Orchard Funding Group PLC
('Orchard Funding Group' or the 'Company' or the 'Group')
Full Year Results
For the 12 months ended 31 July 2015
Orchard Funding Group PLC, the finance company which specialises in insurance premium finance and the professions funding market, is pleased to announce its full year results for the year ended 31 July 2015.
Highlights
· The Group remains highly cash generative, with revenues in the period increasing by 14% to £3.41 million for the 12 months to 31 July 2015 (31 July 2014: £2.99 million)
· Profit before tax increased to £1.29 million, a 33% improvement on the previous year (31 July 2014: £0.97 million)
· Earnings Per Share ("EPS") increased in the period by 28% to 8.77p (31 July 2014: 6.87p)
· The Group lent £43.6 million to clients in the 12 months to 31 July 2015
· The capital raise in the July IPO enables the Group to increase its lending and facilitated the repayment of existing debt facilities, reducing finance costs for the business
· In July 2015, the Company's subsidiary Bexhill UK Limited became the first premium finance lender in the UK to obtain full FCA permission for consumer credit lending
· The Board remains committed to implementing its progressive dividend policy in 2016
Ravi Takhar, Chief Executive Officer of Orchard, said: "This has been another excellent year for Orchard Funding Group. The Company continues to increase its lending to a well-established and trustworthy client base and our recent admission to AIM has enabled the Company to raise capital in order to increase lending and reduce finance costs, creating a base for significantly increasing the profitability of the Group. We have an extensive, and successful, track record in our markets and I am confident that we are well-placed to further scale the business in the years ahead."
For further information please contact
Orchard Funding Group PLC +44 (0)1582 635 507
Ravi Takhar, Chief Executive Officer
Panmure Gordon Limited (Nomad and Broker) +44 (0)20 7886 2500
Dominic Morley (Corporate Finance)
Adam James (Corporate Finance)
Alina Vaskina (Corporate Finance)
Charles Leigh-Pemberton (Corporate Broking)
Novella +44 (0)20 3151 7008
Tim Robertson
Ben Heath
For Investor Relations please go to: www.orchardfundinggroupplc.com
I am delighted to be writing my first statement as Chairman of Orchard following the successful fund raising in July 2015 and the subsequent listing of your Company's shares on the Alternative Investment Market of the London Stock Exchange, making the Company part of the public market.
I am very pleased to be able to report that the Company raised £10m and was able to immediately retire some relatively expensive debt. The group continues to gain clients in a growing market place and your Board is actively considering other promising opportunities in related areas.
Both the insurance premium finance and UK accounting fee funding markets are buoyant and the Bexhill and Orchard brands continue to gain traction with borrowers and are providing real alternatives to the current status-quo.
The executive team, led by Chief Executive Ravi Takhar, is highly experienced in operating in our markets and has strong relationships with insurance brokers and accountants across the UK. The high quality of Orchard's lending book is demonstrated by zero arrears or losses over the last seven years.
The group has demonstrated strong financial performance across the economic cycle and your Board believes that conditions are likely to remain favourable for the foreseeable future.
Orchard is cash generative with high quality assets stemming from the business model. It is possessed of a scalable processing platform with a stable funding structure and excellent long term relationships with its debt providers.
Orchard's potential market place continues to grow and opportunities abound. Your Board is excited by these and remains fully focused on making the most of them. We look to the future with confidence.
David A Clark
Chairman
2 November 2015
I am delighted to report that we have had a very exciting and successful year culminating in our AIM listing in July 2015. We believe we now have a sound capital structure, which will enable us to grow our business to become a leading financial institution in the UK market.
Performance
We have great news on our performance and have already exceeded the forecasts set out in our pre IPO research.
For the 12 months to July 2015:
· Our revenue increased to just over £3.4m, a 14% growth from the 2014 numbers.
· Our profit before tax rose to £1.29m up from £974k in 2014.
· Our profit after tax rose to £1.03m from £751k, a tremendous jump of 38%.
· Our earnings per share also increased from 6.87p to 8.77p.
We are justly proud of all our achievements in 2015 and are very excited by the prospects for our newly capitalised business in 2016.
An immediate benefit from the capital raise was the repayment of historic and expensive debt facilities, which will have an immediate benefit to the profits of the business going forward.
Operations
Our debtor book stood at a healthy £17.9m at the year end with no arrears or defaults.
Barclays Bank continues to support our insurance premium finance lending. Due to our enhanced capital position we do not currently need any third party financing for our accountancy fee funding business. We will continually review our banking requirements in line with the growth of the business.
We have over 100 insurance broker clients and 400 accountancy clients and we continue to provide best in class service from our operations centre in Luton.
We have enhanced our sales team with a new business development manager for the North of England and will be adding to our sales team over the coming year. These strategic appointments will help Orchard to continue to expand its client base.
Our IT system, which was created by Anchor Software Systems and is exclusive to our business, continues to work well and still has market leading functionality for insurance brokers that wish to operate their own premium finance business. The ease of use of the system has also proved attractive to professional firms who want to offer their clients the ability to spread their fees in an efficient manner. The system was enhanced during the year to enable real time credit searches and electronic signatures.
Regulation
We were delighted to announce in July of this year that the Group obtained full FCA regulation for our subsidiary Bexhill UK Limited. Bexhill was the first premium finance lender in the UK to obtain full FCA permission for consumer credit lending.
Outlook
We are extremely excited about the outlook for our newly-listed business. The IPO has enabled the Company to create a strong capital base, reducing finance costs and is now facilitating the growth of our lending book without the capital constraints we have had to manage historically.
Unlike other finance companies the group is not dependent on finance brokers to originate its business. Our direct sales force enables us to build strong and lasting relationships with our clients and gives us a solid foundation to grow our business from its current base.
We are a resilient, growing business as demonstrated by the results of our subsidiaries over the years. Our focus is to increase the wealth of our shareholders by augmenting our market share in the core businesses and, where we feel it fits with the business model, by attacking new markets.
None of what we have done would have been possible without the team that we have. I should like to take this opportunity to thank all of them for the hard work and dedication that has led us to where we are now - and, in anticipation of their future efforts, to thank them for taking us to where we want to go.
Ravi Takhar
Chief Executive Officer
2 November 2015
Objectives
The group's longer term aim is to further increase our capital base to enable us to support higher levels of borrowing and grow our lending book by following the strategy outlined below. This should lead to increased profitability through better liquidity and economies of scale.
Strategy
The insurance premium finance market in which the group operates is expected by the board to grow over the next five years in line with the general insurance market from its current estimated levels of circa £8.5 billion per year to £11.6 billion per year. The market for professional fee finance is also expected to grow as the banks continue to pull out of the market for small-ticket, short-term, unsecured funding.
In the short to medium term, the directors believe that the group's aims will be achieved firstly by increasing the number of our insurance broker and professional firm clients and secondly, by increasing the volume of business from our existing insurance broker and professional firm clients.
The two trading companies, Bexhill UK Limited and Orchard Funding Limited, operate in discrete markets - providing funding for insurance premiums and providing funding for payment of professional fees respectively.
The board is considering additional markets to augment its core businesses but will only enter these if, after detailed analysis, it will assist in achieving the overall objectives.
Our business model
The Group has two main businesses:
· Bexhill UK Limited provides credit to limited companies, partnerships and consumers to enable them to spread the cost of their insurance premiums, through premium funding companies, owned by independent insurance intermediaries; and
· Orchard Funding Limited provides credit to like entities to enable them to spread the cost of their professional fees.
Bexhill
Bexhill borrows up to 75% of the amount advanced to each of its clients from Barclays Bank Plc. The balance is provided by Bexhill from receipts from its debtors. Its capital and reserves were £2.3 million as at 31 July 2015. Barclays has renewed Bexhill's facility each year since 2002. Bexhill's current facility is £10.0 million and has recently been extended to 31 July 2016. Barclays performs regular reviews and supplements these with an audit every six months by external independent auditors. Therefore, Bexhill has operated within a disciplined lending environment since its inception. Insurance broker borrowing limits are set based on financial information, credit reports, regulatory requirements and other qualitative factors obtained from the broker. In addition, an annual review process including regulatory permissions and credit checks is conducted and each broker is monitored monthly for the company's financial exposure to that broker.
Bexhill's cost of finance ranged from approximately 3.4% to approximately 10% in the financial year to 31 July 2015. The recent public offering raised sufficient capital to allow Bexhill to raise additional finance at more competitive rates from its existing bank. In its last seven years of lending, Bexhill has not suffered any arrears or losses on its lending book.
Orchard
Orchard, at present, has no borrowings. Prior to the capital received from the recent public offering, Orchard was able to borrow up to 80% of the amount advanced to each of its clients from Bracken Holdings Limited. The remainder was provided by Orchard from its capital resources and reserves which, at 31 July 2015, were approximately £535,000. Bracken's lending was protected by performing regular audits of the Orchard business, and that has led to Orchard developing a highly disciplined approach. The directors also set credit limits on professional firms and obtain credit reports as part of the underwriting process. In addition, Orchard performs an annual review process and monitors exposure to each accountancy and professional firm monthly.
Orchard's cost of finance was circa 12% when this was provided by Bracken. This finance has now been repaid. The directors believe that this the recent influx of capital from the IPO will enable Orchard to increase its borrowing capabilities, at more competitive rates, enabling it to further expand its lending book. Orchard has already received term sheets from a number of well-known banking institutions for the future financing of its business. Since it commenced business in 2010, Orchard has not suffered any arrears or losses on its lending book.
With both companies it is the simplicity of the premise which is the greatest strength - borrow money at one rate and lend it at a higher rate. Cash flow is excellent and overhead is (relatively) small and stable.
The business environment
One of the main trends having an impact on the business is regulation. The FCA recently reviewed the premium finance market and has revealed that insurer and insurance intermediaries have not always provided customers with clear information about different payment options available when buying general insurance products, including providing clear information about the overall cost of paying for insurance, clear information about the payment options available to them and transparency in the role of the intermediary. The board is confident that our documentation and procedures fulfil the requirements of the FCA, as evidenced by Bexhill UK Limited obtaining full FCA permission.
From research carried out by the group, the insurance premium finance market is currently worth over £8.5 billion and over the next five years it is expected by management to grow to over £11.6 billion per year in the next 5 years.
More professionals are seeing real benefit in offering a finance plan to their clients. It gives them access to cash from their fees more quickly, gives the client an opportunity to budget throughout the year and ensures that the firm is able to plan its own cash flows more reliably. The directors expect this market to grow from the current estimate of approximately £300 million to approximately £500 million in the next 5 years.
Bank interest base rate has remained at 0.5% for some time now. The directors believe that this will continue well into next year from remarks by the Bank of England and other commentators. Even if (or when) rates do increase, the nature of the business will allow fairly quick reaction to this. The board believes that further opportunities will present themselves with liquidity being more important to businesses and individuals.
The business environment provides a real opportunity for the group, with a growing market for its products and relatively stable interest rates.
Principal risks and uncertainties
The group's activities expose it to a variety of financial risks; cash flow interest rate riskA, credit riskB and liquidity riskC. The group's overall risk management programme focuses on reducing the effect of these risks on the group's financial performance. A robust assessment of the principal risks affecting the group has been carried out by the board of directors. It identifies, evaluates and mitigates financial risks and has written policies for credit risk and liquidity risk.
Cash flow interest rate risk
The group borrows money from its bankers which it lends on. The borrowings are repaid each month and new loans taken out to cover lending to customers. Bank borrowings are linked to base rate. If bank rate increases there is therefore a risk that loans already made and which need to be covered will be effectively charged at a lower margin for part of the borrowing term. The board is in regular contact with its bankers and regularly reviews the financial situation in the economy to assist in mitigating this risk. In addition, the loans made are for relatively short terms (no more than twelve months with the average at ten) so any increase is likely to have a fairly short term impact.
Credit risk
The group operates a robust credit system. Money is only lent for periods up to one year, through regulated introducers who are the effective underwriters of any loans. They guarantee the debt of the customer to whom the loan is made. Borrowing limits are set based on financial information, credit reports, regulatory requirements and other qualitative factors obtained from the introducer. In addition, an annual review process including regulatory permissions and credit checks is conducted and each introducer is monitored monthly for the company's financial exposure to that introducer. This process has meant that the incidence of bad debt in the last seven years has been nil.
Liquidity risk
Until recently, the trading companies making up the subsidiaries had to borrow money at a relatively high rate of interest. Business was available but it was not always able to be taken up because liquidity was constricted. Since the share offer sufficient capital has been made available to enable further borrowing at better rates leading to the ability to lend more. The risk of insufficient liquidity has therefore been mitigated.
IT systems risk
A further risk identified by the board is that our operations are dependent on IT systemsD, which could potentially suffer significant disruptions or even failure. The directors, therefore, have in place business continuity procedures and security measures in the event of IT failures or disruption, including backup IT systems for business critical systems.
In summary, cash flow interest rate risk is mitigated by the fact that loans are short term and by regular interaction with our bankers; credit risk is reduced by a robust system of checks on borrowers and by third party guarantees; liquidity risk has been alleviated by the injection of capital, allowing the group to be less reliant on borrowings and enabling it to obtain better borrowing terms; and risk from disruption of the IT system is avoided by thorough continuity procedures.
Each of the areas identified may be viewed below in terms of its impact on the business.
Our internal control systems ensure that the incidence of fraud or error is kept to a minimum. Much of the process is automated and provided and maintained by a third party.
The matrix below gives a broad idea of how each of the risk areas identified above impacts on the business. It is not a precise measure but is an indication of how the board sees the relative risks and effects of an unfavourable situation. For example, if our systems failed, the impact would be great but the chance of it happening is low.
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High |
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Probability |
A |
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|
C B |
D |
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Low |
Negative impact on the business |
High |
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Development and performance of the business
The group relies on funding to provide loans to clients of its partners (insurance intermediaries and professional firms). The ability to provide this money is crucial to the business. The share issue in July made possible the repayment of expensive loans and allowed for better liquidity, enabling further loans to be made at a better margin. Nonetheless, availability of funds is a key area.
The ability to find borrowers is also key to the business. There has been no shortage of good quality lending opportunities up to now. The directors have, however, launched a more formal and extensive marketing plan. The new marketing plan encompasses the expansion of the sales team with new planned staff hires across new regions in the United Kingdom, in addition to the current headquarters located in Luton. A focused marketing drive will help increase awareness of the Group in the market by appointing an industry marketing and public relations agency. In addition, the Group plans to increase regular electronic and telesales contact with existing and new customers in both the insurance and professional sectors. The new marketing plan will also set individual sales targets for insurance brokers and professional firms
Our margin is another key area. Changes in base rate could erode this margin. The board reviews this on a monthly basis and liaises with its bankers. Should rates increase, our rates would also increase to reflect this. Our own analysis indicates that the impact on business would be negligible.
Overheads in this business are relatively stable. Apart from the increases resulting from becoming a listed company, and those associated with an increased sales function, these should not alter significantly.
The board have identified lending, margins and gearing as the three financial key performance indicators (KPIs), and are happy with these.
In terms of non-financial indicators, the most important of these is quality of management and staff.
Our three senior members of staff have 27 years between them working in the business. They have taken on additional responsibilities over the years to the extent that they know each area of the business.
Although each member of the team has his or her own specific tasks, the ethos of the group is that they should, with time, learn each aspect area of the business. Customer care is of paramount importance in our business culture and this aspect is a constant part of staff training. Feedback from our partners in this area has been very positive. Performance objectives set for our staff have all been met.
The group has a very small staff turnover. People are happy to contribute towards our success and their views are always listened to by senior management. In many cases ideas which come forward are put into action and in all cases explanations are given when this does not happen.
The directors continually assess the prospects of the group. Internal forecasts are prepared for a five year period, on a rolling basis. These are also subject to sensitivity analysis, the main aspect of which is the value of loans made. In all scenarios, there is no indication that there will be a problem in continuing as a going concern. However, it is important to appreciate that the further away (in time) the estimate, the less reliable it is. The forecasts are prepared on the basis that bank base rate will remain where it is. This is clearly highly unlikely in the longer term. However, should rates from the bank rise we are in a position to react (as mentioned in the section on cash flow interest rate risk), within a short period of time, with relatively little impact on our margins. This, with other factors, indicates to the directors that it is appropriate to adopt the going concern basis.
The key assumptions and bases used in the forecasts are:
· Funding provided will grow from circa £55m in 2016 to circa £120m over the next 4-5 years;
· Liquidity will be available to fund those loans;
· Margins will generally remain stable on corporate business and will increase slightly on direct business;
· Overhead will increase at the rate of inflation with stepped increases at certain points (when capacity constraints are hit);
· The funding system will be able to accommodate the increased business.
The consolidated statement of financial position shows the situation at the period end in detail.
The two subsidiaries have traded for a number of years and have grown at a rate commensurate with finance available at a given point in time and in line with plans by the directors.
Environmental, social responsibility, community and human rights issues
The group is a small group. It does not manufacture or need physical distribution channels. The impact of the group on the environment consists of power used in an office environment and fuel used for getting to and from work. Environmental issues are therefore negligible.
The group operates out of an office in Luton. Most of our employees are based in the local area. We therefore contribute to the economy of the community. We are an ethical employer and believe in paying well for good performance. None of our employees earn less then £10 per hour (before any bonuses). We provide health club membership for any staff who wish it. We review the background of our suppliers and will not use any supplier which breaches our own high standards as regards human rights.
Gender diversity
The main board of directors is currently all male. The main reason for this situation is taking in outside board members who were best suited to the positions. One female who would have been a main board member sadly passed away earlier this year. The board of the two subsidiaries consist of one male and two females each.
Males make up 30% of the employees in total.
Approved by the directors and signed by order of the board
Liam McShane,
Company secretary
2 November 2015
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2015 |
|
2014 |
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Notes |
£ |
|
£ |
||
|
Continuing operations |
|
|
|
|
|
|||
|
Revenue |
|
|
|
5 |
3,409,859 |
|
2,993,369 |
|
|
Finance costs |
|
|
8 |
(854,929) |
|
(863,460) |
||
|
Other operational costs |
|
|
|
(92,650) |
|
(85,150) |
||
|
Gross profit |
|
|
|
2,462,280 |
|
2,044,759 |
||
|
Administrative expenses |
|
|
(1,169,028) |
|
(1,070,646) |
|||
|
Operating profit before income tax |
9 |
1,293,252 |
|
974,113 |
||||
|
Income tax expense |
|
|
10 |
(258,839) |
|
(223,024) |
||
|
Profit for the year |
|
|
1,034,413 |
|
751,089 |
|||
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
- |
|
- |
|||
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year attributable to the owners of the parent |
|
|
1,034,413 |
|
751,089 |
|||
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|
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|
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|
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Earnings per share attributable to the owners of the parent during the period (pence) |
|
|
|
|
|
|||
|
Basic and diluted |
|
11 |
8.77 |
|
6.87 |
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2015 |
2014 |
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Notes |
£ |
£ |
|
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Assets |
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||
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|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
||
|
Property, plant and equipment |
|
|
14 |
4,427 |
11,900 |
|||
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
||
|
Trade and other receivables |
|
|
16 |
17,914,997 |
19,442,963 |
|||
|
Tax receivable |
|
|
|
|
1,410 |
1,410 |
||
|
Cash and cash equivalents: |
|
|
|
|
|
|||
|
|
Bank balances and cash in hand |
|
|
17 |
2,901,960 |
16,944 |
||
|
|
Bank overdrafts |
|
|
17 |
(47,159) |
(89,739) |
||
|
|
|
|
|
|
|
20,771,208 |
19,371,578 |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
20,775,635 |
19,383,478 |
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|
|
Equity and liabilities |
|
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|
|
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|||
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|
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|
|
|
|
|
|
Equity attributable to the owners of the parent |
|
|
|
|
||||
|
Called up share capital |
|
|
18 |
213,542 |
109,375 |
|||
|
Share premium |
|
|
|
|
8,691,910 |
- |
||
|
Merger reserve |
|
|
|
|
890,725 |
890,725 |
||
|
Retained earnings |
|
|
|
|
1,841,398 |
944,485 |
||
|
Total equity |
|
|
|
|
11,637,575 |
1,944,585 |
||
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
||
|
Non-current liabilities |
|
|
|
|
|
|||
|
Deferred tax |
|
|
|
19 |
590 |
1,626 |
||
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
||
|
Trade and other payables |
|
|
20 |
1,835,908 |
2,236,574 |
|||
|
Borrowings |
|
21 |
7,015,155 |
14,922,933 |
||||
|
Tax payable |
|
|
|
|
286,407 |
277,760 |
||
|
|
|
|
|
|
9,137,470 |
17,437,267 |
||
|
Total liabilities |
|
|
|
|
9,138,060 |
17,438,893 |
||
|
|
|
|
|
|
|
|
|
|
|
Total equity and liabilities |
|
|
|
20,775,635 |
19,383,478 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
Called up |
|
|
|
|
|
|
|
Share |
Retained |
Share |
Merger |
Total |
|
|
|
capital |
earnings |
premium |
reserve |
equity |
|
|
|
£ |
£ |
£ |
£ |
£ |
|
Balance at 1 August 2013 |
109,375 |
361,396 |
- |
890,725 |
1,361,496 |
|
|
|
|
|
|
|
|
|
|
Changes in equity |
|
|
|
|
|
|
|
Total comprehensive income |
- |
751,089 |
- |
- |
751,089 |
|
|
Transactions with owners: |
|
|
|
|
|
|
|
Dividends paid |
- |
(168,000) |
- |
- |
(168,000) |
|
|
|
|
|
|
|
|
|
|
Balance at 31 July 2014 |
109,375 |
944,485 |
- |
890,725 |
1,944,585 |
|
|
|
|
|
|
|
|
|
|
Changes in equity |
|
|
|
|
|
|
|
Total comprehensive income |
- |
1,034,413 |
- |
- |
1,034,413 |
|
|
Transactions with owners: |
|
|
|
|
|
|
|
Dividends paid |
- |
(137,500) |
- |
- |
(137,500) |
|
|
Issue of share capital |
104,167 |
- |
9,895,834 |
- |
10,000,001 |
|
|
Items expensed through share premium |
- |
- |
(1,203,924) |
- |
(1,203,924) |
|
|
|
|
|
|
|
|
|
|
Balance at 31 July 2015 |
213,542 |
1,841,398 |
8,691,910 |
890,725 |
11,637,575 |
|
|
|
|
|
|
|
|
|
The merger reserve arose through the formation of the group on 23 June 2015 using the consolidation method as shown in note 2.2.
The share premium account arose on the IPO on 1 July 2015 at a premium of 95p per share. Costs directly attributable to the issue of shares have been deducted from the account.
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
Notes |
£ |
|
£ |
|
Cash flows from operating activities: |
|
|
|
|
||
|
Profit before income tax |
|
1,293,252 |
|
974,114 |
||
|
Adjustment for depreciation |
|
8,301 |
|
11,000 |
||
|
|
|
|
|
1,301,553 |
|
985,114 |
|
Decrease/(increase) in trade and other receivables |
1,527,966 |
|
(1,288,982) |
|||
|
(Decrease)/increase in trade and other payables |
|
(400,666) |
|
233,444 |
||
|
|
|
|
|
2,428,853 |
|
(70,424) |
|
Income tax paid |
|
|
(251,229) |
|
(206,296) |
|
|
|
|
|
|
|
|
|
|
Net cash generated/(absorbed) by operating activities |
|
2,177,624 |
|
(276,720) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|||
|
Purchases of property, plant and equipment |
(828) |
|
(17,850) |
|||
|
|
|
|
|
|
|
|
|
Net cash absorbed by investing activities |
|
(828) |
|
(17,850) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|||
|
Proceeds of issuance of ordinary shares |
10,000,001 |
|
- |
|||
|
Items expensed through the share premium account |
(1,203,924) |
|
- |
|||
|
Dividends paid |
|
|
(137,500) |
|
(168,000) |
|
|
Proceeds from borrowings |
|
17,430,476 |
|
20,694,148 |
||
|
Borrowings repaid |
|
|
(25,338,253) |
|
(20,271,250) |
|
|
|
|
|
|
|
|
|
|
Net cash generated by financing activities |
|
750,800 |
|
254,898 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
2,927,596 |
|
(39,672) |
|||
|
Cash at the beginning of the period |
|
(72,795) |
|
(33,123) |
||
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of period |
17 |
2,854,801 |
|
(72,795) |
||
|
|
|
|
|
|
|
|
1. General information
Orchard Funding Group plc ("the company") and its subsidiaries (together "the group") provide funding and funding support systems to insurance brokers and professional firms through the trading subsidiaries. On 23 June 2015 the company acquired its subsidiaries, Bexhill UK Limited and Orchard Funding Limited. The group operates in the United Kingdom.
The company is a public company listed on the Alternative Investment Market of the London Stock Exchange, incorporated and domiciled in the United Kingdom. The address of its registered office is 960 Capability Green, Luton, Bedfordshire LU1 3PE.
2. Summary of significant accounting policies
The principal accounting policies applied in the presentation of these consolidated financial statements are set out below.
2.1 Basis of preparation
In accordance with Section 435 of the Companies Act 2006, the Group confirms that the financial information for the years ended 31 July 2015 are derived from the Group's audited financial statements and that these are not statutory accounts and, as such, do not contain all information required to be disclosed in the financial statements prepared in accordance with International Financial Reporting Standards ("I FRS" ).
The statutory accounts for the year ended 31 July 2015 have been audited and approved, but have not yet been filed.
The Group's audited financial statements for the year ended 31 July 2015 received an unqualified audit opinion and the auditor's report contained no statement under section 498(2) or 498(3) of the Companies Act 2006.
The financial information contained within this preliminary statement was approved and authorised for issue by the Board on 2 November 2015.
2.2 Consolidation
Subsidiaries are entities over which the group has control. The group controls an entity when the group has rights to, or is exposed to, variable returns from its involvement with, and has the ability to affect those returns through its power over, the entity.
The business combination giving rise to the group is one in which companies which were under the control of R Takhar combined under a holding company which is also controlled by R Takhar. As such the combination is outside the scope of IFRS 3 and is accounted for using the 'pooling of interests method'. This is a method which treats the merged companies as if they had been combined throughout the current and comparative accounting periods. The accounting principles for these combinations gave rise to a merger reserve in the consolidated statement of financial position, being the difference between the nominal value of new shares issued by the company for the acquisition of the shares of the subsidiaries and each subsidiary's own share capital.
The company records the cost of its investment in subsidiaries acquired in the pooling of interests at the carrying amount of its share of net equity shown in the financial statements of the acquired entities at the date of the reorganisation.
The merger reserve is also used where more than 90% of the shares in a subsidiary are acquired and the consideration includes the issue of new shares by the Company, thereby attracting merger relief under the Companies Act 2006.
2.3 Financial assets
The group has one class of financial asset - loans and receivables.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets except for those that mature more than 12 months after the end of the reporting period. These are classified as non-current assets. The group's loans and receivables comprise "trade and other receivables" and "cash and cash equivalents" in the balance sheet (notes 2.4 and 2.5)
(a) Impairment
The group assesses at the end of each financial reporting period whether there is objective evidence that any financial assets are impaired. Impairment losses are incurred only if there is objective evidence that impairment occurred after the initial recognition of the asset (a "loss event") and that impact of the loss event, or events, on the future cash flows of the financial asset or assets can be reliably estimated.
Evidence of impairment may include indications that the receivables are experiencing significant financial difficulties (including default or delinquency in interest or principal payments) and where observable data indicates that there is a measurable decrease in the estimated future cash flows.
For loans and receivables, the amount of loss is measured as the difference between the asset's carrying value and the present value of future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement.
If in a subsequent period the amount of the impairment loss decreases, and the decrease can be related objectively to an event occurring after the impairment was recognised, a reversal of the previously recognised impairment loss is recognised in the consolidated income statement.
2.4 Trade receivables
Trade receivables are amounts due from borrowers for monies loaned, or services provided, to them. If collection is expected wholly within one year they are classified as current assets. If not they are presented as non-current assets. Trade receivables are initially recognised at fair value and subsequently recognised at amortised cost using the effective interest rate method, less provision for impairment.
2.5 Cash and cash equivalents
Cash and cash equivalents include cash in hand and bank current accounts. It includes bank overdrafts where they are repayable on demand and form an integral part of the group's cash management.
2.6 Share capital
Ordinary shares are classified as equity and any costs of issue are deducted from the proceeds received. No other class of shares exists in the group.
2.7 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not they are presented as non-current liabilities.
Trade creditors are recognised initially at fair value and subsequently at amortised cost using the effective interest method.
2.8 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred.
Borrowings are subsequently carried at amortised cost; any difference between the proceeds and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate method.
Fees paid on the establishment of loan facilities are capitalised and amortised over the period of the facility to which it relates.
Where the facility is not fully utilised and there is a non-utilisation charge, this is recognised as a transaction cost.
2.9 Current and deferred taxation
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or in equity respectively.
Current Income tax charge is calculated on the basis of tax laws enacted in the United Kingdom, where the group exclusively operates.
Deferred tax is recognised on temporary differences arising between the tax based assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax liabilities are not recognised from the initial recognition of goodwill and neither are deferred tax assets recognised from the initial recognition of bargain purchases (negative goodwill). Deferred tax is determined using tax rates that are expected to apply when the liability or asset reverses.
2.10 Employee benefits
One of the subsidiaries in the group operates a defined contribution pension scheme. There are no other post employment benefits.
A defined contribution plan is a pension plan under which the group pays fixed contributions (based on salary) into a separate entity. The group has no legal or constructive obligations to pay further contributions into contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
Contributions payable to the group's pension scheme are charged to the income statement in the period to which they relate.
2.11 Revenue recognition
Interest arising from funding activities is recognised using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life or duration of the financial instrument to the net carrying amount of the financial asset.
Income arising from the provision of funding systems is recognised as the system is provided, usually on a monthly basis.
2.12 Leases
Rentals paid under operating leases are charged to the income statement on a straight line basis over the period of the lease.
2.13 Interest payable
Interest payable is the cost of borrowing funds to lend on to customers. For this reason it is included in cost of sales and therefore forms part of operating results. This is a departure from the requirements of the Companies Act but is necessary for the accounts to show a true and fair view. Had this treatment not been adopted interest payable and similar charges would have been higher and cost of sales would have been lower. The amount of this difference is shown in note 8.
2.14 Dividend distribution
Dividend distribution to the company's shareholders is recognised as a liability in the group's financial statements in the period in which the dividends are approved by the company's shareholders.
2.15 Financial reporting standards in issue but not yet effective
The following standards were in issue but not yet effective, and not applied in these financial statements, at the date of authorisation:
(a) IFRS 7 Financial instruments: disclosures - adds additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required;
(b) IFRS 15 Revenue from contracts with customers - specifies how and when an IFRS reporter will recognise revenue. There is new guidance on whether revenue should be recognised at a point in time or over time. This replaces the previous distinction between goods and services. It also requires entities to provide users of financial statements with more informative, relevant disclosures;
(c) IAS 1 Presentation of financial statements - amendments to ensure that entities are able to use judgement when presenting their financial reports as the wording of some of the requirements in IAS 1 had in some cases been read to prevent the use of judgement.
The directors anticipate that the adoption of these standards in future periods will not have a material impact on the financial statements of the group.
Following the publication of FRS 100 'Application of Financial Reporting Requirements by the Financial Reporting Council', Orchard Funding Group plc ("the company") has elected to adopt FRS 101 'Reduced Disclosure Framework' and to take advantage of the disclosure exemptions therein for its stand alone entity financial statements for the financial year ending 31 July 2016. The board considers that this election is in the best interests of the company.
FRS 101 allows qualifying entities to adopt EU-IFRSs but with a reduction in the required level of disclosures. The company's accounts will still be prepared to meet the requirements of the Companies Act 2006.
The company may take advantage of the disclosure exemptions in FRS 101 'Reduced Disclosure Framework' provided its shareholders have been notified in writing about, and do not object to, the use of the disclosure exemptions.
A shareholder or shareholders holding in aggregate 5% or more of the total allotted shares in the company may serve objections to the use of the disclosure exemptions in FRS 101 'Reduced Disclosure Framework' on the company, in writing, to its registered office, 960 Capability Green, Luton Bedfordshire LU1 3PE, not later than 30 April 2016.
3. Financial risk management
3.1 Financial risk factors
The group's activities expose it to a variety of financial risks; market risk (including cash flow interest rate risk), credit risk and liquidity risk. The group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise the effect on the group's financial performance. Risk management is carried out by the board of directors. They identify, evaluate and mitigate financial risks. The board provides written policies for credit risk and liquidity risk. These risks are dealt with in detail in the strategic report.
(a) Market risk - cash flow interest rate risk
This arises from money borrowed from our bankers which is lent on to customers. There is a risk that loans already made and which need to be covered will be effectively charged at a lower margin for part of the borrowing term. This is mitigated by regular contact with our bankers and regular reviews of the financial situation in the economy. In addition loans are made for a relatively short time so any increase in rates is likely to have a fairly short term impact.
(b) Credit risk
This is the risk that customers will not repay their loans and is mitigated by a system of credit checks, other financial and qualitative factors and a system of third party guarantees from the introducing firms.
(c) Liquidity risk
This is the risk that the company will have insufficient funds to conduct its business. This has been substantially mitigated by an injection of capital through a share issue which has enabled the group to increase its borrowings at better rates leading to the ability to lend more.
3.2 Capital management
Capital consists of net debt (borrowings less cash and cash equivalents) plus total equity. The group's objective when managing capital is to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the board may adjust the amount of dividends paid, return capital to shareholders issue new shares or sell assets to reduce debt.
Consistent with other companies the group monitors capital on the basis of gearing ratio. The ratio is calculated as net debt divided by total capital. On this basis the gearing ratio was 26.33% at the year end. This is lower than in the past as a result of cash injected from the IPO in July this year. The group has a target ratio of 80% in the longer term as this makes best use of our own reserves.
The table below shows the gearing ratio at 31 July 2015 and 31 July 2014:
|
|
2015 |
2014 |
|
|
£ |
£ |
|
Total borrowings |
7,015,155 |
14,922,933 |
|
Less: cash and cash equivalents |
(2,854,801) |
72,795 |
|
Net debt |
4,160,354 |
14,995,728 |
|
Total equity |
11,637,575 |
1,944,585 |
|
Total capital |
15,797,929 |
16,940,313 |
|
Gearing ratio |
26.33% |
88.50% |
4. Critical accounting estimates and judgements
The group makes estimates and assumptions concerning the future. The resulting accounting estimates will seldom equal the related actual results. However, because of the nature of the group, in the opinion of the board there are no areas where there is a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.
5. Segment information
The group operates wholly within the United Kingdom therefore there is no meaningful information that could be given on a geographical basis. It does have, however, two discrete operating segments - insurance premium funding and professional fee funding.
The board assesses the performance of each sector based on operating profit (before tax and exceptional items, but after interest which is a cost of sale). The relative sales, operating costs and operating profit are shown below.
|
2015 |
Total |
Central |
Insurance premium funding |
Professional fee funding |
|
|
£ |
£ |
£ |
£ |
|
Sales |
3,409,859 |
- |
2,132,387 |
1,277,472 |
|
|
|
|
|
|
|
Interest payable |
(854,929) |
- |
(330,459) |
(524,470) |
|
Operational costs and administrative expenses |
(1,261,678) |
(60,655) |
(808,349) |
(392,674) |
|
Operating profit/(loss) before tax |
1,293,252 |
(60,655) |
993,579 |
360,328 |
|
|
|
|
|
|
|
2014 |
Total |
Central |
Insurance premium funding |
Professional fee funding |
|
|
£ |
£ |
£ |
£ |
|
Sales |
2,993,369 |
- |
1,828,552 |
1,164,817 |
|
|
|
|
|
|
|
Interest payable |
(863,460) |
- |
(315,970) |
(547,490) |
|
Operational costs and administrative expenses |
(1,155,796) |
- |
(729,502) |
(426,294) |
|
Operating profit/(loss) before tax |
974,113 |
- |
783,080 |
191,033 |
|
|
|
|
|
|
6. Expenses by nature
|
|
|
|
|
|
2015 |
2014 |
|
|
|
|
|
|
£ |
£ |
|
Interest payable in cost of sales |
|
|
854,929 |
863,460 |
||
|
IT costs |
|
|
28,536 |
24,155 |
||
|
Employee costs (including directors) |
|
(note 7) |
321,521 |
277,106 |
||
|
Advertising and selling costs |
|
|
117,824 |
128,218 |
||
|
Rent payable |
|
|
54,041 |
45,850 |
||
|
Bank fees |
|
|
315,542 |
256,699 |
||
|
Other expenses |
|
|
424,214 |
423,768 |
||
|
Total cost of sales, other operational costs and administrative expenses |
|
|
2,116,607 |
2,019,256 |
||
|
|
|
|
|
|
|
|
7. Employee costs
|
|
|
|
|
|
2015 |
2014 |
|
|
|
|
£ |
£ |
||
|
Wages and salaries (including directors) |
|
|
299,246 |
256,145 |
||
|
Social security costs |
|
|
22,228 |
20,961 |
||
|
Pension costs - defined contribution plans |
|
|
47 |
- |
||
|
Total employee benefit expense |
|
|
321,521 |
277,106 |
||
|
|
|
|
|
|
|
|
The total number of persons employed by the group was:
|
|
|
|
No. |
No. |
||
|
Directors |
|
|
4 |
1 |
||
|
Administration |
|
|
9 |
8 |
||
|
|
|
|
|
|
|
|
Directors' remuneration is as follows:
|
|
Fees and salary |
Taxable benefits |
Employer's NIC |
Total |
|
|
£ |
£ |
£ |
£ |
|
Executive directors |
|
|
|
|
|
R Takhar |
21,503 |
- |
2,874 |
24,377 |
|
L McShane |
5,020 |
- |
- |
5,020 |
|
Non- executive directors |
|
|
|
|
|
D Clark |
2,500 |
- |
- |
2,500 |
|
J Shearman |
2,500 |
- |
- |
2,500 |
|
Total directors' remuneration |
31,523 |
- |
2,874 |
34,397 |
|
|
|
|
|
|
Information given is for 2015 only as the company did not exist before this year.
Key management personnel are considered to be the directors (executive and non-executive).
No director is accruing benefits under a pension scheme.
8. Finance income and costs
The group's income comes from making loans.
Interest payable on borrowings is therefore included as a cost of sale. The amount included was £854,929 (2014 £863,460).
9. Operating profit
This is stated after charging:
|
|
2015 |
2014 |
|
|
£ |
£ |
|
Depreciation of owned property, plant and equipment |
8,301 |
11,000 |
|
Operating lease rentals - land and buildings |
54,041 |
45,850 |
|
Auditor's remuneration: |
|
|
|
Audit fees - parent company and consolidation |
16,800 |
- |
|
Audit fees - subsidiaries |
23,400 |
12,000 |
|
|
|
|
Baker Tilly Corporate Finance charged £180,280 for work carried out on the IPO. This has been included as part of items expensed through the share premium account.
10. Income tax expense
10.1 Current period tax charge:
|
|
2015 |
2014 |
|
|
£ |
£ |
|
Current tax expense |
271,780 |
223,024 |
|
Adjustment re previous year tax expense |
(11,905) |
- |
|
Deferred tax expense relating to the origination and reversal of temporary differences |
(1,036) |
- |
|
|
258,839 |
223,024 |
|
|
|
|
10.2 Tax reconciliation
The tax assessed for the period differs from the main corporation tax rates in the UK (23%, 21% and 20%).
The differences are explained below.
|
|
2015 |
2014 |
|
|
£ |
£ |
|
Profit for the financial period |
1,293,252 |
974,113 |
|
|
|
|
|
Applicable rate - 21% and 20% (2014 23% and 21%) |
20.67% |
22.33% |
|
|
|
|
|
Tax at the applicable rate |
267,315 |
217,552 |
|
Effects of: |
|
|
|
Expenses not deductible for tax |
3,949 |
8,084 |
|
Marginal relief |
(80) |
(142) |
|
Adjustment re previous year tax expense |
(11,905) |
- |
|
Deferred tax not adjusted |
(440) |
(2,470) |
|
Tax charge for the period |
258,839 |
223,024 |
|
|
|
|
11. Earnings per share
Earnings per share is based on the profit for the period of £1,034,413 (2014 £751,089) and the weighted average number of ordinary shares in issue during the period of 11,793,664 (2014 10,937,500). There are no options or other factors which would dilute these therefore the fully diluted earnings per share is identical.
12. Profit of the parent company
As permitted by Section 408 of the Companies Act 2006, the statement of comprehensive income of the parent is not presented as part of these financial statements. The parent company's loss for the year was £1,654.
13. Dividends
Dividends paid as shown in the statement of changes in equity were all paid to the previous owners of the subsidiaries, prior to the new group being formed.
14. Property, plant and equipment
|
|
Office equipment and fixtures |
Computer equipment |
Total |
|
|
£ |
£ |
£ |
|
Cost |
|
|
|
|
At 1 August 2013 |
840 |
19,465 |
20,305 |
|
Additions |
- |
17,850 |
17,850 |
|
At 31 July 2014 |
840 |
37,315 |
38,155 |
|
Additions |
- |
828 |
828 |
|
At 31 July 2015 |
840 |
38,143 |
38,983 |
|
|
|
|
|
|
Depreciation |
|
|
|
|
At 1 August 2013 |
840 |
14,415 |
15,255 |
|
Charged to administrative expenses in the consolidated statement of income |
- |
11,000 |
11,000 |
|
At 31 July 2014 |
840 |
25,415 |
26,255 |
|
Charged to administrative expenses in the consolidated statement of income |
- |
8,301 |
8,301 |
|
At 31 July 2015 |
840 |
33,716 |
34,556 |
|
|
|
|
|
|
Net book value at 31 July 2015 |
- |
4,427 |
4,427 |
|
|
|
|
|
|
Net book value at 31 July 2014 |
- |
11,900 |
11,900 |
|
|
|
|
|
15. Investments
15.1 Subsidiaries
|
|
Shares in subsidiaries |
|
|
£ |
|
Value on formation of the group and net book value |
|
|
Additions |
2,801,374 |
|
At 31 July 2015 and 31 July 2014 |
2,801,374 |
|
|
|
Details of the subsidiaries acquired are:
|
Name |
Country of incorporation and place of business |
Nature of business |
Proportion of ordinary shares held directly by the parent |
|
|
|
|
|
|
Bexhill UK Limited |
England and Wales |
Finance provider |
100% |
|
Orchard Funding Limited |
England and Wales |
Finance provider |
100% |
|
|
|||
Both subsidiaries are included in the consolidation.
16. Trade and other receivables
|
|
2015 |
2014 |
|
||
|
|
Group |
Group |
|||
|
|
£ |
£ |
|||
|
Trade receivables |
17,857,768 |
19,426,626 |
|||
|
Intercompany receivables |
- |
- |
|||
|
Other receivables |
34,637 |
9,280 |
|||
|
Prepayments |
22,592 |
7,057 |
|||
|
|
17,914,997 |
19,442,963 |
|||
|
|
|
||||
Standard credit terms for trade receivables are based on the length of the loan but payments are due on a monthly basis. The directors consider that the carrying amount of trade and other receivables approximates their fair value. There are no impaired debts. The value of debts which were past due but not impaired at year end was £Nil.
17. Cash and cash equivalents
|
|
2015 |
2014 |
|
|
Group |
Group |
|
|
£ |
£ |
|
Amounts held at banks |
2,901,660 |
16,644 |
|
Cash in hand |
300 |
300 |
|
|
2,901,960 |
16,944 |
|
Bank overdrafts |
(47,159) |
(89,739) |
|
|
2,854,801 |
(72,795) |
|
|
|
|
Cash and cash equivalents consists of cash in hand and bank balances. The overdraft is repayable on demand and forms an integral part of the group's cash management.
There is no right of set off between the overdraft and amounts held at bank. Under IAS 32 there can be no offset between assets and liabilities in this situation. However, the overdraft is included as part of current assets because, under IAS 7 it should, for the reasons stated in the previous paragraph, be included in the cash flow statement as part of cash and cash equivalents. The directors believe that it gives better information for the statement of financial position to follow the same treatment.
18. Called up share capital
Allotted, issued and fully paid:
|
Number |
Class |
Nominal value |
£ |
|
21,354,167 |
Ordinary shares |
1p |
213,542 |
|
|
|
|
|
On 23 June 2015 the company issued 10,937,500 ordinary shares in exchange for all the share capital of Bexhill UK Limited and Orchard Funding Limited. On 1 July 2015 a further 10,416,667 shares were issued for cash of £10,000,001. Costs of the issue amounting to £1,203,924 were expensed through the share premium account.
19. Deferred tax
The deferred tax balance relates wholly to capital allowances.
20. Trade and other payables
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2015 |
2014 |
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Group |
Group |
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£ |
£ |
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Trade payables |
1,447,922 |
1,929,526 |
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Other payables |
69,278 |
139,180 |
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Accrued expenses |
318,708 |
167,868 |
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1,835,908 |
2,236,574 |
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The directors consider that the carrying value of trade and other payables approximates their fair value.
21. Borrowings
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2015 |
2014 |
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Group |
Group |
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£ |
£ |
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Current: |
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Bank loans |
7,015,155 |
7,884,475 |
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Other loans |
- |
7,038,458 |
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7,015,155 |
14,922,933 |
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21.1 Terms and debt repayment schedule:
The above amounts are due within one year.
Bank borrowings are secured by a fixed and floating charge over all the assets of Bexhill UK Limited, bear interest at rates of 1.75 per cent. above LIBOR plus any associated costs rates, and are repayable within one year of the advances. The maximum drawdown facility is currently £10m therefore at 31 July 2015 approximately £3m was undrawn.
Other borrowings, which were with Bracken Holdings Limited, had an interest rate which was the higher of 10 per cent. and LIBOR plus 9.46 per cent. The maximum drawdown facility for the loan was £7 million and was repayable on demand with 12 months' notice. It was secured on the assets of Orchard Funding Limited. It has been wholly repaid in the year.
22. Financial instruments
The company is exposed to the risks that arise from its use of financial instruments. The objectives, policies and processes of the company for managing those risks and the methods used to measure them are detailed in note 3.
22.1 Principal financial instruments
The principal financial instruments used by the company, from which financial instrument risk arises, are as follows:
● Cash and cash equivalents
● Trade and other receivables
● Trade and other payables
● Borrowings
22.2 Financial instruments by category
The group held the following financial assets at the reporting date:
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2015 |
2014 |
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Group |
Group |
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£ |
£ |
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Loans and receivables: |
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Trade and other receivables: current |
17,892,405 |
19,435,906 |
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Cash and cash equivalents: |
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Bank balances and cash in hand |
2,901,960 |
16,944 |
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Bank overdrafts |
(47,159) |
(89,739) |
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20,747,206 |
19,363,111 |
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The group held the following financial liabilities at the reporting date:
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2015 |
2014 |
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Group |
Group |
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£ |
£ |
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Other financial liabilities at amortised cost: |
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Interest bearing loans and borrowings: |
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Borrowings payable: current |
7,015,155 |
14,922,933 |
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Trade and other payables |
1,517,200 |
2,068,706 |
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8,532,355 |
16,991,639 |
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22.3 Fair value of financial instruments
The fair values of the financial assets and liabilities are not materially different to their carrying values due to the short term nature of the current assets and liabilities.
22.4 Financial risk management
The company is exposed through its operations to the following financial risks:
● Interest rate risk
● Credit risk
● Liquidity risk
The company's policies for financial risk management are outlined in note 3.
23. Related party transactions
23.1 Ultimate controlling party
The ultimate controlling party is considered to be R Takhar who owns 53.66% of the issued share capital.
23.2 Group companies
The following transactions took place between group companies during the period, all of which were considered to be at arm's length:
Bexhill UK Limited ("Bexhill") - the company loaned £1,800,000 to Bexhill. Bexhill made payments on behalf of the company amounting to £104,597 and paid dividends to the company amounting to £49,000. At the period end Bexhill owed the company £1,744,404. The loan is unsecured, interest free and repayable on demand.
Orchard Funding Limited ("Orchard") - the company loaned £7,436,482 to Orchard. Orchard made payments on behalf of the company amounting to £363,280 and paid dividends to the company amounting to £10,000. At the period end Orchard owed the company £7,083,203. The loan is unsecured, interest free and repayable on demand.
23.3 Other entities
The group is related to the following parties with whom it had activity during the period, all of which is considered to be at arm's length:
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Name of related party |
Nature of the relationship |
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Associated Premium Funding Limited |
Wholly owned by a director, R Takhar |
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Orchard Finance Limited |
Wholly owned by a director, R Takhar |
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Mr H Takhar |
Close family member of a director, R Takhar |
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McShane Wright |
A firm in which a director, L McShane, is a partner |
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Associated Premium Funding Limited - acts as a funding company for a number of clients of Bexhill UK Limited. As such it does not trade in its own right. Any payments to or receipts from this company are on behalf of third parties.
Orchard Finance Limited - during the previous year a loan was made to Orchard Finance Limited for £5,000. This was outstanding at 31 July 2014 and 31 July 2015.
Mr H Takhar - during the year Mr Takhar charged the group £45,000 for consultancy fees (2014 £Nil). At the year end he was owed £10,000 (2014 £Nil).
McShane Wright - during the year the firm of McShane Wright provided the group with accountancy and associated services. The charge made for these was £17,231 (including work carried out for the IPO). Of this £4,020 is shown as part of directors' remuneration in note 7, £1,511 is shown under administrative expenses and £11,700 as part of items expensed through the share premium account. At the year end it was owed £432.
In the previous year the firm of McShane Wright was auditor of Bexhill UK Limited and provided accounting services to both that company and Orchard Funding Limited. The amount charged for audit was £7,200 and for other services £1,913. At the previous year end it was owed £7,200.
24. Treatment of borrowings
The group borrows money from its bankers and lends this on, together with its own funds, to its customers.
Any increase in activity leads to an increase in debtors and an associated increase in borrowings. If the company
was one which bought and sold goods or services the money borrowed would be similar to the company's stock
in trade and the change in creditors would be shown as part of operating cash flows. However, accounting
standards require cash flows from financing to be shown separately and this means that there appears to be a
large outflow of cash from the company's operations which is then covered by borrowings. For reasons stated
above this is not the case.
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Registered office 960 Capability Green Luton Bedfordshire LU1 3PE |
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Solicitors Michelmores LLP Woodwater House Pynes Hill Exeter EX2 5WR |
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Registered number 09618919 (England and Wales) |
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Nominated adviser Panmure Gordon & Co London EC4M 9AF |
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Principal bankers Barclays Bank plc 1 Churchill Place London E14 5HP |
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Broker Panmure Gordon & Co London EC4M 9AF |
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Independent auditor RSM UK Audit LLP Portland 25 High Street Crawley West Sussex RH10 1BG |
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Registrar Neville Registrars 18 Laurel Lane Halesowen B63 3DA
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Reference to online information Website :www.orchardfundinggroupplc.com |
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