26 March 2024
CAB
Payments Holdings plc and its subsidiaries
("CAB
Payments" or the "Group")
Preliminary Results
for the Financial Year Ended 31 December 2023
CAB Payments, a market leader in
business-to-business cross-border payments and foreign exchange,
specialising in hard-to-reach markets, announces financial results
for the year ended 31 December 2023.
Financial and Operating Summary:
·
Gross income1 increased 25% year-on-year to £137.1
million (2022: £109.4 million).
o Income growth
in all four client segments.
o Wholesale FX
and Payment FX income 1, when excluding Nigerian Naira,
increased 28% year-on-year
·
Adjusted EBITDA 1 £64.6 million, up 17% (2022:
£55.0 million).
o Adjusted
EBITDA margin1 47% (2022: 50%).
·
EBITDA1 down 12% at £43.5 million (2022: £49.7
million), largely driven by IPO related costs.
·
Total active clients increased 12% to 509 (2022:
456).
·
Banking partners increased 16% to 331 (2022: 287), including
17% growth in payment partners.
·
EU licence in final stages. US licence timeline H2 2024,
providing significant market opportunities.
Bhairav Trivedi, Chief Executive Officer of
CAB Payments, commented:
2023 was
another year of strong growth for the Group, with income ahead of
the prior year by 25%. We attracted 83 new clients to an
already high-quality list, made up of G10 government entities, some
of the world's best known international development organisations,
global remittance companies, emerging markets financial
institutions and, increasingly, major market banks. Clients
choose CAB Payments due to the strength of its banking and
technology network, its robust compliance culture, and the breadth
of its global banking partner relationships.
We are in
the final stages of the application process for our EU licence and
continue to expect our US licence to be granted in the second half
of this year. These licences will open up significant
additional sales channels for CAB Payments among high-quality
development organisations and remittance providers, who move
considerable sums into our key markets, and will also place
salespeople close to major market banks in both
geographies.
Selected Financial Information from Continuing
Operations (£m)
|
Twelve Months ended 31
December
|
Year on Year
growth
|
|
2023
|
2022
|
%
|
Gross Income 1
|
137.1
|
109.4
|
25%
|
Adjusted EBITDA 1
|
64.6
|
55.0
|
17%
|
Profit before Tax
|
37.6
|
43.9
|
(14%)
|
Profit after Tax
|
23.9
|
33.4
|
(29%)
|
Earnings Per Share (pence)
|
10.0
|
14.0
|
(29%)
|
|
|
|
|
Gross Income by Product Type from Continuing
Operations (£m)
|
Twelve Months ended 31
December
|
YoY
|
|
2023
|
2022
|
%
|
FX
|
68.5
|
63.4
|
8%
|
Payments
|
34.2
|
33.7
|
2%
|
Total
Transactional Income
|
102.7
|
97.1
|
6%
|
Other banking services
|
34.3
|
12.3
|
179%
|
Gross
Income
|
137.1
|
109.4
|
25%
|
|
|
|
| |
1 See alternative performance measures
on page 106 for definition.
Note: Rounding - Certain data in
this document has been rounded. As a result of the rounding, the
totals of data presented in this document may vary slightly from
the actual arithmetic totals of such data.
Analyst and Institutional Investor
webcast
A presentation webcast and live
Q&A conference call for analysts and institutional investors
will take place on March 26th
2024 at 9.30 am UK Time, and a webcast of the presentation
will be made available on the Group's website at
Investors
Home (cabpayments.com), where you can
also register for this event.
For further information, please
contact:
CAB Payments Holdings plc
Michael Goldfarb, Investor
Relations
investorrelations@cabpayments.com
www.cabpayments.com
|
|
|
|
FTI
Consulting
(Public Relations Adviser to CAB Payments)
Ed Bridges -
Edward.Bridges@fticonsulting.com
Katie Bell -
Katherine.Bell@fticonsulting.com
|
Tel:
+44 (0) 7768 216 607
+44 (0) 7976 870
961
|
The information in the preliminary announcement of the
results for the year ended 31 December 2023 was approved by the
Board of Directors on 25 March 2024 and does not constitute
statutory accounts as defined in Section 435 of the UK Companies
Act 2006.
The financial statements for the year ended 31 December 2022
were filed with the Registrar of Companies, and the audit report
was unqualified and contained no statements in respect of Sections
498 (2) and 498 (3) of the UK Companies Act 2006. The financial
statements for the year ended 31 December 2023 will be filed with
the Registrar of Companies in due course.
In
accordance with the Listing Rules of the UK Listing Authority,
these preliminary results have been agreed with the Company's
auditors, Mazars LLP, and the Directors have not been made aware of
any likely modification to the auditor's report to be included in
the Group's Annual Report and Accounts for the year ended 31
December 2023 and not expected to contain statements in respect of
Sections 498 (2) and 498 (3) of the UK Companies Act
2006.
The preliminary results have been prepared on a basis
consistent with the accounting policies set out in the Group's
Annual Report and Accounts for the year ended 31 December
2023.
Chair's Statement
I am delighted to present the
first annual results for CAB Payments Holdings plc (CPH or the
Company) as a listed business. CAB Payments, through its
client-facing brand of Crown Agents Bank, has a rich history and a
recent track record of strong growth. The business
specialises in moving crucial funds into developing countries,
whose growth and future welfare depend on it.
The Group can trace its history
back at least two hundred years and has become a vital part of a
financial support eco-system. In 2023 alone, CAB moved c.
£9.3 billion to developing economies to support humanitarian aid,
financial inclusion and remittance flows to local
populations.
2023 was a very eventful year for
the Group. The tremendous effort that went into generating
the strong growth this year was somewhat overshadowed by events
late in the year in two of our larger markets. These events
caused us to downgrade our short-term guidance on Group financial
performance. This was personally extremely
disappointing. However, the Group grew its income by 25% this
year, an excellent result under any other circumstances, and a
great springboard for future success.
Our clients include some of the
world's most important aid organisations and many key central banks
from developing nations. Feedback consistently shows that
these high-quality clients fully understand the financial strength
of CAB Payments, greatly value the service we offer and continue to
be comfortable placing their trust in us to move their money safely
and securely. We never take these relationships for granted
and continue to work hard to make them even stronger.
We remain focused on delivering
the potential of CAB Payments and are very confident about the
value this business is uniquely positioned to create.
Board and Governance
The Board structure has remained stable since
the Initial Public Offering (IPO) in July 2023, and meetings have
been both regular and ad-hoc. Your
Board is fully engaged in the performance of CAB Payments and the
Non-executive members of the Board seek to maintain direct contact
with all the members of the Executive team, to ensure they get a
broad and accurate view of the current challenges and opportunities
and to hear any concerns or suggestions each individual has to
offer.
I am pleased that the Board is
diverse, with a 60% female representation and an impressive range
of skills, experience and backgrounds. I do believe we can continue
to improve as we move forward to ensure we have an even broader
range of cultural and geographic backgrounds, with a specific focus
on the markets we serve.
In February 2024, we announced
that Neeraj Kapur will succeed Bhairav Trivedi as Chief Executive
Officer (CEO), subject to regulatory approval. The Board
would like to express their sincere gratitude to Bhairav, and we
are delighted he will continue to represent CAB Payments as a
senior adviser to the Board.
We welcome Neeraj to the Group. He
is a very experienced finance professional and will bring a new
perspective to the Group. Once approvals are complete, Neeraj
will replace Bhairav as an Executive member of the
Board.
Capital Allocation
CAB Payments has significant
potential for superior growth into the medium-to-long-term, and
this will be achieved through the successful execution of our
plans. This will require continued investment in
our operations, our capabilities, our network and our product
development - we will do nothing to endanger this. The Group
generates healthy profits and cashflow and we are confident this
will continue. By taking advantage
of the growth opportunities ahead and pursuing active cost
management and a capital light business model, the Group expects to
continue to generate significant free cash flow. We currently
anticipate that the majority of the growth will come through a
consistent capturing of market share in current and new
geographies, with a focused organic approach. The Board will
actively manage capital allocation with an emphasis on growth, but
will also consider distributions to shareholders at the appropriate
time, always seeking to make the right choice to maximise long-term
and sustainable shareholder value.
Looking Forward
CAB Payments is a leader in a very
sizeable niche. Being able to safely, rapidly and
cost-effectively move funds around the world within the confines of
a complex regulatory environment can be a daunting task, and it is
one best left to the experts. CAB Payments are experts.
Compliance is central to the business model, and we are
exceptionally proud of our UK banking licence; this sets us apart
from the competition and gives clients and prospective clients an
indication of the attention to detail and level of service they can
expect from us.
Our people are key to our success,
and we have great people. Their hard work and total
dedication during a period of continued growth is a testament to
their abilities, their experience and their talents. I wish
to thank them on behalf of the Board.
Your board and I, remain very
positive about the future. We will focus on building trust and
confidence in all our stakeholders, and on delivering on the
promises we have made.
I want to finish by thanking you,
our shareholders, for your continued support.
Ann Cairns
Chair - 25 March
2024
CEO Review
Strategic
Context
CAB Payments is a market leader in
business-to-business cross-border payments and FX. The Group has a
high-quality and growing client base, made up of G10 government
entities, some of the world's best known international development
organisations, global remittance companies, emerging markets
financial institutions and, increasingly, major market banks with a
global presence. The Group is a significant and growing
operator in a large and expanding market and has excelled to this
point due to the strength of its financial and technology network,
along with strong global relationships, with both partners and
clients.
While the Group is very capable in developed
markets and more than half its volume is transacted in these
currencies, its core advantages are most pronounced in
hard-to-reach emerging markets, with a particular current emphasis
on Africa. Continued success is dependent on a clear focus on
what we do best, providing an unrivalled and cost-efficient
service, and expanding our product set and geographic reach, in
response to client demands.
CAB Payments has a number of significant
growth drivers underpinning its long-term development:
· Large
addressable market undergoing a shift to specialist
providers;
· High-quality,
diverse client base;
· Global network
and infrastructure; and
· Multi-channel
emerging market platform.
All of this allows us to move money where it
is needed, resulting in a positive global impact.
Research supports the Group's view that the
market for cross border payments is shifting from traditional
global banks to specialist providers like CAB Payments. This
provides a tailwind and an opportunity. CAB Payments expects to
grow from here by exploiting this transition, increasing its client
base rapidly through new sales channels, gaining market share and
strengthening its presence in additional geographic currency
destinations to diversify its income streams.
Business
Performance
2023 was another year of strong growth for the
Group. While we recognise the business did not deliver as we had
anticipated in the second half of the year, it was still in
absolute and relative terms a good performance, with healthy growth
in income and profit, and sets the Group up well for further growth
in 2024 and beyond.
Income growth
overall and in Payments and FX
In the year, Group gross income was ahead of
the previous year by 25% at £137.1 million (2022: £109.4
million). Within this, we did experience some weakness in the
second half of the year, particularly in the fourth quarter, with
interventions in two of our key currency corridors. Income in
the first half of the year came in at £71.8 million (H1 2022: £37.0
million) and declined in the second half of the year to £65.3
million (H2 2022: £72.4 million) with, as mentioned, the fourth
quarter not delivering as expected, and the Nigerian Naira (NGN or
Naira) corridor significantly down year-on-year, as was forecast at
the time of the IPO in July 2023. Naira income was down in
2023 to £18 million (2022: £27.5 million), with £15.2 million of
this coming in the first half. This was more than offset by the
increase in net interest income from cash management, which
delivered £31.7 million in the year, up from £10.1 million in 2022.
Importantly, the transactional Wholesale FX and Payments FX income
grew by 7% year-on-year to £88.4 million (2022: £82.8 million);
excluding the Naira, which experienced well-documented elevated
conditions in 2022, the growth rate would have been 28%.
Robust
profitability and cash flow generation
EBITDA1 was down in
2023 by 12% to £43.5 million (2022: £49.7 million), due to
non-recurring items of £21.1 million, primarily costs directly
associated with the IPO in July (2022: £5.3 million). Excluding
non-recurring items, Adjusted EBITDA 1 was £64.6
million, up 17% (2022: £55.0 million). Reported profit after
tax from continuing operations in the year was down 29% at £23.9
million (2022: £33.4 million), again impacted by non-recurring
costs.
We continued to invest in the
business throughout the period, reflecting our confidence in the
growth potential of the Group over the medium term. Operating
costs, excluding non-recurring costs, were up by 30% at £77.9
million, primarily due to increased headcount and licensing and
support costs associated with the investments in our IT
infrastructure. Capital expenditure in the year was £7.4 million
(2022: £4.9 million). We continue to estimate that capital
investments for the 2024 will be around 8% of gross income, based
on projects in progress and in the pipeline, and that approximately
8-10% going forward would be the appropriate level to fully support
growth.
Stable
Business Model Focused on Areas of Commercial
Advantage
CAB Payments continued to extend
its client and network reach during the year. This extension
will, over time, provide a greater level of diversification and
growth potential and reduce the risk of a single event
significantly impacting financial performance, as we improve our
offering in other geographic regions. In the year the Group
added 83 new clients, of which around half were active in the year,
bringing the total number of active clients to 509 (2022:
456). Even allowing for the fact that a number of clients
onboarded late in the year wouldn't be expected to be active until
2024, the income contribution from new clients was below historic
averages. We are restructuring the onboarding and activation
process to address this and remove any friction from the early
stages of the client journey.
1. See alternative performance measures on page 106 for definition - see Note 3
to the consolidated financial statements.
In 2023, we added some significant
clients. Specific client relationships and identities are
often considered commercially confidential, but it is also
important to be able to help our stakeholders understand the
general prestige of those who choose to trust CAB Payments with
their business. In 2023, we onboarded many high-quality
clients, including Barclays, Inpay, Plan International and SNV
Global, joining such institutions as Save the Children
International, the Norwegian Refugee Council and
PagoNxt/Santander.
We are confident
they will go on to be important and valuable
long-term relationships. We are in negotiations with several
major financial institutions and expect some of these to begin
operating with CAB Payments in the very near future.
Successful progress in this client segment will be an important
driver of growth in the coming years.
We continued to extend our network
reach during 2023 - this is a clear differentiator for CAB Payments
in being able to deliver a cost effective and reliable service to
our clients, who place an incredible degree of trust in us.
In the year we increased the number of banking partners, including
Nostro accounts, liquidity providers and payment partners, by 44 to
331. These partnerships allow us to move client funds quickly
and reliably, whilst retaining full control of the end-to-end
journey. We are seeking to further deepen our network of
Nostros in geographic regions where complexity and market size
provide an opportunity for the Group or where our clients require
our solutions. CAB Payments' credibility and trust is
underpinned by our UK banking licence, and this provides us with an
advantage in developing relationships in other geographic
regions.
The nature of maximising the
impact of our competitive advantages, built up over many years,
means there is regional concentration in the income delivery. CAB
Payments specialises in regions where regulations are constantly
developing and where there is a level of uncertainty. This is
part of the reason why there is an ongoing market share shift from
global banking institutions to specialist providers like CAB
Payments and provides the opportunity for higher margins and future
volume growth.
In recent years, the Naira has
delivered a disproportionate degree of FX and payments income, due
to CAB Payments' inherently strong position in this market.
Although this continued into the first half of 2023, the NGN
represented less than 7% of transactional income in the second half
of the year, returning to a level more in line with medium-term
expectations.
There were negative surprises in
the fourth quarter of the year for two important currencies for the
business, the Central African franc (XAF) and the West African
franc (XOF). The central banks in these regions intervened,
in different ways, in an effort to support the currencies and shore
up the foreign currency reserves. These interventions had the
effect of significantly reducing the income towards the end of the
year from XAF and XOF, during a period when we were forecasting
significant strength in both currencies, causing the Group to
publicly reduce its income estimates for 2023. We understand this
reforecast had a significant impact on shareholder confidence and
we are focused on delivering on the great potential for CAB
Payments and re-establishing shareholder and broader investor
trust.
Looking
Forward
We look forward to 2024 with
confidence and expect another year of income growth. This
will be underpinned by further investment in our sales
capabilities, increased share from the current client base, a
concentration on the activation of new clients onboarded in 2023,
and the development of additional currency corridors and
partnerships.
We are in the final stages of the
application process for our EU licence and continue to expect our
US licence to be granted in the second half of this year.
These licences will open up significant
additional sales channels for CAB Payments among high-quality
development organisations and remittance providers who move
considerable sums into our key markets. Building out offices
in these regions will have the added advantage of placing
salespeople in closer proximity to major market banks in both
geographies, where cultural or language similarities can be
important in the sales process. As mentioned, as well
as new potential clients, we have some sizeable clients we have
already signed up who are yet carried out their first transaction;
we will seek to guide them rapidly and smoothly through the
activation process. And our concentration on continually
improving our service to current clients remains a focus, where our
net revenue retention remains well in excess of 100%.
We did finish 2023 on a disappointing note,
with negative surprises in two of our important markets.
While we are not dependent on a short-term recovery here, we expect
these to be important markets for us over the medium term.
These changes highlighted a requirement for the Group to be
increasingly proactive and influential at the highest level across
the world, not only predicting change, but helping to shape
effective regulation in the markets we serve. It is also
evident to us that CAB Payments' capabilities are ahead of its
profile, and we consistently receive feedback from new clients that
we outperform their expectations. Going forward, I will
dedicate my time to raising the understanding of CAB Payments
globally, once I hand over the reins of CEO to Neeraj Kapur over
the next couple of months. I will do my utmost to ensure
global central banks, regulators, large money movers and senior
industry participants better understand and recognise just how much
of a force for good CAB Payments is. Success here will
underpin the profitable growth and value we expect to continue to
deliver for all our stakeholders.
Bhairav
Trivedi
Chief Executive Officer
25 March 2024
Financial Review
Overall
2023 has been a momentous year for CAB
Payments, achieving record income, completing the premium listing
on the London Stock Exchange and laying the foundations for future
growth.
Over the last seven years, we have invested in
developing our world class correspondent banking network, our
diverse client base, including our relationships with government
agencies, supranational organisations and blue-chip companies which
we serve through relationships with our liquidity providers. This
has enabled us to deliver a high-value and high-quality foreign
exchange and payments proposition, allowing us to consistently
access the hardest to reach markets where our clients need it
most.
With these solid foundations in place, we are
now able to evolve from a UK-centric model to a global offering
with our pending applications in Europe and US. Accessing a new
global client base will allow us to capitalise on the market shift
from Global and Regional Cross border FX and Payment Banks to
specialist and highly-focused providers such as ourselves.
We have continued to invest in the
sustainability of our business model, ensuring that our risk,
governance and control environment are world class and meet the
high prudential and conduct standards set by our regulators, the
Prudential Regulation Authority (PRA) and the Financial Conduct
Authority (FCA).
Notwithstanding the disappointing trading
update in October 2023 in which we reset short-term market
guidance, we have ended the year with a strong income growth of 25%
that translates into an Adjusted EBITDA 1 of £64.6
million. This resilience underpins the broader and consistent
financial health of the organisation.
We are a highly cash generative business, which
is reflected in strong CET1 levels, capital and liquidity surpluses
and the absence of Corporate Debt. Building our capital reserves is
important to us not only for ongoing financial sustainability but
to deliver our global ambitions. We have the robustness and
sustainability of a developed market bank, whilst making emerging
market returns.
Macroeconomically, in 2023 there was a
continuation of high inflationary pressures and consequential
central bank interventions through increasing interest rates. We
have been able to capitalise on those uplifts through enhanced net
interest income proving out the resilience of our business model
through the cycle.
It is important to remember that the CAB
Payments model is uniquely positioned to take advantage of FX
volatility and through our aid delivering client segments provides
a natural counter cyclicality to broader macroeconomic
stresses.
£m unless stated otherwise
|
Twelve Months Ended
31 December
|
Year on Year
growth
|
|
FY23
|
FY22
|
%
|
Gross Income1, of which:
|
137.1
|
109.4
|
25%
|
Wholesale FX and Payments FX exc.
NGN
|
70.4
|
55.2
|
28%
|
Wholesale FX and Payments FX NGN
|
18.0
|
27.5
|
(35)%
|
Other Payments Income
|
14.3
|
14.3
|
0%
|
Banking Services and Other Income
|
34.3
|
12.3
|
179%
|
|
|
|
|
Adjusted EBITDA margin
|
47%
|
50%
|
(3) ppts
|
Operating Free Cash Flow
1
|
56.7
|
49.8
|
14%
|
Free Cash Flow
Conversion1
|
88%
|
91%
|
(3) ppts
|
Gross
Income
Gross Income for the twelve months ended 31
December 2023 stood at £137.1 million, which reflects 25% growth on
the previous year (2022: £109.4 million). At a headline level, the
year-on-year growth rates of both FX and cross currency payments
have been depressed by the market conditions that have underpinned
our business in specific currency corridors, with NGN being
particularly noteworthy with a reduction in income to £18.0 million
in 2023 (2022: £27.5 million). The reductions in NGN were partially
offset by growth in net interest income, reported through Other
Income.
Wholesale FX
and Payments FX Income
Wholesale FX and Payments FX income, excluding
NGN, grew by 28% year-on-year to £70.4 million (2022: £55.2
million). Although this reflects strong growth it is lower than
expected principally impacted by a variety of central bank
directives issued in the year across a number of our
key currencies.
Despite these disruptions, our volumes
remained broadly flat versus 2022, with income growth arising from
higher margins in almost all regions. Our average take rate
increased to 26bps in 2023 from 24bps in 2022, reflecting our
competitive access to liquidity over competitors. Since 2020 our
Emerging Markets take rate has increased steadily over time as
improvements in our liquidity provider network, market position and
product mix have driven sustainable growth.
1 See alternative performance measures
on page 106 for definition.
FX and Cross
Currency
|
Income (£m)
|
Volume (£bn)
|
Take Rate (%)
|
2020
|
2021
|
2022
|
2023
|
2020
|
2021
|
2022
|
2023
|
2020
|
2021
|
2022
|
2023
|
Developed Markets
|
3.9
|
5.5
|
12.0
|
13.0
|
11.6
|
12.8
|
20.8
|
21.0
|
0.03
|
0.04
|
0.06
|
0.06
|
Emerging Markets
|
15.8
|
34.0
|
70.8
|
75.4
|
7.7
|
10.3
|
14.3
|
13.6
|
0.21
|
0.33
|
0.50
|
0.55
|
Total
|
19.6
|
39.5
|
82.8
|
88.4
|
19.2
|
23.1
|
35.0
|
34.7
|
0.10
|
0.17
|
0.24
|
0.26
|
As a fully regulated UK Bank it is in our DNA
to manage to the highest level of conduct and compliance in all the
markets in which we operate. We only deal with counterparties that
are licensed or regulated in our target markets. We continue to
build relationships with local central banks ensuring clarity on
our credentials and the services we provide to those
economies.
In the near term we continue to focus on
geographical diversification, establishing new market footprints in
the United States, Europe and further developing our presence in
LATAM. In future we will look to expand further establishing a
presence in the APAC region. This expansion will reduce
concentration risk and in turn income volatility and will enable us
to further reduce the risk to the business of central bank
interventions.
Another key facet to both our growth and
concentration mitigation is to increase the number of clients that
we actively work with. In 2023, we onboarded 83 new clients, of
which 42 clients generated income in year, while 41 clients are
expected to trade early in 2024.
We provide a valuable service to our clients
by having infrastructure in place, which delivers their flows and
saves them time, effort and cost of managing overseas accounts.
Further, we believe the flows that we provide into our key
corridors supports economic growth and stability.
Other
Payments Income
Our total payments income primarily consists
of Payments FX, Banking Payments and income generated from Mobile
Payments. Banking Payments reflects income from providing access to
USD, GBP and EUR payment and clearing services. In 2023, excluding
Payment FX, we generated £14.3 million from these income streams,
which is in line with 2022.
Banking
Services and Other Income
Other income, which mainly represents net
interest income, and Trade Finance for the reporting year was £34.3
million, up from £12.3 million for the prior period. Net interest
income is earned from investment of clients' deposits and own cash
into high-quality liquid assets and in 2023 generated £31.7 million
compared with £10.1 million from the prior period with the increase
reflecting the impact of Federal Reserve and Bank of England
interest rate rises. This income line is expected to continue to
reflect movements in these rates.
Operating
Expenses
£m
|
Twelve Months Ended 31
December
|
Year on Year growth
|
|
FY23
|
FY22
|
%
|
Staff Expenses
|
45.6
|
35.8
|
27%
|
Other Operating Expenses
|
26.5
|
18.3
|
45%
|
Depreciation and Amortisation
|
5.8
|
5.7
|
2%
|
Non-recurring Operating Expenses
|
21.1
|
5.3
|
296%
|
The business continues to invest to deliver
ongoing revenue growth. The investment is predominantly in
headcount, with a focus on increasing the Sales force, Risk and
Controls, Operations and IT capabilities.
Staff costs have increased 27% to £45.6
million, reflecting the impact of higher headcount, with a higher
average number of permanent employees in 2023 of 310 Full-Time
Equivalent (FTE) versus 222 FTE in 2022, higher number of
short-term staff, increasing by 10 FTE from 20 FTE in 2022, and
following the annual pay review, which includes performance and
inflationary salary increases.
Other operating expenses rose by £8.2 million
to £26.5 million, driven by increased spend on recruitment fees,
software licences and support costs, an uplift in audit fees (as a
result of becoming a listed organisation), and higher professional
fees supporting expansion plans in Europe and the US.
Profitability
Adjusted EBITDA 1
increased by 17% to £64.6 million (2022: £55.0 million) as a result
of incremental income generated outstripping the increase in costs
base; however, with the rate of cost growth being higher than the
rate of income growth - due mainly to the unforeseen central bank
interventions impacting income - the adjusted EBITDA margin
declined to 47% (2022: 50%).
Profit Before Tax was down by 14%
at £37.6 million (2022: £43.9 million) due to the higher
non-recurring items in 2023. Non-recurring items primarily reflect
the professional fees incurred by the listing process in H1, as
well as committed non-performance staff bonuses.
Operating free cash flow grew from
£49.8 million in the year ended 31 December 2022 to £56.7 million
over the same period in 2023. This demonstrates the strong cash
flow delivered by the business as it continues to scale, while also
making investments in tangible and intangible assets of £7.4
million (2022: £4.9 million) and absorbing an increase in payments
made on property leases to £0.5m (2022: £0.3m).
Taxation
The tax charge arising during the
period of £13.7 million (2022: £10.5 million) indicates an
effective tax rate of 36% (2022: 24%) which reflects adjustments
for disallowable costs associated with the listing. The tax rate
takes account of the corporation tax rate and banking
surcharge.
Investments
Capital expenditure for the year
ended 31 December 2023 was £7.4 million (2022: £4.9 million), of
which £7.0 million (2022: £4.5 million) related to capitalised
software. Ultimately this was lower than expectation for the year,
which was due to the Chief Technology Officer undertaking a review
of the Technology function and ensuring resource alignment and
appropriate prioritisation of the change portfolio before
significantly increasing the rate of spend during the tail end of
the year.
Balance
Sheet
2023 has been a year in which we have
continued to build solid foundations and financial health across
our balance sheet. As at 31 December 2023, our High-Quality Liquid
Assets (HQLA) stood at £1.3 billion (2022: £1.2 billion) providing
deep liquidity access to the business to support our ongoing
growth, far exceeding our minimum prudential requirements with LCR
now standing at 152% (2022: 158%).
The Group remains debt free with no debt
securities in issue, we are proud that our debt free and
highly-liquid balance sheet enables us to move in an agile manner
to seize on growth opportunities. We have continued to reinvest our
profits into the long-term growth prospects of the Group whilst
simultaneously growing our capital base with CET1 now standing at
£107.5 million (2022: 84.5 million).
During the year we made provisions for credit
losses of £0.4 million (2022: £0.3 million) with impairment
provisions at 31 December 2023 of £0.9 million (2022: £0.5
million). The bank experienced its first ever credit loss this year
which has been fully provisioned for and has had no material impact
on returns or balance sheet metrics.
Other
Matters
During the year, the Group undertook three
activities of note which were covered in detail as part of the half
year interim results announcement detailed in H1 2023:
1. The Group restructured its
shares in issue to only have one class of ordinary share 'class A
shares';
2. The Group undertook, as part of
the pre-IPO shareholding restructure, a payment in dividends to
shareholders; and
3. The Group also disposed of
Crown Agents Asset Investment Management (CAIM) and JCF Nominees
Limited (JCF) with effect from 31 March 2023.
1 See alternative performance measures
on page 106 for definition.
Income Statement for Continuing Operations
(£m)
|
Year ended
31 December
|
Year-on-year
%
|
2023
|
2022
|
FX Income
|
68.5
|
63.4
|
8%
|
|
|
|
|
Payment FX
|
19.9
|
19.5
|
2%
|
Banking and other
payments
|
14.3
|
14.3
|
0%
|
Total Payments Income
|
34.2
|
33.7
|
2%
|
|
|
|
|
Net Interest income from cash
management
|
31.7
|
10.1
|
215%
|
Other Banking Income
|
2.6
|
2.3
|
14%
|
Total Banking Services Income
|
34.3
|
12.3
|
179%
|
|
|
|
|
Gross
Income
|
137.1
|
109.4
|
25%
|
|
|
|
|
Staff costs
|
(45.6)
|
(35.8)
|
27%
|
Other Operating Expenses
|
(26.5)
|
(18.3)
|
45%
|
Depreciation and amortisation
|
(5.8)
|
(5.7)
|
2%
|
Total Recurring Operating Expenses
|
(77.9)
|
(59.9)
|
30%
|
|
|
|
|
Impairment Provision
1
|
(0.4)
|
(0.3)
|
18%
|
|
|
|
|
Non-recurring Operating
Expenses
|
(21.1)
|
(5.3)
|
296%
|
|
|
|
|
Profit before
Tax
|
37.6
|
43.9
|
(14)%
|
Tax
|
(13.7)
|
(10.5)
|
31%
|
Profit after
tax
|
23.9
|
33.4
|
(29)%
|
1 Includes movements in the Expected Credit Losses (ECL)
provision reported as reversal/impairment (loss) on financial
assets at amortised cost on the interim condensed consolidated
statement of profit or loss and other comprehensive
income.
Balance Sheet
(£m)
|
Year ended
31 December
|
Year-on-year
%
|
2023
|
2022
|
Cash and balances at central banks
|
528.4
|
607.4
|
(13)%
|
Money market funds
|
518.8
|
209.5
|
148%
|
Investment in debt securities
|
353.0
|
414.1
|
(15)%
|
Loans and advances
|
281.0
|
188.1
|
49%
|
PP&E
|
1.2
|
1.6
|
(25)%
|
Right of use assets
|
0.7
|
1.1
|
(39)%
|
Intangible assets
|
24.3
|
21.9
|
9%
|
Other assets
|
25.2
|
41.7
|
(40)%
|
Total
assets
|
1,732.5
|
1,485.5
|
17%
|
|
|
|
|
Client accounts
|
1,542.9
|
1,305.6
|
18%
|
Derivative financial liabilities
|
9.7
|
4.6
|
112%
|
Lease liabilities
|
0.9
|
1.3
|
(31)%
|
Other liabilities
|
47.5
|
58.1
|
(18)%
|
Total
liabilities
|
1,601.0
|
1,369.5
|
17%
|
|
|
|
|
Total
equity
|
131.5
|
116.0
|
13%
|
Consolidated Statement of Profit or
Loss
for the year ended 31 December
2023
|
Note
|
2023
£'000
|
2022
£'000
|
Continuing operations
|
|
|
|
Interest income
|
4
|
52,353
|
17,171
|
Interest expense
|
4
|
(30,854)
|
(10,398)
|
Net Interest Income
|
|
21,499
|
6,773
|
Gains on money market
funds
|
|
11,036
|
3,584
|
Net gain on financial assets and
financial liabilities
mandatorily held at fair value through profit or loss
|
|
1,232
|
1,009
|
Fees and commission
income
|
5
|
14,571
|
15,797
|
Net foreign exchange
gain
|
6
|
88,417
|
82,756
|
Revenue, net of interest
expense
|
|
136,755
|
109,919
|
Other operating income /
(loss)
|
7
|
313
|
(484)
|
Total income, net of interest
expense
|
|
137,068
|
109,435
|
|
|
|
|
-
Recurring
|
8
|
(77,946)
|
(59,870)
|
-
Non-recurring
|
8
|
(21,101)
|
(5,332)
|
Operating expenses
|
|
(99,047)
|
(65,202)
|
Impairment loss on financial assets
at amortised cost
|
37
|
(404)
|
(342)
|
Profit before taxation
|
|
37,617
|
43,891
|
Tax expense
|
9
|
(13,727)
|
(10,456)
|
Profit after tax for the year from
continuing operations
|
|
23,890
|
33,435
|
|
|
|
|
Discontinued operations
|
|
|
|
Loss after tax for the year from
discontinued operations
|
10
|
(153)
|
(67)
|
Profit for the year
|
|
23,737
|
33,368
|
Profit for the year attributable
to:
|
|
|
|
- Owners of the parent
|
28
|
22,713
|
31,001
|
- Non-controlling
interests
|
31
|
1,024
|
2,367
|
|
|
23,737
|
33,368
|
|
|
2023
pence
|
2022
pence
|
Basic and diluted earnings per
share
|
44
|
|
|
Continuing operations
|
|
10
|
14
|
Discontinued operations
|
|
-
|
-
|
Total basic and diluted earnings
per share
|
|
10
|
14
|
The notes on pages 19 to 104 form
part of these consolidated financial statements.
Consolidated Statement of Other
Comprehensive Income
for the year ended 31 December
2023
|
Note
|
2023
£'000
|
2022
£'000
|
Profit for
the year
|
|
23,737
|
33,368
|
|
|
|
|
Other
comprehensive income for the year:
|
|
|
|
Items that
may be reclassified subsequently to profit or
loss:
|
|
|
|
Foreign exchange (losses)/gains on
translation
of foreign operations
|
30
|
(121)
|
119
|
Items that
will not be reclassified subsequently to profit or
loss:
|
|
|
Movement in investment revaluation reserve for
equity instruments at fair value through other comprehensive
income
|
29
|
27
|
88
|
Income tax relating to these items
|
23
|
(12)
|
(17)
|
Other
comprehensive (loss)/income net of tax
|
|
(106)
|
190
|
Total
comprehensive income
|
|
23,631
|
33,558
|
Total
comprehensive income attributable to:
|
|
|
|
- Owners of the
parent
|
|
22,617
|
31,177
|
- Non-controlling
interests
|
31
|
1,014
|
2,381
|
|
|
23,631
|
33,558
|
The notes on pages 19 to 104 form
part of these consolidated financial statements.
Consolidated Statement of Financial
Position
as at 31 December 2023
|
Note
|
As at
31 December 2023
£'000
|
As at
31 December 2022 (restated1)
£'000
|
Assets
|
|
|
|
Cash and balances at central banks
|
11
|
528,396
|
607,358
|
Money market funds
|
12
|
518,764
|
209,486
|
Loans and advances on demand to
banks
|
13
|
135,178
|
90,209
|
Investments in debt securities
|
15
|
353,028
|
414,061
|
Other loans and advances to
banks1
|
13
|
137,570
|
85,465
|
Other loans and advances to
non-banks1
|
13
|
8,216
|
12,447
|
Unsettled transactions2
|
18
|
8,417
|
16,071
|
Derivative financial assets
|
14
|
3,829
|
6,567
|
Investments in equity securities
|
16
|
495
|
488
|
Other assets2
|
18
|
11,200
|
16,409
|
Accrued income
|
17
|
1,215
|
856
|
Property, plant and equipment
|
19
|
1,191
|
1,579
|
Right of use assets
|
20
|
689
|
1,134
|
Intangible assets
|
21
|
24,294
|
21,919
|
|
|
1,732,482
|
1,484,049
|
Assets classified as held for sale
|
10
|
-
|
1,387
|
Total
assets
|
|
1,732,482
|
1,485,436
|
|
|
|
|
Liabilities
|
|
|
|
Client accounts
|
24
|
1,542,889
|
1,305,551
|
Derivative financial liabilities
|
14
|
9,679
|
4,543
|
Unsettled transactions
|
25
|
20,081
|
25,782
|
Other liabilities
|
25
|
8,121
|
11,517
|
Accruals
|
25
|
18,367
|
19,364
|
Lease liabilities
|
20
|
884
|
1,281
|
Deferred tax liability
|
23
|
695
|
316
|
Provisions
|
26
|
236
|
79
|
|
|
1,600,952
|
1,368,433
|
Liabilities classified as held for
sale
|
10
|
-
|
1,045
|
Total
liabilities
|
|
1,600,952
|
1,369,478
|
|
|
|
|
Equity
|
|
|
|
Called up share capital
|
27
|
85
|
68,010
|
Retained earnings
|
28
|
131,478
|
40,179
|
Investment revaluation reserve
|
29
|
111
|
96
|
Foreign currency translation
reserve
|
30
|
(144)
|
(31)
|
Equity
attributable to owners of the parent
|
|
131,530
|
108,254
|
Non-controlling interests
|
31
|
-
|
7,704
|
Shareholders'
funds
|
|
131,530
|
115,958
|
|
|
|
|
Total
liabilities and equity
|
|
1,732,482
|
1,485,436
|
Company registration number -
09659405
1 Prior year restatement note
is disclosed on Note 13.
2 Prior year restatement note
is disclosed on Note 18.
The notes on pages 19 to 104 form part of
these consolidated financial statements.
The Board of Directors approved the
consolidated financial statements on 25 March 2024.
B
Trivedi
R Hallett
Group Chief Executive
Officer
Group Chief Financial Officer
Consolidated Statement of Changes
in Equity
for the year ended 31 December
2023
|
Attributable To Owners Of
The Parent
|
Total
£'000
|
Non-Controlling Interest
(NCI)
£'000
|
Total Shareholders'
Funds
£'000
|
Share
Capital
£'000
|
Retained
Earnings
£'000
|
Investment revaluation
reserve
£'000
|
Foreign currency translation
reserve
£'000
|
|
|
|
Balance at 1 January 2023
|
68,010
|
40,179
|
96
|
(31)
|
108,254
|
7,704
|
115,958
|
Profit for the year (Note
31)
|
-
|
22,713
|
-
|
-
|
22,713
|
1,024
|
23,737
|
Other comprehensive income:
|
|
|
|
|
|
|
|
Foreign exchange losses on
translation
of foreign operations (Note 30)
|
-
|
-
|
-
|
(111)
|
(111)
|
(10)
|
(121)
|
Movement in investment revaluation
reserve for equity instruments at fair
value through other comprehensive income (Note 29)
|
-
|
-
|
27
|
-
|
27
|
-
|
27
|
Income tax relating to these items
(Note 23)
|
-
|
-
|
(12)
|
-
|
(12)
|
-
|
(12)
|
Other comprehensive loss net of tax
|
-
|
-
|
15
|
(111)
|
(96)
|
(10)
|
(106)
|
Total comprehensive income/(loss)
|
-
|
22,713
|
15
|
(111)
|
22,617
|
1,014
|
23,631
|
|
|
|
|
|
|
|
|
Transactions with owners
in their capacity as owners:
|
|
|
|
|
|
|
|
Share based payment expense (Note
32)
|
-
|
1,313
|
-
|
-
|
1,313
|
46
|
1,359
|
Issuance of new shares (Note
27)
|
11
|
(11)
|
-
|
-
|
-
|
-
|
-
|
Capital injection in subsidiary
(Note 28)
|
-
|
3,661
|
-
|
-
|
3,661
|
296
|
3,957
|
Change in ownership interest in
subsidiary (Note 27e)
|
-
|
(543)
|
-
|
-
|
(543)
|
-
|
(543)
|
Share capital reduction (Note
27)
|
(67,936)
|
67,936
|
-
|
-
|
-
|
-
|
-
|
Dividends declared (Note
28)
|
-
|
(11,300)
|
-
|
-
|
(11,300)
|
(1,540)
|
(12,840)
|
FX translations
adjustment
|
-
|
-
|
-
|
8
|
8
|
-
|
8
|
Acquisition of NCI (Note 28, Note
30)
|
-
|
7,530
|
-
|
(10)
|
7,520
|
(7,520)
|
-
|
Total
|
(67,925)
|
68,586
|
-
|
(2)
|
659
|
(8,718)
|
(8,059)
|
Balance at 31 December 2023
|
85
|
131,478
|
111
|
(144)
|
131,530
|
-
|
131,530
|
|
|
|
|
|
|
|
|
Balance at 1 January 2022
|
68,010
|
8,442
|
30
|
(141)
|
76,341
|
5,222
|
81,563
|
Profit for the year (Note
28)
|
-
|
31,001
|
-
|
-
|
31,001
|
2,367
|
33,368
|
Other comprehensive income:
|
|
|
|
|
|
|
|
Foreign exchange gains on
translation
of foreign operations (Note 30)
|
-
|
-
|
-
|
110
|
110
|
9
|
119
|
Movement in investment revaluation
reserve for equity instruments at fair value through other
comprehensive income (Note 29)
|
-
|
-
|
82
|
-
|
82
|
6
|
88
|
Income tax relating to these items
(Note 23)
|
-
|
-
|
(16)
|
-
|
(16)
|
(1)
|
(17)
|
Other comprehensive income net of tax
|
-
|
-
|
66
|
110
|
176
|
14
|
190
|
Total comprehensive income
|
-
|
31,001
|
66
|
110
|
31,177
|
2,381
|
33,558
|
|
|
|
|
|
|
|
|
Transactions with owners
in their capacity as owners:
|
|
|
|
|
|
|
|
Share based payment expense (Note
32)
|
-
|
388
|
-
|
-
|
388
|
-
|
388
|
Change in NCI percentage (Note
31)
|
-
|
348
|
-
|
-
|
348
|
101
|
449
|
|
|
|
|
|
|
|
|
Total
|
-
|
736
|
-
|
-
|
736
|
101
|
837
|
Balance at 31 December 2022
|
68,010
|
40,179
|
96
|
(31)
|
108,254
|
7,704
|
115,958
|
The notes on pages 19 to 104 form
part of these consolidated financial statements.
Consolidated Statement of Cash
Flows
for the year ended 31 December
2023
|
Note
|
2023
£'000
|
Restated
2022
£'000
|
Cash
inflow/(outflow) from operating
activities1
|
34
|
321,476
|
(233,413)
|
Tax paid
|
|
(14,084)
|
(9,583)
|
Payments for interest on lease
liabilities
|
20
|
(65)
|
(19)
|
Net cash
generated from/(used in) operating
activities1
|
|
307,327
|
(243,015)
|
|
|
|
|
Cash flow
used in investing activities
|
|
|
|
Purchase of property, plant and
equipment
|
19
|
(422)
|
(346)
|
Purchase of intangible assets
|
21
|
(6,982)
|
(4,538)
|
Purchase of investments in subsidiary
undertakings
|
|
(543)
|
-
|
Proceeds from sale of investment in
CAIM
|
10
|
2,133
|
-
|
Net cash used
in investing activities
|
|
(5,814)
|
(4,884)
|
|
|
|
|
Cash flow
used in financing activities
|
|
|
|
Repayment of principal portion of the lease
liability
|
20
|
(462)
|
(252)
|
Proceeds from shares issued to non-controlling
interests
|
28
|
973
|
-
|
Dividends paid
|
28
|
(12,840)
|
-
|
Net cash used
in financing activities
|
|
(12,329
|
(252)
|
|
|
|
|
Net
increase/(decrease) in cash and cash
equivalents1
|
|
289,184
|
(248,151)
|
Cash and cash equivalents at the beginning of
the year
|
|
907,053
|
1,120,109
|
Effect of exchange rate changes on cash and
cash equivalents1
|
|
(13,899)
|
35,095
|
Cash and cash
equivalents at the end of the year
|
|
1,182,338
|
907,053
|
Analysed as
follows:
|
|
|
|
Cash and balances at central banks
|
11
|
528,396
|
607,358
|
Money market funds
|
12
|
518,764
|
209,486
|
Loans and advances on demand to
banks
|
13
|
135,178
|
90,209
|
1 Prior year restatement note
is disclosed on Note 34.
The notes on pages 19 to 104 form
part of these consolidated financial statements.
Company Statement of Financial
Position
as at 31 December 2023
|
Note
|
2023
£'000
|
2022
£'000
|
Assets
|
|
|
|
Loans and advances receivable from subsidiary
undertaking
|
13
|
658
|
-
|
Receivables from subsidiary
undertaking
|
35
|
4,239
|
-
|
Other assets
|
18
|
188
|
-
|
Investments in subsidiary
undertakings
|
22
|
164,380
|
63,384
|
|
|
169,465
|
63,384
|
Assets classified as held for sale
|
10
|
-
|
2,181
|
Total
Assets
|
|
169,465
|
65,565
|
|
|
|
|
Liabilities
|
|
|
|
Payables to subsidiary undertaking
|
35
|
19,406
|
1,198
|
Other liabilities
|
25
|
422
|
-
|
Accruals
|
25
|
1,022
|
321
|
Total
Liabilities
|
|
20,850
|
1,519
|
|
|
|
|
Equity
|
|
|
|
Called up share capital
|
27
|
85
|
68,010
|
Merger relief reserve
|
27
|
100,442
|
-
|
Retained earnings
|
28
|
48,088
|
(3,964)
|
Shareholders'
funds
|
|
148,615
|
64,046
|
Total equity
and liabilities
|
|
169,465
|
65,565
|
Company registration number -
09659405
The Company has elected to take the exemption
under Section 408 of the Companies Act 2006 from presenting its own
profit or loss and other comprehensive income statement. The loss
for the year of £4,584k (2022: £1,891k) has been accounted for in
the financial statements of the Company.
The notes on pages 19 to 104 form
part of these financial statements.
The Board of Directors approved the Company
financial statements on 25 March 2024.
B
Trivedi
R Hallett
Group Chief Executive
Officer
Group Chief Financial Officer
Company Statement of Changes in
Equity
for the year ended 31 December
2023
|
Called up
share capital
£'000
|
Merger relief
reserve
£'000
|
Retained
earnings
£'000
|
Total Shareholders' Funds
£'000
|
Balance at 1
January 2023
|
68,010
|
-
|
(3,964)
|
64,046
|
Loss for the year (Note 28)
|
-
|
-
|
(4,584)
|
(4,584)
|
Total
comprehensive income
|
68,010
|
-
|
(8,548)
|
59,462
|
|
|
|
|
|
Transactions
with owners in their capacity as owners:
|
|
|
|
|
Issuance of new shares (Note 27)
|
11
|
100,442
|
-
|
100,453
|
Share capital reduction (Note 27)
|
(67,936)
|
-
|
67,936
|
-
|
Dividends declared (Note 28)
|
-
|
-
|
(11,300)
|
(11,300)
|
Total
|
67,925
|
100,442
|
56,636
|
89,153
|
Balance at 31
December 2023
|
85
|
100,442
|
48,088
|
148,615
|
|
|
|
|
|
Balance at 1
January 2022
|
68,010
|
-
|
(2,073)
|
65,937
|
Loss for the year (Note 28)
|
-
|
-
|
(1,891)
|
(1,891)
|
Total
comprehensive income
|
-
|
-
|
(1,891)
|
(1,891)
|
|
|
|
|
|
Transactions
with owners in their capacity as owners:
|
-
|
-
|
-
|
-
|
Total
|
-
|
-
|
-
|
-
|
Balance at 31
December 2022
|
68,010
|
-
|
(3,964)
|
64,046
|
The notes on pages 19 to 104 form
part of these financial statements.
Company Statement of Cash
Flows
for the year ended 31 December
2023
|
Note
|
2023
£'000
|
2022
£'000
|
Cash inflow from operating
activities
|
34
|
10,368
|
-
|
Net cash
inflow from operating activities
|
|
10,368
|
-
|
|
|
|
|
Cash flow
from investing activities
|
|
|
|
Sale of investments
|
|
2,133
|
-
|
Purchase of investments in subsidiary
undertakings
|
|
(543)
|
-
|
Net cash
generated from investing activities
|
|
1,590
|
-
|
|
|
|
|
Cash flow
used in financing activities
|
|
|
|
Dividends paid
|
|
(11,300)
|
-
|
Net cash used
in financing activities
|
|
(11,300)
|
-
|
|
|
|
|
Net increase
in cash and cash equivalents
|
|
658
|
-
|
Cash and cash equivalents at the beginning of
the year
|
|
-
|
-
|
Cash and cash
equivalents at the end of the year
|
|
658
|
-
|
Analysed as
follows:
|
|
|
|
Loans and advances receivable from subsidiary
undertaking
|
|
658
|
-
|
The notes on pages 19 to 104 form
part of these financial statements.
Notes to the Financial
Statements
for the year ended 31 December
2023
1. Statement of Accounting Policies
The following accounting policies relate to
the financial statements of CAB Payments Holdings plc (the Company)
and its subsidiaries (collectively referred to as the
Group).
a) General
information
On 6 March 2023 the Company changed its name
from CABIM Limited to CAB Payments Holdings Limited. On 4 July 2023
the Company was reregistered as a public limited company, CAB
Payments Holdings plc, to comply with listing requirements. The
Company is incorporated and domiciled in England. The address
of its registered office as at 31 December 2023 is Quadrant House,
The Quadrant, Sutton SM2 5AS, England. The ordinary shares of
the Company were admitted to conditional trading on the London
Stock Exchange on 6 July 2023 and unconditional trading on 11 July
2023. The Company's shares trade under the ticker code of
CABP.L.
The Group provides regulated banking services
that connect emerging and frontier markets to the rest of the
world, using foreign exchange ('FX') and payments
technology.
b) Basis of
preparation
The consolidated and Company financial
statements have been prepared under the historical cost convention,
except as disclosed in the accounting policies set out within these
financial statements, and in accordance with the UK adopted
International Accounting Standards (UK-adopted International
Financial Reporting Standards ('IFRSs')) in conformity
with the applicable legal requirements of the Companies Act
2006.
The principal accounting policies applied in
the preparation of these financial statements are set out in this
Note. These accounting policies have been consistently applied to
all the years presented unless otherwise stated. The balance sheet
has been presented in order of liquidity.
Comparatives have been restated due to prior
period errors set out in Note 13, Note 18 and Note 34. This
restatement was not as a result of a change of accounting policies
and there is no impact to profit or loss and equity.
The preparation of consolidated and Company
financial statements in conformity with IFRS as adopted by the UK
requires the use of certain critical accounting estimates which
have been disclosed in Note 2.
The consolidated and Company financial
statements are presented in British Pound Sterling ("£''). All
values are rounded to the nearest thousand (£'000), except when
otherwise indicated.
The Group and the Company have adopted the
following new or amended IFRSs and interpretations that are
effective from 1 January 2023, none of which had any material
impact on Company's or the Group's consolidated financial
statements and the Company's financial statements.
Accounting
standard
|
Amendment/interpretation
|
Amendments to IAS 8 Accounting
Policies
|
Changes in accounting estimates and errors/
definition
of accounting estimates - effective for annual reporting periods
commencing 1 January 2023.
|
Amendments to IAS 12
|
Deferred Tax related to Assets and Liabilities
arising from
a Single Transaction (Issued May 2021).
|
Amendments to IAS 12
|
Implementation of Pillar 2 tax - effective for
annual reporting periods commencing 1 January 2023 but not
applicable because the group annual revenues are below €750
million.
|
IFRS 17 - Insurance Contracts and amendments
to IFRS 17
|
Effective for annual reporting periods
commencing
1 January 2023.
|
Amendments to IAS 1 Presentation of Financial
Statements and IFRS Practice Statement 2 Making Materiality
Judgements - Disclosures of Accounting Policies
|
Effective for annual reporting periods
commencing
1 January 2023.
|
c) Basis of
consolidation
The consolidated financial statements include
the financial statements of the Company and all of the entities
controlled by the Company i.e., its subsidiaries made up to 31
December each year. Control is achieved when the
Company:
· has the
power over the investee;
· is
exposed, or has rights, to variable return from its involvement
with the investee; and
· has the
ability to use its power to affect its returns.
The Company reassesses whether or not it
controls an investee if facts and circumstances indicate that there
are changes to one or more of the three elements of control listed
above.
A subsidiary is an entity controlled directly
or indirectly by the Company. The Company controls a subsidiary
when it is exposed, or has rights, to variable returns from its
involvement with the subsidiary and has the ability to affect those
returns through its power over the investee.
Consolidation of a subsidiary begins when the
Company obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, the results
of subsidiaries acquired or disposed of during the year are
included in the consolidated profit or loss account from the date
the Company gains control until the date when the Company ceases to
control the subsidiary.
Where necessary, adjustments are made to the
financial statements of subsidiaries to bring the accounting
policies used into line with the Group's accounting
policies.
All intragroup assets and liabilities, equity,
income, expenses and cash flows relating to transactions between
the members of the Group are eliminated on consolidation, with the
exception of foreign currency gains and losses on intragroup
monetary items denominated in a foreign currency of at least one of
the parties.
Non-Controlling Interest ('NCI') in
subsidiaries is identified separately from the Group's equity
therein. Interests of non-controlling shareholders represent
ownership interests entitling them to a proportionate share of net
assets upon liquidation initially being measured at the
non-controlling interest's proportionate share of the acquiree's
identifiable net assets.
Subsequent to acquisition, the carrying amount
of the non-controlling interest is the amount of those interests at
initial recognition plus the NCI's share of subsequent changes in
equity. Total comprehensive income is attributed to non-controlling
interests even if it results in the non-controlling interests
having a deficit balance. Following the capital re-organisation in
July 2023, there is no Non-Controlling Interest ('NCI') at 31
December 2023 (Note 31).
Changes in the Group's interests in
subsidiaries that do not result in a loss of control are accounted
for as equity transactions. The carrying amount of the Group's
interests and the non-controlling interests are adjusted to reflect
the changes in their relative interests in the subsidiaries. Any
difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid
or received is recognised directly in equity and attributed to the
owners of the Company.
d) Going concern
The Directors have assessed the ability of the
Company and of the Group to continue as a going concern based on
the net current asset position, regulatory capital requirements and
estimated future cash flows. The Directors have formed the view
that the Company and the Group have adequate resources to continue
in existence for a period of 12 months from when these financial
statements are authorised for issuance. Accordingly, the financial
statements of the Company and the Group have been prepared on a
going concern basis.
Critical to reaching this view
were:
· The output of
internal stress assessments which were conducted on a Company and
Group level and modelled the impact of severe yet plausible
stresses which underpinned the ICAAP assessment.
· The output of
the Reverse Stress Testing assessment which modelled the scenarios
that would have to occur in order for the Group to fall below its
Total Capital Requirement (being the aggregate of Pillar 1 and
Pillar 2A capital requirements).
In reaching their conclusions, the Directors
also considered the outputs of the 2023 ILAAP, the 2023 ICAAP and
the 2023 Recovery Plan.
i. Internal stress assessments
In total, three stresses were
considered:
· Market &
Climate Change Stress which modelled the impacts of a severe global
recession which leads to increased credit defaults and widespread
credit rating downgrades, a low interest rate environment
detrimentally impacting Net Interest Income and £ sharply
depreciating against USD which led to material increases in USD
denominated Credit Risk Weighted Assets ("RWA").
· Idiosyncratic
Stress which modelled the impact of a material reduction in revenue
driven by idiosyncratic events.
· A Combined
Stress which modelled the impact of the Market & Climate Stress
occurring concurrently with the Idiosyncratic Stress.
In all the stresses noted above both the
Company and the Group maintained sizeable surpluses to Total
Capital Requirement.
ii. Reverse stress tests
The Reverse Stress tests are used to assess
vulnerabilities of the Group and determine what extreme adverse
events would cause the business to fail. Where any of these events
are deemed to be plausible, the Group will adopt measures to
mitigate the impact of such events where plausible.
The Group did not identify reasonably possible
scenarios which could result in failure to continue in operational
existence for a period of twelve months from when these financial
statements are authorised for issuance.
iii. Conclusion
The Directors are of the view that:
· There are no
material uncertainties relating to events or conditions that cast
significant doubt on the Company and the Group's ability to
continue as a going concern.
· The significant
judgements and estimates made by management in determining whether
or not the adoption of the going concern is appropriate are
disclosed in note 2.1. The forecasts and assumptions used for
impairment assessments were the same used for going concern
assessment.
· There are no
material uncertainties to disclose in respect of going
concern.
Accordingly, the financial statements have
been prepared on a going concern basis.
e) Interest
income and interest expense
Interest income and interest expense for all
interest-bearing financial instruments, including interest accruals
on related foreign exchange contracts, are recognised within Net
interest income in the statements of profit or loss and other
comprehensive income. The interest expense on financial liabilities
and interest income on assets that are held for collection of
contractual cash flows, where those cash flows represent solely
payments of principal and interest, is recognised using the
effective interest method.
The effective interest method is a method of
calculating the amortised cost of a financial asset or financial
liability and of allocating the interest income or expense over the
relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the life of the financial
instrument or, when appropriate, a shorter period, to the net
carrying amount of the financial asset or financial
liability.
f) Fees and
commission income
Fees and commissions receivable which are not
an integral part of the effective interest rate are recognised as
income as the Group fulfils its performance obligations. Fee
and commission income include following key revenue
streams:
· Account management and payment
services: the Group's performance obligation in
relation to account management services is to provide management or
maintenance services to its current account holders. The revenue
for these services is recognised over the period of time on a
monthly basis as fees are received and Crown Agents Bank Ltd
('CAB') provides the service.
Payment services fees relate to
payment services offered by the Group to its clients by executing
payment transactions. Revenue from providing services is recognised
at a point in time when the services are rendered i.e. when the
payments are executed.
· Pension payment fees:
pension payment fees are charged to pension companies for
making payment to pension beneficiaries on their behalf. The Group
acts as a principal in rendering these services to its clients.
Revenue from providing services is recognised at a point in time
when the services are rendered i.e., when the payments are
executed.
· Trade finance income
o Financial guarantee income: financial guarantee income
includes fixed fees earned by the Group for issuing financial
guarantee contracts. The performance obligation of the Group is to
provide financial assurance to the recipient of the guarantee in
case of payment default. Revenue from providing financial guarantee
services is recognised over the period of time across the contract
term. The fees for providing financial guarantee services are
charged and collected upfront.
o Income from letters of credit: the Group also receives
certain fees in respect of its finance business against the issue
of letters of credit where the performance obligations are
typically fulfilled towards the end of the client contract. Where
it is unlikely that the letter of credit will be exercised, letter
of credit fees are recognised in fee and commission income over the
life of the facility, rather than as an adjustment to the effective
interest rate for loans expected to be drawn. The fees for
acceptance of letter of credits include fee are charged and
collected upfront. Other charges relating to the services offered
including advising fees, confirming bank's fees and bank charges,
all of which are collected on the completion of the term of the
letter of credit.
· Electronic platform fees:
these fees include the services provided by the Group using
its electronic platform to facilitate bulk payments to its
clients. Revenue from providing platform fees services are
recognised at a point in time when the services are rendered
i.e., when the payments are executed.
· Risk assessment fees:
risk assessment services include income from enhanced due
diligence services provided by the Group under fixed price
contracts. Revenue from providing services is recognised over the
period of time in the accounting period on the basis of the actual
service provided. As the fixed contracts are time-based contracts,
revenue is determined based on the time elapsed relative to the
total time as per the contract period. The invoicing for the risk
assessment services is done on the completion of services or on a
quarterly basis in accordance with the contractual terms. No
significant element of financing is deemed present as the services
provided allow a credit term of 30 days.
· Introductory commission:
this is commission earned by the Group for introducing a new
client to a third party to facilitate cash payment
transactions. Revenue is recognised at a point in time when the
services are rendered by the third
party.
g) Net
foreign exchange gain
Net foreign exchange gain comprises the
following:
· Profit on settlement of foreign exchange
contracts and remeasurement of non-sterling balances:
these profits arise on foreign exchange settlements involving
the transfer of client funds to specified recipients. Under the
Group's foreign exchange and payment services, clients agree to
terms and conditions for all transactions at the time of signing a
contract with the Group. On trade date the Group measures these
transactions at fair value, further changes in fair value are
recognised in profit or loss until the settlement of the contract.
The remeasurement of non-sterling balances is performed daily via
the translation of foreign currency balances at daily spot rates,
with changes taken to profit and loss.
· Fair value gains or losses on
derivatives: this income comprises the profits
and losses on remeasurement of forward foreign exchange derivatives
carried at fair value through profit and loss ('FVTPL').
· Foreign exchange gain on payment
transaction revenue: a foreign exchange gain or
loss on payment transactions is the difference between the spot
exchange rate between the functional currency and the foreign
currency at the date of the payment transaction.
h) Foreign
currency
(i)
Functional and presentational currency
The Company and the Group's
functional and presentational currency is British Pounds Sterling
(''£'').
(ii)
Transactions and balances
Foreign currency transactions are translated
into the functional currency using the spot exchange rates at the
dates of the transactions.
At each period end foreign currency
monetary items are translated to the functional currency using the
closing rate. Non‑monetary items measured at historical cost are translated
using the exchange rate at the date of the transaction and
non-monetary items measured at fair value are measured using the
exchange rate when fair value was determined.
Foreign exchange gains and losses resulting
from the settlement of transactions and from the translation at
period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the
consolidated statement of profit or loss except for foreign
exchange gains and losses in relation to instruments measured at
fair value through other comprehensive income ('FVTOCI') which are
recognised in other comprehensive income ('OCI').
(iii) Effects of foreign exchange movements on consolidated
statement of cash flows
The consolidated statement of cash flows
includes cash flows in currencies other than GBP. Such cash flows
should be reported at the GBP equivalent of the cash flow at the
time of the transaction. In order to calculate such cash flows
during the period, the approach taken has been to remove from
movement in the GBP equivalent at the beginning and end of the
year, the effect of the movement in the GBP balance caused solely
by changes in the underlying exchange rate.
The Group's systems do not presently allow
extraction of the amount of FX gains and losses recognised in
P&L on the retranslation of cash and cash equivalents, for
which an adjustment needs to be made to operating profit for the
purposes of arriving at cash flows from operating activities and
presented at the foot of the cash flow statement as a
reconciliation of the opening and closing cash and cash equivalent
balance. Historically the effects of foreign exchange rate
movements on the GBP equivalent balance recognised in P&L for
the purposes of this adjustment has been determined by calculating
the movement of the GBP equivalent of the opening currency balance
using the exchange rates at the beginning and the end of the year.
Management have reconsidered the approach previously applied and
have produced a report which now factors in daily movements at the
daily closing rate to estimating the FX gains and losses on cash
and cash equivalents recognised in P&L. Applying this
more sophisticated approach has revealed that the adjustment made
in 2022 was materially different to the more sophisticated approach
used to estimate the 2023 adjustment. Therefore, the
comparative reconciliation of profit to cash flows from operating
activities has been restated so that it is consistent with the
approach used in the current period.
(iv) Group
companies
For the purpose of presenting consolidated
financial statements, the assets and liabilities of the Group's
foreign operations are translated to the Group's presentational
currency at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at daily exchange rates at
the date of transactions.
Foreign exchange differences arising on the
translation of a foreign operation are recognised in other
comprehensive income and accumulated in the Foreign Currency
Translation Reserve ('FCTR').
i)
Taxation
The tax expense for the period comprises
current and deferred tax recognised in the reporting period.
Current and deferred tax are recognised in profit or loss, except
when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case, the
current and deferred tax are also recognised in other comprehensive
income or directly in equity respectively. If current tax or
deferred tax arises from the initial accounting for a business
combination, the tax effect is included in the accounting for the
business combination.
Current or deferred tax assets or liabilities
are not discounted.
Current
tax
Current tax is the tax expected to be payable
on the taxable profit for the year and on any adjustment to tax
payable in respect of previous years. Taxable profit differs from
net profit as reported in profit or loss because it excludes items
of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the end of the
reporting period.
A provision is recognised for those matters
for which the tax determination is uncertain but it is considered
probable that there will be a future outflow of funds to a tax
authority. The provisions are measured at the best estimate of the
amount expected to become payable.
If a company within the Group incur losses
within the period, that company may surrender trading losses and
other amounts eligible for relief from corporation tax to another
group company (the claimant company) for the claimant company to
set off against its own profits for corporation tax purposes as
permitted by HMRC.
Deferred
tax
Deferred tax is the tax expected to be payable
or recoverable on differences between the carrying amounts of
assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit,
and is accounted for using the liability method. Deferred tax
liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such assets
and liabilities are not recognised if the temporary difference
arises from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit. In
addition, a deferred tax liability is not recognised if the
temporary difference arises from the initial recognition of
goodwill.
j) Intangible
assets (excluding Goodwill)
Intangible assets (except for Goodwill) are
stated at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is calculated, using the
straight-line method, to allocate the amount to be amortised, of
the assets to their residual values over their estimated
useful lives, as follows:
Core accounting software - 12.5
years1
Other software - 5 years (or over the life of
the licence if less)
Brand/name - 50 years (acquired)
Costs associated with maintaining computer
software are recognised as an expense as incurred. Development
costs that are directly attributable to the design and testing of
identifiable and unique software products controlled by the Group
are recognised as intangible assets when the following criteria are
met:
· it is
technically feasible to complete the software so that it will be
available for use;
· management
intends to complete the software and use or sell it;
· there is an
ability to use or sell the software;
· it can be
demonstrated how the software will generate probable future
economic benefits;
· adequate
technical, financial and other resources to complete the
development and to use or sell the software are available;
and
· the expenditure
attributable to the software during its development can be reliably
measured.
Other development expenditure that does not
meet these criteria are recognised as an expense as incurred.
Development costs previously recognised as an expense are not
recognised as an asset in a subsequent period. Long term
software-as-a-service type contracts that do not meet the
definition of an asset (rental of software) are expensed to profit
and loss over the period of the contract in line with the benefits
received.
1
The amortisation period for core accounting software changed from
10 years in 2022 to 12.5 years in the current period. This change
was prompted by a revision in our assessment of the expected useful
life of this intangible asset, and accurately reflect the economic
reality of this system as it will continue in use until at least 31
December 2026. As a result of this change, we have adjusted the
amortisation expense prospectively in line with requirements of IAS
8. The impact on the depreciation balance in each year is as
follows:
|
2023
£'000
|
2024
£'000
|
2025
£'000
|
2026
£'000
|
Previous useful life
|
838
|
419
|
-
|
-
|
New useful life
|
314
|
314
|
314
|
314
|
Impact of
change in estimate
|
524
|
105
|
(314)
|
(314)
|
k) Property,
plant and equipment and depreciation
Property, plant and equipment are stated in
the statement of financial position at historic cost less
accumulated depreciation. Cost includes the original purchase price
of the asset and the costs attributable to bring the asset to its
working condition for its intended use. Property, plant and
equipment are depreciated on a straight-line basis over their
estimated useful lives. Depreciation commences when an asset
becomes available for use. Depreciation is calculated to write down
assets to their residual value in equal instalments over their
estimated useful lives, which are:
Leasehold
improvements
|
Life of lease
|
Computer equipment
|
5 years
|
Mobile phones
|
3 years
|
Fixtures and fittings
|
5 years
|
Artwork
|
20 years
|
l) Impairment
of non-financial assets and disposal assets held for
sale
At each statement of financial position date,
non-financial assets not carried at fair value are assessed to
determine whether there is an indication that the asset may be
impaired such as: a decline in operational performance,
geopolitical uncertainty, economic uncertainty i.e. rising interest
rates and inflation, changes in the outlook of future profitability
among other potential indicators. If there is such an indication
the recoverable amount of the asset is compared to the carrying
amount of the asset.
Individual assets are grouped for impairment
assessment purposes at the lowest level at which there are
identifiable cash inflows that are largely independent of the cash
flows of other groups of assets. This should be at a level not
higher than an operating segment. The recoverable amount of the
asset is the higher of the fair value less costs to sell and value
in use. Value in use is defined as the present value of the future
cash flows before interest and tax obtainable as a result of the
asset's continued use. These cash flows are discounted using a
pre-tax discount rate that represents the current market risk-free
rate and the risks inherent in the asset. In determining fair value
less costs to sell, recent market transactions are taken into
account. If no such transactions can be identified, an appropriate
valuation model is used. If the recoverable amount of the
asset is estimated to be lower than the carrying amount, the
carrying amount is reduced to its recoverable amount. An impairment
loss is recognised in the statement of profit or loss unless the
asset has been revalued then the amount is recognised in other
comprehensive income to the extent of any previously recognised
revaluation. An impairment loss recognised for goodwill is not
reversed in a subsequent period.
If an impairment loss is subsequently
reversed, the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, but only to the
extent that the revised carrying amount does not exceed the
carrying amount that would have been determined (net of
depreciation or amortisation) had no impairment loss been
recognised in prior periods. A reversal of an impairment loss is
recognised in the statement of profit or loss and other
comprehensive income.
Goodwill is allocated on acquisition to the
cash generating unit expected to benefit from the synergies of the
combination. Goodwill is included in the carrying value of cash
generating units for impairment testing.
Disposal groups held for sale are measured at
the lower of their carrying amount and fair value less costs to
sell. At initial classification of the disposal group as held for
sale, the carrying amounts of all the individual assets and
liabilities in the disposal group are measured in accordance with
the Group's accounting policies. If fair value less costs to sell
for the disposal group is below the aggregate carrying amount of
all of the assets and liabilities included in the disposal group,
the disposal group is written down. The impairment loss is
recognised in profit or loss for the period.
m) Cash and
cash equivalents
Cash and cash equivalents include cash in hand
and deposits held at call with commercial or central banks and
exposures to money market funds (transacted via open ended
investment companies). Cash equivalents are short-term highly
liquid investments that are readily convertible to a known amount
of cash and which are subject to an insignificant risk of changes
in value. Cash equivalents are held for the purpose of meeting
short-term cash commitments rather for investment or other
purposes.
n)
Goodwill
Goodwill arises on the acquisition of
subsidiaries and represents the excess of the consideration
transferred over the Group's interest in the net fair value of the
net identifiable assets, liabilities and contingent liabilities of
the acquiree and the fair value of any non-controlling interest in
the acquiree.
Goodwill is tested for impairment at the end
of each accounting period.
On disposal of a cash-generating unit, the
attributable amount of goodwill is included in the determination of
the profit or loss on disposal. Goodwill is accounted for at
cost less accumulated impairment losses.
o) Financial
instruments
Financial assets and financial liabilities are
recognised in the Company and Group statements of financial
position when the Company or Group becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are
initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial
assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss are
added to or deducted from the fair value of the financial assets or
financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in profit or
loss.
(i) Financial
assets
All regular way purchases or sales of
financial assets are recognised and derecognised using trade date
accounting. The trade date is the date of the commitment to
buy or sell the financial asset.
All recognised financial assets are measured
subsequently in their entirety at either amortised cost or fair
value, depending on the classification of the financial
assets.
Classification of financial
assets
Financial assets that meet the following
conditions are measured subsequently at amortised cost:
· the financial
asset is held within a business model whose objective is to hold
financial assets in order to collect contractual cash flows;
and
· the contractual
terms of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on
the principal amount outstanding.
Financial assets that meet the following
conditions are measured subsequently at FVTOCI:
· the financial
asset is held within a business model whose objective is achieved
by both collecting contractual cash flows and selling the financial
assets; and
· the contractual
terms of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on
the principal amount outstanding.
Despite the foregoing, the Group and the
Company may irrevocably elect to present subsequent changes in fair
value of an equity investment in other comprehensive income if
equity instruments are held as a strategic investment and not held
with the intention to realise a profit.
By default, all other financial assets are
measured subsequently at fair value through profit or
loss.
The Group's financial assets measured at
amortised cost comprise primarily of:
· Cash and
balances at central banks
· Loans and
advances on demand to banks
· Other loans and
advances to banks
· Other loans and
advances to non-banks
· Investment in
debt securities
· Unsettled
transaction and
· Other assets
such as balances with mobile network operators, staff loans,
transactions debited by third party Nostro providers.
The Group's financial assets measured at FVTPL
comprise primarily of money market funds and derivative
financial instruments.
Financial assets at FVTPL are measured at fair
value at the end of each reporting period, with any fair value
gains or losses recognised in profit or loss. Fair value is
determined in the manner described in Note 43.
The Group's financial assets designated at
FVTOCI comprise primarily of its investments in equity
securities, which are not held for trading (Note 16).
The equity instruments are held as a strategic
investment and not held with the intention to realise a
profit.
Investments in equity instruments at FVTOCI
are initially measured at fair value plus transaction costs.
Subsequently, they are measured at fair value with gains and
losses arising from changes in fair value recognised in other
comprehensive income and accumulated in the Investment revaluation
reserve. The cumulative gain or loss is not reclassified to profit
or loss on disposal of the equity investments, instead, it is
transferred to retained earnings.
Dividends on these investments in equity
instruments are recognised in profit or loss in accordance with
IFRS 9 unless the dividends clearly represent a recovery of part of
the cost of the investment. Dividends are included in the 'Other
operating income/(loss) ' line item (Note 7) in the statement of
profit or loss and other comprehensive income.
Interest income is recognised using the
effective interest method for debt instruments measured
subsequently at amortised cost (Note 1 (e)) above. Interest income
is recognised in the statement of profit or loss and other
comprehensive income in the 'Net interest income' line item (Note
4).
Derecognition of financial
assets
The Group derecognises a financial asset only
when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially
all the risks and rewards of ownership of the asset to another
entity.
On derecognition of a financial asset the
difference between the asset's carrying amount and the sum of the
consideration received and receivable is recognised in profit or
loss.
(ii)
Financial liabilities
Debt and equity instruments are classified as
either financial liabilities or as equity in accordance with the
contractual substance of the contractual arrangements and the
definitions of a financial liability and an equity
instrument.
Classification of financial
liabilities
All financial liabilities are measured
subsequently at amortised cost using the effective interest method
or at fair value through profit and loss.
Financial liabilities at fair value
through profit and loss
The Group's financial liabilities at fair
value through profit and loss comprise primarily of derivative
liabilities (see below for policy on derivative financial
instruments).
Financial liabilities at fair value through
profit and loss are measured at fair value, with any gains or
losses arising on changes in fair value recognised in profit
or loss.
Financial liabilities at amortised
cost
The Group's financial liabilities at amortised
cost comprise primarily of client accounts, unsettled transactions
and other liabilities such as trade creditors, funds received in
advance, transactions credited by third party Nostro providers and
other creditors.
Financial liabilities at amortised cost are
measured subsequently at amortised cost using the effective
interest method (see Note 1(e) above).
Derecognition of financial
liabilities
Financial liabilities are derecognised when,
and only when, the Group's obligations are discharged, cancelled or
have expired. The difference between the carrying amount of the
financial liability derecognised and the consideration paid and
payable is recognised in profit or loss.
(iii)
Derivative financial instruments
The Group's derivatives policy only permits
dealing in forward foreign exchange contracts to hedge or provide
services to clients.
Derivative financial instruments are initially
recognised at fair value on the date a derivative contract is
entered into and are subsequently remeasured at their fair value at
the reporting date.
A derivative with a positive fair value is
recognised as a financial asset whereas a derivative with a
negative fair value is recognised as a financial
liability.
Hedge accounting is not applied.
(iv)
Offsetting
Financial assets and liabilities are offset
and the net amounts presented in the financial statements only when
there is a legally enforceable right to set off the
recognised amounts and there is an intention to settle on a net
basis or to realise the asset and settle the liability
simultaneously.
(v)
Equity
An equity instrument is any contract that
evidences a residual interest in the assets of an entity after
deducting all of its liabilities.
Repurchase of the Company's own equity
instruments is recognised and deducted directly from equity. No
gain or loss is recognised in profit or loss on the purchase,
sale, issue or cancellation of the Company's own equity
instruments.
(vi)
Financial guarantee contracts and letter of credit
confirmations/bill acceptances - provisions
Financial guarantee
contracts
A financial guarantee contract is a contract
that requires the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to
make payments when due in accordance with the terms of a
debt instrument.
Letters of credit confirmations/bill
acceptances
Letters of credit confirmation/acceptance is a
letter from an issuing bank guaranteeing that a buyer's payment to
a seller will be received on time and for the correct amount. The
Group confirms/accepts the letters of credit issued by an issuing
bank and charges fixed fees which are received either in advance or
at a later date.
Fees relating to financial guarantee contracts
and letter of credit confirmations / bill acceptances issued by the
Group fees can be received upfront and these fees are amortised on
a straight-line basis to income over the year. When fees for
financial guarantee contracts and letter of credit confirmations/
bill acceptances issued by the Group are received at termination
date, they are recognised initially at zero, as the term has not
yet started. The receivable increases over the life of the contract
as service is performed with the corresponding recognition of
income in the statement of profit or loss.
All financial guarantee contracts issued by
the Group are subsequently measured at the higher of:
· the amount of
the loss allowance determined in accordance with IFRS 9;
and
· the amount
initially recognised less, where appropriate, the cumulative amount
of income recognised in accordance with the Group's revenue
recognition policies.
Financial guarantee contracts and letter of
credit confirmations / bill acceptances are presented as provisions
on the statement of financial position and the remeasurement is
included within the reversal of impairment / (impairment loss) on
financial assets at amortised cost.
(vii)
Impairment of financial assets
The Group recognises loss allowances for
Expected Credit Loss (ECL) in accordance with IFRS 9 on the
following financial instruments that are not measured at FVTPL and
are not equity instruments measured at FVTOCI:
· Cash and
balances at central banks.
· Loans and
advances on demand to banks (comprising nostro
balances).
· Other loans and
advance to banks (comprising fixed term deposits).
· Other loans and
advances to non-banks (comprising receivables from Non-Bank
Financial Institutions (''NBFIs'') and other non-banks.
· Investment in
debt securities.
· Other assets
(financial assets included are balances with mobile network
operators, transactions debited by third party nostro providers,
staff loans, late receipts).
· Accrued
income.
· Off - balance
sheet financial assets (comprising Financial guarantees, Liquidity
as a Service (''Laas'') and letters of credit confirmations / bill
acceptances).
· Unsettled
transactions.
Equity investments are not subject to
impairment, consistent with IFRS 9.
ECLs are required to be measured through a
loss allowance at an amount equal to:
· twelve-month ECL
(referred to as Stage 1); or
· full lifetime
ECL (referred to as Stage 2 and Stage 3).
For Stages 1 and 2, interest revenue is
calculated on the gross carrying amount. Under Stage 3, interest
revenue is calculated based on the net carrying amount (gross
amount less ECL).
The amount of ECL is updated at each reporting
date to reflect changes in credit risk since initial recognition of
the respective financial instrument. For these financial assets,
the Group recognises lifetime ECL when there has been a significant
increase in credit risk since initial recognition. However, if the
credit risk on the financial instrument has not increased
significantly since initial recognition, the Group measures the
loss allowance for that financial instrument at an amount
equal to twelve-month ECL.
Lifetime ECL represents the expected credit
losses that will result from all possible default events over the
expected life of a financial instrument. In contrast, twelve-month
ECL represents the portion of lifetime ECL that is expected to
result from default events on a financial instrument that are
possible within twelve months after the reporting date.
Significant increase in credit
risk
The Group monitors all financial assets,
financial guarantee contracts and letter of credit
confirmations/bill acceptances that are subject to the impairment
requirements to assess whether there has been a significant
increase in credit risk since initial recognition. If there has
been a significant increase in credit risk the Group will measure
the loss allowance based on lifetime rather than twelve-month
ECL.
In assessing whether the credit risk on a
financial instrument has increased significantly since initial
recognition, the Group compares the risk of a default occurring on
the financial instrument at the reporting date with the risk of a
default occurring on the financial instrument at the date of
initial recognition. In making this assessment, the Group considers
both quantitative and qualitative information that is reasonable
and supportable, including historical experience and
forward-looking information that is available without undue cost or
effort. Forward-looking information considered includes the future
prospects of the industries in which the Group's debtors operate,
obtained from economic expert reports, financial analysts,
governmental bodies, relevant think-tanks and other similar
organisations, as well as consideration of various external sources
of actual and forecast economic information that relate to the
Group's core operations.
In particular, the following information is
taken into account when assessing whether credit risk has increased
significantly since initial recognition:
· an actual or
expected significant deterioration in the financial instrument's
external (if available) or internal credit rating;
· significant
deterioration in external market indicators of credit risk for a
particular financial instrument, e.g., a significant increase
in the credit spread, the credit default swap prices for the
debtor, or the length of time or the extent to which the
fair value of a financial asset has been less than its amortised
cost;
· existing or
forecast adverse changes in business, financial or economic
conditions that are expected to cause a significant decrease
in the debtor's ability to meet its debt obligations;
· an actual or
expected significant deterioration in the operating results of the
debtor;
· economic
uncertainty i.e., inflation and rising interest rates;
· geopolitical
uncertainty;
· significant
increases in credit risk on other financial instruments of the same
debtor; and
· an actual or
expected significant adverse change in the regulatory, economic, or
technological environment of the debtor that results in a
significant decrease in the debtor's ability to meet its debt
obligations.
Irrespective of the outcome of the above
assessment, the Group presumes that the credit risk on a financial
asset has increased significantly since initial recognition when
contractual payments are more than 30 days past due, unless
the Group has reasonable and supportable information that
demonstrates otherwise. Despite the foregoing, the Group assumes
that the credit risk on a financial instrument has not increased
significantly since initial recognition if the financial instrument
is determined to have low credit risk at the reporting date. A
financial instrument is determined to have low credit risk
if:
· the financial
instrument has a low risk of default;
· the debtor has a
strong capacity to meet its contractual cash flow obligations in
the near term; and
· adverse changes
in economic and business conditions in the longer term may, but
will not necessarily, reduce the ability of the borrower to fulfil
its contractual cash flow obligations.
The Group considers a financial asset to have
low credit risk when the asset with a credit rating of 'investment
grade' in accordance with the globally understood definition, and a
high credit risk when the asset has a credit rating of
'sub-investment grade'. Throughout the lifetime of the account, the
Group monitors the behaviour of the asset based on its financial
position and assesses whether the asset has any amounts past due.
The Group assigns a 'performing' status when the counterparty has a
strong financial position and there is no past due amounts, and a
'non-performing' status when there is a degradation in the
financial position and subsequent arrears.
For financial guarantee contracts and letter
of credit confirmations/bill acceptances, the date that the Group
becomes a party to the irrevocable commitment is considered to
be the date of initial recognition for the purposes of assessing
the financial instrument for impairment. In assessing whether there
has been a significant increase in the credit risk since initial
recognition of a financial guarantee contract, the Group considers
the changes in the risk that the specified debtor will default on
the contract.
The Group regularly monitors the effectiveness
of the criteria used to identify whether there has been a
significant increase in credit risk and revises them as appropriate
to ensure that the criteria are capable of identifying significant
increase in credit risk before the amount becomes past
due.
Definition of default
The Group considers the following as
constituting an event of default for internal credit risk
management purposes as historical experience indicates that
financial assets that meet the earlier of either of the following
criteria are generally not recoverable:
· when there is a
breach of financial covenants by the debtor; or
· information
developed internally or obtained from external sources indicates
that the debtor is unlikely to pay its creditors, including
the Group, in full.
Irrespective of the above analysis, the Group
considers that default has occurred when a financial asset is more
than 90 days past due unless the Group has reasonable and
supportable information to demonstrate that a more lagging default
criterion is more appropriate.
Write-off policy
The Group writes off a financial asset when
there is information indicating that the debtor is in severe
financial difficulty and there is no realistic prospect of
recovery, e.g. when the debtor has been placed under liquidation or
has entered into bankruptcy proceedings. Financial assets written
off may still be subject to enforcement activities under the
Group's recovery procedures, taking into account legal advice where
appropriate. Any recoveries made are recognised in profit or
loss.
Measurement and recognition of
ECLs
ECLs are a probability-weighted estimate of
the present value of credit losses. These are measured as the
present value of the difference between the cash flows due to the
Group under the contract and the cash flows that the Group expects
to receive arising from the weighting of multiple future economic
scenarios, discounted at the asset's Effective Interest Rate
('EIR').
The measurement of expected credit losses is a
function of the probability of default, loss given default (i.e.
the magnitude of the loss if there is a default) and the exposure
at default. The assessment of the probability of default and loss
given default is based on historical data adjusted by
forward-looking information as described in Note 37. As for the
exposure at default, for financial assets, this is represented by
the assets' gross carrying amount at the reporting date; for
financial guarantee contracts and letter of credit
confirmations/bill acceptances, the exposure includes the amount of
guaranteed debt that has been drawn down as at the reporting date,
together with any additional guaranteed amounts expected to be
drawn down by the borrower in the future by default date determined
based on historical trend, the Group's understanding of the
specific future financing needs of the debtors, and other relevant
forward-looking information.
For financial assets, the expected credit loss
is estimated as the difference between all contractual cash flows
that are due to the Group in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at the
original effective interest rate.
For a financial guarantee contract and letter
of credit confirmations/bill acceptances, as the Group is required
to make payments only in the event of a default by the debtor in
accordance with the terms of the instrument that is guaranteed, the
expected loss allowance is the expected payments to reimburse the
holder for a credit loss that it incurs less any amounts that the
Group expects to receive from the holder, the debtor or any other
party.
If the Group has measured the loss allowance
for a financial instrument at an amount equal to lifetime ECL in
the previous reporting period but determines at the current
reporting date that the conditions for lifetime ECL are no longer
met, the Group measures the loss allowance at an amount equal to
twelve-month ECL at the current reporting date.
The Group measures ECL on an individual basis,
or on a collective basis for portfolios of loans that share similar
economic risk characteristics. The measurement of the loss
allowance is based on the present value of the asset's expected
cash flows using the asset's original EIR, regardless of whether it
is measured on an individual basis or a collective
basis.
Presentation of ECL
Loss allowances for ECL are presented in the
statement of financial position as follows:
· for financial
assets measured at amortised cost: as a deduction from the gross
carrying amount of the assets;
· financial
guarantee contracts: as a provision.
The Group recognises an increase or decrease
in impairment in profit or loss for all financial instruments with
a corresponding adjustment to their carrying amount through a
loss allowance account.
p) Employee
benefits
The Group provides a range of benefits to
employees, including annual bonus arrangements, paid holiday
arrangements, medical insurance and defined contribution pension
plans. The Group also provides to Executive Directors and certain
other key employees or senior management:
· a Long-Term
Incentive Plan;
· the rights to
invest in restricted shares of Group companies;
· the rights to
restricted share units of Group companies;
Short-term
benefits
Short-term benefits, including holiday pay and
other similar non-monetary benefits, are recognised as an expense
in the period in which the service is received.
Pension
contributions
All pension contributions are accounted for as
defined contributions and paid over on a monthly basis. No
liability for pension entitlement accrues to the Group.
Long term
incentive plan and restricted shares/restricted share units
plan
The Group provides share-based payment
arrangements to certain employees.
Equity-settled arrangements are measured at
fair value of the equity instruments at the grant date. The fair
value is expensed on a straight-line basis over the vesting period.
The fair value of the employee services received in exchange for
the grant of the awards is recognised in employee benefit expenses
together with a corresponding increase in equity (retained
earnings), over the period in which the service and the performance
conditions are fulfilled (the vesting period).
Long term incentive plan ("LTIP") awards are
subject to performance conditions. LTIP
awards granted in 2023 are subject to both market performance
conditions (TSR) and non-market performance conditions
(EPS). Service conditions are not taken into
account when determining the grant date and for fair value of
awards, but the likelihood of the conditions being met is assessed
as part of the Group's best estimate of the number of equity
instruments that will ultimately vest. Any other conditions
attached to an award, but without an associated service
requirement, are non-vesting conditions. Non-vesting conditions are
reflected in the fair value of an award. Share awards vest when
service conditions are met.
Where equity-settled arrangements are modified
before the vesting date, and are of benefit to the employee, the
incremental fair value is recognised over the period from the date
of modification to date of vesting. If modified after vesting, it
is recognised immediately. Where a modification is not beneficial
to the employee there is no change to the charge for the
share-based payment. Settlement and cancellations are treated as an
acceleration of vesting and the unvested amount is recognised
immediately in the statements of profit or loss and other
comprehensive income.
The Group has no cash-settled
arrangements.
Details regarding the determination of the
fair value of equity-settled share-based transactions are set out
in Note 32.
q)
Investments in subsidiaries
Investments in subsidiaries are non-monetary
assets measured at cost less impairment. Refer to Note 2 for the
judgements and estimates involved in impairment
assessment.
r)
Discontinued operations and disposal group held for
sale
Discontinued operations and disposal group
held for sale is a component of the Group's business, the
operations and cashflows of which can be clearly distinguished from
the rest of the Group and which:
· represents a
separate major line of business or geographical area of operation;
or
· is part of a
single coordinated plan to dispose of a separate major line of
business or geographical area of operation; or
· is a subsidiary
acquired exclusively with a view to resale.
Classification as a discontinued operation
occurs upon disposal, abandonment or when the operations meet the
criteria to be classified as held for sale. This condition is
regarded as satisfied only when the sale is highly probable and the
asset or disposal group is available for immediate sale in its
present condition. Management must be committed to the sale, which
should be expected to qualify for recognition as a completed sale
within one year of the date of classification. Property, plant and
equipment and intangible assets, once classified as held for sale,
are not depreciated or amortised.
Disposal groups classified as held for sale
are measured at the lower of the carrying value and the fair value
less costs to sell. Non-current assets and disposal groups are
classified as held for sale if their carrying amounts will be
recovered through a sale transaction rather than continued use.
When an operation is classified as a discontinued operation, the
comparative statement of profit or loss and other comprehensive
income is re-presented as if the operation had been discontinued
from the start of the comparative year.
When the Group ceases to have control of an
undertaking (disposal group), it is at this point that the Group
ceases to consolidate the operations and any gain or loss on
disposal is recognised in the Group consolidated statement of
profit or loss. In addition, any movements previously recognised in
other comprehensive income in respect of that entity are accounted
for as if the Group had directly disposed of the related assets or
liabilities. This may mean that amounts previously recognised in
other comprehensive income are reclassified to profit or
loss.
s) Provisions
and contingent liabilities
Provisions are recognised in respect of
present obligations arising from past events where it is probable
that outflows of resources will be required to settle the
obligations and they can be reliably estimated. Contingent
liabilities are possible obligations whose existence depends on the
outcome of uncertain future events or those present obligations
where the outflows of resources are uncertain or cannot be measured
reliably. Contingent liabilities are not recognised in the
consolidated and company financial statements but are disclosed
unless they are remote.
t) Share
capital
On issue of ordinary shares, any consideration
received net of any directly attributable transaction costs is
included in equity.
u) Earnings
per share
i. Basic
earnings per share
Basic earnings per share is calculated on the
Group's profit or loss after taxation attributable to the owners of
the parent and based on weighted average of ordinary shares at the
end of the year.
ii. Diluted
earnings per share
Diluted earnings per share is calculated on
the Group's profit or loss after taxation attributable to owners of
the parent and based on weighted average of ordinary shares at the
end of the year and the weighted average number of ordinary shares
that would be issued on conversion of all the dilutive potential
ordinary shares into ordinary shares. Performance-based employee
share options are treated as contingently issuable shares because
their issue is contingent upon satisfying specified conditions in
addition to the passage of time.
v) Dividends
Dividends are recognised in the financial
statements when they are declared and approved by the Board of
Directors. This is because the approval of a dividend creates a
legal obligation for the Company to pay the dividend to its
shareholders.
w) Leases
(Group as lessee)
The Group assesses whether a contract is, or
contains, a lease, at inception of the contract. The Group
recognises a right-of-use asset and a corresponding lease
liabilities with respect to all lease arrangements in which it is
the lessee, except for short-term leases (defined as leases with a
lease term of twelve months or less) and leases of low value assets
(such as small items of fixtures and equipment and value of less
than £10,000). For these leases, the Group recognises the lease
payments as an Operating Expense on a straight-line basis over the
term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from
the leased assets are consumed.
The lease liabilities are initially measured
at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the
lease. If this rate cannot be readily determined, the Group
uses its incremental borrowing rate.
The incremental borrowing rate depends on the
term, currency and start date of the lease and is determined based
on a series of inputs including: the risk-free rate based on
government bond rates; a country-specific risk adjustment; a credit
risk adjustment based on bond yields; and an entity-specific
adjustment when the risk profile of the entity that enters into the
lease is different to that of the Group.
Lease payments included in the measurement of
the Group's lease liabilities are fixed lease payments less any
lease incentives receivable.
The lease liabilities are presented as a
separate line in the consolidated statement of financial
position.
The lease liabilities are subsequently
measured by increasing the carrying amount to reflect interest on
the lease liabilities (using the effective interest method) and by
reducing the carrying amount to reflect the lease payments
made.
The right-of-use assets comprise the initial
measurement of the corresponding lease liabilities, lease payments
made at or before the commencement day, less any lease incentives
received and any initial direct costs and estimations of any
dilapidation obligations. They are subsequently measured at cost
less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the
shorter period of lease term and useful life of the right-of-use
asset. The depreciation starts at the commencement date of the
lease.
The right-of-use assets are presented as a
separate line in the consolidated statement of financial
position.
The Group applies IAS 36 to determine whether
a right-of-use asset is impaired and accounts for any identified
impairment loss as described in the 'impairment of non-financial
assets' policy.
x) New and
revised IFRS accounting standards in issue but not yet
effective
At the date of authorisation of these
consolidated financial statements, the Group has not applied the
following new and revised IFRS Accounting Standards that have been
issued and endorsed for use in the UK but are not yet
effective.
Accounting
standard
|
Details of
amendment
|
Amendments to IAS 1
|
Classification of Liabilities as Current or
Non-current: clarify that the classification of liabilities as
current or non-current is based solely on a company's right to
defer settlement for at least twelve months at the reporting date.
The right needs to exist at the reporting date and must have
substance.
|
Amendments to IFRS 16, Leases
|
Lease Liability in a Sale-and-Leaseback
requires a seller-lessee to account for variable lease payments
that arise in a sale-and-leaseback transaction as
follows:
· On initial
recognition, include variable lease payments when measuring a lease
liability arising from a sale-and-leaseback transaction.
· After initial
recognition, apply the general requirements for subsequent
accounting of the lease liability such that no gain or loss
relating to the retained right of use is recognised.
|
IAS 7, Statement of Cash Flows and IFRS 7,
Financial Instruments: Disclosures (Amendment)
|
Supplier Finance Arrangements requires an
entity to disclose qualitative and quantitative information about
its supplier finance programmes, such as terms and conditions -
including, for example, extended payment terms and security
or guarantees provided.
|
Amendments to IAS 21 The Effects of Changes in
Foreign Exchange Rates:
|
Lack of Exchangeability (Issued August
2023).
|
The Group does not expect that the adoption of
the Standards listed above will have a material impact on the
consolidated and Company Financial Statements of the Group and the
Company in future periods. The effective date of these
amendments is 1 January 2024.
y) New
sustainability standards issued by the International Sustainability
Standards Board (ISSB) effective 1 January 2024
The International Sustainability Standards
Board (ISSB) issued its first two sustainability reporting
standards on 26 June 2023. This included:
· General
Requirements for Disclosure of Sustainability-related Financial
Information (IFRS S1), the core framework for the disclosure of
material information about sustainability-related risks and
opportunities across an entity's value chain
· Climate-related
Disclosures (IFRS S2), the first thematic standard issued that sets
out requirements for entities to disclose information about
climate-related risks and opportunities
IFRS S1 and IFRS S2 are applicable for
accounting periods beginning on or after 1 January 2024, but they
have not yet been adopted for use in the UK. The Directors are in
the process of assessing the implications of these
standards.
2. Critical Accounting Judgements and Key Sources of
Estimation Uncertainty
In applying the Group's accounting policies,
which are described in Note 1, the Directors are required to make
judgements (other than those involving estimations) that have a
significant impact on the amounts recognised and to make estimates
and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future
periods.
The critical judgements, apart from those
involving estimation, made by management in applying the Group's
accounting policies in these consolidated financial statements and
the key sources of estimation uncertainty that may have a
significant risk of causing a material adjustment to the carrying
amount of assets and liabilities within the next financial year),
which together are considered critical to the Group's results and
financial position, are as follows:
2.1 Key
judgements and estimates in impairment and going concern
assessment
The assessment of goodwill (Note 21),
intangible assets (Note 21), investments in subsidiary undertakings
(Note 22) for impairment and appropriateness of going concern
reflects management's best estimate of the future cash flows of the
Cash Generating Units ("CGUs") and the rates used to discount these
cash flows, both of which are subject to uncertain factors as
follows:
Judgements
|
Estimates
|
The accuracy of forecast cash flows
is subject to a high degree of uncertainty in volatile market
conditions.
Where such circumstances are
determined to exist, management re-tests goodwill, intangible
assets and investments in subsidiaries for impairment more
frequently than once a year when indicators of impairment exist.
Judgement was involved in calculating the cash flow forecasts and
it involved consideration of past business performance, current
market conditions and our macroeconomic outlook to estimate future
earnings.
Key assumptions underlying cash
flow projections reflect management's outlook on interest rates and
inflation, as well as business strategy, including the scale of
investment in technology and automation.
|
Cashflows
forecasts
The future cash flows of the CGUs
are sensitive to the cash flows projected for the 3 year period
which detailed forecasts are available and to assumptions regarding
the long-term pattern of sustainable cash flows thereafter.
Forecasts are compared with actual performance and verifiable
economic data, but they reflect management's view of future
business prospects at the time of the assessment.
Discount
rates (Weighted Average Cost of Capital ('WACC'))
The rates used to discount future
expected cash flows can have a significant effect on their
valuation, and are based on the costs of equity assigned to
individual CGUs. The cost of equity percentage is generally derived
from a capital asset pricing model and market implied cost of
equity, which incorporates inputs reflecting a number of financial
and economic variables, including the risk-free interest rate in
the country concerned and a premium for the risk of the business
being evaluated. These variables are subject to fluctuations in
external market rates and economic conditions beyond management's
control.
Terminal
growth rates
The terminal growth rate is used to
extrapolate the cash flows in perpetuity because of the long-term
perspective within the Group of business units making up the
CGUs.
Refer to sensitivity analysis in
Note 21.
|
2.2 Key
judgements and estimates impairment of financial
assets
The calculation of the Group's ECL under IFRS
9 requires the Group to make a number of judgements, assumptions
and estimates. The most significant are set out below:
Judgements
|
Estimates
|
Defining what is considered to be a
significant increase in credit risk
· Selecting and
calibrating the Probability of Default ("PD"), Loss Given Default
("LGD") and Exposure At Default ("EAD") models, which support the
calculations, including making reasonable and supportable
judgements about how models react to current and future economic
conditions
· Selecting model
inputs and economic forecasts, including determining whether
sufficient and appropriately weighted economic forecasts are
incorporated to calculate unbiased expected loss
· Making
management adjustments to account for late-breaking events, model
and data limitations and deficiencies, and expert credit judgements
(none were noted).
|
Note 37 - Credit Risk sets out the assumptions
used in determining ECL, and provides an indication of the
sensitivity of the result to the application of different
weightings being applied to different economic
assumptions.
|
The quantitative disclosures, range of
outcomes and sensitivities applied are disclosed in Note
37.
2.3 Key
judgements on classification of non-recurring
costs
Some of the expenses accounted for by the
Group have been separately identified as non-recurring in the
Consolidated Statement of Profit or Loss and Other comprehensive
income on the basis that such presentation enhances the
transparency and understanding of the Group's financial
performance. Judgement has been applied in determining whether an
item of expense is non-recurring in accordance with the Group's
accounting policy. Based on an assessment of the nature, timing,
and frequency of the events giving rise to certain expenses the
following items have been presented as non-recurring:
· Professional
costs incurred in connection with review and implementation of
strategic options;
· Staff bonuses
related to listing and to take on commitments.
3. Segment Reporting
Operating segments are determined by the
Group's internal reporting to the Chief Operating Decision Maker
(CODM). The CODM has been determined to be the Group's
Executive Committee. The information regularly reported to the
Executive Committee for the purposes of resource allocation and the
assessment of performance, is based wholly on the overall
activities of the Group. Based on the Group's business model, the
Group has determined that it has only one reportable segment of
continuing operations.
The CODM assess the profitability of the
segment based on a measure of EBITDA and Adjusted EBITDA is defined
as follows:
· EBITDA -
Calculated as Profit before Tax and IFRS16 lease liability
interest, depreciation and amortisation. Although it is
typical to calculate EBITDA before interest, our net interest
income is generated from operational client deposits and subsequent
re-investment to generate returns for the shareholder and therefore
remains included within EBITDA.
· Adjusted EBITDA
- EBITDA before non-recurring operating expenses.
All revenue from external clients is generated
through its operations located in the UK and on that basis is
wholly attributable to the UK and all non-current assets, other
than financial instruments and deferred tax assets, are located
in the UK.
a)
Income
The Group derives its income from continuing
and discontinued operations as follows:
Year ended 31
December 2023
Income by
Business Line
|
Continuing
operations
£'000
|
Discontinued
operations
£'000
|
Total
£'000
|
FX
|
68,518
|
4
|
68,522
|
Payments
|
34,229
|
855
|
35,084
|
Banking services and other income
|
34,321
|
-
|
34,321
|
Total income
- net of interest expense
|
137,068
|
859
|
137,927
|
Year ended 31
December 2022
Income by
Business Line
|
Continuing
operations
£'000
|
Discontinued
operations
£'000
|
Total
£'000
|
FX
|
63,425
|
26
|
63,451
|
Payments
|
33,661
|
3,362
|
37,023
|
Banking services and other income
|
12,349
|
-
|
12,349
|
Total income
- net of interest expense
|
109,435
|
3,388
|
112,823
|
FX: The Group's FX revenue is
derived from the difference between the exchange rate the Group
makes available to its clients and the rate that it receives from
one or more liquidity providers from whom it sources the relevant
currency. Revenue categorised as FX is from clients with a need to
exchange a bulk amount from one currency for another without onward
payment to another party.
Payments: The Group's
payments revenue include cross currency payments, same currency
payments (corresponding activity income, and account management
fees), pension payments and platform revenue. Cross currency
payments comprise margin derived from bid-ask spreads on foreign
currency conversion and fees paid by clients to transfer money from
one country to another to third parties.
Same currency relates to payment
services provided for payments transacted without an exchange of
foreign currency largely relating to major market currency clearing
and includes fees for account management activities and payments
execution. Pension payments fees relate to amounts earned on
processing of pension scheme foreign currency payments. Platform
revenue relates to recurring fixed fees rather than fees earned on
transaction volumes.
Banking services and other income: The Group also generates income from trade finance, liquidity
services (including trade finance and letters of credit), and risk
management consulting fees, interest earned from other placements
with banks, interest earned from advances to non-banks outside
Liquidity as a Service, interest from staff loans and net gains
from financial 3. assets measured at fair value. The Group takes
client funds earmarked for other needs as client deposits and makes
short-term investment in the money market to generate gain on money
market funds.
b)
Profitability
The Group measures profitability for the
reporting segment on an Adjusted EBITDA basis. Adjusted EBITDA is
used as a key profit measure because it shows the results of
normal, core operations exclusive of income or charges that are not
considered to represent the underlying operational performance.
Adjusted EBITDA is useful as a measure of comparative operating
performance between both previous periods, and other companies as
it removes the effect of taxation, depreciation and amortisation,
and non-recurring operating expenses, as well as items relating to
capital structure.
Reconciliation of Profit before tax to
EBITDA and Adjusted EBITDA
Year ended 31
December 2023
|
Continuing
operations
£'000
|
Discontinued
operations
£'000
|
Total
£'000
|
Profit
/(loss) before taxation
|
37,617
|
(287)
|
37,330
|
Adjusted for:
|
|
|
|
Interest expenses on lease
liabilities
|
65
|
-
|
65
|
Amortisation
|
4,607
|
13
|
4,620
|
Depreciation1
|
1,243
|
-
|
1,243
|
EBIDTA
|
43,532
|
(274)
|
43,258
|
Non-recurring operating expenses
|
21,101
|
-
|
21,101
|
Adjusted
EBITDA
|
64,633
|
(274)
|
64,359
|
Reconciliation of Profit before tax to
EBITDA and Adjusted EBITDA
Year ended 31
December 2022
|
Continuing
operations
£'000
|
Discontinued
operations
£'000
|
Total
£'000
|
Profit/(loss)
before taxation
|
43,891
|
(77)
|
43,814
|
|
Adjusted for:
|
|
|
|
|
Interest expense on lease liability
|
19
|
-
|
19
|
|
Amortisation
|
4,600
|
51
|
4,651
|
|
Depreciation1
|
1,141
|
1
|
1,142
|
|
EBIDTA
|
49,651
|
(25)
|
49,626
|
|
Non-recurring operating expenses
|
5,332
|
-
|
5,332
|
|
Adjusted
EBITDA
|
54,983
|
(25)
|
54,958
|
|
1 Balance includes depreciation on property plant and equipment
and depreciation on right of use of asset.
4. Net Interest Income
Interest
Income
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Interest on cash and balances at central
banks
|
28,147
|
8,217
|
Interest on loans and advances
|
7,676
|
3,421
|
Interest on letters of credit
|
599
|
302
|
Interest on investment in debt
securities
|
15,802
|
5,168
|
Other interest income and similar
income1
|
129
|
63
|
Interest
income
|
52,353
|
17,171
|
|
|
|
Interest
expense
|
|
|
Interest on financial liabilities at amortised
cost
|
(30,685)
|
(10,328)
|
Interest expense on lease
liabilities
|
(65)
|
(19)
|
Other interest expense1
|
(104)
|
(51)
|
Interest
expense
|
(30,854)
|
(10,398)
|
Total net
interest income
|
21,499
|
6,773
|
1 Other interest income and
similar income and other interest expense are interest received,
interest accrued or interest paid on the collateral balances paid
to or received from our FX Swap Counterparties.
5. Fees and Commissions Income
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Fees and
commissions income:
|
|
|
Account management and payments
|
11,750
|
12,151
|
Pension payment fees
|
1,467
|
1,395
|
Trade finance
|
725
|
645
|
Electronic platform fees
|
610
|
785
|
Introductory commission
|
19
|
821
|
Total fees
and commission income
|
14,571
|
15,797
|
At 31 December 2023, the Group
held on its consolidated statement of financial position £531k
(2022: £610k) of accrued income in respect of services provided to
clients and £75k (2022: £171k) of deferred income (entirely
recognised within one year) in respect of amounts received from
clients for services to be provided after the year end.
6. Net Foreign Exchange Gain
|
Consolidated
|
20231
£'000
|
20221
£'000
|
Profit on settlement of foreign exchange
contracts
and remeasurement of non-sterling balances
|
76,402
|
55,021
|
Fair value (losses)/gains on
derivatives2
|
(7,884)
|
8,059
|
Foreign exchange gain on payment transaction
revenue
|
19,899
|
19,676
|
Total
|
88,417
|
82,756
|
1 Includes only continuing
operations. Net foreign exchange transactions relating to
discontinued operations is included in Note 10.
2 Foreign exchange derivative
financial instruments are mandatorily held at fair value through
profit or loss. These fair value movements offset the Profit and
Losses arising from the remeasurement of non-sterling
balances.
7. Other Operating Income/(Loss)
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Other operating income/(loss)
|
313
|
(484)
|
The other operating loss balance
for 2022 includes the effect of revisions to the estimate of the
R&D claim accruals for the years 2020 and 2021. The claims
relate to tax credits receivable from HMRC under the UK Research
and Development Expenditure Credit (RDEC) scheme and are recognised
in the consolidated statement of profit or loss and other
comprehensive income.
The 2023 balance consists of the
Group's estimate of the R&D claim in relation to 2023 and a
revision of the estimate in relation to 2022.
8. Operating Expenses
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Staff costs
and Directors' emoluments
|
|
|
Salaries and bonuses
|
37,646
|
30,050
|
Share based payments
|
1,359
|
837
|
Social security costs
|
4,401
|
3,484
|
Pension costs
|
2,180
|
1,445
|
|
|
|
Fees payable
to the auditors
|
|
|
Audit
|
|
|
- the Company
|
724
|
104
|
- Group
companies1
|
1,090
|
723
|
Audit related services
|
477
|
-
|
|
|
|
Depreciation
and amortisation
|
|
|
Amortisation of intangible assets (Note
21)
|
4,607
|
4,600
|
Depreciation of property, plant, and equipment
(Note 19)
|
798
|
819
|
Depreciation of right-of-use assets (Note
20)
|
445
|
322
|
|
|
|
Other
expenses
|
|
|
Low-value lease expenses
|
47
|
25
|
Clearing costs
|
2,314
|
2,597
|
Other costs of sales
|
-
|
139
|
Other bank charges
|
2,861
|
2,514
|
Software support/licenses
|
5,903
|
4,771
|
Process automation costs (see Note
36B(ii)(a))
|
2,000
|
2,000
|
Professional fees
|
2,573
|
1,112
|
Irrecoverable VAT
|
1,090
|
1,158
|
Other operating expenses
|
7,431
|
3,170
|
Total
recurring operating expenses
|
77,946
|
59,870
|
Non-recurring operating
expenses2
|
21,101
|
5,332
|
Total
operating expenses
|
99,047
|
65,202
|
1 Audit fees includes £379k
(2022: £221K) of prior year audit fees. Additional services
provided by the auditors are noted in (a) below.
2 Non-recurring operating
expenses consist of material non-recurring items that are
considered exceptional in nature by virtue of their size and/or
incidence and as a result of arising outside of the
normal trading of the Group. In determining whether a cost is
non-recurring, the Group considers the nature and frequency of
similar events or transactions that have occurred in the
past, as well as the likelihood of similar events or transactions
in the future.
a)
Non-recurring operating expenses can be analysed as
follows:
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Professional costs incurred in connection with
review of strategic options:
|
16,559
|
1,868
|
Fees related to services provided by the
auditors1
|
1,250
|
-
|
Other
|
15,309
|
1,868
|
|
|
|
Bonus related to:
|
4,542
|
3,464
|
Listing
|
2,288
|
-
|
Take-on commitments
|
2,254
|
3,464
|
Total
non-recurring operating expenses
|
21,101
|
5,332
|
1 Fees for audit services
amounts to £125k (2022:nil) and fees for non-audit services amounts
to £1,125k (2022:nil).
b) Number of employees
The monthly average number of full-time
equivalent staff employed within the Group, including executive
directors, was 310 (2022: 234) and the number of employees at
year-end was 381 (2022; 244).
Average
number of persons employed during the year by legal
entity
|
2023
|
2022
|
Crown Agents Bank Limited
|
303
|
214
|
Segovia Technology Company
|
6
|
8
|
CAB Europe BV
|
1
|
-
|
Crown Agents Investment Managements
|
-
|
12
|
|
310
|
234
|
9. Tax Expense
a) Analysis
of tax expense for the year
i. Tax
expense
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Continuing
and discontinued operations
|
|
|
Current
tax
|
|
|
Corporation tax based on the taxable profit
for the year
|
13,079
|
10,569
|
Adjustment in respect of prior
years
|
316
|
(20)
|
|
13,395
|
10,549
|
Deferred
tax
|
|
|
Prior year
|
-
|
59
|
Impact of tax rate changes
|
-
|
10
|
Origination and reversal of temporary
differences
|
332
|
(172)
|
|
332
|
(103)
|
Total tax
expense in statement of profit or loss
|
13,727
|
10,446
|
Analysed as follows:
|
|
|
Continuing operations
|
13,727
|
10,456
|
Discontinued operations
|
(66)
|
(10)
|
Total tax
expense for the year
|
13,661
|
10,446
|
Effective
tax1
|
36%
|
24%
|
1 The effective tax rate
materially exceeds the applicable tax rate since a large portion of
the non-recurring expenses, (e.g., relating to the Admission) are
not deductible for tax purposes.
ii. Amounts
recognised directly in other comprehensive income
|
2023
£'000
|
2022
£'000
|
Aggregate
deferred tax arising in the year and not recognised in
net profit or loss and recognised in other comprehensive
income:
|
|
|
Current year
|
6
|
17
|
Adjustment in respect of prior
years
|
6
|
-
|
Deferred tax
charge (Note 23)
|
12
|
17
|
b) Factors
affecting tax expense for the year
The tax assessed for the year is higher (2022:
higher) than the standard rate of Corporation Tax in the
UK.
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Profit before
taxation
|
37,617
|
43,891
|
Standard rate corporation tax of 25%/19.00% on
profit before taxation (2022: 19.00%)
|
8,840
|
8,339
|
19.00%
|
1,787
|
8,339
|
25.00%
|
7,053
|
-
|
Effect
of:
|
|
|
Expenses not deductible for tax
|
4,514
|
268
|
Temporary differences regarding capital
items
|
(19)
|
67
|
Losses not available for group
relief
|
20
|
79
|
Impact of overseas tax rates
|
67
|
(40)
|
Tax rate changes
|
-
|
9
|
Permanent difference due to banking surcharge
levy
|
642
|
1,695
|
Prior year adjustments / other
|
(337)
|
39
|
Total tax
expense for continuing operations for the year
|
13,727
|
10,456
|
The Company's tax loss of £391k (2022: £60k)
was surrendered to other Group companies (Corporation Tax Group
Relief) as permitted by HMRC. No tax has been paid by the Company
in the current year (2022:nil).
As laid out in the Finance Act 2021, from 1
April 2023 the main corporation tax rate increased to 25% (19%
previously). In addition, there is a permanent difference due to
banking surcharge levy of 3% (8% previously) in relation to taxable
profits of banks in excess of £100 million (£25 million previously)
from 1 April 2023. The effects of this increase are reflected in
the consolidated financial statements. The figures above
incorporate the increased tax rate in respect of timing differences
expected to reverse after that date.
10. Discontinued Operations, Assets Classified as Held for
Sale, Liabilities Classified as Held for
Sale
a) Assets and
liabilities classified as held for sale
|
Consolidated
|
|
20231
£'000
|
2022
£'000
|
Cash at bank and in hand
|
-
|
-
|
Other assets
|
-
|
989
|
Property, plant and equipment
|
-
|
3
|
Intangible assets
|
-
|
395
|
Assets
classified as held for sale
|
-
|
1,387
|
|
|
|
Derivative financial liabilities
|
-
|
(22)
|
Other liabilities
|
-
|
(1,023)
|
Liabilities
classified as held for sale
|
-
|
(1,045)
|
1 The 2023 results presented
in table A and table B above represent 3 months to 31 March 2023
when CAIM and JCF were sold.
The sale of Crown Agents Investments
Managements Limited (''CAIM'') and JCF Nominees Limited ("JCF") was
completed on 31 March 2023. As at 31 March 2023, the cash balance
with the Group amounts to £1,608k and the Group lost
control of assets totalling £1,275k and liabilities totalling
£634k. There was no
impairment loss recognised in the current year
or prior year in the determination of fair value less costs to
sell. The consideration of £2,133k received on sale included cash
and cash equivalents of £2,133k.
b) Results
from discontinued operations
In accordance with IFRS 5 'Non-current Assets
Held for Sale and Discontinued Operations' the results of CAIM and
JCF are presented as discontinued operations in the current year
and in the 2022 year-end. The results from discontinued operations,
which are included in the consolidated statement of profit or loss
and other comprehensive income, are set out below:
|
Consolidated
|
|
20231
£'000
|
2022
£'000
|
Interest income
|
25
|
-
|
Fees and commission income
|
830
|
3,362
|
Net foreign exchange gain
|
4
|
26
|
Total income,
net of interest expense
|
859
|
3,388
|
Operating expenses
|
(1,146)
|
(3,465)
|
Loss before
tax
|
(287)
|
(77)
|
Tax on loss
|
66
|
10
|
Loss for the
financial year
|
(221)
|
(67)
|
Profit on sale of discontinued
operation
|
68
|
-
|
Other comprehensive income
|
-
|
-
|
Total
comprehensive income
|
(153)
|
(67)
|
The loss from discontinued operations of £153k
(2022: £67k) is attributable entirely to the owners of the Company.
There was no other comprehensive income attributable to
discontinued operations.
c) Cash flows from discontinued operations
|
Consolidated
|
|
20231
£'000
|
2022
£'000
|
Cash flow from operating activities
|
(536)
|
148
|
Cash and cash equivalents at the end of the
year
|
-
|
-
|
d) Assets
classified as held for sale
In the Company financial statements, the
investment in CAIM met the recognition criteria under IFRS 5
Non-current assets held for sale and discontinued operations on 20
June 2022. On initial recognition, assets classified as held for
sale assets are carried at lower of their carrying value or fair
value less cost to sell. The table below summarises the carrying
value and impairment loss recognised on investment in
CAIM.
|
Company
|
|
2023
£'000
|
2022
£'000
|
Assets
classified as held for sale at the beginning of the
year
|
2,181
|
-
|
Investment in CAIM prior to classification as
held for sale
|
-
|
3,446
|
Impairment loss recognised
|
-
|
(1,265)
|
Disposal
|
(2,181)
|
-
|
Assets
classified as held for sale at end of year
|
-
|
2,181
|
The Company recognised a profit on sale of
CAIM of £68k (2022: impairment £1,265k).
1 The 2023 results presented
in table A and table B above represent 3 months to 31 March 2023
when CAIM and JCF were sold.
11. Cash and Balances at Central Banks
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Cash and balances at central banks
|
528,396
|
607,358
|
Less: Impairment loss allowance
|
-
|
-
|
|
528,396
|
607,358
|
Component of
cash and balances included in cashflow under:
|
|
|
Cash and
balances at central banks
|
528,396
|
607,358
|
Cash and balances at central banks
include no encumbered assets (2022: £nil).
There are no restricted amounts
within cash and balances at central banks. The cash and bank
balance at central banks is measured at amortised cost as they meet
the Solely Payment of Principal and Interest (SPPI) criterion and
are held to collect the contractual cashflows.
The carrying amount of these
assets is approximately equal to their fair value.
Refer to Note 37 on Credit risk
for further details on impairment loss allowance.
12. Money Market Funds
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Open Ended
Investment Companies
|
|
|
Goldman Sachs USD Treasury Liquid Reserves
Fund
|
380,805
|
209,486
|
Black Rock ICS USD Liquidity Fund
|
98,566
|
-
|
JP Morgan USD Liquidity LVNAV Fund
|
39,393
|
-
|
|
518,764
|
209,486
|
|
|
|
Component of
Money Market Funds included in
consolidated statement of cashflows under:
|
|
|
Cash and cash equivalent balances
|
518,764
|
209,486
|
Money market funds are mandatorily
held at fair value through profit or loss as they do not satisfy
the Solely Payment Of Principal And Interest (SPPI) criterion set
out in IFRS9. The funds are all rated AAA (in 2022 and 2023) based
on a basket of credit ratings agencies, all approved by the
Financial Conduct Authority.
The Company had no Money Market
funds throughout 2023 (2022: nil). Refer to Note 43 on fair value
measurements for further details.
13. Loans and Advances
Loans and advances are measured at amortised
cost as they meet the SPPI criterion and are held to collect the
contractual cash flows.
|
Consolidated
|
2023
£'000
|
Restated
2022
£'000
|
Loans and
advances (gross)
|
|
|
Loans and advances on demand to
banks
|
135,203
|
90,255
|
Other loans and advances to
banks1
|
137,597
|
85,516
|
Other loans and advances to
non-banks1
|
8,712
|
12,647
|
Total
|
281,512
|
188,418
|
|
|
|
Less:
Impairment loss allowance
|
|
|
Loans and advances on demand to
banks
|
(25)
|
(46)
|
Other loans and advances to banks
|
(27)
|
(51)
|
Other loans and advances to
non-banks
|
(496)
|
(200)
|
Total
|
(548)
|
(297)
|
|
|
|
Net Loans and advances on demand to
banks
|
135,178
|
90,209
|
Net Other loans and advances to
banks
|
137,570
|
85,465
|
Net Other loans and advances to
non-banks
|
8,216
|
12,447
|
Net loans and
advances
|
280,964
|
188,121
|
|
|
|
Component of loans and advances included
in
the consolidated statement of cash flows under:
|
|
|
Cash and cash equivalents
|
135,178
|
90,209
|
Total
|
135,178
|
90,209
|
The Group's other loans and advances to banks
include £8,264k of encumbered assets (2022: £1,827k) in relation to
derivative contracts with other financial institutions and the
balances are not overdue. Other loans and advances to non-banks
includes a loan to a related party (2023: nil; 2022: £2,251k) (see
Note 35).
Refer to Note 37 on Credit risk. for further
details on impairment loss allowance.
1 Prior period restatement
note
A prior period adjustment has been made to
record a reclassification of a counterparty which was incorrectly
recognised in Other loans and advances to banks instead of Other
loans and advances to non-banks. There was no impact to profit or
loss, equity or earnings per share. The 31 December 2022
consolidated statement of financial position has been restated as
follows:
Consolidated
financial statements as at 31 December 2022:
|
Other loans and advances to
banks
£'000
|
Other loans
and advances
to non-banks
£'000
|
Year ended 31 December 2022 (as previously
reported)
|
93,164
|
4,748
|
Prior period adjustment
|
(7,699)
|
7,699
|
Year ended 31
December 2022 (as restated)
|
85,465
|
12,447
|
The Other loans and advances to banks and
Other loans and advances to non-banks balances on Note 34, Note 37,
Note 38, Note 40 and Note 42 have been impacted by the same prior
period adjustment amount and have been restated
accordingly.
The Company's loans and advances with
subsidiary undertaking is receivable from CAB and amounts to £658k
(2022: nil).
14. Derivative Financial Instruments
At 31 December, the derivative assets and
liabilities are set out below, these are held to manage foreign
currency exposure and are not designated in hedge accounting
relationships for risk management purposes:
Consolidated
Foreign
Exchange Forwards:
|
Notional Principal
£'000
|
Assets
£'000
|
Liabilities
£'000
|
2023
|
711,098
|
3,829
|
9,679
|
2022
|
714,810
|
6,567
|
4,543
|
The forward foreign exchange contracts have
been transacted to economically hedge assets and liabilities in
foreign currencies. The net unrealised (loss)/ gain at the
statement of financial position date is (£5,850k) (2022: unrealised
gain £2,024k). These derivative financial instruments and the
underlying transactions they hedge will mature during 2024 split as
follows (2022: mature during 2023).
The Group has entered into arrangements that
do not meet the criteria for offsetting but still allow for the
related amounts to be set off in certain circumstances, such as
bankruptcy or the termination of a contract. There were no such
instances during the year.
The following table presents the recognised
financial instruments that are offset, or subject to enforceable
master netting arrangements and other similar agreements but were
not offset in the statement of financial position, as at 2023 and
2022. The column 'net amount' shows the impact on the Group's
balance sheet if all set-off rights were exercised.
Consolidated
2023
£'000
|
Gross amounts
|
Gross amounts
set off in the balance sheet
|
Net amounts presented in the balance
sheet
|
Amounts subjected on master netting
arrangements1
|
Net amount
|
Financial
assets
|
|
|
|
|
|
Derivative assets
|
3,829
|
-
|
3,829
|
736
|
3,093
|
Financial
liabilities
|
|
|
|
|
|
Derivative liabilities
|
9,679
|
-
|
9,679
|
8,387
|
1,292
|
Consolidated
2022
£'000
|
Gross amounts
|
Gross amounts
set off in the
balance sheet
|
Net amounts presented in the balance
sheet
|
Amounts subjected on master netting
arrangements1
|
Net amount
|
Financial
assets
|
|
|
|
|
|
Derivative assets
|
6,567
|
-
|
6,567
|
3,523
|
3,044
|
Financial
liabilities
|
|
|
|
|
|
Derivative liabilities
|
4,543
|
-
|
4,543
|
4,219
|
324
|
1 Agreements with derivative
counterparties are based on an ISDA Master Agreement and other
similar master netting arrangement with other counterparties. Under
the terms of these arrangements, only where certain credit events
occur (such as termination of the contract or default of the other
party), will the net position owing/receivable to a single
counterparty in the same currency be taken as owing and all the
relevant arrangements terminated. As the Group does not presently
have a legally enforceable right of set-off, these amounts have not
been offset in the balance sheet, but have been presented
separately in the table above.
The fair value of a derivative contract
represents the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date (an exit
price).
The Company had no derivative financial
instruments throughout 2023 (2022: nil).
15. Investment in Debt Securities
The Group's investment in debt securities
consist of fixed rate bonds issued (or guaranteed) by central and
private banks. These are measured at amortised cost as they meet
the SPPI criterion and are held to collect the contractual
cashflows.
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Investment in
debt securities at amortised costs
|
|
|
Balance at the beginning of the
period
|
414,061
|
73,248
|
Purchases
|
484,208
|
518,079
|
Redemptions
|
(521,161)
|
(188,662)
|
Exchange gains/losses
|
(19,776)
|
13,498
|
Movement in discount/premium and accrued
Interest receivable
|
(4,290)
|
(2,089)
|
|
353,042
|
414,074
|
Less: Impairment loss allowance
|
(14)
|
(13)
|
Balance at
the end of the period
|
353,028
|
414,061
|
The Company had no investment in debt
securities in 2023 ( 2022: nil).
Refer to Note 37 on Credit risk for further
details on impairment loss allowance.
16. Investment in Equity Securities
Investment securities designated at FVTOCI are
as follows:
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Shares in The Society for Worldwide Interbank
Financial Telecommunication ('SWIFT')
|
495
|
488
|
|
495
|
488
|
|
Consolidated
|
2023
£'000
|
2022
£'000
|
At 1
January
|
488
|
382
|
Exchange (loss)/gain
|
(20)
|
18
|
Fair value gain
|
27
|
88
|
At 31
December
|
495
|
488
|
With the exception of the above the Group's
policy is not to invest in equities. However, in order to undertake
its business, the Group utilises the SWIFT payment system, the
conditions of which oblige participants to invest in the shares of
SWIFT, in proportion to participants' financial contributions to
SWIFT. Due to the nature of the investment, this equity security
has been designated at FVTOCI.
No dividend income was recognised from these
shares (2022: nil). There was no sale of these equity shares (2022:
nil).
Apart from investments in subsidiary
undertakings (see Note 22) the Company held no other investments
throughout the current or prior year.
Refer to Note 43 on fair value measurements
for further details.
17. Accrued Income
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Financial
assets:
|
|
|
Accrued income (others)
|
547
|
429
|
Less: Impairment loss allowance
|
(3)
|
(5)
|
|
544
|
424
|
|
|
|
Non-financial
assets:
|
|
|
Research and development tax rebate
|
671
|
432
|
|
671
|
432
|
Total
|
1,215
|
856
|
Accrued income relates to amounts
owed for services which have not yet been invoiced. This balance
arises from several components including management fee, pension
accruals, and other revenues. The balance is also related to a
research and development tax rebate which is a tax claim that the
Group is due to receive from HMRC for the qualifying research and
development activities undertaken from the Group.
Lifetime ECL has been recognised
for accrued income. Further details of expected credit losses on
contract asset (accrued income) are disclosed in Note
37.
18. Unsettled Transactions and Other Assets
i. Other
assets
|
Consolidated
|
2023
£'000
|
Restated
2022
£'000
|
Financial
assets:
|
|
|
Balances with mobile network
operators1
|
3,164
|
3,635
|
Staff loans
|
335
|
544
|
Transactions debited by third party Nostro
provider2
|
1,996
|
8,322
|
Other assets
|
262
|
794
|
Less: impairment loss
|
(36)
|
(62)
|
Total
|
5,721
|
13,233
|
|
|
|
Non-financial
assets:
|
|
|
VAT refund
|
1,994
|
914
|
Prepayments
|
3,429
|
2,262
|
Deferred tax
|
56
|
-
|
Total
|
5,479
|
3,176
|
Total other
assets
|
11,200
|
16,409
|
Financial assets are measured at amortised
cost as they meet the SPPI criterion and are held to collect the
contractual cash flows.
1
Balances with mobile network operators (MNOs) are
due to the Group in respect of mobile money transfers. The Group
charges fees for services it provides to aid transfer of funds by
its clients to beneficiaries via mobile money using MNOs. These
balances are funds with the MNO which have yet to be transferred to
beneficiaries.
2 These balances represent
amounts that are debited in advance by third party Nostro providers
at year end. The prior year balance has been restated to financial
assets because it was previously incorrectly classified under
non-financial assets.
The Company's other assets in 2023 amount to
£188k (2022: nil).
ii. Unsettled
transactions:
|
Consolidated
|
2023
£'000
|
Restated
2022
£'000
|
Unsettled transactions1
|
8,417
|
16,071
|
1 Unsettled foreign currency
transactions that are delayed due to time differences, public
holidays in other countries (where the counterparties are located)
or similar operational reasons. The arising balances are short-term
in nature (typically less than four days) and were settled early
the following period.
The Company does not have unsettled
transactions at year-end (2022:nil).
Prior period
restatement note
A prior period adjustment has been made to
record a reclassification of late receipts which was incorrectly
recognised in Other Assets instead of Unsettled Transactions. The
31 December 2022 consolidated statement of financial position has
been restated as follows:
Consolidated
financial statements as at 31 December 2022:
|
Other assets
£'000
|
Unsettled transactions
£'000
|
Year ended 31 December 2022 (as previously
reported)
|
19,520
|
12,960
|
Prior period adjustment
|
(3,111)
|
3,111
|
Year ended 31
December 2022 (as restated)
|
16,049
|
16,071
|
The Other Assets and Unsettled Transactions
balances in Note 34, Note 37, Note 38, Note 40 and Note 42 have
been impacted by the same prior period adjustment amount and have
been restated accordingly. There is no impact on the bucketing of
the balances in the respective notes.
19. Property, Plant and Equipment
2023
|
Consolidated
|
Leasehold Improvements
£'000
|
Computer
Equipment1
£'000
|
Fixtures &
Fittings2
£'000
|
Total
£'000
|
Cost
|
|
|
|
|
At 1 January
2023
|
122
|
2,516
|
2,209
|
4,847
|
Additions
|
-
|
348
|
74
|
422
|
Disposals
|
-
|
(75)
|
(8)
|
(83)
|
At 31
December 2023
|
122
|
2,789
|
2,275
|
5,186
|
|
|
|
|
|
Accumulated
depreciation
and impairment
|
|
|
|
|
At 1 January
2022
|
89
|
1,605
|
1,574
|
3,268
|
Charge to profit or loss
|
22
|
371
|
405
|
798
|
Disposals
|
-
|
(69)
|
(2)
|
(71)
|
At 31
December 2023
|
111
|
1,907
|
1,977
|
3,995
|
|
|
|
|
|
Net book
value
|
|
|
|
|
As 1 January
2023
|
33
|
911
|
635
|
1,579
|
At 31
December 2023
|
11
|
882
|
298
|
1,191
|
1 Includes mobile
phones.
2 Includes
artwork.
2022
|
Consolidated
|
Leasehold Improvements
£'000
|
Computer
Equipment1
£'000
|
Fixtures &
Fittings2
£'000
|
Total
£'000
|
Cost
|
|
|
|
|
At 1 January
2022
|
122
|
2,288
|
2,183
|
4,593
|
Exchange differences
|
-
|
(2)
|
-
|
(2)
|
Additions
|
-
|
325
|
30
|
355
|
Disposals
|
-
|
(95)
|
(4)
|
(99)
|
At 31
December 2022
|
122
|
2,516
|
2,209
|
4,847
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
|
|
At 1 January
2022
|
67
|
1,293
|
1,173
|
2,533
|
Exchange differences
|
-
|
-
|
-
|
-
|
Charge to profit or loss
|
22
|
393
|
404
|
819
|
Disposals
|
-
|
(81)
|
(3)
|
(84)
|
At 31
December 2022
|
89
|
1,605
|
1,574
|
3,268
|
|
|
|
|
|
Net book
value
|
|
|
|
|
At 1 January
2022
|
55
|
995
|
1,010
|
2,060
|
At 31
December 2022
|
33
|
911
|
635
|
1,579
|
1 Includes mobile
phones.
2 Includes
artwork.
The Directors consider property and plant for
indicators of impairment at least annually, or when there is an
indicator of impairment. There are no physically visible impairment
indicators at year-end. Management have considered decline in
market capitalisation as an impairment indicator, therefore
performed an impairment assessment of the value of the business
which included property plant and equipment ('PPE'). Refer to Note
21 for the comparison between recoverable amount (value in use of
CAB) and the carrying amount of the net assets.
No impairment charge was taken in the period
(2022:nil).
The Company had no property, plant and
equipment (2022:nil).
20. Leases (Group as a Lessee)
The Group has recognised a right of use (ROU)
asset and lease liabilities for its property leases which are for
an average lease term of five-year and 10-month period. The leases
have been accounted for as a portfolio (as they have similar
characteristics). The discounts used are the incremental borrowing
rates in the range of 2.14% - 8.99% in 2023 and 2022.
The Group makes fixed payments on a quarterly
basis, in advance, to the lessors for the use of the properties and
there are no variable payments. The property leases have lease
incentives, with the lease incentive receivable being deducted from
the future lease payments.
The services provided by the Lessors, such as
cleaning, security, maintenance, and utilities as part of the
contract, are components which are not included in the ROU
calculation and have been expensed in 'Other operating expenses'
line item in Note 8. These expenses amount to £397k (2022:
£259k).
There was no dilapidation cost (restoration
cost) added to the ROU.
The Group's leases of low value fixtures and
equipment are expensed in 'Other operating expenses' line item in
Note 8 on a straight-line basis (see accounting policy in Note
1 for leases). These amounted to £47k (2022: £25k).
There were no short-term leases during the
year (2022:nil).
The lease terms covers only the
non-cancellable lease term. There are no purchase, extension, or
termination options and residual guarantees in the
leases.
There are also no restrictions or covenants
imposed by the leases.
The lease interest payments charged as an
expense for the year totalled £65k (2022: £19k).
The Company had no lease payments under
non-cancellable operating leases during 2023 (2022:
nil).
There were no leases entered into but which
had not commenced as at the year-end in the Group or the
Company.
a) Right of
use assets
All the Group's right-of-use assets are
non-current assets. A reconciliation of the Group's right-of-use
assets as at
31 December 2022 and 31 December 2023 are shown below:
|
Consolidated
|
Leasehold property2
£'000
|
Cost
|
|
At 1 January
2023
|
1,760
|
Additions
|
-
|
At 31
December 2023
|
1,760
|
|
|
Accumulated
depreciation
|
|
At 1 January
2023
|
626
|
Charge to profit or
loss1
|
445
|
At 31
December 2023
|
1,071
|
|
|
Net book
value
|
|
At 31
December 2023
|
689
|
|
|
Cost
|
|
At 1 January
2022
|
1,065
|
Additions
|
695
|
At 31
December 2022
|
1,760
|
|
|
Accumulated
depreciation
|
|
At 1 January
2022
|
304
|
Charge to profit or
loss1
|
322
|
At 31
December 2022
|
626
|
|
|
Net book
value
|
|
At 31
December 2022
|
1,134
|
1 Charge to P&L includes
depreciation on leases attributable to discontinued
operations.
2 There is only one class of
right of use assets which is the property lease.
b) Lease
liabilities
A reconciliation of the Group's remaining
operating lease payments as at 31 December 2023 and 31 December
2022 are shown below:
|
Consolidated
|
Leasehold property
£'000
|
Lease
liabilities as at 1 January 2023
|
1,281
|
Additions during the year
|
-
|
Payments during the year
|
(462)
|
Add: interest on lease liabilities
|
65
|
At 31
December 2023
|
884
|
|
|
Lease
liabilities as at 1 January 2022
|
819
|
Additions during the year
|
695
|
Payments during the year
|
(252)
|
Add: interest on lease liabilities
|
19
|
At 31
December 2022
|
1,281
|
There were no variable lease payments expenses
in the reporting period (2022: nil).
The Group's lease liabilities as at 31
December 2022 and 31 December 2023 is split into current and
non-current portions as follows:
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Current
|
372
|
611
|
Non-current
|
512
|
670
|
Lease
liabilities
|
884
|
1,281
|
The maturity analysis of lease liabilities is
disclosed in Note 37.
c) Impact on
the profit and loss
The following are the amounts recognised in
profit or loss:
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Depreciation expense of right-of-use assets
(Note 8)
|
445
|
322
|
Interest expense on lease liabilities (Note
4)
|
65
|
19
|
Expense relating to leases of low-value assets
(Note 8)
|
47
|
25
|
Total amount
recognised in profit or loss
|
557
|
366
|
The Group had total cash outflows
for all leases of £462k (2022: £277k).
21. Intangible Assets
|
|
Consolidated
|
Goodwill
£'000
|
Core Accounting Software
£'000
|
Other Software £'000
|
Brand/ Name
£'000
|
Total
£'000
|
Cost
|
|
|
|
|
|
At 1 January 2023
|
5,919
|
5,817
|
24,809
|
1,427
|
37,972
|
Additions
|
-
|
82
|
6,844
|
56
|
6,982
|
Exchange rate loss
|
-
|
(27)
|
-
|
-
|
(27)
|
At 31
December 2023
|
5,919
|
5,872
|
31,653
|
1,483
|
44,927
|
|
|
|
|
|
|
Accumulated
amortisation
and impairment
|
|
|
|
|
|
At 1 January 2023
|
-
|
4,146
|
11,785
|
122
|
16,053
|
Charged for the year
|
-
|
309
|
4,253
|
45
|
4,607
|
Exchange rate loss
|
-
|
(27)
|
-
|
-
|
(27)
|
At 31
December 2023
|
-
|
4,428
|
16,038
|
167
|
20,633
|
|
|
|
|
|
|
Net book
value
|
|
|
|
|
|
At 1 January 2023
|
5,919
|
1,671
|
13,024
|
1,305
|
21,919
|
At 31
December 2023
|
5,919
|
1,444
|
15,615
|
1,316
|
24,294
|
In addition to the above the Group
incurred a loss of £284k (2022 - £nil) in relation to intangible
assets disclosed within the assets held for sale as at 31 December
2022.
|
Consolidated
|
Goodwill
£'000
|
Core Accounting
Software
£'000
|
Other Software
£'000
|
Brand/Name
£'000
|
Total
£'000
|
Cost
|
|
|
|
|
|
At 1 January 2022
|
5,919
|
5,684
|
20,987
|
1,536
|
34,126
|
Additions
|
-
|
133
|
4,389
|
16
|
4,538
|
Classified as held for sale
|
-
|
-
|
(480)
|
(125)
|
(605)
|
Disposal
|
-
|
-
|
(87)
|
-
|
(87)
|
At 31
December 2022
|
5,919
|
5,817
|
24,809
|
1,427
|
37,972
|
|
|
|
|
|
|
Accumulated
amortisation
|
|
|
|
|
|
At 1 January 2022
|
-
|
3,429
|
8,200
|
91
|
11,720
|
Charged for the year
|
-
|
717
|
3,794
|
37
|
4,548
|
Classified as held for sale
|
-
|
-
|
(152)
|
(6)
|
(158)
|
Disposals
|
-
|
-
|
(57)
|
-
|
(57)
|
At 31
December 2022
|
-
|
4,146
|
11,785
|
122
|
16,053
|
|
|
|
|
|
|
Net book
value
|
|
|
|
|
|
At 1 January 2022
|
5,919
|
2,255
|
12,787
|
1,445
|
22,406
|
At 31
December 2022
|
5,919
|
1,671
|
13,024
|
1,305
|
21,919
|
Software that does not result in an
intangible asset (right to receive access to the supplier's
application software in the future is a service contract) of the
Group are expensed. Software expensed in the period amounts to
£2,926k (2022: £1,239k). These costs are expensed to profit and
loss over the period of the contract in line with the benefits
received. There are no judgements made in this respect.
Internally generated assets include
payment-related software that is created and utilised in the
Group's operation. All intangible assets (except Goodwill)
have finite lives - see Note 1 for accounting policies on the
amortisation method and useful lives.
Other software held by the Group
includes payments, compliance, and banking software.
The Company had no intangible
assets throughout 2023 and 2022.
a)
Goodwill
The goodwill relates to the
acquisitions:
(i) by the Company, on 31 March
2016, of the entire share capital of both Crown Agents Bank Limited
('CAB'), a regulated wholesale bank, and
(ii) by the Group,
on 1 July 2019, of the entire share capital of Segovia Technology
Company ('Segovia'), a US based fintech Company.
Cash Generating Units ('CGU'):
goodwill relating to the acquisitions of both CAB and Segovia is
allocated to CAB. This is because CAB is the cash generating unit
benefitting from the Segovia's business platforms which have the
underlying value of goodwill. The CGUs are determined at company
level because there are no individual assets that can be attributed
to revenue generation.
The goodwill is tested for
impairment at the CGU level. Impairment reviews were performed on
the carrying values of all goodwill and intangible assets as
follows:
(i) Goodwill: reviewed against a
value in use calculation of CAB, the cash generating
unit.
(ii) Other
Intangible Assets: reviewed against valuations of the Group
companies concerned. For CAB comparisons were made against value in
use calculations.
The carrying amount of goodwill has
been allocated to the operating segment for all periods. The
Group tests goodwill and intangible assets annually for impairment,
or more frequently if there are indications that goodwill and
intangible assets might be impaired. This impairment assessment
also applies to PPE (Note 19) and investments in subsidiary
undertakings (Note 22).
Crown Agents
Bank Limited value in use
The recoverable amount of this
cash-generating unit is determined based on a value in use
calculation which uses cash flow projections based on financial
budgets approved by the Board of Directors covering a three-year
period ended 31 December 2026, with the terminal growth rate
applied from the start of 2027. The key assumptions used by the
Group in setting the financial forecasts for the initial three-year
period were as follows:
|
2023
|
2022
|
Discount rate
|
20.3%
|
17%
|
Terminal value growth rate
|
2%
|
0%
|
i. Discount rate
The Group uses a pre-tax discount rate based
on a weighted average cost of capital.
ii. Terminal growth
rate
Terminal growth rate has increased from 0% to
2% being an industry realistic benchmark based on the UK long term
inflation rate.
iii. Sensitivity analysis of key
assumptions in calculating value in use
The Group has conducted an analysis
of the sensitivity of the impairment test to changes in the key
assumptions used to determine the
recoverable amount for each of the group of CGUs to which goodwill
and intangible assets are allocated. The Group believes that any
reasonably possible change in the key assumptions on which the
recoverable amount of CAB is based would not cause the aggregate
carrying amount of goodwill and intangible assets to exceed the
aggregate recoverable amount of the related CGUs.
iv. Other impairment
indicators
The reduction in market capitalisation due to
announcement of inability to meet targeted profits by end of 2023
was assessed as a potential impairment indicator. However, the
market capitalisation of the group at year-end is above the
carrying amount of the CGUs and the net assets of the Group,
therefore no impairment is required (2022:nil).
22. Investments in Subsidiary Undertakings
Investments in subsidiary
undertakings were as follows:
Reconciliation
|
Company
|
2023
£'000
|
2022
£'000
|
At 1
January
|
63,384
|
66,830
|
Additions1
|
100,996
|
-
|
Impairments
|
-
|
(1,265)
|
Classified as held for sale2
|
-
|
(2,181)
|
At 31
December
|
164,380
|
63,384
|
|
Company
|
2023
£'000
|
2022
£'000
|
Analysed
as:
|
|
|
CAB Tech Holdco Limited ('CTH')
|
164,380
|
63,384
|
Crown Agents Investment Management Limited
('CAIM')1
|
-
|
-
|
|
164,380
|
63,384
|
1 The Company acquired an
additional interest in CTH on 10 July 2023 amounting to £100,996k
(2022:nil).
2. The investment in CAIM was
classified as held for sale in the prior year and it was sold
during the year. Refer to Note 10 for details on disposal of
CAIM.
Impairment reviews were performed on the
carrying values of the investment in CTH for 2022 and 2023 as
follows:
The key asset in CTH is its investment in CAB.
The value in use of CAB calculation and assessment of key
assumptions and related sensitivity analysis in Note 21 is
applicable for assessment for impairment of investment in
subsidiary undertakings. The value in use exceeds the carrying
amount of the investment in subsidiary undertakings, therefore no
impairment is recognised (2022:nil).
For further details on subsidiaries refer to
Note 33.
Refer to Note 28 for information on dividend
payments.
23. Deferred Tax
a) Deferred
tax liability
The deferred tax liability recognised in the
consolidated financial statements is as follows:
|
Consolidated
|
Property, plant and
equipment
|
Investment
in equity
|
Intangible assets1
|
ECL
Provision
|
Total
|
Deferred tax
liability (2023)
|
|
|
|
|
|
At 1 January
2023
|
3
|
24
|
263
|
44
|
334
|
Charge/(Credit) to profit and loss
2023
|
112
|
-
|
281
|
(44)
|
349
|
Charge to other comprehensive income
2023
|
-
|
12
|
-
|
-
|
12
|
At 31
December 2023
|
115
|
36
|
544
|
-
|
695
|
Analysed as
follows:
|
|
|
|
|
|
Continued operations
|
115
|
36
|
544
|
-
|
695
|
Discontinued operations
|
-
|
-
|
-
|
-
|
-
|
|
115
|
36
|
544
|
-
|
695
|
|
|
|
|
|
|
Deferred tax
liability (2022)
|
|
|
|
|
|
At 1 January
2022
|
233
|
7
|
180
|
-
|
420
|
Charge/(Credit) to profit and loss
2022
|
(230)
|
-
|
83
|
44
|
(103)
|
Charge to other comprehensive income
2022
|
-
|
17
|
-
|
-
|
17
|
At 31
December 2022
|
3
|
24
|
263
|
44
|
334
|
Analysed as
follows:
|
|
|
|
|
|
Continued operations
|
3
|
24
|
245
|
44
|
316
|
Discontinued operations
|
-
|
-
|
18
|
-
|
18
|
|
3
|
24
|
263
|
44
|
334
|
The deferred tax liability can be further
analysed as follows:
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Liability reversing at 23.5%
|
-
|
19
|
Liability reversing at 25%
|
695
|
5
|
Liability reversing at 25.5%
|
-
|
(9)
|
Liability reversing at 27.25%
|
-
|
123
|
Liability reversing at 28%
|
-
|
196
|
At 31 December 2023 at 25% (2022:
23.5%/25%/25.5%/27.25%/28%)
|
695
|
334
|
b) Deferred
tax recognised in the year
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Accelerated tax depreciation on property,
plant and equipment
|
112
|
(230)
|
Intangible assets
|
300
|
83
|
Expected credit loss provision
|
(80)
|
44
|
Total tax
expense/(credit) to profit or loss1
|
332
|
(103)
|
Charged to
other comprehensive income:
|
|
|
Deferred tax expense on investment on equity
securities
|
12
|
17
|
Total
deferred tax expense in other comprehensive
income
|
12
|
17
|
Total
deferred tax charge/(credit) for the year
|
344
|
(86)
|
1 Includes a deferred tax
asset credit of £18k (2022 - £nil).
c)
Unrecognised deferred tax assets and deferred tax
liability
At the reporting date, the Group had £nil
(2022: £nil) unused tax losses available for offset against future
profits.
Company
The Company had not recognised deferred tax
assets or liabilities at 31 December 2022 and 31 December
2023.
24. Client Accounts
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Repayable on demand
|
785,316
|
656,419
|
Other clients' accounts with agreed maturity
dates
or periods of notice by residual maturity repayable:
|
|
|
3 months or less
|
670,901
|
479,641
|
1 year or less but over 3 months
|
81,020
|
169,491
|
2 years or less but over 1 year
|
5,652
|
-
|
|
1,542,889
|
1,305,551
|
The Company had no client accounts
throughout 2023 (2022: nil).
Client accounts are accounts that
clients hold with the Group. The Group is transaction led and does
not borrow to finance lending. A substantial proportion of client
accounts are current accounts that, although repayable on demand,
have historically formed a stable deposit base.
25. Unsettled Transactions, Accruals and Other
Liabilities
A. Other
liabilities
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Financial
liabilities
|
|
|
Trade creditors
|
2,041
|
554
|
Funds received in advance
|
3,327
|
4,988
|
Transactions credited by third party Nostro
providers1
|
159
|
3500
|
Other creditors
|
696
|
9
|
|
6,223
|
9,051
|
Non-financial
liabilities
|
|
|
HM Revenue & Customs
|
1,816
|
2,413
|
Deferred income2
|
82
|
53
|
|
1,898
|
2,466
|
Total other
liabilities
|
8,121
|
11,517
|
1 These balances represent
amounts that are credited incorrectly by third party Nostro
providers at year-end. The prior year balance has been restated to
financial liabilities because it was previously incorrectly
classified under non-financial liabilities.
2 Deferred income relates to
payments that are received from clients before the services are
provided to clients
B. Unsettled
transactions
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Unsettled transactions3
|
20,081
|
25,782
|
3 Unsettled transactions
result from foreign exchange transactions that are delayed due to
time differences, public holidays in other countries (where the
counterparties are located) or similar operational reasons. The
arising balances are short-term in nature (typically less than four
days) and were settled shortly after the balance sheet
date.
C.
Accruals
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Accruals4
|
18,367
|
19,364
|
The Company's accruals and other
liabilities are as follows:
|
Company
|
|
2023
£'000
|
2022
£'000
|
Accruals4
|
1,022
|
321
|
Other liabilities
|
422
|
-
|
|
1,444
|
321
|
4 Accruals comprise various
balances which have not yet been invoiced for goods received or
services provided e.g audit fees, bank charges, professional fees
and payroll accruals.
The Company does not have
unsettled transactions (2022: nil).
26. Provisions
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Expected
credit loss:
|
|
|
Financial guarantee liability
|
2
|
1
|
Liability for letter of credit confirmations /
bill acceptances
|
6
|
6
|
Liquidity as a Service - undrawn
commitments
|
228
|
72
|
ECL for off
balance sheet balances (Note 37)
|
236
|
79
|
i. Financial
guarantee contracts
A financial guarantee contract is a contract
that requires the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to
make payments when due in accordance with the terms of a debt
instrument. The Group provides financial guarantees to multiple
counterparties. Please refer to Note 37 for the maximum exposure of
financial guarantee contracts. The Group received premiums of £73k
(2022: £85k).
ii. Letter of
credit confirmations/bill acceptances
Letter of credit confirmation /
acceptance is a letter from an issuing bank guaranteeing that a
buyer's payment to a seller will be received on time and for the
correct amount. The Group confirmed the letters of credit issued by
an issuing bank and charged fixed fees which are received either in
advance or at a later date. The Group provides these acceptances to
multiple counterparties. Please refer to Note 31 for the maximum
exposure of letter of credit confirmations / bill acceptances. The
Group received premiums of £754k (2022: £572k).
The uncertainties relating to the
amount or timing of any outflow are those inherent within the
products concerned, notably that the relevant counterparty will not
carry out its obligations. Cash collateral of £44,588k (2022:
£40,283k) was held by the Group in respect of the assets underlying
financial guarantees and letter of credits noted above. These are
not restricted cash and are available for use by the
Group.
iii.
Liquidity as a Service ('LaaS') - undrawn
commitments
LaaS is a credit facility offered by the Group
to its clients which allows clients to draw down on the facility on
satisfaction of the terms of this facility. The Group charges
facility fees for consideration of providing this facility. The
Group provides this facility to multiple counterparties. Please
refer to Note 37 for the maximum exposure of LaaS. The Group
received facility fees of £47k (2022: £ 52k).
27. Called up Share Capital
Number of
ordinary shares
|
2023
'000
|
2022
'000
|
Authorised,
allotted, issued, and fully paid (ordinary shares - Class
A)
|
|
|
As at
beginning of year
|
68,000
|
68,000
|
Redesignation of class A Shares to new
ordinary shares (Note 27c)
|
(68,000)
|
-
|
As at period
end (ordinary shares - Class A)
|
-
|
68,000
|
|
|
|
Authorised,
allotted, issued, and fully paid (ordinary shares - Class
B)
|
|
|
As at
beginning of the year
|
10
|
10
|
Share split of Class B shares resulting in
reduction of nominal value
per share from £0.5913044 to £0.001 (Note 27b)
|
5,913
|
-
|
Redesignation of class B shares to new
ordinary shares (Note 27c)
|
(5,913)
|
-
|
As of end of the year (ordinary shares- Class
B)
|
-
|
10
|
|
|
|
Authorised,
allotted, issued, and fully paid (number of ordinary
shares)
|
|
|
Redesignation of Class A and Class B shares to
new ordinary shares (Note 27c)
|
73,913
|
-
|
Share split (Note 27d)
|
147,826
|
-
|
Issuance of ordinary shares to former external
shareholders of CTH (Note 27e)
|
32,404
|
-
|
As of end of
the year (£0.000333 nominal value per ordinary
shares)
|
254,143
|
68,010
|
|
|
|
Ordinary
share balance
|
2023
'000
|
2022
'000
|
As at
beginning of year
|
68,010
|
68,010
|
Share capital reduction of Class A shares and
Class B shares before redesignation (Note 27a)
|
(67,936)
|
-
|
Issuance of ordinary shares to former external
shareholders of CTH
(32,404 at £0.000333 per share) (Note 27e)
|
11
|
-
|
Total share
capital - at year-end
|
85
|
68,010
|
A. Group
reorganisation and listing
The ordinary shares of the Company were
admitted to the premium listing segment of the Official List of the
FCA and to trading on the Main Market of the London Stock Exchange
on 11 July 2023 ("Admission"). Immediately prior to
Admission, the Group undertook certain steps as part of a
reorganisation of its corporate structure, which resulted in all
shareholders of CTH (other than the Company) exchanging shares in
CTH for Ordinary Shares in the Company (the
"Reorganisation").
On 4 July 2023, the Company was re-registered
as a public company limited by shares.
In relation to the existing share plans within
the Group structure prior to the share capital reorganisation and
the Share Exchange described below, and prior to Admission, any
unvested conditional awards and options vested in full.
Participants who held conditional awards received the CTH shares
subject to their awards and participants who held options were
given the opportunity to exercise their options and acquire CTH
shares in order to participate in the Share Exchange.
The following steps relating to the
Reorganisation took place during the year 2023 (2022:
none):
27a) On 19 June
2023, in connection with the Pre-Admission Reorganisation, the
Company reduced the nominal value of the A shares in the Company
from £1 to £0.001 and the B shares in the Company from £1 to
£0.5913044. The effect of the share capital reduction has been to
reduce the share capital of the Company from £68,010k to £74k and
to increase retained earnings accordingly by £67,936k.
27b) The Company
split the B ordinary shares into 5,913,044 ordinary shares with a
nominal value of £0.001 each.
27c) The Company
re-designated its existing A ordinary shares and B ordinary shares
into a single class of ordinary shares with a nominal value of
£0.001 each.
27d) The Company
subdivided each ordinary share with a nominal value of £0.001 each
into three ordinary shares with a nominal value of 0.0333 pence
each.
Following steps (27a) to (27d) the Company's
share capital comprised 221,739,135 ordinary shares.
27e) In accordance
with the terms of the Implementation Agreement, the Company
acquired the shares held by the other shareholders in CTH from each
of CAB Tech Holdco Limited's other shareholders in exchange for
32,404,083 newly issued Ordinary Shares (the "Share
Exchange").
Accordingly, 254,143,218 Ordinary Shares are
in issue at year-end (2022: 68,010,000).
There are no restrictions on the distribution
of dividends and the repayment of capital.
B. Merger
relief reserve
The Company recognised a merger relief reserve
of £100,442k (2022:nil) relating to the transaction described in
Note 27e. On consolidation the merger relief reserve was eliminated
by the difference between the adjustment to the non-controlling
interest and the fair value of the shares issued.
28. Retained Earnings
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Balance at
beginning of year
|
40,179
|
8,442
|
Profit for the year
|
22,713
|
31,001
|
Share capital reduction (Note 27a)
|
67,936
|
-
|
Dividends declared1
|
(11,300)
|
-
|
Share-based payment expense (Note
32)
|
1,313
|
388
|
Acquisition of NCI (Note 31)
|
7,530
|
348
|
Capital injection2
|
3,661
|
-
|
Issuance of new shares
|
(11)
|
-
|
Change in ownership interest in subsidiary
(Note 27e)
|
(543)
|
-
|
Balance at
end of year
|
131,478
|
40,179
|
The Company's retained earnings
are as follows:
|
Company
|
2023
£'000
|
2022
£'000
|
Balance at
beginning of year
|
(3,964)
|
(2,073)
|
Loss for the year
|
(4,584)
|
(1,891)
|
Share capital reduction (Note 27a)
|
67,936
|
-
|
Dividends declared1
|
(11,300)
|
-
|
Balance at
end of year
|
48,088
|
(3,964)
|
1 During the year, Company declared dividends to its
shareholders amounting to £11,300k in total, being £5,587k on 26
April 2023 and £5,713k on 1 June 2023 (year ended 31 December 2022:
nil). The dividend per share was £0.08 in each case. CTH, a
subsidiary of the Company, declared a dividend of £17,100k on 19
April 2023 (year ended 31 December 2022: nil) of which £1,540k was
payable externally to CTH's minority shareholders.
2 The capital injection in subsidiary relates to new shares
issued by CTH as follows:
· The Group received cash from the issuance of A2 ordinary
shares which increased equity attributable to the owners of the
Group by £331k (2022:nil).
· The Group received cash from the issuance of C and D shares
on 30 May 2023, which increased the equity attributable to the
owners of the Group (£3,330k) and the non-controlling interest
(£296k). Of the new shares issued only £973k (2022 - £nil) was
received in cash.
Equity classification of C and D shares held by
Non-Controlling Interest ('NCI') during the year
A judgement has been made, based on the
Articles of Association of CTH, adopted on 2 May 2023, that C and D
shares issued on 30 May 2023 by CTH qualify as equity instruments
in the consolidated financial statements. Contingent events that
could give rise to a put or a call over the shares issued by CTH
are within our control and we therefore have an unconditional right
to avoid delivery of shares in the CAB Payments or cash to CTH
shareholders.
29. Investment Revaluation Reserve
|
Consolidated
£'000
|
Balance at 1
January 2023
|
96
|
Fair value gain on investments in equity
instruments designated as at FVTOCI
|
27
|
Income tax relating to above
|
(12)
|
Balance at 31
December 2023
|
111
|
|
|
Balance at 1
January 2022
|
30
|
Fair value gain on investments in equity
instruments designated as at FVTOCI
|
82
|
Income tax relating to above
|
(16)
|
Balance at 31
December 2022
|
96
|
The investment revaluation reserve
represents the cumulative gains and losses arising on the
revaluation of investments in equity instruments designated as at
FVTOCI, net of cumulative gain / loss transferred to retained
earnings upon disposal.
30. Foreign Currency Translation Reserve
|
Consolidated
£'000
|
Balance at 1
January 2023
|
(31)
|
Exchange losses arising on translating the
foreign operations
|
(121)
|
Attributable to owners
|
(111)
|
Acquisition of NCI (Note
31)
|
(10)
|
FX translation adjustment
|
8
|
Balance at 31
December 2023
|
(144)
|
|
|
Balance at 1
January 2022
|
(141)
|
Exchange losses arising on translating the
foreign operations
|
110
|
Balance at 31
December 2022
|
(31)
|
Exchange differences relating to
the translation of the results and net assets of the Group's
foreign operation from its functional currencies to the Group's
presentational currency (i.e. £) are recognised directly in OCI and
accumulated in the foreign currency translation reserve. Exchange
differences previously accumulated in the foreign currency
translation reserve (in respect of translating the net assets of
foreign operations) are reclassified to profit or loss on the
disposal of the foreign operation.
31. Non-controlling Interest (NCI)
Summarised financial information in
respect of the Group's subsidiary (CTH, which owns the entire share
capital of CAB and CAB Tech Holdco USA LLC, a US based holding
Company, which itself owns Segovia) that had material
non‑controlling
interests up to 11 July 2023 is set out below.
|
Consolidated
|
|
2023
£'000
|
2022
£'000
|
Profit attributable to owners of the
Company
|
22,713
|
31,001
|
Profit attributable to the non-controlling
interests
|
1,024
|
2,367
|
Profit for
the year
|
23,737
|
33,368
|
|
|
|
Other comprehensive income/(loss) attributable
to owners of the Company
|
(96)
|
177
|
Other comprehensive income attributable to the
non-controlling interests
|
(10)
|
13
|
Other
comprehensive income /(loss) for the year
|
(106)
|
190
|
|
|
|
Total comprehensive income attributable to
owners of the Company
|
22,617
|
31,177
|
Total comprehensive income attributable to the
non-controlling interests
|
1,014
|
2,381
|
Total
comprehensive income for the year
|
23,631
|
33,558
|
|
|
|
Dividends paid to non-controlling
interests
|
1,540
|
-
|
Net cash outflow from operating
activities
|
(4,460)
|
(18,223)
|
Net cash outflow from investing
activities
|
(24)
|
(395)
|
Net cash outflow from financing
activities
|
(666)
|
(28)
|
The external shareholders of CTH exchanged
their shareholding in CTH for shares in CPH on 11 July
2023. The NCI % used in these financial statements was 7.13% up to
11 July 2023 and was nil as at 31 December 2023 (2022: 6.99%)
following the capital restructuring of the Group detailed in Note
27. The balances attributable to the NCI in the table above
are for the period up to 11 July 2023.
The total equity attributable to NCI upon
group capital restructuring amounting to £7,520k (2022: £7,704k)
was transferred to retained earnings and there was no NCI at
year-end. Refer to the consolidated statement of changes in equity
for the NCI reconciliation.
32. Share Based Payments
The Group operates a number of employee
equity-settled schemes as part of its strategy. The fair value of
the employee services received in exchange for the grant of the
awards is recognised in employee benefit expenses together with a
corresponding increase in equity (share-based payment reserve),
over the period in which the service and the performance conditions
are fulfilled (the vesting period). Movements in the consolidated
statement of profit or loss and other comprehensive income during
the year for all three schemes were as follows:
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Share based payments expenses recognised
in
statement of profit or loss and other comprehensive
income
|
|
|
Share based scheme 1
|
665
|
449
|
Share based scheme 2
|
387
|
388
|
Share based scheme 3
|
307
|
-
|
Expense
arising from equity settled share based payment
transactions
|
1,359
|
837
|
a) Share
Based Scheme 1 - Group
Description
and vesting
In 2017 an equity settled share based payment
scheme was put in place to incentivise senior management. Legal
ownership of the shares lies with the Employee Benefit Trust (EBT).
Employees receive the equitable interest in the shares for which
they pay nominal value.
In July 2023, the Admission triggered an
"exit" event. As a result, all vesting conditions were accelerated
as follows:
Share based
payments scheme 1
|
Consolidated
|
Number of awards
|
Outstanding at 1 January 2022
|
10,000
|
Granted during the year
|
-
|
Released during the year
|
-
|
Cancelled during the year
|
-
|
Forfeited during the year
|
-
|
Outstanding
at 31 December 2022
|
10,000
|
Vested and
exercisable at 31 December 2022
|
8,590
|
|
|
Outstanding at 1 January 2023
|
10,000
|
Granted during the year
|
-
|
Released during the year
|
(10,000)
|
Cancelled during the year
|
-
|
Forfeited during the year
|
-
|
Outstanding
at 31 December 2023
|
-
|
Vested and
exercisable at 31 December 2023
|
-
|
The scheme is now closed. Given the
accelerated vesting and release of the awards in the current year,
the provision of vesting details provided in previous years is now
irrelevant and not disclosed.
Valuation and
inputs to the model
The fair value at grant date is independently
determined using the Monte Carlo method which considers, the term
of the award, the share price at grant date and expected price
volatility of the underlying share, the expected dividend yield,
the risk-free interest rate for the term of the award and the
correlations and volatilities of peer group companies. The expected
price volatility is based on the historic volatility (based on the
remaining life of the awards), adjusted for any expected changes to
future volatility due to publicly available information. The
valuation is a Level 2 valuation.
In 2021, new allocations were made to further
senior managers. The estimated fair value of the awards granted was
£605 per share on grant date. There were no allocations in 2022 or
2023 for this scheme and therefore no valuations were
required.
The following table lists the inputs to the
models used to determine the fair value at grant date for the share
awards granted in this scheme:
Share based
payments scheme 1
|
Key inputs
|
Dividend yield (%)
|
n/a
|
Expected volatility (%)
|
30-40
|
Risk-free interest rate (%)
|
1.2
|
Expected life of share awards (%)
|
2.7
|
Share price at grant date (£)
|
142
|
Model used
|
Monte
Carlo
|
b) Share
based scheme 2 - Group
Description
and vesting requirements
Following the purchase of Segovia in 2019,
incentives in the shares of CTH were allocated to key individuals
employed within Segovia. The incentives were provided as Restricted
Share Awards or Restricted Share Unit Awards (both in relation to
the Class B £1 ordinary shares) at the individual's discretion.
Subsequently, additional Restricted Share Units were awarded to key
individuals of Segovia Technology Company. This scheme is an equity
settled share-based payment scheme. When issued, the fair
value of the Restricted Shares and Restricted Share Units was
£1.19. The fair value at grant date was based on a market valuation
of CTH following a report provided by external consultants. The
fair value included a discount of 20% on the valuation of CTH due
to a lack of marketability.
In July 2023, the Admission, as detailed in
Note 1 (a), triggered an "exit" event. As a result, all vesting
conditions were accelerated, and employees exercised their right to
receive ordinary shares in CTH, as follows:
Share based
payments scheme 2
|
Consolidated number of
awards
|
RS-Number
|
RSU-Number
|
Outstanding at 1 January 2022
|
858,560
|
1,384,442
|
Granted during the year
|
-
|
-
|
Released during the year
|
-
|
-
|
Cancelled during the year
|
-
|
-
|
Forfeited during the year
|
-
|
-
|
Outstanding
at 31 December 2022
|
858,560
|
1,384,442
|
Vested and
exercisable at 31 December 2022
|
826,999
|
-
|
|
|
|
Outstanding at 1 January 2023
|
858,560
|
1,384,442
|
Granted during the year
|
-
|
-
|
Released during the year
|
(858,560)
|
(1,384,442)
|
Cancelled during the year
|
-
|
-
|
Forfeited during the year
|
-
|
-
|
Outstanding
at 31 December 2023
|
-
|
-
|
Vested and
exercisable at 31 December 2023
|
-
|
-
|
The Group's tax liability was £404k (2022:
£490k) for corporate taxes payable on employee share based payment
obligations; the personal tax obligation was borne by the
employees. By the year end the liability had been
settled.
The scheme is now closed. Given the
accelerated vesting and release of the awards in the current year,
the provision of vesting details provided in previous years is now
irrelevant and not disclosed.
Valuation and
inputs to the models
There were no allocations in 2022 or 2023 for
this scheme and therefore no valuations were required.
c) Share
based scheme 3 - Group
Description
and vesting requirements
Long Term Incentive Plan ('LTIP') awards were
granted to incentivise senior management on 11 July 2023. The
vesting conditions are subject to performance measures relating to
relative total shareholder return and earnings per share. Each
measure is assessed independently over the vesting period. LTIP
awards have an individual conduct gateway requirement that results
in the award lapsing if not met. The scheme includes a clawback
condition for a minimum period of three years.
The LTIP award movements for the year to 31
December 2023 is as follows:
Number of
awards
|
Two-year number of
awards
|
Three-year number of
awards
|
Holding period
|
Non-holding period
|
Holding period
|
Non-holding period
|
Outstanding at 1 January 2023
|
-
|
-
|
-
|
-
|
Granted during the year
|
629,851
|
792,492
|
1,106,713
|
792,480
|
Released during the year
|
-
|
-
|
-
|
-
|
Cancelled during the year
|
-
|
(34,029)
|
-
|
(34,029)
|
Forfeited during the year
|
-
|
-
|
-
|
-
|
Outstanding
at 31 December 2023
|
629,851
|
758,463
|
1,106,713
|
758,451
|
Vested and
exercisable at 31 December 2023
|
-
|
-
|
-
|
-
|
Inputs to the
models
The calculation of the LTIP expense takes into
account the following key inputs:
|
Key inputs
|
Two year awards
|
Three year awards
|
Grant date
|
11 July
2023
|
11 July
2023
|
Share price at grant date
|
£3.10
|
£3.10
|
Actual leavers
|
34,029
|
34,029
|
Vesting period
|
Until 11 July
2025
|
Until 11 July
2026
|
Earnings per share range
|
Less than
25p
|
Less than
33.4p
|
Total shareholder return discount
|
45%
|
39%
|
Holding period discount
|
8%
|
9%
|
Leavers lapse provision (holding/non-holding
period)
|
0%/22%
|
0%/31%
|
Clawback condition - effect on
valuation
|
0%
|
0%
|
Model used
|
Monte
Carlo
|
Monte
Carlo
|
The resulting value is expensed to the
consolidated statement of profit and loss and other comprehensive
income over the vesting period in line with the vesting of the
interests concerned.
33. Related Undertakings
i. Principal
subsidiaries
The Company's principal direct and indirect
subsidiaries as at 31 December 2023 are set out below. The Company
is the majority shareholder of CTH. Shares in other subsidiaries
are held as indicated. Unless otherwise stated, the share capital
consists solely of ordinary shares and the proportion of ownership
held equals the voting rights held by the parent. For all
subsidiaries, the country of incorporation or registration is also
the principal place of business.
Direct /
Indirect Subsidiaries
|
Principal
activity /
Business
|
Country of
Incorporation and Principal Place of Business
|
CAB Tech HoldCo Limited
|
Holding Company
|
UK
|
Crown Agents Bank Limited (''CAB'')
|
Bank
|
UK
|
CAB Europe BV
|
Payments
|
Netherlands
|
Stichting CAB Payments Europe
|
Trust company
|
Netherlands
|
CAB Tech HoldCo USA LLC
|
Holding Company
|
US
|
Segovia Technology Company
|
Fintech
|
US
|
Segovia International Holdings LLC
|
Holding Company
|
US
|
Segovia Technology Pakistan (PVT)
Limited
|
Dormant
|
Pakistan
|
Segovia Technology International
Ltd
|
Holding Company
|
Cayman Islands
|
Segovia Technology Congo SARL
|
Fintech
|
The Republic of Congo
|
Segovia Technology Cote d'Ivoire
SARL
|
Fintech
|
Ivory Coast
|
Segovia Technology Kenya Limited
|
Fintech
|
Kenya
|
Segovia Technology Liberia
Corporation
|
Fintech
|
Liberia
|
Segovia Technology 454 Limited
|
Dormant
|
Malawi
|
Segovia Technology Nigeria Limited
|
Fintech
|
Nigeria
|
Segovia Technology Rwanda Corporation
Limited
|
Fintech
|
Rwanda
|
Segovia Technology Tanzania Company
Limited
|
Fintech
|
Tanzania
|
Segovia Technology Company Uganda
Limited
|
Fintech
|
Uganda
|
Segovia Technology Bangladesh Ltd (dissolved
January 2022)
|
Dissolved
|
Bangladesh
|
Segovia Technology Cameroon Co Ltd (dissolved
March 2022)
|
Dissolved
|
Cameroon
|
Segovia Niger SARL (dissolved March
2022)
|
Dissolved
|
Niger
|
Segovia Technology Senegal Corp SUARL
(dissolved January 2023)
|
Dissolved
|
Senegal
|
All Segovia entities are held indirectly
through CTH in 2023 and 2022, which owns the entire share capital
of CAB Tech Holdco USA LLC, a US based holding Company which owns
Segovia. CTH also owns 100% shareholding in CAB in 2022 and 2023.
All UK subsidiaries are incorporated in the UK with registered
offices at Quadrant House, The Quadrant, Sutton, Surrey SM2 5AS.
Refer to Note 9 for assets classified as held for sale relating to
CAIM and JCF.
All subsidiaries are 100% group owned except
for Segovia Technology Pakistan (PVT) Ltd which is 66% (2022 - 66%)
owned by senior management.
34. Notes to the Statement of Cash Flows
i.
Reconciliation of profit before taxation to net cash outflow from
operating activities
|
Consolidated
|
|
Company
|
2023
£'000
|
Restated
2022
£'000
|
|
2023
£'000
|
2022
£'000
|
Profit
/(loss) before taxation
|
|
|
|
|
|
Continuing operations
|
37,617
|
43,891
|
|
(4,964)
|
(1,913)
|
Discontinued operations
|
(220)
|
(75)
|
|
-
|
-
|
|
|
|
|
|
|
Adjusted for non-cash items:
|
|
|
|
|
|
Effect of currency exchange rate
change1
|
(14,988)
|
53,317
|
|
-
|
-
|
Effect of other mark to market
revaluations
|
(83)
|
(15)
|
|
-
|
-
|
Amortisation
|
4,607
|
4,600
|
|
-
|
-
|
Depreciation
|
|
|
|
|
|
- Right of use of
assets
|
445
|
322
|
|
-
|
-
|
- Property, plant and
equipment
|
798
|
819
|
|
-
|
-
|
Share based payment charge
|
1,359
|
837
|
|
-
|
-
|
Loss on write-off of:
|
|
|
|
|
|
- Property, plant and
equipment
|
12
|
35
|
|
-
|
-
|
- Intangible
assets
|
284
|
-
|
|
-
|
-
|
Profit on disposal of discontinued
operations
|
(67)
|
-
|
|
-
|
-
|
Other non-cash expenses
|
1,045
|
1,606
|
|
|
|
Dividend received from subsidiary
|
-
|
-
|
|
(15,560)
|
-
|
Interest accrued on lease
liabilities
|
65
|
19
|
|
-
|
-
|
Impairment provision on investment in
subsidiary undertakings
|
-
|
-
|
|
-
|
1,265
|
|
30,874
|
105,356
|
|
(20,524)
|
(648)
|
Changes in working capital:
|
|
|
|
|
|
Net decrease in
collections/transmissions
|
-
|
-
|
|
-
|
-
|
Net (increase)/decrease in loans and advances
to banks other than on demand1
|
(54,376)
|
4,927
|
|
-
|
-
|
Net increase/(decrease) in client
accounts1
|
294,336
|
(14,044)
|
|
-
|
-
|
Net decrease/(increase) in investment in debt
securities1
|
41,410
|
(324,285)
|
|
-
|
-
|
Net decrease/(increase) in other loans and
advances to non-banks1
|
4,226
|
(12,431)
|
|
-
|
-
|
Net decrease/ (increase) in unsettled
transactions1
|
1,952
|
(5,620)
|
|
-
|
-
|
Net decrease/(increase) in other
assets1
|
4,756
|
(7,768)
|
|
(11,181)
|
-
|
Net (decrease)/increase in other
liabilities
|
(237)
|
9,264
|
|
19,009
|
468
|
Net decrease in accrued income
|
470
|
325
|
|
-
|
-
|
Net (decrease)/increase in accruals,
provisions, and deferred income
|
(1,935)
|
10,863
|
|
702
|
180
|
Net cash
generated/(outflow) from operating activities1,2
|
321,476
|
(233,413)
|
|
10,368
|
-
|
1 See restatements in note iv below.
2 Cash flows from operating activities include interest
received of £53,606k (2022 - £21,718k) and interest paid of
£21,869k (2022 - £5,472k).
ii. Non-cash
transactions - Consolidated
Non-cash transactions from investing
activities for the Group during the year include acquisition of
right of use assets amounting to £nil (2022: £695k).
Non-cash transactions from investing
activities for the Company during the year include the acquisition
of CTH shares held by external shareholders as at 5 July 2023.
(2022: nil).
iii. Changes
in liabilities arising from financing activities
The Group's changes in lease liabilities are
in Note 20. There are no other changes in liabilities from
financing activities.
There are no changes in liabilities arising
from financing activities for the Company.
iv.
Restatement of prior year balances
Certain 2022 cash flow balances have been
restated as follows:
Notes to the
statement of cash flows
|
|
Consolidated - 2022
|
Previously reported
£'000
|
Prior Year Adjustments
£'000
|
Restated
£'000
|
|
|
Adjustment 1
|
Adjustment 2
|
Adjustment 3
|
Adjustment 4
|
|
Non-cash
items
|
|
|
|
|
|
|
Effect of currency exchange rate
changes
|
50,437
|
-
|
-
|
2,880
|
-
|
53,317
|
Other non-cash expenses
|
-
|
-
|
-
|
-
|
1,606
|
1,606
|
|
|
|
|
|
|
|
Changes in
working capital
|
|
|
|
|
|
|
Net (increase)/decrease in loans and advances
to banks other than on demand
|
(10,426)
|
7,699
|
-
|
7,474
|
-
|
4,927
|
Net decrease in client accounts
|
(11,340)
|
-
|
-
|
(2,704)
|
-
|
(14,044)
|
Net (increase) in investment in debt
securities
|
(332,055)
|
-
|
-
|
7,770
|
-
|
(324,285)
|
Net (increase) in other loans and advances to
non-banks
|
(4,748)
|
(7,699)
|
-
|
16
|
-
|
(12,431)
|
Net (increase) in unsettled
transactions
|
(2,509)
|
-
|
(3,111)
|
-
|
-
|
(5,620)
|
Net (increase) / decrease in other
assets
|
(10,879)
|
-
|
3,111
|
-
|
-
|
(7,768)
|
Net (decrease) / increase in other
liabilities
|
10,870
|
-
|
-
|
-
|
1,606
|
9,264
|
Net cash outflow from operating
activities
|
(248,849)
|
-
|
-
|
15,436
|
-
|
(233,413)
|
|
|
|
|
|
|
|
Consolidated
statement of cash flows for the year ended 31 December
2022
|
|
|
|
|
|
|
Net cash outflow from operating
activities
|
(248,849)
|
-
|
-
|
15,436
|
-
|
(233,413)
|
Net cash used in operating
activities
|
(248,849)
|
-
|
-
|
15,436
|
-
|
(233,413)
|
Net decrease in cash and cash
equivalents
|
(263,587)
|
-
|
-
|
15,436
|
-
|
(248,151)
|
Effect of exchange rate changes on cash and
cash equivalents
|
50,531
|
-
|
-
|
(15,436)
|
-
|
35,095
|
Adjustment 1: see Note
13.
Adjustment 2: see Note
18.
Adjustment 3: The Group has
implemented an improved approach to capturing unrealised FX gains
and losses which under IAS 7 are not deemed to be cash flows. As a
result, the prior year balances relating to the consolidated
statement of cash flows for the year ended 31 December 2022 and
related notes have been restated accordingly.
Adjustment 4: relates to the net
receipt of bonuses which were transferred internally. As a result
there was no cash movement.
35. Related Party Transactions
The immediate parent undertaking of the
company which had control in 2022 and up to 6 July 2023 was Merlin
Midco Limited. As at the year- end Merlin Midco Limited's ownership
was 45.1% (2022: 98.8%), which is held by a nominee company
Diagonal Nominees Limited. No company is required to consolidate
these financial statements this year (2022: no company consolidated
the entity).
The related party transactions (which were all
at arm's length and were transacted at market prices) are as
follows:
a) As at 31
December 2023 the Group had related party balances with companies
outside the Group (2022: two) as follows:
(i) £129k (2022: £64k), payable to
Helios Investors Genpar III LP. The amount relates to the
outstanding balance of a director's fees payable by CAB. No
interest accrues on the outstanding amount. Helios Investors Genpar
III LP continues to have indirect significant influence over the
Company as at 31 December 2023 following changes to the capital
structure on 6 July 2023
(ii) Other loans and advances to
non-banks include (2023: nil; 2022: £2,251k) receivable from Merlin
Topco Limited. The balance related to a contractual loan on
which interest accrues at a commercial rate. The balance was
settled during the year. Merlin Topco Limited is the parent company
of Merlin Midco Limited which has direct significant influence over
CAB Payments as at 31 December 2023 following changes to the
capital structure on 06 July 2023.
b) As at the
year-end, nil (2022: 771,605 £1 Class A ordinary shares,) ordinary
shares of the Company were owned by a Company connected to a
director of the Company.
c) The Group provided
banking services to connected parties with income earned as
follows:
2023
|
Net foreign
exchange gain
£'000
|
Net interest income
£'000
|
Total
£'000
|
Helios Investors Genpar III LP
|
1
|
-
|
1
|
|
1
|
-
|
1
|
2022
|
|
|
|
GiveDirectly Inc1
|
1,315
|
16
|
1,331
|
Helios Investors Genpar III LP
|
2
|
-
|
2
|
|
1,317
|
16
|
1,333
|
1 An entity of which Michael
Faye, a director of CAB, CAB Tech Holdco Limited (both until 11
July 2023) and Segovia Technology Company (until 27 November 2023),
was a director. This company is not a related party in 2023 due to
Michael Faye no longer being deemed to have a controlling
interest.
d) As at 31
December 2023, CAB Payments owns 100% shareholding in CTH following
the capital reorganisation as disclosed in Note 27. Directors owned
the following shares in CTH as at 31 December 2022:
2022
|
CAB Tech HoldCo Limited - Number Of £1
ordinary shares
|
A2 Shares
|
A2 Share Options
|
Restricted Shares
(B Shares)
|
Restricted Share Units
(B Shares)
|
C Shares
|
D Shares
|
Director 1
|
662,325
|
-
|
157,808
|
-
|
-
|
-
|
Related parties
|
202,681
|
-
|
-
|
-
|
-
|
-
|
Director 2
|
43,989
|
22,929
|
4,871
|
544,910
|
-
|
-
|
e) Directors
and key management loans
The Group had a number of loans to Directors
and key management as summarised as shown below. Across the Group
there were loans outstanding at the period-end as
follows:
|
2023
|
2022
|
No.
|
£'000
|
No.
|
£'000
|
Directors
|
|
|
|
|
As at 1 January
|
3
|
159
|
3
|
159
|
As at period end
|
1
|
335
|
3
|
159
|
Key
Management
|
|
|
|
|
As at 1 January
|
8
|
252
|
8
|
252
|
As at period end
|
-
|
-
|
8
|
252
|
The loans outstanding as at 31 December 2022
(and repaid in 2023) accrued interest at the HMRC stipulated
interest rate but only on balances in excess of £10,000. The
Director's loan advanced in 2023 was to Bhairav Trivedi and accrues
interest at the HMRC stipulated rate on the entirety of the
loan. All loans are repayable on the occurrence of the
earliest of a number of events. There was no impairment on loans in
respect of the amounts owed by related parties (2022: nil). The ECL
for staff loans was assessed as immaterial as at 31 December 2023
(2022: nil).
f)
Remuneration of key management personnel (including
directors)
The remuneration of the key management
personnel of the Group is set out below in aggregate for each of
the categories specified in IAS 24 Related Party
Disclosures.
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Short-term employee benefits (including
bonusses and NICs Ers)
|
12,427
|
5,975
|
Post-employment benefits
|
241
|
187
|
Share-based payments
|
639
|
837
|
Total
remuneration
|
13,307
|
6,999
|
Included in the aggregate emoluments above,
the Group has made contributions of £84k (2022: £58k) on behalf of
two directors (2022: three) to a defined contribution pension
scheme. No retirement benefits accrued for any director (2022:
none) under a defined benefit pension scheme.
The aggregate emoluments (including share
based payment charge) and accrued pension contributions of the
highest paid director in the Group were £3,163k (2022: £2,113k) and
£58k (2022: £nil) per annum respectively.
The aggregate emoluments
(Including pension contributions and exit compensation) of the
Group's key management personnel (excluding directors) were
£8,583k (2022: £6,999k). See breakdown in Note 35 on 'Related
party transactions policy'.
g) Company
related party balances
In addition to the above related party transactions and balances of
the Group, the Company had outstanding balances with following
intercompany entities within the group as at 31 December
2023:
i. £19,406k (2022: £1,198k),
payable to CAB. The amount relates to the payments made by CAB on
behalf of the Company.
ii. £4,239k (2022: £nil),
receivable from its subsidiary, CTH. The amount relates to a
dividend payment and other intragroup receivables.
iii. The Company holds a bank account
with CAB and the balance at year-end is £658k
(2022:nil).
36. Contingent Liabilities, Commitments and
Guarantees
a) Contingent
liabilities
The Group and the Company do not have any
other contingent liabilities at the balance sheet date other than
those disclosed in Note 26.
b)
Commitments
i. Capital
commitments
The Group and Company do not have any capital
commitments at the balance sheet date (2022: nil) nor any which
have been approved but not contracted (2022: nil). It should be
noted that as disclosed in Note 46, a property lease was
signed on 25 January 2024.
ii. Other
commitments
a)
In 2020, the Group entered into a five-year
contract to assist with the ongoing automation of manual processes.
The following payments are due under the contract:
Payment
Due
|
2023
£'000
|
2022
£'000
|
Not later than one year
|
2,260
|
2,210
|
Later than one year and not later than five
years
|
1,883
|
4,143
|
|
4,143
|
6,353
|
The total of the amounts due under the
contract are expensed to P&L over the life of the contract in
line with the benefits received.
b) The Group has
committed to the following lease payments for the use of office
space at Quadrant House and Tower 42 lease contracts (Note 20)
in existence at year-end:
Payment
Due
|
2023
£'000
|
2022
£'000
|
Not later than one year
|
407
|
670
|
Later than one year and not later than five
years
|
477
|
611
|
|
884
|
1,281
|
Right of use of asset balance and a lease
liability balance have been recognised on the statement of
financial position and interest expense and depreciation will be
recognised on the statement of profit or loss and other
comprehensive income over the life of the lease
contract.
Further commitments are discussed in Note
26.
37. Credit Risk
Credit risk is the risk that a client or
counterparty will default on its contractual obligations resulting
in financial loss to the Group. Credit risk is a principal risk,
arising from financial assets which are loans and advances on
demand to banks, other loans and advances to banks, other loans and
advances to non-banks, investments in debt securities, unsettled
transactions, accrued income and other asset exposures. In
addition, it considers off-balance sheet exposures from financial
guarantees, acceptances, confirmations, and Liquidity as a Service.
The Group considers the following elements of credit risk exposure,
including counterparty-specific risk, geographical risk, and sector
risk for risk management purposes. Information about the credit
risk management policy of the Group is contained in the strategic
report.
a) Credit
risk management
The Group monitors credit risk per class of
financial instrument. The Group recognises expected credit losses
on financial assets that are measured at amortised cost which
includes cash and balances at central banks, loans and advances on
demand to banks, other loans and advances to banks, other loans and
advances to non-banks, unsettled transactions, accrued income,
Investment in debt securities, other assets, as well as off-balance
sheet account (undrawn commitments) such as financial guarantees,
letter of acceptances, letter of confirmations and Liquidity as a
Service.
b) Exposure to
credit risk by instrument
The table below outlines the classes
identified, as well as the financial statement line item and the
note. The related notes contain an analysis of the items included
in the financial statement line for each class of financial
instrument including how the exposure to credit risk arise. There
are no changes to the exposures to risks on these financial
instruments and how those exposures to risk arise compared to prior
year.
Instrument
|
Description
|
Note
|
Cash and
balances at central banks
|
These are
balances with the Bank of England, which has AA-credit rating.
Balances are available on demand and are located in the
UK.
|
11
|
Loans and
Advances on Demand to Banks
|
These are
Nostro bank accounts that the Group holds with other commercial
banks in support of client payment flows.
|
13
|
Other
Loans and Advances to banks
|
Credit
Support Annexes (CSA) Loans represent collateral required from
clients through a credit support annexe for initial and variation
margin as part of derivative transactions. They are under a
collateralised mark to market (CTM) regime. A CTM model requires
the out of the money party to post collateral with an amount equal
to the cumulative mark to market value, either with the
counterparty or with an exchange. Both initial and variation margin
are refundable upon settlement of the derivative and is therefore
accounted for as collateral.
Discounted Letters of Credit are advanced letter of credit
payments that the Group pay to counterparties before the completion
of the sales and shipping process. The amount that the Group pays
out is discounted by a discounted fee (interest rate) and as such,
is lower that the principal expected to be received. They are
essentially factoring transactions.
Trade
Finance loans are short-term working capital loans to banks
operating in trade finance markets. They assist buyers and sellers
to finance their trade commitments on a transactional basis. The
Group receives interest payments in return.
|
13
|
Other
Loans and Advances to non-banks
|
Liquidity
as a Service is a type of overdraft facility where the Group agrees
to provide clients with a facility for a set period with specific
terms as set out in the Liquidity as a Service agreement. The
clients use the liquidity to undertake foreign exchange business
with the Group.
A flat
facility fee is charged for the provision of services. The Group
will lend money to clients solely for the purpose of assisting the
client with its specific liquidity requirements that arise from
settlement timelines in its standard payment flows. The rate
charged for the amount lent is the greater of i. a fixed rate (e.g.
9%) or ii. US Federal rate plus a spread (e.g. US Fed rate plus
1%).
|
13
|
Unsettled
Transactions
|
Unsettled
transactions are unsettled balances resulting from foreign exchange
transactions that are delayed due to time differences, public
holidays in other countries (where the counterparties are located)
or similar operational reasons. The balances are short-term
(typically less than four days).
|
18
|
Investment in Debt
Securities
|
Fixed
rate bonds (US Treasury bills) are US Treasury bills issued by the
US government which offer a fixed rate of interest for a set period
of time.
Fixed
rate bonds (other) are other fixed rate bonds issued by companies
or G20 governments which offer a fixed rate of interest for a set
period of time.
Floating
rate notes (FRNs) are Investment in debt securities that pay a
coupon determined by a reference rate which resets periodically. As
such, the interest received is not fixed.
Certificates of deposit (CDs) are Investment in debt
securities that pay fixed interest for a fixed period of time.
Unlike bonds, CDs are usually not tradable in a secondary
market.
|
15
|
Other
assets
|
Balances
with mobile network operators are the payments from mobile network
operators (MNOs) that are due to the Group in respect of mobile
money accounts. In certain countries in Africa, mobile money
accounts are widely used, this service allows users to deposit
money into an account stored on their mobile phones and to then
send balances using a PIN-secured SMS text message to other
users.
One of the
services that the Group provide is the transfer of funds by clients
to beneficiaries via mobile. Typically, a client will deposit funds
in the Group's controlled bank account. These funds are then
transferred to an account held with a MNO. Clients submit a request
for a payment to be made on the Payment Gateway. On receipt of the
request, funds are remitted from the account held with the MNOs to
the beneficiary with the Group's fee deducted simultaneously. MNOs
therefore provide the Group with the equivalent of a bank
account.
In
relation to the Company - Other Asset exposures also include
amounts due from Group companies.
|
18
|
Accrued
income
|
Accrued
income is money owed to the Group for services rendered or provided
that have not yet been invoiced. The balance arises from several
components such as management fees, pension fee accruals, and other
revenues.
|
17
|
Off-Balance Sheet
Accounts
|
These are
trade finance guarantees, letter of acceptances and confirmation
that are contingent liabilities and so require documented levels of
performance to be achieved for settlement. Typically, the Group's
counterparty is another bank and ordinarily the contract has a
maximum tenor of six months.
The
undrawn portion of Liquidity as a Service facilities. The Liquidity
as a Service facilities are repayable on demand as drawing to the
agreed limit can be made at the counterparty's instruction then the
undrawn portion does attract an ECL amount.
|
26
|
The maximum credit exposures (gross balance
before ECL adjustment) distributed across each instrument are
summarised in the table below.
|
Consolidated
|
2023
£'000
|
Restated
2022
£'000
|
Cash and balances at central banks
|
528,396
|
607,358
|
Loans and Advances on Demand to
Banks
|
135,203
|
91,470
|
Other Loans and Advances to
Banks1
|
137,597
|
84,493
|
Other Loans and Advances to
Non-Banks1
|
8,712
|
12,455
|
Unsettled transactions2
|
8,417
|
16,988
|
Investment in debt securities
|
353,042
|
414,074
|
Other asset (measured at amortised
cost)2
|
11,257
|
4,056
|
Accrued income
|
1,218
|
429
|
Total
On-Balance Sheet Exposure
|
1,183,842
|
1,231,323
|
1 Prior year balances have
been restated. Refer to Note 13.
2 Prior year balances have
been restated. Refer to Note 18.
Refer to Note 37 g) for the financial assets
carrying amounts tying to consolidated statement of financial
assets.
i.
Off-balance sheet exposures
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Financial guarantee contracts
|
1,911
|
4,000
|
Trade Finance - letter of credit confirmation
/ acceptance
|
4,228
|
15,000
|
Confirmations
|
9,173
|
23,000
|
Liquidity as a service
|
14,884
|
4,721
|
Total
Off-Balance Sheet Exposure1
|
30,196
|
46,721
|
1 The total off-balance sheet
exposure consists of the following: financial guarantee contracts,
which are contracts that requires the issuer to make specified
payments to reimburse the holder for a loss it incurs because a
specified debtor fails to make payments when due in accordance with
the terms of a debt instrument, letter of credit confirmation /
acceptance, which is a letter from an issuing bank guaranteeing
that a buyer's payment to a seller will be received on time and for
the correct amount and liquidity as a service, which is a credit
facility offered by the Group to its clients which allows clients
to draw down on the facility on satisfaction of the terms of this
facility.
The carrying amounts of financial assets best
represents their maximum exposure to credit risk. The amounts
include both balance sheet and undrawn exposures.
c)
Significant increase in credit risk (SICR)
The Group uses a defined criteria
to determine whether credit risk has increased significantly for
each instrument. The criteria used are both quantitative changes in
PDs as well as qualitative. The table below summarises the range
above which an increase in lifetime PD is determined to be
significant, as well as some indicative qualitative indicators
assessed. The Group uses an internal rating system that goes from
Rating 0 to 7 with Rating 8 representing default except for
Non-Banking Financial Institutions (NBFI) and International
Development Organisations (IDO) counterparties which do not fit the
Moody's risk rating Model (RiskCalc). Below is a table that
represents the through-the-cycle (TTC) PD range per rating and the
exposure-weighted distribution for 2023. Furthermore, ratings 0 to
3 represent investment grade ratings whilst 4 to 7 represent
sub-investment grade ratings. This range in unchanged from previous
years.
Rating
Type
|
Rating
|
TTC PD
Range
|
Investment Grade
|
Rating 0
|
0%, 0.01%
|
Rating 1
|
0.01%, 0.02%
|
Rating 2
|
0.03%, 0.05%
|
Rating 3
|
0.06%, 0.08%
|
Sub-Investment Grade
|
Rating 4
|
0.081%, 0.10%
|
Rating 5
|
0.11%, 0.5%
|
Rating 6
|
0.51%, 1.5%
|
Rating 7
|
1.51%, 25%
|
Rating 8 (Default)
|
100%
|
Irrespective of the outcome of the above
rating assessment, the Group presumes that the credit risk on a
financial asset has increased significantly since initial
recognition when contractual payments are more than 30 days past
due unless the Group has reasonable and supportable information
that demonstrates otherwise.
The Group has monitoring procedures in place
to make sure that the criteria used to identify significant
increases in credit risk are effective, meaning that
significant increase in credit risk is identified before the
exposure is defaulted. The Group performs periodic
back-testing of its ratings to consider whether the drivers of
credit risk that led to default were accurately reflected in the
rating in a timely manner.
d)
Incorporation of forward-looking information
The Group incorporates readily available
forward-looking information in its computation of Expected Credit
Losses (ECL) and utilises external data to formulate a 'base case'
scenario, projecting future economic variables and exploring a
representative spectrum of alternative forecast scenarios. The
Group assigns probabilities to the identified forecast scenarios,
with the base case representing the singularly most probable
outcome utilised for strategic planning and budgeting
purposes.
Key drivers of credit risk and credit losses
for each financial instrument class are meticulously identified and
documented, and statistical analyses of historical data establish
relationships between macro-economic variables and credit risk as
well as credit losses. Throughout the reporting period, there have
been no alterations to the estimation techniques or significant
assumptions.
The Group's balance sheet is made from a
simple product suite where the significant macro-economic variable
is GDP growth rates. These are disclosed in section 37 with related
sensitivities.
The greatest volume of the exposure on the
Balance Sheet is Bank of England balances and hold to maturity US
Treasuries and other High Quality Liquid Assets that are not really
affected negatively by inflation, interest rates and unemployment
in those jurisdictions as they are with low risk
institutions.
Whilst inflation, interest rates and
unemployment could affect the economic cycle in some of the 130+
countries of risk, the exposure is short-term and ordinarily de
minimis at less than 10% of CAB's balance sheet through Nostro
balances and FX settlement exposure. The cost of providing detailed
forecast macro-economic variables such as unemployment, inflation
and interest rates would be onerous and potentially greater than
the small exposure in such countries. Furthermore, in some
jurisdictions such data may not be available.
The table below outlines GDP growth indicators
forecasted in economic scenarios as of December 31, 2023, for the
years 2024 to 2028, specifically focusing on the UK and key regions
where the Group operates, thereby exerting a substantial impact on
Expected Credit Losses (ECLs).
This table comprises the 2023 GDP growth rates
used in the calculation of the 2023 ECL balance.
|
2024
|
2025
|
2026
|
2027
|
2028
|
United
Kingdom GDP growth
|
|
|
|
|
|
Base scenario
|
0.5%
|
1.5%
|
1.9%
|
1.5%
|
1.4%
|
Upside scenario
|
4.6%
|
3.7%
|
3.0%
|
1.8%
|
1.3%
|
Mild upside scenario
|
3.0%
|
2.9%
|
2.6%
|
1.7%
|
1.3%
|
Stagnation scenario
|
(2.0%)
|
0.6%
|
1.6%
|
1.5%
|
1.5%
|
Downside scenario
|
(3.1%)
|
0.2%
|
1.4%
|
1.4%
|
1.5%
|
Severe downside scenario
|
(5.1%)
|
(0.7%)
|
1.1%
|
1.3%
|
1.6%
|
|
|
|
|
|
|
Americas GDP
growth
|
|
|
|
|
|
Base scenario
|
1.1%
|
1.6%
|
2.4%
|
2.2%
|
1.8%
|
Upside scenario
|
3.7%
|
3.6%
|
3.7%
|
3.6%
|
1.7%
|
Mild upside scenario
|
2.6%
|
2.9%
|
3.3%
|
2.5%
|
1.8%
|
Stagnation scenario
|
(0.4%)
|
0.9%
|
1.9%
|
2.1%
|
1.9%
|
Downside scenario
|
(1.1%)
|
0.5%
|
1.6%
|
2.0%
|
1.9%
|
Severe downside scenario
|
(2.3%)
|
(0.3%)
|
1.0%
|
1.8%
|
2.0%
|
|
|
|
|
|
|
Eurozone GDP
growth
|
|
|
|
|
|
Base scenario
|
0.8%
|
2.0%
|
2.1%
|
1.7%
|
1.4%
|
Upside scenario
|
4.0%
|
4.5%
|
3.4%
|
1.9%
|
1.2%
|
Mild upside scenario
|
2.7%
|
3.6%
|
3.0%
|
1.8%
|
1.3%
|
Stagnation scenario
|
(1.2%)
|
1.0%
|
1.7%
|
1.7%
|
1.5%
|
Downside scenario
|
(2.1%)
|
0.4%
|
1.4%
|
1.7%
|
1.5%
|
Severe downside scenario
|
(3.7%)
|
(0.5%)
|
1.0%
|
1.6%
|
1.6%
|
|
|
|
|
|
|
Asia-Pacific
GDP growth
|
|
|
|
|
|
Base scenario
|
3.6%
|
3.8%
|
3.8%
|
3.7%
|
3.6%
|
Upside scenario
|
7.0%
|
5.9%
|
5.4%
|
4.2%
|
3.5%
|
Mild upside scenario
|
5.6%
|
5.1%
|
4.9%
|
4.0%
|
3.5%
|
Stagnation scenario
|
1.6%
|
2.9%
|
3.1%
|
3.5%
|
3.7%
|
Downside scenario
|
0.7%
|
2.4%
|
2.8%
|
3.4%
|
3.7%
|
Severe downside scenario
|
(0.9%)
|
1.6%
|
2.1%
|
3.2%
|
3.8%
|
|
|
|
|
|
|
Sub-Saharan
Africa GDP growth
|
|
|
|
|
|
Base scenario
|
3.1%
|
3.4%
|
3.4%
|
3.4%
|
3.2%
|
Upside scenario
|
8.8%
|
6.9%
|
5.7%
|
3.8%
|
2.8%
|
Mild upside scenario
|
6.6%
|
5.7%
|
4.9%
|
3.7%
|
3.0%
|
Stagnation scenario
|
(0.0%)
|
1.9%
|
2.3%
|
3.1%
|
3.4%
|
Downside scenario
|
(1.6%)
|
1.1%
|
1.7%
|
3.0%
|
3.6%
|
Severe downside scenario
|
(4.1%)
|
(0.4%)
|
0.6%
|
2.9%
|
3.8%
|
|
|
|
|
|
|
Middle East
North Africa GDP growth
|
|
|
|
|
|
Base scenario
|
2.6%
|
3.0%
|
2.8%
|
2.6%
|
2.5%
|
Upside scenario
|
8.1%
|
6.7%
|
5.1%
|
3.0%
|
2.1%
|
Mild upside scenario
|
5.9%
|
5.4%
|
4.3%
|
2.8%
|
2.3%
|
Stagnation scenario
|
(0.5%)
|
1.5%
|
1.8%
|
2.4%
|
2.7%
|
Downside scenario
|
(2.0%)
|
0.6%
|
1.2%
|
2.3%
|
2.9%
|
Severe downside scenario
|
(4.4%)
|
(0.9%)
|
0.1%
|
2.2%
|
3.1%
|
This table comprise the 2022 GDP growth rates
used in the calculation of 2022 ECL balance.
|
2023
|
2024
|
2025
|
2026
|
2027
|
United
Kingdom GDP growth
|
|
|
|
|
|
Base scenario
|
(0.9%)
|
1.5%
|
2.7%
|
2.2%
|
1.7%
|
Upside scenario
|
3.0%
|
3.8%
|
3.9%
|
2.6%
|
1.5%
|
Mild upside scenario
|
1.4%
|
3.0%
|
3.5%
|
2.5%
|
1.6%
|
Stagnation scenario
|
(3.5%)
|
0.7%
|
2.5%
|
2.2%
|
1.8%
|
Downside scenario
|
(4.6%)
|
0.2%
|
2.3%
|
2.1%
|
1.8%
|
Severe downside scenario
|
(6.5%)
|
(0.6%)
|
2.0%
|
2.1%
|
1.9%
|
|
|
|
|
|
|
Americas GDP
growth
|
|
|
|
|
|
Base scenario
|
(0.0%)
|
1.3%
|
2.3%
|
2.4%
|
2.2%
|
Upside scenario
|
2.7%
|
3.2%
|
3.7%
|
2.8%
|
2.1%
|
Mild upside scenario
|
1.6%
|
2.5%
|
3.2%
|
2.7%
|
2.1%
|
Stagnation scenario
|
(1.4%)
|
0.5%
|
1.8%
|
2.2%
|
2.2%
|
Downside scenario
|
(2.1%)
|
0.1%
|
1.5%
|
2.1%
|
2.3%
|
Severe downside scenario
|
(3.2%)
|
(0.7%)
|
1.0%
|
2.0%
|
2.3%
|
|
|
|
|
|
|
Eurozone GDP
growth
|
|
|
|
|
|
Base scenario
|
(0.1%)
|
2.1%
|
2.3%
|
1.9%
|
1.6%
|
Upside scenario
|
3.1%
|
4.7%
|
3.6%
|
2.1%
|
1.4%
|
Mild upside scenario
|
1.8%
|
3.8%
|
3.2%
|
2.0%
|
1.5%
|
Stagnation scenario
|
(2.1%)
|
1.1%
|
1.9%
|
1.9%
|
1.6%
|
Downside scenario
|
(3.1%)
|
0.6%
|
1.6%
|
1.9%
|
1.7%
|
Severe downside scenario
|
(4.6%)
|
(0.4%)
|
1.2%
|
1.8%
|
1.7%
|
|
|
|
|
|
|
Asia-Pacific
GDP growth
|
|
|
|
|
|
Base scenario
|
3.3%
|
4.2%
|
4.9%
|
4.6%
|
4.2%
|
Upside scenario
|
6.4%
|
6.3%
|
6.3%
|
5.0%
|
4.0%
|
Mild upside scenario
|
5.1%
|
5.5%
|
5.8%
|
4.8%
|
4.1%
|
Stagnation scenario
|
1.2%
|
3.3%
|
4.1%
|
4.3%
|
4.2%
|
Downside scenario
|
0.3%
|
2.9%
|
3.7%
|
4.2%
|
4.3%
|
Severe downside scenario
|
(1.3%)
|
2.0%
|
3.0%
|
4.0%
|
4.3%
|
|
|
|
|
|
|
Sub-Saharan
Africa GDP growth
|
|
|
|
|
|
Base scenario
|
2.8%
|
3.2%
|
3.3%
|
3.4%
|
3.3%
|
Upside scenario
|
8.1%
|
6.7%
|
5.6%
|
3.8%
|
2.8%
|
Mild upside scenario
|
6.0%
|
5.4%
|
4.8%
|
3.6%
|
3.0%
|
Stagnation scenario
|
(0.3%)
|
1.8%
|
2.2%
|
3.2%
|
3.6%
|
Downside scenario
|
(1.8%)
|
0.9%
|
1.6%
|
3.1%
|
3.7%
|
Severe downside scenario
|
(4.2%)
|
(0.5%)
|
0.6%
|
2.9%
|
4.0%
|
|
|
|
|
|
|
Middle East
North Africa GDP growth
|
|
|
|
|
|
Base scenario
|
2.1%
|
2.9%
|
2.8%
|
2.5%
|
2.4%
|
Upside scenario
|
7.5%
|
6.7%
|
5.2%
|
2.9%
|
2.0%
|
Mild upside scenario
|
5.4%
|
5.3%
|
4.4%
|
2.8%
|
2.2%
|
Stagnation scenario
|
(1.0%)
|
1.2%
|
1.7%
|
2.4%
|
2.7%
|
Downside scenario
|
(2.5%)
|
0.3%
|
1.1%
|
2.3%
|
2.8%
|
Severe downside scenario
|
(5.0%)
|
(1.3%)
|
(0.0%)
|
2.1%
|
3.0%
|
Predicted relationships between the key
indicators and default and loss rates on various portfolios of
financial assets have been developed based on analysing historical
data over the past 18 years.
The Group has performed a sensitivity analysis
on how ECL on the main portfolio would change if the key
assumptions used to calculate ECL change by macroeconomic scenario.
The table below outlines the total ECL across the portfolio as at
31 December 2023, if the assumptions used to measure ECL remain as
expected (amount as presented in the statement of financial
position) for each of the macroeconomic scenarios. The changes are
applied in isolation for illustrative purposes and are applied to
each probability weighted scenario used to develop the estimate of
expected credit losses. Each economic scenario represents the
average twelve-month PD and ECL, assuming a 100% weighting to that
scenario. There will be interdependencies between the various
economic inputs and the exposure to sensitivity will vary across
the economic scenarios.
|
2023
|
2022
|
As at
2023
|
Average
12m PD
|
ECL
£'000
|
ECL sensitivity from Base Case
£'000
|
Average
12m PD
|
ECL
£'000
|
ECL sensitivity from Base
Case
£'000
|
Base
|
0.2%
|
814
|
-
|
0.8%
|
440
|
-
|
Upside
|
0.2%
|
713
|
- 101
|
0.7%
|
409
|
- 31
|
Mild upside
|
0.2%
|
750
|
- 64
|
0.8%
|
421
|
- 19
|
Stagnation
|
0.2%
|
889
|
+ 75
|
0.9%
|
465
|
+ 25
|
Downside
|
0.2%
|
921
|
+ 107
|
0.9%
|
478
|
+ 38
|
Severe
|
0.3%
|
1,004
|
+ 190
|
1.0%
|
501
|
+ 61
|
There are no changes to the estimation
techniques for ECL at year-end and there are no significant changes
to the GDP growth rate when compared to prior year. It can be noted
above that the sensitivity analysis does not result in significant
changes to the ECL balances.
The ECL is calculated using a weighted case
from the macro-economic scenarios above. The probability of each
scenario occurring in both 2023 and 2022 is based on the
following;
Economic
Scenario
|
Probability Weighting
|
1. Base
|
30%
|
2. Upside
|
10%
|
3. Mild upside
|
15%
|
4. Stagnation
|
10%
|
5. Downside
|
20%
|
6. Severe
|
15%
|
e)
Measurement of expected credit losses (ECL)
ECL is applicable to financial
assets classified at amortised cost. The measurement of ECL
reflects an unbiased and probability-weighted amount that is
determined by evaluating a range of possible outcomes, time value
of money and 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.
The Group applies the general model
for measuring expected credit losses (ECL) which uses a three-stage
approach in recognising the expected loss allowance to its
financial assets measured at amortised cost. The Group considers
the model and the assumptions used in calculating these ECLs
as key sources of estimation uncertainty.
The key inputs used for measuring
ECL are:
· probability of default (PD);
· loss given default (LGD); and
· exposure at default (EAD).
The ECL Model allocates accounts to
three Stages and calculates the impairment as:
· Twelve months Expected Loss for accounts in Stage 1;
and
· Lifetime Expected Loss (LEL) for accounts in Stage 2 and
Stage 3.
The Group measures ECL considering
the risk of default over the maximum contractual period (including
extension options) over which the entity is exposed to credit risk
and not a longer period, even if contract extension or renewal
is common business practice.
The measurement of ECL is based on
probability weighted average credit loss. As a result, the
measurement of the loss allowance should be the same
regardless of whether it is measured on an individual basis or a
collective basis (although measurement on a collective basis is
more practical for large portfolios of items).
The Group has measured its ECL at a
counterparty-level which is then aggregated to a product and
segment level. In relation to the assessment of whether there
has been a significant increase in credit risk it can be necessary
to perform the assessment on a collective basis as noted
below.
i.
Probability of Default
PD is an estimate of the likelihood of default
over a given time horizon. It is estimated as at a point in time.
PDs are determined using the one-factor Merton-Vasicek model and
transforms TTC PDs to a 1-month Forward-in-Time (FiT) PD for each
period of a loan's contractual life by decomposing the portfolio
into systematic and idiosyncratic risk factors. The systematic
factor captures risks relevant to the entire portfolio and is
assumed to be correlated to the overall macroeconomy. The
idiosyncratic factor captures counterparty-specific
characteristics. These statistical models are based on market data
(where available), as well as internal data comprising both
quantitative and qualitative factors. PDs are estimated considering
the contractual maturities of exposures and estimated prepayment
rates. The estimation is based on current conditions, adjusted to
take into account estimates of future conditions that will impact
PD.
The Group estimates the remaining lifetime
Probability of Default (PD) of exposures and how these are expected
to change over time. The Group uses the Moody's RiskCalc tool to
assign a risk rating to each counterparty which represents the
probability of default. The factors considered in this process
include macro-economic data including GDP per region - UK,
Americas, Eurozone, Asia, Sub-Saharan Africa (SSA), and Middle East
& North Africa (MENA). The Group generates a 'base case'
scenario of the future direction of relevant economic variables as
well as a representative range of other possible forecast
scenarios. The Group then uses these forecasts, which are
probability-weighted, to adjust its estimates of
PDs.
ii. Loss
Given Default
The LGD is an estimate of the loss arising on
default. It is based on the difference between the contractual cash
flows due and those that the lender would expect to receive, taking
into account cash flows from any collateral. The LGD model for
portfolio incorporates information on time of recovery, recovery
rates and seniority of claims. The calculation is on a discounted
cash flow basis, where the cash flows are discounted by the
original effective interest rate (EIR) of the loan.
iii. Exposure
at Default
The EAD is the estimated total value of the
Group's exposures at the time of default. It includes all the
outstanding amounts, including the account balance, interest, fees,
and arrears as well as any default penalty and recovery fees
associated with defaulted account. For the balance sheet exposure,
the EAD specifically includes committed but undrawn amount together
with interest.
f) Groupings based on shared risks
characteristics
When ECL is measured on a collective basis,
(aggregating the results of each individual calculation) the
financial instruments are grouped on the basis of shared risk
characteristics, such as: instrument type, credit risk grade, and
regional split.
The groupings are reviewed on a regular basis
to ensure that each group is comprised of homogenous
exposures.
g) Impairment
of financial assets
The Group's impairment loss on financial
assets, undrawn commitments and financial guarantees that are
subject to the expected credit loss model are as shown
below:
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Impairment
recognised in profit or loss:
|
|
|
Increase in ECL provision for cash and
balances at central banks
|
-
|
-
|
Increase/(decrease) in ECL for Loans and
advances on Demand to Banks
|
21
|
(1)
|
(Decrease)/Increase in ECL for other Loans and
Advances to Banks
|
(62)
|
70
|
Increase in ECL for other Loans and Advances
to Non-Banks
|
448
|
205
|
Increase in ECL Unsettled Transaction
Exposures
|
-
|
4
|
Increase in ECL provision for investment in
debt securities
|
1
|
11
|
Increase in ECL for other assets
|
42
|
2
|
(Decrease)/Increase in ECL for accrued
income
|
(2)
|
4
|
Total
impairment recognised in profit or loss for financial
assets
|
448
|
295
|
Increase in ECL for Guarantees
|
1
|
31
|
Increase in ECL for Acceptances
|
3
|
-
|
(Decrease)/Increase in ECL for
Confirmations
|
(6)
|
8
|
(Decrease)/Increase in ECL for Liquidity as a
Service
|
(43)
|
271
|
Total
impairment loss/ (recovery) recognised in profit or
loss
|
404
|
342
|
h) Credit
quality
An analysis of the Group's credit rating,
maturity and credit risk concentrations per class of financial
asset is provided in the following tables.
i. Portfolio
grading
The table below displays a breakdown of the
portfolio in terms of credit quality. Instruments with strong
credit characteristics are categorised as 'investment grade' (risk
grades 0 to 3), while those with higher credit risk are categorised
as 'sub-investment grade' (risk grades 4 to 7).
The table below comprise the maximum credit
exposure by portfolio grading.
Exposure by
grade
|
Consolidated
|
2023
£'000
|
Restated
2022
£'000
|
On-Balance
Sheet Exposure
|
|
|
Cash and
balances at central banks
|
528,396
|
607,358
|
Investment Grade
|
528,396
|
607,358
|
Loans and
Advances on Demand to banks
|
135,203
|
91,470
|
Investment Grade
|
115,274
|
78,754
|
Sub-Investment Grade
|
19,929
|
12,716
|
Other Loans
and Advances to banks1
|
137,597
|
84,494
|
Investment Grade
|
78,253
|
50,334
|
Sub-Investment Grade
|
59,344
|
34,160
|
Other Loans
and Advances to non-banks1
|
8,712
|
12,455
|
Investment Grade
|
-
|
-
|
Sub-Investment Grade
|
8,712
|
12,455
|
Unsettled
Transactions2
|
8,417
|
16,987
|
Investment Grade
|
1,608
|
8,511
|
Sub-Investment Grade
|
6,809
|
8,476
|
Investment in
debt securities
|
353,042
|
414,074
|
Investment Grade
|
353,042
|
414,074
|
Sub-Investment Grade
|
-
|
-
|
Other
assets2
|
11,257
|
4,056
|
Investment Grade
|
2,493
|
1
|
Sub-Investment Grade
|
8,764
|
4,055
|
Accrued
income
|
1,218
|
429
|
Investment Grade
|
391
|
-
|
Sub-Investment Grade
|
827
|
429
|
Total
On-Balance Sheet Exposure
|
1,183,842
|
1,231,323
|
Investment Grade
|
1,079,457
|
1,159,032
|
Sub-Investment Grade
|
104,385
|
72,291
|
1 Prior year balances have
been restated. Refer to Note 13.
2 Prior year balances have
been restated. Refer to Note 18.
i. Portfolio
grading (continued)
The table below summarises the
total off-balance sheet exposure.
Exposure by
Grade
Off Balance
Sheet Exposure
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Financial
guarantees
|
1,911
|
4,000
|
Investment Grade
|
-
|
-
|
Sub-Investment Grade
|
1,911
|
4,000
|
Acceptances
|
4,228
|
15,000
|
Investment Grade
|
1,482
|
-
|
Sub-Investment Grade
|
2,746
|
15,000
|
Confirmations
|
9,173
|
23,000
|
Investment Grade
|
3,680
|
-
|
Sub-Investment Grade
|
5,493
|
23,000
|
Liquidity as
a Service
|
14,884
|
4,721
|
Investment Grade
|
-
|
-
|
Sub-Investment Grade
|
14,884
|
4,721
|
Total
Off-Balance Sheet Exposure
|
30,196
|
46,721
|
Investment Grade
|
5,162
|
-
|
Sub-Investment Grade
|
25,034
|
46,721
|
ii. Exposure
by region
The table below describes the gross carrying
amount by location for each asset class.
Exposures by
region
|
Consolidated
|
2023
£'000
|
Restated
2022
£'000
|
|
|
|
Cash and
Balances
|
528,396
|
607,358
|
UK
|
528,396
|
607,358
|
Loans and
Advances on demand to banks
|
135,203
|
91,470
|
Africa
|
15,647
|
11,674
|
China
|
1,489
|
1,041
|
Europe
|
22,759
|
13,209
|
Far East
|
3,414
|
1,986
|
Japan
|
15,758
|
6,226
|
Middle East
|
872
|
8,656
|
Other
|
1,580
|
2,984
|
UK
|
23,490
|
13,260
|
Americas
|
50,194
|
32,434
|
|
|
|
Other Loans
and Advances to banks1
|
137,597
|
84,494
|
Africa
|
52,021
|
37,197
|
China
|
8,079
|
27,358
|
Europe
|
10,486
|
1,055
|
Far East
|
15,492
|
-
|
Japan
|
-
|
-
|
Middle East
|
33,424
|
19,286
|
Other
|
-
|
-
|
UK
|
15,260
|
137
|
Americas
|
2,836
|
2,461
|
|
|
|
Other Loans
and Advances to non-banks1
|
8,712
|
12,455
|
Africa
|
5,544
|
142
|
China
|
-
|
-
|
Europe
|
352
|
3,078
|
Far East
|
-
|
-
|
Japan
|
-
|
-
|
Middle East
|
-
|
-
|
Other
|
-
|
-
|
UK
|
2,816
|
9,235
|
Americas
|
-
|
-
|
1
Prior year balances have been restated. Refer to Note
13.
ii. Exposure
by region (continued)
Exposures by
Region
|
Consolidated
|
2023
£'000
|
Restated
2022
£'000
|
|
|
|
Unsettled
Transactions1
|
8,417
|
16,988
|
Africa
|
5,286
|
8,938
|
China
|
-
|
-
|
Europe
|
1,419
|
72
|
Far East
|
656
|
7,287
|
Japan
|
-
|
-
|
Middle East
|
413
|
-
|
Other
|
-
|
-
|
UK
|
644
|
611
|
Americas
|
-
|
80
|
|
|
|
Investments
in Debt Securities
|
353,042
|
414,074
|
Africa
|
-
|
24,283
|
Europe
|
194,872
|
145,823
|
Far East
|
65,036
|
49,268
|
Middle East
|
-
|
-
|
Other
|
29,923
|
17,314
|
UK
|
-
|
19,698
|
Americas
|
63,211
|
157,688
|
|
|
|
Other
Assets1
|
11,257
|
4,056
|
Africa
|
7,533
|
2,003
|
Europe
|
41
|
-
|
Far East
|
8
|
-
|
Middle East
|
-
|
-
|
Other
|
-
|
-
|
UK
|
3,675
|
1,289
|
Americas
|
-
|
764
|
|
|
|
Accrued
Income
|
1,218
|
429
|
UK
|
1,218
|
429
|
Americas
|
-
|
-
|
Total
On-Balance Sheet Exposure
|
1,183,842
|
1,231,323
|
1 Prior year balances have
been restated. Refer to Note 18.
ii. Exposure
by region (continued)
The total off balance sheet exposure is broken
down below.
Off Balance
Sheet Exposures by Region
|
2023
£'000
|
2022
£'000
|
Financial
Guarantees
|
1,911
|
4,000
|
Africa
|
1,589
|
4,000
|
Europe
|
-
|
-
|
Far East
|
-
|
-
|
Middle East
|
-
|
-
|
Other
|
-
|
-
|
UK
|
87
|
-
|
Americas
|
235
|
-
|
|
|
|
Acceptances
|
4,228
|
15,000
|
Africa
|
2,746
|
15,000
|
Europe
|
-
|
-
|
Far East
|
-
|
-
|
Middle East
|
-
|
-
|
Other
|
-
|
-
|
UK
|
-
|
-
|
Americas
|
1,482
|
-
|
|
|
|
Confirmations
|
9,173
|
23,000
|
Africa
|
5,493
|
23,000
|
Europe
|
-
|
-
|
Far East
|
-
|
-
|
Middle East
|
-
|
-
|
Other
|
-
|
-
|
UK
|
-
|
-
|
Americas
|
3,680
|
-
|
|
|
|
Liquidity as
a Service
|
14,884
|
4,721
|
Africa
|
544
|
4,721
|
Europe
|
1,875
|
-
|
Far East
|
-
|
-
|
Middle East
|
-
|
-
|
Other
|
-
|
-
|
UK
|
12,465
|
-
|
Americas
|
-
|
-
|
|
|
|
Total
Off-Balance Sheet Exposure
|
30,196
|
46,721
|
|
|
|
Total
Exposure
|
1,214,038
|
1,278,044
|
iii.
Breakdown by maturity
The table below describes the gross carrying
amount per maturity for each asset class.
Exposure by
maturity
On Balance Sheet Exposure
|
2023
£'000
|
2022
£'000
|
Cash and
balances at central banks
|
528,396
|
607,358
|
3 months or less
|
528,396
|
607,358
|
More than 3 months
|
-
|
-
|
|
|
|
Loans and
Advances on demand to banks
|
135,203
|
91,470
|
3 months or less
|
135,203
|
91,470
|
More than 3 months
|
-
|
-
|
|
|
|
Other Loans
and Advances to banks1
|
137,597
|
84,494
|
3 months or less
|
137,597
|
84,494
|
More than 3 months
|
-
|
-
|
|
|
|
Other Loans
and Advances to non-banks1
|
8,712
|
12,455
|
3 months or less
|
8,712
|
12,455
|
More than 3 months
|
-
|
-
|
|
|
|
Unsettled
Transactions2
|
8,417
|
16,987
|
3 months or less
|
8,417
|
16,987
|
More than 3 months
|
-
|
-
|
|
|
|
Investment in
debt Securities
|
353,042
|
414,074
|
3 months or less
|
353,042
|
414,074
|
More than 3 months
|
-
|
-
|
|
|
|
Other
Assets2
|
11,257
|
4,056
|
3 months or less
|
11,257
|
4,056
|
More than 3 months
|
-
|
-
|
|
|
|
Accrued
Income
|
1,218
|
429
|
3 months or less
|
1,218
|
429
|
More than 3 months
|
-
|
-
|
Total On
Balance Sheet Exposure
|
1,183,842
|
1,231,323
|
1 Prior year balances have
been restated. Refer to Note 13.
2 Prior year balances have
been restated. Refer to Note 18.
iii.
Breakdown by maturity (continued)
The total off balance sheet exposure is broken
down below.
Exposure by
maturity
Off balance
sheet exposures
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Financial
guarantees
|
1,911
|
4,000
|
3 months or less
|
1,911
|
4,000
|
More than 3 months
|
-
|
-
|
Acceptances
|
4,228
|
15,000
|
3 months or less
|
4,228
|
15,000
|
More than 3 months
|
-
|
-
|
Confirmations
|
9,173
|
23,000
|
3 months or less
|
9,173
|
23,000
|
More than 3 months
|
-
|
-
|
Liquidity as
a Service
|
14,884
|
4,721
|
3 months or less
|
14,884
|
4,721
|
More than 3 months
|
-
|
-
|
Total Off
Balance Sheet Exposure
|
30,196
|
46,721
|
Total
Exposure
|
1,214,038
|
1,278,044
|
iv. Loss
allowance
The tables below describes gross
carrying amount, loss allowance, and carrying amount after loss
allowance per class of assets.
On Balance
sheet exposure
|
Consolidated
|
2023
£'000
|
Restated
2022
£'000
|
Cash and
Balances at Central Banks
|
|
|
Gross Carrying Amount
|
528,396
|
607,358
|
Loss Allowance
|
-
|
-
|
Carrying Amount After Loss
Allowance
|
528,396
|
607,358
|
|
|
|
Loans and
Advances on demand to banks
|
|
|
Gross Carrying Amount
|
135,203
|
91,470
|
Loss Allowance
|
(25)
|
(4)
|
Carrying Amount After Loss
Allowance
|
135,178
|
91,466
|
|
|
|
Other Loans
and Advances to banks1
|
|
|
Gross Carrying Amount
|
137,597
|
84,494
|
Loss Allowance
|
(27)
|
(63)
|
Carrying Amount After Loss
Allowance
|
137,570
|
84,431
|
|
|
|
Other Loans
and Advances to non-banks1
|
|
|
Gross Carrying Amount
|
8,712
|
12,455
|
Loss Allowance
|
(496)
|
(230
|
Carrying Amount After Loss
Allowance
|
8,216
|
12,224
|
|
|
|
Unsettled
Transactions2
|
|
|
Gross Carrying Amount
|
8,417
|
16,988
|
Loss Allowance
|
-
|
(2)
|
Carrying Amount After Loss
Allowance
|
8,417
|
16,985
|
|
|
|
Investment in
debt securities
|
|
|
Gross Carrying Amount
|
353,042
|
414,074
|
Loss Allowance
|
(14)
|
(13)
|
Carrying Amount After Loss
Allowance
|
353,028
|
414,061
|
|
|
|
Other
Assets2
|
|
|
Gross Carrying Amount
|
11,257
|
4,056
|
Loss Allowance
|
(57)
|
(60)
|
Carrying Amount After Loss
Allowance
|
11,200
|
3,996
|
|
|
|
Accrued
Income
|
|
|
Gross Carrying Amount
|
1,218
|
429
|
Loss Allowance
|
(3)
|
(5)
|
Carrying Amount After Loss
Allowance
|
1,215
|
424
|
Total
On-Balance Sheet Gross Carrying Amount
|
1,183,842
|
1,231,323
|
Total Loss
Allowance
|
(621)
|
(377)
|
Total
On-Balance Carrying Amount After Loss Allowance
|
1,183,221
|
1,230,946
|
1 Prior year balances have been
restated. Refer to Note 13.
2 Prior year balances have been
restated. Refer to Note 18.
iv. Loss
allowance (continued)
The off-balance sheet exposure is
broken down below.
Off Balance
Sheet exposure
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Financial
Guarantees Contracts
|
|
|
Gross Carrying Amount
|
1,911
|
4,000
|
Loss Allowance
|
(2)
|
(1)
|
Carrying Amount After Loss
Allowance
|
1,910
|
3,999
|
|
|
|
Acceptances
|
|
|
Gross Carrying Amount
|
4,228
|
15,000
|
Loss Allowance
|
(3)
|
(1)
|
Carrying Amount After Loss
Allowance
|
4,225
|
14,999
|
|
|
|
Confirmations
|
|
|
Gross Carrying Amount
|
9,173
|
23,000
|
Loss Allowance
|
(3)
|
(6)
|
Carrying Amount After Loss
Allowance
|
9,170
|
22,994
|
|
|
|
Liquidity as
a service
|
|
|
Gross Carrying Amount
|
14,884
|
4,721
|
Loss Allowance
|
(228)
|
(72)
|
Carrying Amount After Loss
Allowance
|
14,656
|
4,649
|
|
|
|
Total
Off-Balance Sheet Exposure
|
30,196
|
46,721
|
Total Loss
Allowance
|
(236)
|
(79)
|
Total
Off-Balance Sheet Exposure After Loss Allowance
|
29,960
|
46,642
|
|
|
|
Total
Exposure
|
1,214,038
|
1,278,044
|
Total Loss
Allowance
|
(857)
|
(456)
|
Total
Exposure After Loss Allowance
|
1,213,181
|
1,277,588
|
v. Breakdown
as a function of staging and risk grade
An analysis of The Group's expected credit
loss per class of financial asset, internal rating, and "staging"
without taking into account the effects of any collateral or other
credit enhancements is provided in the following tables.
|
Consolidated
|
ECL
|
2023
£'000
|
|
2022
£'000
|
Stage 1
|
Stage 2
|
Stage 3
|
|
Stage 1
|
Stage 2
|
Stage 3
|
Cash and
balances at central banks
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Investment Grade
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Sub-Investment Grade
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Loans and
advances on demand to banks
|
25
|
-
|
-
|
|
4
|
-
|
-
|
Investment Grade
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Sub-Investment Grade
|
25
|
-
|
-
|
|
4
|
-
|
-
|
Other Loans
and advances to banks
|
27
|
-
|
-
|
|
63
|
-
|
-
|
Investment Grade
|
1
|
-
|
-
|
|
-
|
-
|
-
|
Sub-Investment Grade
|
27
|
-
|
-
|
|
63
|
-
|
-
|
Other Loans
and advances to non-banks
|
14
|
450
|
32
|
|
230
|
-
|
-
|
Investment Grade
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Sub-Investment Grade
|
14
|
450
|
32
|
|
230
|
-
|
-
|
Unsettled
Transactions
|
13
|
-
|
-
|
|
2
|
1
|
-
|
Investment Grade
|
|
-
|
-
|
|
-
|
-
|
-
|
Sub-Investment Grade
|
13
|
-
|
-
|
|
2
|
1
|
-
|
Investment in
debt securities
|
14
|
-
|
-
|
|
13
|
-
|
-
|
Investment Grade
|
14
|
-
|
-
|
|
13
|
-
|
-
|
Sub-Investment Grade
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Other asset
exposures
|
27
|
1
|
16
|
|
59
|
-
|
-
|
Investment Grade
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Sub-Investment Grade
|
27
|
1
|
16
|
|
59
|
-
|
-
|
Accrued
income
|
3
|
-
|
-
|
|
5
|
-
|
-
|
Investment grade
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Sub-Investment Grade
|
3
|
-
|
-
|
|
5
|
-
|
-
|
Total
On-Balance Sheet ECL
|
122
|
451
|
48
|
|
375
|
1
|
-
|
Total
On-Balance Sheet ECL
|
621
|
|
376
|
v. Breakdown
as a function of staging and risk grade
(continued)
The off-Balance sheet breakdown of ECL per
instrument at each stage is shown below:
|
Consolidated
|
ECL
Off Balance
Sheet Items
|
2023
£'000
|
|
2022
£'000
|
Stage 1
|
Stage 2
|
Stage 3
|
|
Stage 1
|
Stage 2
|
Stage 3
|
Financial
Guarantees
|
2
|
-
|
-
|
|
1
|
-
|
-
|
Investment Grade
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Sub-Investment Grade
|
2
|
-
|
-
|
|
1
|
-
|
-
|
Acceptances
|
3
|
-
|
-
|
|
1
|
-
|
-
|
Investment Grade
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Sub-Investment Grade
|
3
|
-
|
-
|
|
1
|
-
|
-
|
Confirmation
|
3
|
-
|
-
|
|
6
|
-
|
-
|
Investment Grade
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Sub-Investment Grade
|
3
|
-
|
-
|
|
6
|
-
|
-
|
Liquidity as
Service
|
7
|
221
|
-
|
|
72
|
-
|
-
|
Investment Grade
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Sub-Investment Grade
|
7
|
221
|
-
|
|
72
|
-
|
-
|
Total
Off-Balance Sheet ECL
|
15
|
221
|
-
|
|
79
|
-
|
-
|
Total
Off-Balance Sheet ECL
|
236
|
|
79
|
|
|
|
|
|
|
|
|
Total ECL per
stage
|
137
|
672
|
48
|
|
455
|
1
|
-
|
Total
ECL
|
857
|
|
456
|
v.
Breakdown as a Function of Staging (continued)
The on-balance sheet and
off-Balance sheet breakdown of maximum exposure per instrument at
each stage is shown below:
|
2023
|
2022
|
Maximum exposure per
staging
|
£'000
|
£'000
|
On balance sheet items
|
Stage
1
|
Stage
2
|
Stage
3
|
Stage
1
|
Stage
2
|
Stage
3
|
Cash and balances at central
banks
|
528,396
|
-
|
-
|
607,358
|
-
|
-
|
|
Loans and advances on demand to
banks
|
134,882
|
322
|
-
|
91,380
|
89
|
-
|
|
Other Loans and advances to
banks
|
137,598
|
-
|
-
|
84,494
|
-
|
-
|
|
Other Loans and advances to
non-banks
|
2,531
|
6,092
|
-
|
12,455
|
-
|
-
|
|
Unsettled
Transactions
|
7,365
|
1,035
|
-
|
15,985
|
1,003
|
-
|
|
Investment in debt
securities
|
353,042
|
-
|
-
|
414,074
|
-
|
-
|
|
Other asset
exposures
|
8,057
|
3,109
|
89
|
4,056
|
-
|
-
|
|
Accrued income
|
1,218
|
-
|
-
|
429
|
-
|
-
|
|
Total On-Balance Sheet maximum
exposure
|
1,173,089
|
10,558
|
89
|
1,230,231
|
1,092
|
-
|
|
Total On-Balance Sheet maximum
exposure
|
|
1,183,736
|
|
|
1,231,323
|
|
|
|
|
|
|
|
|
|
|
Off Balance Sheet
Items
|
|
|
|
|
|
|
|
Financial
Guarantees
|
1,899
|
12
|
-
|
4,000
|
-
|
-
|
|
Acceptances
|
4,228
|
-
|
-
|
15,000
|
-
|
-
|
|
Confirmation
|
9,173
|
-
|
-
|
23,000
|
-
|
-
|
|
Liquidity as
Service
|
685
|
14,199
|
-
|
4,721
|
-
|
-
|
|
Total Off-Balance Sheet maximum
exposure
|
15,985
|
14,211
|
-
|
46,721
|
-
|
-
|
|
Total Off-Balance Sheet maximum
exposure
|
|
30,196
|
|
|
46,721
|
|
|
|
|
|
|
|
|
|
|
Total maximum exposure per
stage
|
1,189,074
|
24,769
|
-
|
1,276,952
|
1,092
|
-
|
|
Total maximum exposure per
stage
|
|
1,213,932
|
|
|
1,278,044
|
|
|
|
|
|
|
|
|
|
| |
vi. Coverage ratios table
The tables below analyse the
coverage ratio.
Coverage ratios
|
2023
|
2022
|
On
balance sheet
|
Gross carrying amount £'000
|
ECL
£'000
|
Coverage ratio %
|
Gross carrying amount £'000
|
ECL
£'000
|
Coverage ratio %
|
Stage 1
|
1,173,089
|
122
|
0.01%
|
1,230,231
|
375
|
0.03%
|
Stage 2
|
10,558
|
451
|
4.27%
|
1,092
|
1
|
0.09%
|
Stage 3
|
89
|
48
|
53.93%
|
-
|
-
|
-
|
Total on-balance sheet
|
1,183,736
|
621
|
0.05%
|
1,231,323
|
376
|
0.03%
|
|
|
|
|
|
|
|
Off - balance sheet
|
|
|
|
|
|
|
Stage 1
|
15,985
|
15
|
0.09%
|
46,721
|
79
|
0.17%
|
Stage 2
|
14,211
|
221
|
1.56%
|
-
|
-
|
-
|
Stage 3
|
-
|
-
|
-
|
-
|
-
|
-
|
Total - off balance sheet
|
30,196
|
236
|
0.78%
|
46,721
|
79
|
0.17%
|
|
|
|
|
|
|
|
TOTAL
|
1,213,932
|
857
|
0.07%
|
1,278,044
|
455
|
0.04%
|
vii. Movement in loss allowances across the
stages
The tables below analyse the
movement of the loss allowance during the year per class of assets
with movements in stages.
|
Consolidated
|
|
2023
£'000
|
|
2022
£'000
|
Stage 1
|
Stage 2
|
Stage 3
|
|
Stage 1
|
Stage 2
|
Stage 3
|
Loss allowance at beginning of
period
|
454
|
2
|
-
|
|
113
|
1
|
-
|
Loans expired / closed from previous
period
|
(448)
|
(2)
|
-
|
|
(91)
|
(1)
|
-
|
New loans Issued
|
843
|
8
|
-
|
|
432
|
1
|
-
|
Expected credit loss before changes
in
loss allowance
|
849
|
8
|
-
|
|
454
|
1
|
-
|
Change in loss allowance
|
(712)
|
-
|
-
|
|
(1)
|
-
|
-
|
Transfer to Stage 1
|
-
|
-
|
-
|
|
-
|
-
|
-
|
Transfer to Stage 2
|
(664)
|
-
|
-
|
|
(1)
|
-
|
-
|
Transfer to Stage 3
|
(48)
|
-
|
-
|
|
-
|
-
|
-
|
Transfers in
|
-
|
664
|
48
|
|
-
|
1
|
-
|
Adjustments in expected credit loss
|
92
|
8
|
-
|
|
2
|
-
|
-
|
Loss allowance at end of period
|
137
|
672
|
48
|
|
454
|
2
|
-
|
Total loss
allowance at end of period
|
857
|
|
456
|
38. Liquidity Risk
Information on the policy for liquidity risk
is in the Strategic Report. The risks relating to discontinued
operations up to 20 June 2022 have been managed in the same
manner as the rest of the Group at this time. From the date of
transfer these risks reside with fair value of the disposal group
held for sale (note 10).
The liquidity (undiscounted) cashflow profile
of the Group's financial assets and financial liabilities
(including interest receivable / payable on maturity) is as
follows:
Assets
2023
|
Consolidated
|
Less than
3 months
£'000
|
3 months
- 1 year
£'000
|
1 year
- 2 years
£'000
|
2 years
- 5 years
£'000
|
More than
5 years
£'000
|
Total
£'000
|
Cash and balances at central banks
|
529,835
|
-
|
-
|
-
|
-
|
529,835
|
Money market funds
|
518,764
|
-
|
-
|
-
|
-
|
518,764
|
Loans and advances on
demand to banks
|
135,239
|
-
|
-
|
-
|
-
|
135,239
|
Other loans and advances to banks
|
73,416
|
65,011
|
-
|
-
|
-
|
138,427
|
Other loans and advances to
non-banks
|
8,216
|
-
|
-
|
-
|
-
|
8,216
|
Derivative financial assets
|
3,795
|
34
|
-
|
-
|
-
|
3,829
|
Unsettled transactions
|
8,417
|
-
|
-
|
-
|
-
|
8,417
|
Investment in debt securities
|
105,534
|
169,033
|
70,263
|
20,713
|
-
|
365,543
|
Investment in equity securities
|
-
|
-
|
-
|
-
|
495
|
495
|
Other assets
|
5,721
|
-
|
-
|
-
|
-
|
5,721
|
Accrued income (others)
|
1,215
|
-
|
-
|
-
|
-
|
1,215
|
|
1,390,152
|
234,078
|
70,263
|
20,713
|
495
|
1,715,700
|
Liabilities
2023
|
Consolidated
|
Less than
3 months
£'000
|
3 months
- 1 year
£'000
|
1 year
- 2 years
£'000
|
2 years
- 5 years
£'000
|
More than
5 years
£'000
|
Total
£'000
|
Non-derivative
liabilities
|
|
|
|
|
|
|
Customer accounts
|
1,457,254
|
83,136
|
6,051
|
-
|
-
|
1,546,441
|
Unsettled transactions
|
20,081
|
-
|
-
|
-
|
-
|
20,081
|
Other liabilities
|
6,223
|
-
|
-
|
-
|
-
|
6,223
|
Accruals
|
18,367
|
-
|
-
|
-
|
-
|
18,367
|
Lease liabilities
|
134
|
238
|
181
|
331
|
-
|
884
|
|
1,502,059
|
83,374
|
6,232
|
331
|
-
|
1,591,996
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
|
|
|
|
|
Derivative financial instruments
|
9,645
|
34
|
-
|
-
|
-
|
9,679
|
Assets 2022
(Restated)
|
Consolidated
|
Less than
3 months
£'000
|
3 months
- 1 year
£'000
|
1 year
- 2 years
£'000
|
2 years
- 5 years
£'000
|
More than
5 years
£'000
|
Total
£'000
|
Cash and balances at central banks
|
607,358
|
-
|
-
|
-
|
-
|
607,358
|
Money market funds
|
209,486
|
-
|
-
|
-
|
-
|
209,486
|
Loans and advances on
demand to banks
|
90,209
|
-
|
-
|
-
|
-
|
90,209
|
Other loans and advances to
banks3
|
73,213
|
12,252
|
-
|
-
|
-
|
85,465
|
Loans and advances to
non-banks3
|
12,447
|
-
|
-
|
-
|
-
|
12,447
|
Derivative financial assets
|
6,551
|
16
|
-
|
-
|
-
|
6,567
|
Unsettled transactions4
|
16,071
|
-
|
-
|
-
|
-
|
16,071
|
Investment in debt securities
|
101,323
|
243,385
|
66,844
|
10,125
|
-
|
421,677
|
Investment in equity securities
|
-
|
-
|
-
|
-
|
488
|
488
|
Other assets2/4
|
5,242
|
-
|
-
|
-
|
-
|
5,242
|
Accrued income (others)
|
856
|
-
|
-
|
-
|
-
|
856
|
|
1,122,756
|
255,653
|
66,844
|
10,125
|
488
|
1,455,866
|
Liabilities
2022
|
Consolidated
|
Less than
3 months
£'000
|
3 months
- 1 year
£'000
|
1 year
- 2 years
£'000
|
2 years
- 5 years
£'000
|
More than
5 years
£'000
|
Total
£'000
|
Non-derivative
liabilities
|
|
|
|
|
|
|
Customer accounts
|
1,134,194
|
171,357
|
-
|
-
|
-
|
1,305,551
|
Unsettled transactions
|
25,782
|
-
|
-
|
-
|
-
|
25,782
|
Other liabilities1
|
5,551
|
-
|
-
|
-
|
-
|
5,551
|
Accruals
|
19,364
|
-
|
-
|
-
|
-
|
19,364
|
Lease liabilities
|
108
|
359
|
346
|
468
|
-
|
1,281
|
Provisions
|
79
|
-
|
-
|
-
|
-
|
79
|
|
1,185,078
|
171,716
|
346
|
468
|
-
|
1,357,608
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
|
|
|
|
|
Derivative financial instruments
|
4,520
|
23
|
-
|
-
|
-
|
4,543
|
1 Excludes non-financial
liabilities such as HM Revenue & Customs.
2 Excludes non-financial
assets such as corporation tax refund, and VAT refund.
3 The prior year balance has
been restated. Refer to Note 13 for further details
thereon.
4 The prior year balance has
been restated. Refer to Note 18 for further details
thereon.
a) Company
financial assets and liabilities
The liquidity (undiscounted) cashflow profile
of the Company's financial assets and financial liabilities
(including interest receivable / payable) is as follows:
Assets
2023
|
Company
|
Less than
3 months
£'000
|
3 months
- 1 year
£'000
|
1 year
- 2 years
£'000
|
2 years
- 5 years
£'000
|
Total
£'000
|
Loans and Advances to banks
|
658
|
-
|
-
|
-
|
658
|
Intercompany receivables
|
4,239
|
-
|
-
|
-
|
4,239
|
Other Assets
|
188
|
-
|
-
|
-
|
188
|
Total
|
5,085
|
-
|
-
|
-
|
5,085
|
Liabilities
2023
|
Company
|
Less than
3 months
£'000
|
3 months
- 1 year
£'000
|
1 year
- 2 years
£'000
|
2 years
- 5 years
£'000
|
Total
£'000
|
Intercompany payables
|
19,406
|
-
|
-
|
-
|
19,406
|
Accruals
|
1,022
|
-
|
-
|
-
|
1,022
|
Other Liabilities
|
422
|
-
|
-
|
-
|
422
|
Total
|
20,850
|
-
|
-
|
-
|
20,850
|
Liabilities
2022
|
Company
|
Less than
3 months
£'000
|
3 months
- 1 year
£'000
|
1 year
- 2 years
£'000
|
2 years
- 5 years
£'000
|
Total
£'000
|
Intercompany payables
|
1,198
|
-
|
-
|
-
|
1,198
|
Total
|
1,198
|
-
|
-
|
-
|
1,198
|
The Company does not have any significant
trade obligations or liabilities to meet, and the financial
liabilities of the Company largely constitute intercompany payables
towards its subsidiary, CAB. Although, this liability is payable on
demand, management does not expect its subsidiary to demand
payment. The Company had no financial assets in
2022.
Where the Company is required to make any
outward payments other than above intercompany payables, its
subsidiary CAB advances the cash to the Company as needed.
Therefore, the Company's liquidity risk is negligible.
39. Currency Risk
The Group does not have any structural
exposure. The table below shows the Group's transactional currency
exposures in its book, i.e. those non-structural exposures that
give rise to the net currency gains and losses recognised in the
statements of profit or loss and other comprehensive income. Such
exposures comprise the monetary assets and monetary liabilities of
the Group that are not denominated in sterling.
At 31 December, these financial instruments
were as follows:
2023
Currency
|
Consolidated - Net foreign currency
monetary (liabilities) / assets in £'000
|
US Dollar
|
Euro
|
KES
|
UGX
|
Other
|
Total
|
(Liabilities) / assets
|
(281,532)
|
(97,714)
|
410
|
(153)
|
12,822
|
(366,167)
|
Net forward purchases/(sales)
|
282,402
|
97,077
|
(309)
|
-
|
(10,177)
|
368,993
|
|
870
|
(637)
|
101
|
(153)
|
2,645
|
2,826
|
|
|
|
|
|
|
|
Change in
assets / (liabilities) due
to a change in currency value by
|
|
|
|
|
|
|
+ 100 basis points
|
9
|
(6)
|
1
|
(2)
|
26
|
28
|
- 100 basis points
|
(9)
|
6
|
(1)
|
2
|
(26)
|
(28)
|
2022
Currency
|
US Dollar
|
Euro
|
KES
|
UGX
|
Other
|
Total
|
(Liabilities) / assets
|
(358,485)
|
(52,910)
|
419
|
390
|
(1,304)
|
(411,890)
|
Net forward purchases
|
360,651
|
52,007
|
119
|
-
|
5,137
|
417,914
|
|
2,166
|
(903)
|
538
|
390
|
3,833
|
6,024
|
|
|
|
|
|
|
|
Change in
assets / (liabilities) due
to a change in currency value by
|
|
|
|
|
|
|
+ 100 basis points
|
217
|
(90)
|
54
|
39
|
3,830
|
4,045
|
- 100 basis points
|
(217)
|
90
|
(44)
|
(39)
|
(3,830)
|
(4,045)
|
An analysis of the total financial
instruments,, split between GBP and other currencies, is as
follows:
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Assets
|
|
|
Denominated in other currencies
|
1,040,623
|
757,150
|
|
|
|
Liabilities
and Equity
|
|
|
Denominated in other currencies
|
1,406,167
|
1,162,160
|
A 10% appreciation in the value of GBP against
all other currencies would decrease the Group's profit or loss
value by £283k (2022: £668k decrease).
A 10% depreciation in the value of GBP against
all other currencies would increase the Group's profit or loss
value by £283k (2022: £668k increase).
All of the Company's assets and liabilities in
2023 (2022: GBP) were denominated in GBP.
Therefore, the Company is not subjected to
currency risk.
40.
Interest Rate Risk
a) Interest
rate sensitivity
Part of the Group's return on
financial instruments is obtained from controlled mismatching of
the dates on which the instruments mature or, if earlier, the dates
on which interest receivable on financial assets and interest
payable on financial liabilities are next reset to market rates.
The table below summarises these re-pricing mismatches on the
Group's book as at 31 December 2023. Items are allocated to time
bands by reference to the earlier of the next contractual interest
rate re‑pricing
date and the maturity date. All the financial assets / financial
liabilities are based on fixed interest. The repricing table
therefore is prepared on the basis that maturity date equals
repricing date. It should be noted that the Group manages its
interest rate risk on a behavioural basis where a portion of client
deposits are treated as being rate insensitive.
b) Interest
rate repricing
Interest Rate
Repricing
2023
|
Consolidated £'000
|
Not more than three
months
|
More than three months but not more than
six months
|
More than six months but not more than
one year
|
More than one year but not more than
five years
|
Non-interest bearing
|
Total
|
Assets
|
|
|
|
|
|
|
Cash and balances at central banks
|
528,396
|
-
|
-
|
-
|
-
|
528,396
|
Money market funds
|
518,764
|
-
|
-
|
-
|
-
|
518,764
|
Loans and advances on demand to
banks
|
135,178
|
-
|
-
|
-
|
-
|
135,178
|
Other loans and advances to banks
|
74,366
|
50,701
|
12,503
|
-
|
-
|
137,570
|
Loans and advances to non-banks
|
8,216
|
-
|
-
|
-
|
-
|
8,216
|
Derivative financial assets
|
3,795
|
15
|
19
|
-
|
-
|
3,829
|
Unsettled transactions
|
-
|
-
|
-
|
-
|
8,417
|
8,417
|
Investment in debt securities
|
104,424
|
56,322
|
110,547
|
89,336
|
-
|
360,629
|
Investments in equity securities
|
-
|
-
|
-
|
-
|
495
|
495
|
Other assets1
|
330
|
-
|
-
|
-
|
5,391
|
5,721
|
Accrued income
|
-
|
-
|
-
|
-
|
1,215
|
1,215
|
Total
assets
|
1,373,469
|
107,038
|
123,069
|
89,336
|
15,518
|
1,708,430
|
1 Includes
financial liabilities and lease liabilities
Interest rate
repricing
2023
Liabilities
|
Consolidated £'000
|
Not more than three
months
|
More than three months but not more than
six months
|
More than six months but not more than
one year
|
More than one year but not more than
five years
|
Non-interest bearing
|
Total
|
Customer accounts
|
1,456,217
|
37,686
|
43,334
|
5,652
|
-
|
1,542,889
|
Derivative financial liabilities
|
9,645
|
15
|
19
|
-
|
-
|
9,679
|
Unsettled transactions
|
-
|
-
|
-
|
-
|
20,081
|
20,081
|
Other liabilities1
|
-
|
-
|
-
|
-
|
7,107
|
7,107
|
Accruals
|
-
|
-
|
-
|
-
|
18,367
|
18,367
|
Shareholders' funds
|
-
|
-
|
-
|
-
|
131,530
|
131,530
|
Total
liabilities
|
1,465,862
|
37,701
|
43,353
|
5,652
|
177,085
|
1,729,653
|
|
|
|
|
|
|
|
Interest rate sensitivity gap
|
(92,393)
|
69,337
|
79,716
|
83,684
|
(161,567)
|
(21,223)
|
Cumulative
gap
|
(92,393)
|
(23,056)
|
56,660
|
140,344
|
(21,223)
|
|
1 Includes
financial liabilities and lease liabilities
Interest Rate
Repricing
2022
(Restated)
|
Consolidated £'000
|
Not more than three
months
|
More than three months but not more than
six months
|
More than six months but not more than
one year
|
More than one year but not more than
five years
|
Non-interest bearing
|
Total
|
Assets
|
|
|
|
|
|
|
Cash and balances at central banks
|
607,358
|
-
|
-
|
-
|
-
|
607,358
|
Money market funds
|
209,486
|
-
|
-
|
-
|
-
|
209,486
|
Loans and advances on demand to
banks
|
90,209
|
-
|
-
|
-
|
-
|
90,209
|
Other loans and advances to
banks1
|
73,213
|
12,252
|
-
|
-
|
-
|
85,465
|
Loans and advances to
non-banks1
|
12,447
|
-
|
-
|
-
|
-
|
12,447
|
Derivative financial assets
|
6,551
|
16
|
-
|
-
|
-
|
6,567
|
Unsettled transactions2
|
-
|
-
|
-
|
-
|
16,071
|
16,071
|
Investment in debt securities
|
98,675
|
64,460
|
175,103
|
75,823
|
-
|
414,061
|
Investments in equity securities
|
-
|
-
|
-
|
-
|
488
|
488
|
Other assets2
|
-
|
-
|
-
|
-
|
5,242
|
5,242
|
Accrued income
|
-
|
-
|
-
|
-
|
856
|
856
|
Total
assets
|
1,097,939
|
76,728
|
175,103
|
75,823
|
22,657
|
1,448,250
|
1 The prior year balance has
been restated. Refer to Note 13 for further details
thereon.
2 The prior year
balance has been restated. Refer to Note 18 for further details
thereon.
Interest rate
repricing
2022
Liabilities
|
Consolidated £'000
|
Not more than three
months
|
More than three months but not more than
six months
|
More than six months but not more than
one year
|
More than one year but not more than
five years
|
Non-interest bearing
|
Total
|
Customer accounts
|
1,134,309
|
128,369
|
42,873
|
-
|
-
|
1,305,551
|
Derivative financial liabilities
|
4,520
|
23
|
-
|
-
|
-
|
4,543
|
Unsettled transactions
|
-
|
-
|
-
|
-
|
25,782
|
25,782
|
Other liabilities1
|
-
|
-
|
-
|
-
|
5,551
|
5,551
|
Accruals
|
-
|
-
|
-
|
-
|
19,364
|
19,364
|
Provisions
|
-
|
-
|
-
|
-
|
79
|
79
|
Shareholders' funds
|
-
|
-
|
-
|
-
|
115,958
|
115,958
|
Total
liabilities
|
1,138,829
|
128,392
|
42,873
|
-
|
166,734
|
1,476,828
|
|
|
|
|
|
|
|
Interest rate sensitivity gap
|
(40,890)
|
(51,664)
|
132,230
|
75,823
|
(144,077)
|
(28,578)
|
Cumulative
gap
|
(40,890)
|
(92,554)
|
39,676
|
115,499
|
(28,578)
|
|
1 Excludes non-financial
liabilities such as HM Revenue & Customs.
Following a parallel shift in interest rates,
the Group's net asset value and profit would change as
follows:
Parallel
Shift (consolidated)
|
2023
£'000
|
2022
£'000
|
+ 200bp
|
157
|
(58)
|
- 200bp
|
(181)
|
45
|
None of the Company's assets or liabilities in
2023 or 2022 earned interest. Therefore, the Company is not
subjected to interest risk.
41. Capital Management
Capital risk is the risk that the Group has
insufficient capital resources to meet the minimum regulatory
requirements in all jurisdictions where regulated activities
are undertaken, to support its credit rating and to support its
growth and strategic options.
a) Capital
risk management
As for liquidity and market risks, the Assets
& Liabilities Committee (ALCO) is responsible for ensuring the
effective management of capital risk throughout the Group. Specific
levels of authority and responsibility in relation to capital risk
management have been assigned to the appropriate
committees.
b) Externally
imposed capital requirements
Companies within the Group are subject to
regulatory requirements (on an entity and / or a consolidated
basis) imposed by the PRA and / or the FCA. Such regulations
include the requirement, at all times, to carry sufficient
regulatory capital to meet the underlying capital
requirements.
Capital risk is measured and monitored using
limits set in relation to capital, all of which are calculated in
accordance with relevant regulatory requirements.
The Group's regulatory capital consists solely
of Common Equity Tier 1 (CET 1) capital which includes ordinary
share capital, retained earnings, investment revaluation reserve
and foreign currency translation reserve after deductions for
goodwill, intangible assets and other regulatory adjustments
relating to items that are included in equity but are treated
differently for capital adequacy purposes.
The Group's capital plans are developed with
the objective of maintaining capital that is adequate in quantity
and quality to support the Group's risk profile, regulatory and
business needs. Capital forecasts are continually monitored against
relevant internal target capital ratios to ensure they remain
appropriate and consider risks to the plan including possible
future regulatory changes.
The Group and its regulated trading subsidiary
calculate those capital requirements on a daily basis and, using a
traffic light warning system based on an internal buffer, reports
to the Assets and Liabilities Committee, or, should the need arise,
the Board.
The Group manages capital risk on an ongoing
basis through other means such as:
· Stress testing:
internal group-wide stress testing is undertaken to quantify and
understand the impact of sensitivities on the capital plan and
capital ratios arising from stressed macroeconomic conditions.
Reverse stress testing is also performed to identify the extent of
stress that could be survived before limits are
breached.
· Risk mitigation:
as part of the stress testing process, actions are identified that
should be taken to mitigate the risks that could arise in the event
of material adverse changes in the current economic and business
environment.
· Senior
management awareness and transparency: Capital management
information is readily available at all times to support the
Group's executive management's strategic and day-to-day business
decision making, as may be required.
Full details of the capital adequacy
requirements for each of the Group's regulated entities are
provided in its Pillar 3 disclosures which can be found on the
website of CAB Payments Holdings plc (www.cabpayments.com). The
Pillar 3 disclosures are not audited.
c) Capital management in relation to the
Company
The Company manages its capital to
ensure that it will be able to continue as going concerns while
maximising the return to shareholders through the optimisation of
the debt and equity balance. The Company's overall strategy remains
unchanged from 2022. The Company is not subject to any externally
imposed capital requirements.
The capital structure of the
Company consists of equity (called-up share capital, retained
earnings and shareholder's funds as disclosed in Notes 27 and
29).
42. Classification of Financial Instruments
The carrying values of the financial assets
and financial liabilities are summarised by category
below:
Financial
assets
|
Consolidated
|
2023
£'000
|
(Restated)
2022
£'000
|
|
|
|
Mandatorily
measured at fair value through profit or loss
|
|
|
Money market
funds
|
518,764
|
209,486
|
Derivative financial
instruments - foreign exchange related contracts
|
3,829
|
6,567
|
|
522,593
|
216,053
|
|
|
|
Measured at
amortised cost
|
|
|
Cash and balances at
central banks
|
528,396
|
607,358
|
Loans and advances on
demand to banks
|
135,178
|
90,209
|
Other loans and advances to
banks1
|
137,570
|
85,465
|
Other loans and advances to
non-banks1
|
8,216
|
12,447
|
Investment in debt
securities
|
353,028
|
414,061
|
Unsettled
transactions2
|
8,417
|
16,071
|
Other assets (excluding
non-financial assets) 2
|
5,721
|
13,233
|
Accrued income
|
544
|
856
|
|
1,177,070
|
1,239,700
|
|
|
|
Measured at
fair value through other comprehensive income
|
|
|
Investment in equity
securities
|
495
|
488
|
1 The prior year balance has
been restated. Refer to Note 13 for further details
thereon.
2 The prior year balance has
been restated. Refer to Note 18 for further details
thereon.
Financial
liabilities
|
Consolidated
|
2023
£'000
|
2022
£'000
|
|
|
|
Mandatorily
measured at fair value through profit or loss
|
|
|
Derivative financial
instruments - foreign exchange related contracts
|
9,679
|
4,543
|
|
9,679
|
4,543
|
|
|
|
Measured at
amortised cost
|
|
|
Client accounts
|
1,542,889
|
1,305,551
|
Unsettled
transactions
|
20,081
|
25,782
|
Other liabilities
(excluding non-financial liabilities)
|
6,223
|
9,051
|
Lease
liabilities
|
884
|
1,281
|
Accruals
|
18,367
|
19,364
|
|
1,588,444
|
1,361,029
|
Financial
assets measured at amortised cost
|
Company
|
2023
£'000
|
2022
£'000
|
|
|
|
Other assets
|
773
|
-
|
Intercompany
receivables
|
4,239
|
-
|
|
5,012
|
-
|
Financial
liabilities measured at amortised cost
|
Company
|
2023
£'000
|
2022
£'000
|
|
|
|
Intercompany
payables1
|
19,406
|
1,198
|
Other
Liabilities
|
422
|
321
|
|
19,828
|
1,519
|
1 Intercompany payables are balances borrowed by
the Company from a subsidiary company to be used in its
operation.
There were no loss allowances recognised for
the Company's financial assets as the carrying amount is
insignificant.
The Company had no financial assets valued at
fair value through profit and loss as at 31 December 2023 and
31 December 2022.
43. Fair Value Measurements
a) Fair value
methodology
Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Where available fair values are determined at prices quoted in
active markets. In some instances, such price information is not
available for all instruments and the Group applies valuation
techniques to measure such instruments. These valuation techniques
make maximum use of market observable data but in some cases,
management estimate unobservable market inputs within the valuation
model. There is no standard model and different assumptions would
generate different results. To provide an indication about the
reliability of the inputs used in determining fair value, the Group
has classified its financial instruments that are measured at fair
value into the three levels of fair value hierarchy explained
further below, based on the lowest level input that
is significant to the entire measurement of the
instrument.
b) Fair value
hierarchy
Level 1 -
Quoted prices (unadjusted) in active markets for identical assets
or liabilities
Inputs to level 1 fair value are quoted prices
(unadjusted) in active markets for identical assets. An active
market is one in which transactions for the asset occurs with
sufficient frequency and volume to provide pricing information
on an on‑going
basis.
Level 2 -
Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly
The fair value of financial instruments that
are not traded in an active market (for example, over-the-counter
derivative financial instruments) is determined using valuation
techniques which maximise the use of observable market data and
rely as little as possible on entity-specific estimates. If all
significant inputs required to fair value such an instrument are
observable, the instrument is included in level 2.
Fair values of derivative financial
instruments (foreign exchange contracts), money market funds,
investment in equity securities and investment in debt securities
are included in level 2.
Money market funds and exchange traded funds
are valued at fair value based on the price a willing buyer would
pay for the asset. Any gain or loss is taken through the profit and
loss account. The money market funds include contractual terms such
that they are traded at par until the total market value of the
underlying instruments deviates from that par value by a certain
amount (typically 20bps). The funds have each traded at par at all
times since the initial investment by the Group.
The fair value of the Group's investment in
debt securities is determined by using discounted cash flow models
that use market interest rates as at the end of the
period.
Level 3 -
Unobservable inputs for the asset or liability
Inputs to level 3 fair values are based on
unobservable inputs for the assets at the last measurement date. If
all significant inputs required to fair value an instrument are
observable then the instrument is included in level 2, if not it is
included in level 3.
There were no transfers between fair value
hierarchy level during the year (2022: nil). There were no changes
in valuation techniques used during the year (2022: nil)
c) Financial
assets and liabilities through FVTPL and FVTOCI are categorised at
Level 2 Fair value hierarchy
Financial
assets and financial liabilities at fair value through profit or
loss
|
Valuation
techniques
|
Inputs
(including any significant unobservable inputs)
|
Derivative
financial assets
|
The Mark-to-Market (''MTM'') calculation for
foreign currency forwards is performed within Core Banking System
(''CBS'') based on market inputs pulled from Reuters at the end of
each trading day.
CBS applies a straight-line interpolation
calculation to derive the requisite forward points for each
currency based on the maturity date of the transaction - these
points are added to the spot rate to derive a revaluation
rate.
|
Reuters quoted spot rates and forward
points.
|
Money market
funds
|
Net asset value based on the valuation of the
underlying level 1 investments.
|
Quoted market prices but not for identical
assets.
|
Investment in
equity securities
|
In order to undertake its business,
the Group utilises the Swift payment system, the conditions of
which oblige participants to invest in the shares of Swift, in
proportion to participants' financial contributions to
Swift.
|
The fair value is calculated annually based on
price received from Swift and is approved annually
at reporting period.
|
Derivative
financial liabilities
|
The MTM calculation for FX Forwards is
performed within CBS based on market inputs pulled from Reuters at
the end of each trading day.
CBS applies a straight-line interpolation
calculation to derive the requisite forward points for each
currency based on the maturity date of the transaction - these
points are added to the spot rate to derive a revaluation
rate.
|
Reuters quoted spot rates and forward
points.
|
d) Financial
assets and financial liabilities at fair value through profit or
loss
Forward foreign exchange contracts have been
transacted to economically hedge assets and liabilities in foreign
currencies with movements recognised at fair value through profit
or loss.
The gains, losses, and changes in fair values
of financial assets at fair value through profit or loss recorded
in the consolidated statement of profit or loss and other
comprehensive income is as follows:
|
Consolidated
|
2023
£'000
|
2022
£'000
|
Revaluation of money market funds
|
-
|
-
|
Fair value gain or loss on forward foreign
exchange contracts1
|
88,417
|
63,352
|
|
88,417
|
63,352
|
1 The (loss) / gain on the FX
contracts typically offsets the gain / loss of a similar magnitude
following the revaluation of non GBP denominated assets /
liabilities on the statement of financial position throughout the
year.
e) Fair
values of financial assets that are measured at amortised
cost
For the Group and the Company, apart from the
fixed rate bonds, the carrying amounts of financial assets and
liabilities measured at amortised cost are approximately the same
as their fair values due to their short-term nature. The fair value
of the fixed rate bonds is provided below.
f) Impairment
and risk exposure
Information about the impairment of financial
assets, their credit quality and the Group's exposure to credit
risk can be found in the accounting policy note for financial
instruments and Note 42.
g) Financial
liabilities measured at amortised cost
For the Group and the Company, the carrying
amounts of financial liabilities at amortised cost are
approximately the same as their fair values due to their short-term
nature.
h) Financial
liabilities measured at fair value
The valuation levels of the financial assets
and financial liabilities accounted for at fair value are as
follows:
Asset
/(Liability) Type - 2023
|
Consolidated
|
Level 2
£'000
|
Stress
|
Sensitivity
£'000
|
Financial
assets at fair value
|
|
|
|
- Money market
funds
|
518,764
|
1% increase in
interest rates
|
(895)
|
- Derivative financial
assets
|
3,829
|
£ exchange rate
rise of 1%
|
(299)
|
- Investment in equity
securities
|
495
|
Equity price
+5%
|
24
|
Financial
liabilities at fair value
|
|
|
|
- Derivative financial
liabilities
|
(9,679)
|
£ exchange ate rise
of 1%
|
(3,390)
|
|
513,409
|
|
(4,560)
|
Asset
/(Liability) Type - 2023
|
Consolidated
|
Level 2
£'000
|
Stress
|
Sensitivity
£'000
|
Financial
assets at fair value
|
|
|
|
- Money market
funds
|
209,486
|
1% increase in
interest rates
|
(107)
|
- Derivative financial
assets
|
6,567
|
£ exchange rate
rise of 1%
|
(3,098)
|
- Investment in equity
securities
|
488
|
Equity price
+5%
|
24
|
Financial
liabilities at fair value
|
|
|
|
- Derivative financial
liabilities
|
(4,543)
|
£ exchange rate
rise of 1%
|
|
|
211,998
|
|
(1,093)
|
These are all recurring fair value measurements.
There were no financial assets classified as Level 1 and Level 3,
and there were no movements between fair value levels.
i) Fair value
and carrying amount of investment in debt
securities
|
Consolidated
|
2023
£'000
|
|
2022
£'000
|
Carrying Value
|
Fair Value
|
|
Carrying Value
|
Fair Value
|
Fixed rate bonds
|
|
|
|
|
|
- US Treasury Bills
(excluding accrued interest)
|
7,845
|
7,775
|
|
66,207
|
65,636
|
- Other fixed rate bonds
(excluding accrued interest)
|
343,070
|
342,907
|
|
345,321
|
341,889
|
Accrued interest
|
2,113
|
2,113
|
|
2,533
|
2,533
|
|
353,028
|
352,795
|
|
414,061
|
410,058
|
Note: The fair values of the fixed
rate bonds are based on market quoted prices. They are classified
as level 1 fair values in the fair value hierarchy due to the
liquid nature of the bond holdings, having observable and
transparent secondary market pricing.
44. Earnings Per Share
The calculation of the basic and diluted
earnings per share at reporting date is based on the following
data:
|
Consolidated
|
|
Audited
|
Unaudited
|
Earnings
/(losses) attributable to owners of the Group:
|
2023
£'000
|
2022
£'000
|
Continuing operations
|
22,866
|
31,068
|
Discontinued operations
|
(153)
|
(67)
|
|
22,713
|
31,001
|
Weighted
average number of ordinary shares
|
Year ended 31 December
|
Audited
2023
'000
|
Unaudited
20223
'000
|
Class A ordinary shares
|
68,000
|
68,000
|
Class B ordinary shares
|
5,913
|
5,913
|
- Class B ordinary shares
at beginning of reporting date
|
10
|
10
|
- Class B share
split1 (Note 27)
|
5,903
|
5,903
|
Weighted
average number of Class A and Class B ordinary
shares
|
73,913
|
73,913
|
|
|
|
Add effect
of redesignation of shares, share split and issuance
of shares during the period
|
|
|
Redesignation of Class A
and Class B ordinary shares during the period
|
(73,913)
|
(73,913)
|
New class of ordinary
shares issued during the period1
|
237,186
|
221,739
|
- Redesignation of class A and class B shares
into new class of shares1
|
73,913
|
73,913
|
- New ordinary shares from share split (note
27)
|
147,826
|
147,826
|
- Issuance of additional new ordinary shares
to former shareholders of CTH2
|
15,447
|
-
|
Weighted
average number of ordinary shares for basic and diluted
EPS
|
237,186
|
221,739
|
1 These shares are assumed to
have been issued retrospectively and at the beginning of the
periods presented as there was no change in resources on issuance
thereof in line with IAS 33.28.
2 These shares were issued
during the year (July 2023) to former external shareholders of CTH
and have been weighted accordingly.
3 For comparability and
consistent presentation, the weighted average number of ordinary
shares for 2022 was determined on the same basis as the 2023
numbers except for the shares issued to minority shareholders of
CTH which resulted in a change of resources.
|
31 December
|
2023
pence
|
2022
pence
|
Basic and
diluted earnings per share
|
|
|
Continued
operations
|
10
|
14
|
Discontinued
operations
|
-
|
-
|
Total basic
earnings per share attributable to owners of the
Company
|
10
|
14
|
As required by IAS 33, the earnings
per share calculation takes account of the share split which took
place on 5 July 2023. The resulting number of shares has been
included in the comparative calculation.
45. Consideration of Climate Change
Financial statement preparation includes the
consideration of the impact of climate change on the consolidated
financial statements. There has been no material impact identified
on the financial reporting judgement and estimates. In particular,
the directors considered the impact of climate change in respect of
the:
· Going concern of
the Group for a period of at least twelve months from the date of
approval of the consolidated financial statements.
· Assessment of
impairment of non-financial assets including goodwill.
· Carrying value
and useful economic lives of property, plant and
equipment.
· Fair value of
financial assets and liabilities. These are generally based on
market indicators which include the market's assessment of climate
risk.
· Economic
scenarios used for measurement of expected credit losses and the
behavioural lifetime of assets against the expected time horizons
of when climate risks may materialise.
· Forecasting of
the Group's future UK taxable profits, which impacts deferred tax
recognition.
· Impact on
debtors within the next twelve month (stage 1) or lifetime (stage 2
and stage 3 facilities), for impact on the related ECL
calculation.
Whilst there is currently no material
short-term impact of climate change expected, the Group
acknowledges the long-term nature of climate risk and continues to
monitor and assess climate risks.
46. Events after the reporting period
a) London
Bridge lease
The Group completed on a lease agreement for
office space at 3 London Bridge, SE1 9SG, London on 25 January
2024. Right of use of asset balance and a lease liability balance
will be recognised on the consolidated statement of financial
position 2024 and interest expense and depreciation will be
recognised on the consolidated statement of profit or loss and
other comprehensive income from 2024 onwards. The Group has
committed to the following undiscounted lease payments:
|
2023
£'000
|
2022
£'000
|
Not later than one year
|
-
|
-
|
Later than one year and not later than five
years
|
8,345
|
-
|
Later than five years
|
15,513
|
-
|
|
23,858
|
-
|
There are no other events after the reporting
period requiring disclosure or further adjustments to the financial
information.
47. Board Approval
The consolidated financial statements,
together with the Company Financial Statements, for the year ended
31 December 2023 were approved by the Board of Directors and
authorised for issue on 25 March 2024.
Shareholder Information
Financial Calendar 2024
26 March 2024
|
Full year results
|
9 May 2024
|
AGM
|
30 June
|
Half year end
|
TBC September 2024
|
Half year results
|
31 December 2024
|
Financial year end
|
TBC March 2025
|
2024 Full year results
|
Ordinary Shares
The Company's ordinary shares are
traded on the London Stock Exchange (ticker: CABP; ISIN:
GB00BMCYKB41; SEDOL: BMCYKB4).
AGM
The Company's AGM will be held at
2.00pm on Thursday, 9 May 2024 at The News Building, 3 London
Bridge Street, London SE1 9SG.
Company's Registrar
Enquiries concerning
shareholdings, change of address or other particulars should be
directed in the first instance to the Company's registrar,
Equiniti, on 0371 384 2126 from the UK or, if calling from
overseas, +44 (0)121 415 7047. Equiniti also provides a range
of online shareholder information services at www.shareview.co.uk,
where shareholders can check their holdings and find practical help
on transferring shares or updating their details.
Shareholder Security
Shareholders are advised to be
wary of any unsolicited advice, offers to buy shares at a discount
or offers of free reports about the Company.
Details of any share dealing
facilities that the Company endorses will be included in the
Company's mailings or on our website. More detailed information can
be found at www.fca.org.uk/consumers
Alternative Performance Measures
CAB Payments uses alternative
performance measures ("APMs") when presenting its financial
results. Management believe these provide stakeholders with
additional useful information to interpret the underlying performance of the
business. They are used by the Directors and management to monitor
performance.
APMs used
within this Annual Report are supplemental to, but not a substitute
for IFRS measures presented within the Financial Statements. They
may not be comparable with the APMs of other companies.
Alternative
Performance Measure
|
How the
metric is used
|
Calculation
Definition
|
Calculation
|
Gross Income or Income
|
As a fast-growing organisation, the Group's
focus is on driving income growth through controlled investment,
whether as capital expenditure or through operating
costs.
|
Total income, net of interest
expense.
|
Consolidated statement of profit or
loss
|
EBITDA
|
The key measure of profitability used
internally at Executive Committees and Board and with externally
with investors.
|
Calculated as Profit before Tax and IFRS16
lease liability interest, depreciation and
amortisation.
Although it is typical to calculate EBITDA
before interest, our net interest income is generated from
operational client deposits and subsequent re-investment to
generate returns for the shareholder and therefore remains included
within EBITDA.
|
Note 3: segmental reporting note
|
Adjusted EBITDA
|
The Group believes that Adjusted EBITDA is a
useful measure for investors because it is closely tracked by
management to evaluate Group's performance for making financial,
strategic and operating decisions, as well as aiding investors to
understand and evaluate the underlying trends in the Group's
performance period on period, in a comparable manner.
|
EBITDA before non-recurring operating
expenses.
|
Note 3: segmental reporting note
|
Adjusted EBITDA Margin
|
A measure of profitability, by understanding
how much of the income is converted to profit.
|
Adjusted EBITDA as a percentage of Gross
Income
|
See Table 1
|
Operating Free Cash Flow
|
Measure of cash flow generated by the
business. It is a non-statutory measure used by the Board and the
senior management team to measure the ability of the Group to
support future business expansion, distributions or
financing.
|
Adjusted EBITDA before the cost of purchasing
property, plant and equipment, the cost of intangible asset
additions and the cost of lease payments.
|
See Table 2
|
Operating Free Cash Flow Conversion
|
A measure used by the Group to understand how
much of the Group's profitability (measured as adjusted EBITDA), is
converted to available capital for future business
growth.
|
Free cash flow as a percentage of Adjusted
EBITDA
|
See Table 2
|
Wholesale FX and Payment FX income
|
Wholesale FX and Payment FX Income is measured
collectively by Group as the underlying economic drivers are the
same. The income, volume and margins are all measured and
monitored, along with the underlying currencies, to help the Group
understand broader income performance.
The reported figures represents the
accumulative income from all trades undertaken during the year,
where the income of a single transaction has been generated from
the bid / ask spread and any associated payment fees if the Foreign
Exchange is then forward to a 3rd party beneficiary.
|
Net foreign exchange gain
|
Consolidated statement of profit or
loss
|
Alternative Interest Income
|
Group measures and monitors net interest
income by its underlying commercial driver, which enables
evaluation of performance in consideration of return on capital
deployed and product profitability.
|
This is done by capturing interest income by
source and spreading the interest expense through an internal
transfer pricing mechanism
|
See table 3
|
Table 1:
Adjusted
EBITDA margin
|
reference
|
|
2023
|
2022
|
|
|
|
£'000
|
£'000
|
Adjusted EBITDA
|
Note 3
(ii)
|
A
|
64,633
|
54,983
|
Gross Income (defined as Total Income, net of
interest expense)
|
Consolidated
statement of Profit or Loss
|
B
|
137,068
|
109,435
|
Adjusted EBITDA margin
|
|
A / B
|
47%
|
50%
|
Table 2:
Operating
Free Cash Flow:
|
reference
|
|
2023
|
2022
|
|
|
|
£'000
|
£'000
|
Adjusted EBITDA
|
Note 3
(ii)
|
A
|
64,633
|
54,983
|
Less: additions of tangible fixed
assets
|
Note 19
|
|
(422)
|
(355)
|
Less: additions of intangible fixed
assets
|
Note 21
|
|
(6,982)
|
(4,538)
|
Less: cash payments made on property
leases
|
Note 20 B
|
|
(462)
|
(252)
|
Operating Free Cash Flow
|
|
B
|
56,767
|
49,838
|
Operating Free Cash Flow Conversion
|
|
B / A
|
88%
|
91%
|
Table 3:
Alternative
Interest Income:
|
reference
|
|
2023
|
2022
|
|
|
|
£'000
|
£'000
|
Net Interest Income
|
Consolidated
statement of profit or loss
|
|
21,499
|
6,773
|
Gains on money market funds
|
Consolidated
statement of profit or loss
|
|
11,036
|
3,584
|
Net gain on financial assets and financial
liabilities mandatorily held at fair value through profit or
loss
|
Consolidated
statement of profit or loss
|
|
1,232
|
1,009
|
Total
|
|
|
33,767
|
11,366
|
|
|
|
|
|
NII from Cash Management
|
|
|
31,711
|
10,065
|
Trade Finance NII
|
|
|
1,571
|
1,193
|
Liquidity as a Service NII
|
|
|
485
|
108
|
Total
|
|
|
33,767
|
11,366
|
Glossary
In the Annual Report and Accounts,
the "Group" or "CAB Payments" refers to CAB Payments Holdings plc
and its subsidiaries, the "Company" or "CPH" refers to CAB Payments
Holdings plc, "CAB" refers to Crown Agents Bank Limited and "CTH"
refers to CAB Tech HoldCo Limited, a 100% subsidiary of the
Company.
The following definitions apply
throughout this document unless the context requires
otherwise:
Active Client
|
A client that has generated income
within the last 12 months
|
Addressable Market
|
the market addressable by the
Group, comprising primarily developed to emerging markets flows, excluding non-LCU flows and non-focus
geographies
|
Admission
|
The ordinary shares of the Company
were admitted to the premium listing segment of the Official List
of the FCA and to trading on the Main Market of the London Stock
Exchange on 11 July 2023
|
AML/CTF laws
|
laws and regulations relating to
corrupt and illegal payments, counter-terrorism financing,
anti-bribery and corruption and adherence to anti-money laundering
obligations, as well as laws, sanctions and economic trade
restrictions relating to doing business with certain individuals,
groups and countries
|
APAC
|
Asia Pacific Region
|
API
|
the Group's EMpower FX application
programming interface
|
APM
|
Alternative Performance Measures
as defined on pages 106 to 107
|
B2B
|
Business to Business
|
Banking Services
|
one of the Group's three business
lines
|
BEIS
|
Department for Business, Energy
& Industrial Strategy
|
BN
|
a billion, ie 1,000
million
|
BRICS
|
BRICS is an intergovernmental
organisation comprising Brazil, Russia, India, China, South Africa,
Egypt, Ethiopia, Iran, and the United Arab Emirates.
|
CAB
|
Crown Agents Bank Limited, a
regulated subsidiary of the Group
|
CAGR
|
Compound Annual Growth
Rate
|
CAIM
|
Crown Agents Investment Management
Limited a wholly owned subsidiary of the Company until it was sold
on 31 March 2023
|
CAPEX
|
Expenditures made for goods or
services that are recorded on a company's balance sheet
|
CBS
|
Core Banking System, the Group's
banking software
|
CCY
|
Currency
|
CD
|
Certificate of deposits
|
CEO
|
Chief Executive Officer
|
CET1
|
Common Equity Tier 1
|
CFO
|
Chief Financial Officer
|
CHIPS
|
Clearing House Interbank Payments
System
|
CRD IV
|
Capital Requirements Directive
IV
|
CRR
|
the Capital Requirements
Regulation (Regulation (EU) 575/2013)
|
CTO
|
Chief Technology
Officer
|
currency corridor
|
specific combinations of sending
currency and receiving currency pairs, or, in some cases, country combinations
|
DEFRA
|
Department for Environment, Food
& Rural Affairs
|
EAD
|
Exposure at default
|
EBT
|
Employee benefit trust
|
ECL
|
Expected Credit Loss
|
EIR
|
Effective interest rate
|
EMFI
|
Emerging Market Financial
Institutions
|
ERMF
|
Enterprise Risk Management
Framework
|
ESG
|
Environmental, Social and
Governance
|
EU
|
European Union
|
EVP
|
Corporate title: Executive Vice
President
|
FCA
|
Financial Conduct
Authority
|
FDI
|
Foreign Direct
Investment
|
FinTech
|
Financial Technology
|
FIT
|
Forward-in-time
|
FTEs
|
Full Time Employees, including
temporary contractors and consultants filling in for
permanent
|
FVTOCI
|
Fair value through other
comprehensive income
|
FVTPL
|
Fair value through profit and
loss
|
FX
|
Foreign Exchange. When referring
to the Group's services, it refers to one of the Group's business lines, including the Group's spot
foreign exchange trading services
|
G10
|
Belgium, Canada, France, Italy,
Japan, the Netherlands, the United Kingdom, and the United States, Switzerland and the central banks of
Germany and Sweden
|
GDP
|
Gross Domestic Product
|
GHG
|
Greenhouse Gas
|
GUI
|
the Group's EMpower FX graphical
user interface
|
HQLA
|
High Quality Liquid
Assets
|
ICAAP
|
Internal Capital Adequacy
Assessment Process
|
IDO
|
International Development
Organisation
|
IFRS
|
UK-adopted international
accounting standards
|
ILAAP
|
Internal Liquidity Adequacy
Assessment Process
|
Indirect Nostro
|
a bank account held by CAB with
another bank who then relies on a domestic bank denominated in a
foreign currency
|
IPO
|
Initial Public Offering
|
IRRBB
|
Interest rate risk in the banking
book
|
JCF
|
JCF Nominees Limited, a wholly
owned subsidiary of the Company until it was sold on 31 March
2023
|
KPI
|
Key Performance
Indicator
|
KYC
|
Know Your
Customer
|
LATAM
|
Latin America region
|
LCR
|
Liquidity Coverage
Ratio
|
LGD
|
Loss given Default
|
Local Bank Account Network
|
demand accounts in the Group's
name held with various local banks across the globe which provide
the Group with direct access to local currency where it has such
deposits
|
LTIP
|
Long term incentive
plan
|
LSE
|
London Stock Exchange
|
MENA
|
Middle East and North
Africa
|
MMB
|
Major Market Banks
|
MN
|
a Million
|
MTM
|
Mark to market
|
NBFI
|
Non-Bank Financial
Institution
|
NCI
|
Non-controlling
interest
|
netting
|
the practice of using funds
received from one customer to fulfil an order in that same currency
from another customer in order to capture both bid and ask spreads
on the transaction
|
NGO
|
Non-Governmental
Organisation
|
Non-LCU
|
non-local currency, cross border
payments that take place with no FX transaction
|
Nostro
|
A bank account held by CAB in
another country, denominated in a foreign currency
|
NRR
|
Net revenue retention
|
NSFR
|
Net Stable Funding
Ratio
|
OCI
|
Other comprehensive
income
|
OECD countries
|
the 38 member countries of the
Organisation for Economic Co-operation and Development
|
OLAR
|
Overall Liquidity Adequacy
rule
|
Payments
|
one of the Group's three business
lines
|
PD
|
Probability of default
|
PLC
|
Public Limited Company
|
PPE
|
Property plant and
equipment
|
PRA
|
Prudential Regulation
Authority
|
RAS
|
Risk Appetite Statement
|
Registrar
|
Equiniti Limited
|
Reorganisation
|
Certain steps taken by the group
prior to Admission as part of a reorganisation of its corporate
structure, which resulted in all shareholders of CTH (other than
the Company) exchanging shares in CTH for Ordinary Shares in the
Company
|
Revenue
|
When referring to the Group's
financial results means "revenue, net of interest
expense"
|
ROU
|
Right of use
|
SBTi
|
Science Based Targets
initiative
|
SDG
|
Sustainable Development
Goals
|
SEC
|
US Securities and Exchange
Commission
|
SECR
|
Streamlined Energy and Carbon
Reporting
|
SPPI
|
Solely Payment of Principal and
Interest principle under IFRS 9
|
Supranational
|
An international organisation with
powers or influence that transcend national boundaries or
governments
|
SVP
|
Corporate Title: Senior Vice
President
|
SWIFT
|
Society for Worldwide Interbank
Financial Telecommunication
|
TAM
|
Target Addressable
Market
|
TCFD
|
Task Force on Climate-related
Financial Disclosures
|
TL
|
Tolerance Limits
|
Take Rate
|
a combination of the dealing
profit (i.e. the spread between any buy / sell of two FX trades
undertaken), the margin added to the transaction (i.e. the fee
element agreed with the customer for the
transaction), and any additional fees charged; and the take rate is
calculated as FX and cross-currency payments income divided by FX
and cross currency payments volumes
|
Target Market
|
the Group's core market today,
which excludes large transactions (over $50 million transaction
size) as well as China, India and the above-mentioned free format
flows (including sanctioned markets)
|
Target Market
Assessment
|
the approval process, which has
determined that the Ordinary Shares are: (i) compatible
with an end target market of retail
investors and investors who meet the criteria of professional
clients and eligible counterparties, each as defined in Chapter 3
of the FCA Handbook Conduct of Business
Sourcebook; and (ii) eligible for distribution through all
permitted distribution channels
|
total income
|
when referring to the Group's
financial results means "total income, net of interest
expense"
|
TN
|
Trillion
|
TPP
|
Third Party Currency
Provider
|
TTC
|
Through-the-cycle
|
UKLA
|
United Kingdom Listing
Authority
|
VP
|
Corporate Title: Vice
President
|
Currency abbreviations
BDT
|
Bangladeshi Taka
|
DKK
|
Danish Krone
|
EUR
|
Euro
|
GBP
|
British Pound Sterling
|
GHS
|
Ghanaian cedi
|
KES
|
Kenyan Shilling
|
MWK
|
Malawian Kwacha
|
NGN
|
Nigerian Naira
|
SDG
|
Sudanese Pound
|
UGX
|
Ugandan Shilling
|
USD
|
United States Dollar
|
XAF
|
Central African Franc: Currency of
six independent states in Central Africa: Cameroon, Central African
Republic, Chad, Republic of the Congo, Equatorial Guinea and
Gabon
|
XOF
|
West African Franc: Currency used
by eight independent states in West Africa: Benin, Burkino Faso,
Cote d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and
Togo
|
Contact Detail
Registered office
CAB Payment Holdings plc Quadrant House
The Quadrant
Sutton
SM2 5AS
Tel: +44 (0)203 903
3000
Website:
www.cabpayments.com
Auditor
Mazars
30 Old Bailey
London
EC4M 7AU
Tel: +44 (0)20 7063
4000
Website:
www.mazars.co.uk
Registrar
Equiniti Limited Aspect
House
Spencer Road
Lancing
West Sussex
BN99 6DA
United Kingdom
Tel: +44 (0)371 384 2130
(UK)
Website:
www.shareview.co.uk
|
Brokers (joint)
Barclays Bank PLC 1
Churchill Place
London
E14 5HP
Tel: (0)207 623 2323
Website:
www.barclays.com
Canaccord Genuity Limited 88 Wood Street
London
EC2V 7QR
Tel: (0)207 523 8000
Website:
www.canaccordgenuity.com
J. P. Morgan Cazenove 25
Bank Street
London
E14 5JP
Tel: (0)207 742 4000
Website:
www.jpmorgan.com
Financial PR adviser
FTI Consulting Limited 200 Aldersgate
Aldersgate Street
London
EC1A 4HD
United Kingdom
Tel: +44 (0)20 327 1000
Website: www.fticonsulting.com
|
CAB
Payments Holdings PLC is the
holding company for Crown
Agents Bank, a trusted payments processing and foreign
exchange brand.
They specialize in business-to-business
cross-border payments and foreign exchange, particularly in
hard-to-reach markets1.
The
company's Legal
Entity Identifier (LEI) is 8945007OZHZDN4LW1G21