrawn commitments of \u00a3157.3 million (2022: \u00a341.6 million). An expected credit loss impairment allowance is held within other provisions by the Group of \u00a31.4 million (2022: \u00a30.3 million) in relation to the estimated credit losses the Group may be exposed to on these undrawn lines of credit.", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-331": { "value": "
26. Subsequent events
At the year end date, the Directors were considering the future direction of the US business. Whilst the US continues
to offer attractive growth, it will require significant cash and capital under the SBA programme. Against this, we have
determined that a simpler, more profitable UK business will deliver greater shareholder value with improved profitability
and cash generation.
We have now reached a point, in March 2024, where we have announced our decision to focus on the UK opportunity
and that we are in discussion with third parties regarding the US business. The financial impact of this is yet to be
quantified.
In March 2024, the Group announced and commenced purchases under a discretionary programme to purchase
ordinary shares of \u00a30.001 each in its share capital, up to maximum consideration of \u00a325 million, because the share
price materially undervalues the business. Funding Circle intends to conduct the programme in accordance with and
under the terms of and capacity available under the general authority granted by its shareholders at its Annual General
Meeting held on 11 May 2023, subject to available distributable reserves.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-332": { "value": "
27. Interests in other entities
Investments in subsidiaries
The Group had the following subsidiaries, all of which have been included in these consolidated financial statements.
The proportion of the voting rights in subsidiary undertakings held directly by the Company does not differ from the
proportion of ordinary shares held.
Proportion of Directly/
Place of ownership indirectly
Subsidiary undertakings incorporation interest
held
Registered office address
Funding Circle Ltd
UK
100%
Directly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Asset Finance Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle BB Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Eclipse Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Focal Point Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Global Partners Limited
UK
100%
Directly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Midco Limited
UK
100%
Directly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Property Finance Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Trustee Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Made To Do More Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Horizon Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Polaris Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle USA, Inc.
USA
100%
Directly
707 17th Street, Suite 2200 Denver, CO 80202
Funding Circle Notes Program, LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC Marketplace, LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
Funding Circle Investor Funds, LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC Depositor US LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC Capital US III LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC SBA Lending LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
Funding Circle CE GmbH
Germany
100%
Directly
Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Deutschland GmbH
Germany
100%
Indirectly
Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Connect GmbH
Germany
100%
Indirectly
Rheinstra\u00dfe 11, 14513 Teltow
FC Forderungsmanagement GmbH
Germany
100%
Indirectly
Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Espana S.L.
Spain
100%
Indirectly
Calle Claudio Coello n\u00famero 91,
3a planta, 28006 Madrid
Funding Circle Nederland B.V.
Netherlands
100%
Indirectly
Atrium, Strawinskylaan 3075,
4th Floor, 1077 ZX Amsterdam
Investments in associates
Set out below are the associates of the Group as at 31 December 2023 which, in the opinion of the Directors, are
material to the Group. The entities listed below have share capital consisting solely of ordinary shares, which are held
directly by the Group. The country of incorporation or registration is also their principal place of business, and the
proportion of ownership interest is the same as the proportion of voting rights held.
Proportion of Directly/
Place of ownership indirectly
Associate entity name incorporation interest
held
Registered office address
Funding Circle UK SME Direct
Ireland
8%
Indirectly
70, Sir John Rogerson\u2019s Quay, Dublin 2,
Lending Fund I\u00b9 Ireland
1. Private sub-fund held via the Funding Circle ICAV, an Irish collective asset-management vehicle constituted as an umbrella fund with registered office address
of 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland.
The associates outlined above directly hold investments in subsidiary entities as detailed below, which are considered
to be related parties of the Group.
Place of % ownership by
Other related party name
incorporation
Relationship
associate
Immediate parent entity
Registered office address
Throgmorton
Ireland
Subsidiary
100%
Funding Circle UK SME Direct
70, Sir John Rogerson\u2019s Quay,
Lending Designated of associate Lending Fund I Dublin 2, Ireland
Activity Company
The tables below provide summarised financial information for those associates that are material to the Group. The
information disclosed reflects the amounts presented in the financial statements of the relevant associates and
not Funding Circle Holdings plc\u2019s share of those amounts. They have been amended to reflect adjustments made
by the entity when using the equity method, including modifications for differences in accounting policy. While the
Group holds less than 20% ownership in Funding Circle UK SME Direct Lending Fund I, the Group considers that it
has significant influence over the entity through representation on its Board and so continues to account for it as an
associate instead of a trade investment.
The associates are sub-funds which invest in SME loans, and the Group is exposed to default and prepayment risk
with respect to the performance of the underlying loans in the associates, to the extent that the share of profit from
associates may diminish. The table below illustrates the Group\u2019s maximum exposure to the investment in associate
which represents the value on the Group balance sheet. The value of the investment is derived from net asset value
statements from the sub-funds; however, being private, these are not from observable market data, and therefore the
fair value is considered to be aligned to the carrying value.
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
31 December 31 December
2023 2022
Summarised balance sheet (Group\u2019s share) \u00a3m \u00a3m
Non-current assets
1.2
2.4
Current assets
0.3
0.3
Current liabilities
\u2014
\u2014
Non-current liabilities
\u2014
\u2014
Net assets
1.5
2.7
Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s
consolidated financial statements
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
2023 2022
\u00a3m \u00a3m
Opening net assets as at 1 January
32.5
51.3
Profit for the year
1.1
3.2
Exchange differences
\u2014
\u2014
Other comprehensive income
\u2014
\u2014
Capital redemptions in the year
(13.8)
(18.1)
Dividends paid in the year
(1.5)
(3.9)
Closing net assets as at 31 December
18.3
32.5
Group\u2019s share in %
8.3%
8.3%
Group\u2019s share of net assets as at 31 December
1.5
2.7
Accounting policy alignment
\u2014
\u2014
Group\u2019s carrying amount
1.5
2.7
Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s
consolidated financial statements continued
Summarised statement of comprehensive income (Group\u2019s share)
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
2023 2022
\u00a3m \u00a3m
Gross income
0.2
0.3
Profit for the year
0.1
0.4
Other comprehensive income
\u2014
\u2014
Total comprehensive income
0.1
0.4
Dividends received from associates
0.1
0.3
Capital redemptions received from associates
1.1
1.5
Interest in other entities
Stichting Derdengelden Funding Circle is not a direct or indirect subsidiary of Funding Circle Holdings plc but is an
independent special purpose foundation which is required in the Netherlands to safeguard borrower and investor funds
and is consolidated as it is controlled by the Group. The registered office address is Atrium, Strawinskylaan 3075, 4th
Floor, 1077 ZX Amsterdam.
The Funding Circle Holdings Employee Benefit Trust was established on 14 September 2018. The purpose of the trust
is to facilitate the acquisition of shares in the Company by, or for the benefit of, existing and future employees of the
Company and Group subsidiaries and is consolidated as it is controlled by the Group.
Consolidated structured entities: Small Business Origination Loan Trust 2019-3 DAC, Great Trinity Lending 1 DAC,
Small Business Lending Trust 2019-A, Small Business Lending Grantor Trust 2019-A, Small Business Lending Trust
2020-A and Small Business Lending Grantor Trust 2020-A were consolidated structured warehouse and securitisation
entities which either hold SME loan assets in a warehouse or hold the portfolio of SME loans and issued bonds after
securitisation has occurred.
Kanaloa 2 Limited (\u201cK2\u201d) is a consolidated UK leveraged SPV warehouse that has been set up with the intention of
funding FlexiPay lines of credit through the use of a senior lending facility.
The entities are, or were, bankruptcy remote special purpose vehicles and as such there is no requirement for the
Group to provide financial support to the entities. The entities\u2019 activities are not governed by voting rights and the
Group has assessed that it has power over the entities based on the purpose and design of the entity and ability to
direct the relevant activities of the entity, the nature of the relationship with the entity and the size of its exposure to
the variability of the returns from each entity.
As explained in note 14, the Group experiences credit risk in relation to the SME loan assets and FlexiPay lines of credit net of bank borrowings, and interest rate risk in relation to the warehouse loan facilities which is partially mitigated through the use of derivative financial instruments. The principal activities of the Group\u2019s most significant subsidiary undertakings are set out below. These are considered significant in the context of the Group\u2019s business, results and financial position.
Subsidiary undertakings
Principal activity
Funding Circle Ltd
Acts as facilitator and performs intermediary services in respect of all loans made through
the Funding Circle platform in the UK and FlexiPay lines of credit.
Funding Circle USA, Inc.
The US operating subsidiary of Funding Circle. Acts as the administrator of the Funding
Circle platform in the US.
FC Marketplace, LLC
Acts as originator and servicer of all loans made through the Funding Circle platform in
the US. FC Marketplace, LLC sells each loan it originates, on a servicing retained basis, to
third party institutional investors or to affiliates (e.g. Funding Circle Notes Program, LLC)
on an arm\u2019s length basis.
Funding Circle execs Program, LLC
A special purpose bankruptcy remote entity which issues loan payment dependent
debt securities to accredited investors. It uses the proceeds to purchase a specific
corresponding loan made through the Funding Circle platform from FC Marketplace, LLC.
The entity retains the contractual rights to receive the cash flows from the loan assets it
has purchased, but has assumed a contractual obligation to pay those cash flows to the
holders of the debt securities. The eligibility criteria have been met to derecognise the
loan assets and associated issued debt securities as a pass-through arrangement
under IFRS 9.
Funding Circle Focal Point Subsidiary via which CBILS loans are originated and which holds legal title to loans which
Lending Limited are held via trust structures for the beneficial ownership of institutional investors.
Funding Circle Eclipse Subsidiary via which RLS loans are originated and which holds legal title to loans which
Lending Limited are held via trust structures for the beneficial ownership of institutional investors.
Funding Circle Deutschland GmbH
Operated the Funding Circle platform in Germany and services loans.
Funding Circle Nederland B.V.
Operated the Funding Circle platform in the Netherlands and services loans.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-394": { "value": "27. Interests in other entities Investments in subsidiaries The Group had the following subsidiaries, all of which have been included in these consolidated financial statements. The proportion of the voting rights in subsidiary undertakings held directly by the Company does not differ from the proportion of ordinary shares held.
Proportion of Directly/
Place of ownership indirectly
Subsidiary undertakings incorporation interest
held
Registered office address
Funding Circle Ltd
UK
100%
Directly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Asset Finance Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle BB Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Eclipse Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Focal Point Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Global Partners Limited
UK
100%
Directly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Midco Limited
UK
100%
Directly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Property Finance Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Trustee Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Made To Do More Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Horizon Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Polaris Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle USA, Inc.
USA
100%
Directly
707 17th Street, Suite 2200 Denver, CO 80202
Funding Circle Notes Program, LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC Marketplace, LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
Funding Circle Investor Funds, LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC Depositor US LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC Capital US III LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC SBA Lending LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
Funding Circle CE GmbH
Germany
100%
Directly
Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Deutschland GmbH
Germany
100%
Indirectly
Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Connect GmbH
Germany
100%
Indirectly
Rheinstra\u00dfe 11, 14513 Teltow
FC Forderungsmanagement GmbH
Germany
100%
Indirectly
Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Espana S.L.
Spain
100%
Indirectly
Calle Claudio Coello n\u00famero 91,
3a planta, 28006 Madrid
Funding Circle Nederland B.V.
Netherlands
100%
Indirectly
Atrium, Strawinskylaan 3075,
4th Floor, 1077 ZX Amsterdam
Investments in associates Set out below are the associates of the Group as at 31 December 2023 which, in the opinion of the Directors, are material to the Group. The entities listed below have share capital consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.
Proportion of Directly/
Place of ownership indirectly
Associate entity name incorporation interest
held
Registered office address
Funding Circle UK SME Direct
Ireland
8%
Indirectly
70, Sir John Rogerson\u2019s Quay, Dublin 2,
Lending Fund I\u00b9 Ireland
1. Private sub-fund held via the Funding Circle ICAV, an Irish collective asset-management vehicle constituted as an umbrella fund with registered office address of 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland. The associates outlined above directly hold investments in subsidiary entities as detailed below, which are considered to be related parties of the Group.
Place of % ownership by
Other related party name
incorporation
Relationship
associate
Immediate parent entity
Registered office address
Throgmorton
Ireland
Subsidiary
100%
Funding Circle UK SME Direct
70, Sir John Rogerson\u2019s Quay,
Lending Designated of associate Lending Fund I Dublin 2, Ireland
Activity Company
The tables below provide summarised financial information for those associates that are material to the Group. The information disclosed reflects the amounts presented in the financial statements of the relevant associates and not Funding Circle Holdings plc\u2019s share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including modifications for differences in accounting policy. While the Group holds less than 20% ownership in Funding Circle UK SME Direct Lending Fund I, the Group considers that it has significant influence over the entity through representation on its Board and so continues to account for it as an associate instead of a trade investment. The associates are sub-funds which invest in SME loans, and the Group is exposed to default and prepayment risk with respect to the performance of the underlying loans in the associates, to the extent that the share of profit from associates may diminish. The table below illustrates the Group\u2019s maximum exposure to the investment in associate which represents the value on the Group balance sheet. The value of the investment is derived from net asset value statements from the sub-funds; however, being private, these are not from observable market data, and therefore the fair value is considered to be aligned to the carrying value.
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
31 December 31 December
2023 2022
Summarised balance sheet (Group\u2019s share) \u00a3m \u00a3m
Non-current assets
1.2
2.4
Current assets
0.3
0.3
Current liabilities
\u2014
\u2014
Non-current liabilities
\u2014
\u2014
Net assets
1.5
2.7
Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s consolidated financial statements
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
2023 2022
\u00a3m \u00a3m
Opening net assets as at 1 January
32.5
51.3
Profit for the year
1.1
3.2
Exchange differences
\u2014
\u2014
Other comprehensive income
\u2014
\u2014
Capital redemptions in the year
(13.8)
(18.1)
Dividends paid in the year
(1.5)
(3.9)
Closing net assets as at 31 December
18.3
32.5
Group\u2019s share in %
8.3%
8.3%
Group\u2019s share of net assets as at 31 December
1.5
2.7
Accounting policy alignment
\u2014
\u2014
Group\u2019s carrying amount
1.5
2.7
Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s consolidated financial statements continued Summarised statement of comprehensive income (Group\u2019s share)
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
2023 2022
\u00a3m \u00a3m
Gross income
0.2
0.3
Profit for the year
0.1
0.4
Other comprehensive income
\u2014
\u2014
Total comprehensive income
0.1
0.4
Dividends received from associates
0.1
0.3
Capital redemptions received from associates
1.1
1.5
Interest in other entities Stichting Derdengelden Funding Circle is not a direct or indirect subsidiary of Funding Circle Holdings plc but is an independent special purpose foundation which is required in the Netherlands to safeguard borrower and investor funds and is consolidated as it is controlled by the Group. The registered office address is Atrium, Strawinskylaan 3075, 4th Floor, 1077 ZX Amsterdam. The Funding Circle Holdings Employee Benefit Trust was established on 14 September 2018. The purpose of the trust is to facilitate the acquisition of shares in the Company by, or for the benefit of, existing and future employees of the Company and Group subsidiaries and is consolidated as it is controlled by the Group. Consolidated structured entities: Small Business Origination Loan Trust 2019-3 DAC, Great Trinity Lending 1 DAC, Small Business Lending Trust 2019-A, Small Business Lending Grantor Trust 2019-A, Small Business Lending Trust 2020-A and Small Business Lending Grantor Trust 2020-A were consolidated structured warehouse and securitisation entities which either hold SME loan assets in a warehouse or hold the portfolio of SME loans and issued bonds after securitisation has occurred. Kanaloa 2 Limited (\u201cK2\u201d) is a consolidated UK leveraged SPV warehouse that has been set up with the intention of funding FlexiPay lines of credit through the use of a senior lending facility. The entities are, or were, bankruptcy remote special purpose vehicles and as such there is no requirement for the Group to provide financial support to the entities. The entities\u2019 activities are not governed by voting rights and the Group has assessed that it has power over the entities based on the purpose and design of the entity and ability to direct the relevant activities of the entity, the nature of the relationship with the entity and the size of its exposure to the variability of the returns from each entity. As explained in note 14, the Group experiences credit risk in relation to the SME loan assets and FlexiPay lines of credit net of bank borrowings, and interest rate risk in relation to the warehouse loan facilities which is partially mitigated through the use of derivative financial instruments. The principal activities of the Group\u2019s most significant subsidiary undertakings are set out below. These are considered significant in the context of the Group\u2019s business, results and financial position.
Subsidiary undertakings
Principal activity
Funding Circle Ltd
Acts as facilitator and performs intermediary services in respect of all loans made through
the Funding Circle platform in the UK and FlexiPay lines of credit.
Funding Circle USA, Inc.
The US operating subsidiary of Funding Circle. Acts as the administrator of the Funding
Circle platform in the US.
FC Marketplace, LLC
Acts as originator and servicer of all loans made through the Funding Circle platform in
the US. FC Marketplace, LLC sells each loan it originates, on a servicing retained basis, to
third party institutional investors or to affiliates (e.g. Funding Circle Notes Program, LLC)
on an arm\u2019s length basis.
Funding Circle execs Program, LLC
A special purpose bankruptcy remote entity which issues loan payment dependent
debt securities to accredited investors. It uses the proceeds to purchase a specific
corresponding loan made through the Funding Circle platform from FC Marketplace, LLC.
The entity retains the contractual rights to receive the cash flows from the loan assets it
has purchased, but has assumed a contractual obligation to pay those cash flows to the
holders of the debt securities. The eligibility criteria have been met to derecognise the
loan assets and associated issued debt securities as a pass-through arrangement
under IFRS 9.
Funding Circle Focal Point Subsidiary via which CBILS loans are originated and which holds legal title to loans which
Lending Limited are held via trust structures for the beneficial ownership of institutional investors.
Funding Circle Eclipse Subsidiary via which RLS loans are originated and which holds legal title to loans which
Lending Limited are held via trust structures for the beneficial ownership of institutional investors.
Funding Circle Deutschland GmbH
Operated the Funding Circle platform in Germany and services loans.
Funding Circle Nederland B.V.
Operated the Funding Circle platform in the Netherlands and services loans.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCompositionOfGroupExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-386": { "value": "Investments in subsidiaries The Group had the following subsidiaries, all of which have been included in these consolidated financial statements. The proportion of the voting rights in subsidiary undertakings held directly by the Company does not differ from the proportion of ordinary shares held.
Proportion of Directly/
Place of ownership indirectly
Subsidiary undertakings incorporation interest
held
Registered office address
Funding Circle Ltd
UK
100%
Directly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Asset Finance Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle BB Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Eclipse Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Focal Point Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Global Partners Limited
UK
100%
Directly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Midco Limited
UK
100%
Directly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Property Finance Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Trustee Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Made To Do More Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Horizon Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle Polaris Lending Limited
UK
100%
Indirectly
71 Queen Victoria Street, London EC4V 4AY
Funding Circle USA, Inc.
USA
100%
Directly
707 17th Street, Suite 2200 Denver, CO 80202
Funding Circle Notes Program, LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC Marketplace, LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
Funding Circle Investor Funds, LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC Depositor US LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC Capital US III LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
FC SBA Lending LLC
USA
100%
Indirectly
707 17th Street, Suite 2200 Denver, CO 80202
Funding Circle CE GmbH
Germany
100%
Directly
Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Deutschland GmbH
Germany
100%
Indirectly
Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Connect GmbH
Germany
100%
Indirectly
Rheinstra\u00dfe 11, 14513 Teltow
FC Forderungsmanagement GmbH
Germany
100%
Indirectly
Rheinstra\u00dfe 11, 14513 Teltow
Funding Circle Espana S.L.
Spain
100%
Indirectly
Calle Claudio Coello n\u00famero 91,
3a planta, 28006 Madrid
Funding Circle Nederland B.V.
Netherlands
100%
Indirectly
Atrium, Strawinskylaan 3075,
4th Floor, 1077 ZX Amsterdam
Interest in other entities Stichting Derdengelden Funding Circle is not a direct or indirect subsidiary of Funding Circle Holdings plc but is an independent special purpose foundation which is required in the Netherlands to safeguard borrower and investor funds and is consolidated as it is controlled by the Group. The registered office address is Atrium, Strawinskylaan 3075, 4th Floor, 1077 ZX Amsterdam. The Funding Circle Holdings Employee Benefit Trust was established on 14 September 2018. The purpose of the trust is to facilitate the acquisition of shares in the Company by, or for the benefit of, existing and future employees of the Company and Group subsidiaries and is consolidated as it is controlled by the Group. Consolidated structured entities: Small Business Origination Loan Trust 2019-3 DAC, Great Trinity Lending 1 DAC, Small Business Lending Trust 2019-A, Small Business Lending Grantor Trust 2019-A, Small Business Lending Trust 2020-A and Small Business Lending Grantor Trust 2020-A were consolidated structured warehouse and securitisation entities which either hold SME loan assets in a warehouse or hold the portfolio of SME loans and issued bonds after securitisation has occurred. Kanaloa 2 Limited (\u201cK2\u201d) is a consolidated UK leveraged SPV warehouse that has been set up with the intention of funding FlexiPay lines of credit through the use of a senior lending facility. The entities are, or were, bankruptcy remote special purpose vehicles and as such there is no requirement for the Group to provide financial support to the entities. The entities\u2019 activities are not governed by voting rights and the Group has assessed that it has power over the entities based on the purpose and design of the entity and ability to direct the relevant activities of the entity, the nature of the relationship with the entity and the size of its exposure to the variability of the returns from each entity.
As explained in note 14, the Group experiences credit risk in relation to the SME loan assets and FlexiPay lines of credit
net of bank borrowings, and interest rate risk in relation to the warehouse loan facilities which is partially mitigated
through the use of derivative financial instruments.
The principal activities of the Group\u2019s most significant subsidiary undertakings are set out below. These are considered
significant in the context of the Group\u2019s business, results and financial position.
Subsidiary undertakings
Principal activity
Funding Circle Ltd
Acts as facilitator and performs intermediary services in respect of all loans made through
the Funding Circle platform in the UK and FlexiPay lines of credit.
Funding Circle USA, Inc.
The US operating subsidiary of Funding Circle. Acts as the administrator of the Funding
Circle platform in the US.
FC Marketplace, LLC
Acts as originator and servicer of all loans made through the Funding Circle platform in
the US. FC Marketplace, LLC sells each loan it originates, on a servicing retained basis, to
third party institutional investors or to affiliates (e.g. Funding Circle Notes Program, LLC)
on an arm\u2019s length basis.
Funding Circle execs Program, LLC
A special purpose bankruptcy remote entity which issues loan payment dependent
debt securities to accredited investors. It uses the proceeds to purchase a specific
corresponding loan made through the Funding Circle platform from FC Marketplace, LLC.
The entity retains the contractual rights to receive the cash flows from the loan assets it
has purchased, but has assumed a contractual obligation to pay those cash flows to the
holders of the debt securities. The eligibility criteria have been met to derecognise the
loan assets and associated issued debt securities as a pass-through arrangement
under IFRS 9.
Funding Circle Focal Point Subsidiary via which CBILS loans are originated and which holds legal title to loans which
Lending Limited are held via trust structures for the beneficial ownership of institutional investors.
Funding Circle Eclipse Subsidiary via which RLS loans are originated and which holds legal title to loans which
Lending Limited are held via trust structures for the beneficial ownership of institutional investors.
Funding Circle Deutschland GmbH
Operated the Funding Circle platform in Germany and services loans.
Funding Circle Nederland B.V.
Operated the Funding Circle platform in the Netherlands and services loans.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-369": { "value": "Investments in associates Set out below are the associates of the Group as at 31 December 2023 which, in the opinion of the Directors, are material to the Group. The entities listed below have share capital consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.
Proportion of Directly/
Place of ownership indirectly
Associate entity name incorporation interest
held
Registered office address
Funding Circle UK SME Direct
Ireland
8%
Indirectly
70, Sir John Rogerson\u2019s Quay, Dublin 2,
Lending Fund I\u00b9 Ireland
1. Private sub-fund held via the Funding Circle ICAV, an Irish collective asset-management vehicle constituted as an umbrella fund with registered office address of 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland. The associates outlined above directly hold investments in subsidiary entities as detailed below, which are considered to be related parties of the Group.
Place of % ownership by
Other related party name
incorporation
Relationship
associate
Immediate parent entity
Registered office address
Throgmorton
Ireland
Subsidiary
100%
Funding Circle UK SME Direct
70, Sir John Rogerson\u2019s Quay,
Lending Designated of associate Lending Fund I Dublin 2, Ireland
Activity Company
The tables below provide summarised financial information for those associates that are material to the Group. The information disclosed reflects the amounts presented in the financial statements of the relevant associates and not Funding Circle Holdings plc\u2019s share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including modifications for differences in accounting policy. While the Group holds less than 20% ownership in Funding Circle UK SME Direct Lending Fund I, the Group considers that it has significant influence over the entity through representation on its Board and so continues to account for it as an associate instead of a trade investment. The associates are sub-funds which invest in SME loans, and the Group is exposed to default and prepayment risk with respect to the performance of the underlying loans in the associates, to the extent that the share of profit from associates may diminish. The table below illustrates the Group\u2019s maximum exposure to the investment in associate which represents the value on the Group balance sheet. The value of the investment is derived from net asset value statements from the sub-funds; however, being private, these are not from observable market data, and therefore the fair value is considered to be aligned to the carrying value.
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
31 December 31 December
2023 2022
Summarised balance sheet (Group\u2019s share) \u00a3m \u00a3m
Non-current assets
1.2
2.4
Current assets
0.3
0.3
Current liabilities
\u2014
\u2014
Non-current liabilities
\u2014
\u2014
Net assets
1.5
2.7
Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s consolidated financial statements
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
2023 2022
\u00a3m \u00a3m
Opening net assets as at 1 January
32.5
51.3
Profit for the year
1.1
3.2
Exchange differences
\u2014
\u2014
Other comprehensive income
\u2014
\u2014
Capital redemptions in the year
(13.8)
(18.1)
Dividends paid in the year
(1.5)
(3.9)
Closing net assets as at 31 December
18.3
32.5
Group\u2019s share in %
8.3%
8.3%
Group\u2019s share of net assets as at 31 December
1.5
2.7
Accounting policy alignment
\u2014
\u2014
Group\u2019s carrying amount
1.5
2.7
Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s consolidated financial statements continued Summarised statement of comprehensive income (Group\u2019s share)
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
2023 2022
\u00a3m \u00a3m
Gross income
0.2
0.3
Profit for the year
0.1
0.4
Other comprehensive income
\u2014
\u2014
Total comprehensive income
0.1
0.4
Dividends received from associates
0.1
0.3
Capital redemptions received from associates
1.1
1.5
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInAssociatesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-387": { "value": "Investments in associates Set out below are the associates of the Group as at 31 December 2023 which, in the opinion of the Directors, are material to the Group. The entities listed below have share capital consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.
Proportion of Directly/
Place of ownership indirectly
Associate entity name incorporation interest
held
Registered office address
Funding Circle UK SME Direct
Ireland
8%
Indirectly
70, Sir John Rogerson\u2019s Quay, Dublin 2,
Lending Fund I\u00b9 Ireland
1. Private sub-fund held via the Funding Circle ICAV, an Irish collective asset-management vehicle constituted as an umbrella fund with registered office address of 70, Sir John Rogerson\u2019s Quay, Dublin 2, Ireland. The associates outlined above directly hold investments in subsidiary entities as detailed below, which are considered to be related parties of the Group.
Place of % ownership by
Other related party name
incorporation
Relationship
associate
Immediate parent entity
Registered office address
Throgmorton
Ireland
Subsidiary
100%
Funding Circle UK SME Direct
70, Sir John Rogerson\u2019s Quay,
Lending Designated of associate Lending Fund I Dublin 2, Ireland
Activity Company
The tables below provide summarised financial information for those associates that are material to the Group. The information disclosed reflects the amounts presented in the financial statements of the relevant associates and not Funding Circle Holdings plc\u2019s share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including modifications for differences in accounting policy. While the Group holds less than 20% ownership in Funding Circle UK SME Direct Lending Fund I, the Group considers that it has significant influence over the entity through representation on its Board and so continues to account for it as an associate instead of a trade investment. The associates are sub-funds which invest in SME loans, and the Group is exposed to default and prepayment risk with respect to the performance of the underlying loans in the associates, to the extent that the share of profit from associates may diminish. The table below illustrates the Group\u2019s maximum exposure to the investment in associate which represents the value on the Group balance sheet. The value of the investment is derived from net asset value statements from the sub-funds; however, being private, these are not from observable market data, and therefore the fair value is considered to be aligned to the carrying value.
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
31 December 31 December
2023 2022
Summarised balance sheet (Group\u2019s share) \u00a3m \u00a3m
Non-current assets
1.2
2.4
Current assets
0.3
0.3
Current liabilities
\u2014
\u2014
Non-current liabilities
\u2014
\u2014
Net assets
1.5
2.7
Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s consolidated financial statements
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
2023 2022
\u00a3m \u00a3m
Opening net assets as at 1 January
32.5
51.3
Profit for the year
1.1
3.2
Exchange differences
\u2014
\u2014
Other comprehensive income
\u2014
\u2014
Capital redemptions in the year
(13.8)
(18.1)
Dividends paid in the year
(1.5)
(3.9)
Closing net assets as at 31 December
18.3
32.5
Group\u2019s share in %
8.3%
8.3%
Group\u2019s share of net assets as at 31 December
1.5
2.7
Accounting policy alignment
\u2014
\u2014
Group\u2019s carrying amount
1.5
2.7
Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s consolidated financial statements continued Summarised statement of comprehensive income (Group\u2019s share)
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
2023 2022
\u00a3m \u00a3m
Gross income
0.2
0.3
Profit for the year
0.1
0.4
Other comprehensive income
\u2014
\u2014
Total comprehensive income
0.1
0.4
Dividends received from associates
0.1
0.3
Capital redemptions received from associates
1.1
1.5
", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-398": { "value": "Reconciliation of associates\u2019 total shareholders\u2019 equity to carrying amount in Funding Circle Holdings plc\u2019s consolidated financial statements continued Summarised statement of comprehensive income (Group\u2019s share)
Funding Circle Funding Circle
UK UK
SME Direct SME Direct
Lending Fund I Lending Fund I
2023 2022
\u00a3m \u00a3m
Gross income
0.2
0.3
Profit for the year
0.1
0.4
Other comprehensive income
\u2014
\u2014
Total comprehensive income
0.1
0.4
Dividends received from associates
0.1
0.3
Capital redemptions received from associates
1.1
1.5
As explained in note 14, the Group experiences credit risk in relation to the SME loan assets and FlexiPay lines of credit net of bank borrowings, and interest rate risk in relation to the warehouse loan facilities which is partially mitigated through the use of derivative financial instruments. The principal activities of the Group\u2019s most significant subsidiary undertakings are set out below. These are considered significant in the context of the Group\u2019s business, results and financial position.
Subsidiary undertakings
Principal activity
Funding Circle Ltd
Acts as facilitator and performs intermediary services in respect of all loans made through
the Funding Circle platform in the UK and FlexiPay lines of credit.
Funding Circle USA, Inc.
The US operating subsidiary of Funding Circle. Acts as the administrator of the Funding
Circle platform in the US.
FC Marketplace, LLC
Acts as originator and servicer of all loans made through the Funding Circle platform in
the US. FC Marketplace, LLC sells each loan it originates, on a servicing retained basis, to
third party institutional investors or to affiliates (e.g. Funding Circle Notes Program, LLC)
on an arm\u2019s length basis.
Funding Circle execs Program, LLC
A special purpose bankruptcy remote entity which issues loan payment dependent
debt securities to accredited investors. It uses the proceeds to purchase a specific
corresponding loan made through the Funding Circle platform from FC Marketplace, LLC.
The entity retains the contractual rights to receive the cash flows from the loan assets it
has purchased, but has assumed a contractual obligation to pay those cash flows to the
holders of the debt securities. The eligibility criteria have been met to derecognise the
loan assets and associated issued debt securities as a pass-through arrangement
under IFRS 9.
Funding Circle Focal Point Subsidiary via which CBILS loans are originated and which holds legal title to loans which
Lending Limited are held via trust structures for the beneficial ownership of institutional investors.
Funding Circle Eclipse Subsidiary via which RLS loans are originated and which holds legal title to loans which
Lending Limited are held via trust structures for the beneficial ownership of institutional investors.
Funding Circle Deutschland GmbH
Operated the Funding Circle platform in Germany and services loans.
Funding Circle Nederland B.V.
Operated the Funding Circle platform in the Netherlands and services loans.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "fact-333": { "value": "
71 Queen Victoria Street
London
EC4V 4AY
", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:2138003EK6UAINBBUS19", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } } } }