PCF Group (GPW:PCF) — PCF Bank AGM 2021

0:01 Good morning, ladies and gentlemen, and welcome to the PCF Group PLC twenty twenty one AGM presentation. Throughout this presentation, investors will be in listen only mode. Investors have the opportunity to submit questions ahead of today's AGM. Questions can be submitted during the meeting via the Q and A tab situated on the right hand corner of your screen. The company will not be answering any questions during the presentation itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. I would also like to remind you this presentation is being recorded. I would now like to hand

0:32 you over to Tim Franklin, Chairman of PCF GROUP PLC. Good morning, Tim. Good morning, Paul, and good morning, everybody else. Ladies and gentlemen, it's my pleasure to welcome you here today to this annual general meeting of PCF GROUP PLC. My name is Tim Franklin, and I'm the chairman of PCF GROUP. Those of you who have attended our AGMs in the past will know that there is formal business of the day that has to be entered into first, following which our chief executive officer Scott Mabry will give a short presentation on trading so far in the current financial year. Due to the COVID nineteen pandemic and the government social distancing measures, it hasn't been possible to hold our AGM in a traditional way. As such, this year's AGM is being held as a closed meeting in accordance with current legislation. The only attendees are the directors, all of whom are shareholders, and I can confirm, therefore, that we have a quorum.

1:21 In spite of this, we have numerous shareholders who are attending through the investor meet company platform, and I'm delighted to welcome them all. With me are your directors, Mark Brown, Christine Higgins, Marion Martin, David Morgan, David Titmuss, and Scott Mabry. Also in attendance is Caroline Richardson, who's recently joined PCF GROUP as chief financial officer, and her appointment as a director will be made once all regulatory approvals have been obtained. Before I commence the formal business of the annual general meeting, I'd like to provide you with an update on the audit and publication of our annual report and financial statements for the year ended the 09/30/2020. Ordinarily, the annual report would be presented to shareholders at our AGM, but for a number of reasons, it hasn't been possible to do so this year. The impact of the pandemic has been felt by us both operationally and from an audit perspective.

2:09 Our staff have, in the main, been working remotely and have not had the opportunity to have the customary face to face meetings with our auditors. The levels of forbearance which we granted to our customers led to a significant amount of work to assess our impairment charges in accordance with the IFRS nine accounting standard. Since the preliminary announcement of our results in December 2020, it's been necessary to make further adjustments relating to the charging to the profit and loss account of previously capitalized costs for software projects, a reduction in an interest receivable balance from the employee benefit trust, and adjustments to accruals for interest due on stage three impaired loans offset by lower staff incentive rewards. The full extent of these adjustments is being finalized. We issued an RNS on the March 11 in which we stated the that the effect on profit would be no more than £750,000, and that remains our expectations.

3:01 We're doing our very best to ensure that the financial statements are audited and circulated to shareholders as soon as possible. And as soon as the annual report's been published, we'll convene a general meeting so that shareholders can adopt it and ask any questions. In the meantime, I can confirm that the business remains profitable and cash generative in spite of the unprecedented challenges that COVID nineteen's created, and your board remains confident in the group's business prospects. You will all have received the notice of the meeting posted to shareholders on the 03/03/2021. Accordingly, the requisite notice of the meeting has been given, and I will take that notice as read. Thank you. We have a quorum, and I now declare the meeting open. Voting today will be by by way of proxy votes with no voting by way of a show of hands.

3:46 The results of the voting will be announced through our regulatory information service and published on our website as soon as reasonably practicable. The purpose of today's meeting is to consider and to approve as ordinary resolutions of the company. My own reappointment as I'm retiring as a director by rotation as a director of the company. The reappointment of Mark Brown, who's also retiring as a director by rotation as a director of the company. The reappointment of Christine Higgins, who's retiring as a director by rotation as a director of the company. And Marion Martin too, who's also, retiring as a director by rotation as a director of the company. The reappointment of David Morgan, similarly is retiring as a director by rotation as a director of the company. The reappointment of David Titmus, who again is retiring as a director by rotation as a director of the company and the reappointment of Scott Mabry who's also retiring as a director by rotation as a director of the company.

4:41 Also the authorizing of the directors for the purposes of section five fifty one of the Companies Act 2006 to exercise all the powers of the company to allot relevant securities up to an aggregate nominal amount of £2,500,000 and to consider and to approve a special resolutions of the company empowering of the directors to allot equity securities as as if section five six one one of the company's act 2,006 did not apply to such allotment, provided that such allotment should be limited as more fully detailed in the notice of this annual general meeting. Resolutions one to eight are proposed as ordinary resolutions and require a simple majority to be passed. Resolution nine is proposed as a special resolution, which to be passed requires a majority of 75% to vote in favor of the resolution.

5:29 We will now proceed to vote on the resolutions, which I will formally propose to the meeting. The full text of each of the resolutions is set out in the notice of the meeting, a copy of which you will have received. Thank you. So let's start with resolution one. The first item on the agenda is the resolution relating to my own appointment as I'm retiring as a director by rotation, and I have a proposal from mister Mabry that Tim Franklin be reappointed as a director of the company. Is that correct, mister Mabry? Yes. That is correct. Could I call upon miss Higgins to second the resolution, please? Mister chairman, I have much pleasure in seconding the resolution. Thank you. For the record, I can confirm that I've received proxy votes representing a 160,000,000 sorry, a 163,000,000,850,216 shares in favor of this resolution, 1,031 at my discretion, and 10,798 against. In addition, votes representing 5,000 shares were withheld.

6:29 I therefore declare the resolution carried as an ordinary resolution. I'm now gonna move on to resolution number two. The next item on the agenda is the resolution relating to the reappointment of Mark Brown, who's retiring as a director by rotation. Again, I have a proposal from Christine Higgins that Mark Brown be reappointed as the director of the company. Is that correct, Christine? Yes. That's correct. Could I call upon mister Mabry to second the resolution, please? Mister chairman, I have much pleasure in seconding the resolution. Thank you. For the record, I can confirm that I've received proxy votes representing a 163,735,757 shares in favor of this resolution, 1,031 at my discretion and 125,257 against.

7:16 In addition, votes representing 5,000 shares were withheld. I therefore declare the resolution carried as an ordinary resolution. The third item on the agenda is the resolution relating to reappointment of Christine Higgins, who's retiring as the director by rotation. I have a proposal from mister Mabry that Christine Higgins be reappointed as the director of the company. Is that correct, Scott? Yes. That is correct. Could I call upon Mark Brown, please, to second the resolution? Mister chairman, I have much pleasure in seconding the resolution. Thank you, Mark. For the record, I can confirm that I've received proxy votes representing a 163,853,893 shares in favor of this resolution, 1,031 at my discretion, and 7,121 against. In addition, votes representing 5,000 shares were withheld. I therefore declare the resolution carried as an ordinary resolution.

8:10 Resolution four, the fourth item on the agenda, is the resolution relating to reappoint of Marion Martin, who's retiring as a director by rotation. And I have a proposal from Christine Higgins that Marion Martin be reappointed as a director of the company. Is that correct, Christine? Yes. That's correct. Could I call upon Scott Mabry to second the resolution, please? Mister chairman, I have much pleasure in seconding that resolution. For the record, I can confirm that I've received proxy votes representing a 163,859,448 shares in favor of the resolution, 1,031 at my discretion, and 1,566 against. In addition, votes representing 5,000 shares were withheld. I therefore declare the resolution carried as an ordinary resolution.

8:57 The next item on the agenda, resolution five, is the resolution to the reappointment of David Morgan, who's retiring as a director by rotation. And again, I have a proposal from Christine Higgins that David Morgan be reappointed as the director of the company. Is that correct, Christine? Yes. That's correct. Could I call upon Mark Brown to second the resolution, please? Mister chairman, I have much pleasure in seconding the resolution. Thank you, Mark. For the record, I can confirm I've received proxy votes representing a 163,000,000,735,757 shares in favor of this resolution, 1,031 at my discretion, and a 125,257 against. And additional votes representing 5,000 shares were withheld. I therefore declare the resolution carried as an ordinary resolution.

9:44 The sixth item on the agenda is the resolution relating to the reappointment of David Titmus, who's retiring as a director by rotation, and I have a proposal from Christine Higgins that David Titmus be reappointed as a director of the company. Is that correct, Christine? Yes. That's correct. Could I call upon Scott Maybridge to second the resolution, please? Mr Chairman, I have much pleasure seconding the resolution. Thank you, Scott. For the record, I can confirm that I've received proxy votes representing 163,850,216 shares in favor of the resolution, 1,031 at my discretion, and 10,798 against. In addition, votes representing 5,000 shares were withheld. I declare the resolution carried as an ordinary resolution. The next item on the agenda is a resolution relating to the reappointment of Scott Mabry, who's retiring as a director by rotation.

10:34 I've got a proposal again from Christine Higgins that Scott Mabry be reappointed as the director of the company. Is that correct, Christine? Yes. That's correct. Could I call upon Mark Brown, please, to second the resolution? Mister chairman, have much pleasure in seconding the resolution. Thank you, Mark. For the record, I can confirm that I've received proxy votes representing a Hundred And 63859448 shares in favor of this resolution, 1,031 at my discretion, and 1,566 against. In addition, votes representing 5,000 shares were withheld. I therefore declare the resolution carried as an ordinary resolution. Resolution eight on today's agenda is to refresh the authorities granted the directors to allot relevant securities pursuant section five five one of the Companies Act 2006.

11:23 The wording of this resolution was detailed in full in the notice of the meeting. So with the permission of those attending this meeting, I propose to take the notice as read. Thank you. I have a proposal for this resolution from Scott Mabry. Is that correct, Scott? Yes. That is correct. Mark, could I please call upon Mark Brown to second the resolution? Mister chairman, I I have much pleasure in seconding the resolution. Thank you. For the record, I can confirm that I received proxy votes representing a 163,757,130 shares in favor of the resolution, 1,031 at my discretion, and 58,884 against. In addition, votes representing 50,000 shares will be held. I therefore declare the resolution carried as an ordinary resolution.

12:09 Turning now to resolution number five, we now turn to the sorry. Number nine, we now turn to the special resolution proposed at this meeting. Resolution nine deals with the authorities granted to the directors to a lot relevant securities other than on a preemptive basis. The full wording of this resolution was detailed in full in the notice of the meeting. So with the permission of those attending this meeting, I propose to take the notices read. Thank you. I have a proposal for the resolution from Scott Mabry. Is that correct Scott?

12:34 Yes, is correct. Could I call upon Mark Brown to second the resolution please? Mr chairman, I have the much pleasure in seconding the resolution. Thank you, Mark. For the record, I can confirm that I've received proxy votes representing 163,732,130 shares in favor of the resolution, 1,031 at my discretion, and 83,884 against. In addition, votes representing 50,000 shares were withheld. I therefore declare the resolution carried as a special resolution. That concludes the formal business of the meeting. There have been no questions submitted by shareholders in advance of the meeting. So I'll now hand over to Scott Mabry, the chief executive officer, and Scott will run through a short presentation on trading so far in the first five months of the current financial year. So over to you, Scott.

13:27 Thank you, Tim, and good morning everyone and thank you for attending today. I've got a short presentation here which supports the trading update which was put out to the stock exchange this morning as a RNS. The key messages in the presentation are the portfolio quality. We're continuing to build with almost a 100% of our originations in our top quality grades. Lower portfolio growth based on lower origination, and a cautious approach to our lending at the present time. After the initial shock of forbearance, the recovery of the portfolio from a peak of 38% back in July last year to currently 5%.

14:16 And the fact we've used 2020 wisely as a period of lower demand to undertake an operational review of the business. And finally, of course, throughout putting our customers and our colleagues first and we'll continue to do through do so through the pandemic. So turning to the highlights on this first page, our lending divisions are all open for business and supporting customers requiring finance. We've continued to focus on better quality lending, as I said previously. The new business originations are at 104,000,000, which is down slightly on the same period last year. The group portfolio stands at 440,000,000, which is just a modest increase on the position at September 2020.

15:07 Forbearance levels, as I've mentioned, have fallen to 20,000,000, which is now less than 5% of the portfolio. The growth and funding of the portfolio is supported by 342,000,000 of retail deposits, and we're very pleased to receive a platinum award from FIFA for our savings operation. Platinum awards for companies that have achieved a gold standard over the previous three years. And as I said, we've undertaken an operational review looking at efficiencies, costs, and automation of our platform to provide support for future growth. Turning to each of the divisions, the consumer finance division, we've seen demand fairly robust in this division throughout the pandemic.

15:57 We adopted some new commission structures at the beginning of the year to comply with the FCA's investigation into the industry. They've been well received. The new business volumes have stood up at 35,000,000 in the first five months. The lending has been a 100% in our better quality credit grades, and the portfolio has actually grown to a 179,000,000 in the year. Forbearance levels in this portfolio are relatively low at 2.2%. The business finance division lending to SMEs. We have seen demand affected as you could probably expect the investment in business critical assets is lower at the current time. But also, businesses that are looking for finance are in most and many instances using the government support schemes of c bills and b bills, which provides more flexible long term lending on a working capital loan basis and not using our more traditional asset finance methods.

17:03 The new business originations have actually fallen in the period, once again focusing on our top credit grades, of course, and we've seen a small decline in the portfolio to a 173,000,000. As you'd probably expect in an economic downturn and what business and with what businesses have had to experience during the pandemic, the forbearance levels are slightly higher in this portfolio at 6.6. Our property bridging finance division has continued to grow. It was a new division for us largely building itself up in 2020. The new business in the period is 27,000,000.

17:50 The portfolio has grown to 68,000,000 in the period, and there is no instances of forbearance in that portfolio and we're happy with its performance.

18:03 Azul Finance, which was an acquisition for us, a relatively small but exciting part of our business has been suffered a little bit more than others during this pandemic. And I think when you realize that it operates in the broadcast and media sector, The effect on sporting events, live events, TV, and film have all been very hard hit during COVID nineteen. So there has we have seen a downturn of activity in this division, reduced origination volumes of 21,000,000, shrinkage of the portfolio down to 20,000,000. We did see one very large deal in this in this space during the period, which was a record deal for us and very exciting. But as far as a steady stream of originations, we don't expect demand in this area to pick up until we've seen ourselves clear of all lockdown restrictions later in the year.

19:04 Forbearance which we've got a graphical presentation there of the successes we've made in this area. I think the key things to mention here is our focus on early attention to the the wave of forbearance that was a problem for all lending businesses. The priority we gave it, the way we engaged with our customers, and our introduction of automation to help with the decision making. And, of course, the hard work by our staff and all colleagues in the business where we seconded people from other parts of the business to help with the effort to address this,

19:49 what was quite a a large issue back in July. As you can see there at its peak, it was 140,000,000 of our portfolio. That's now fallen to 20,000,000. And I think with this successful unwind where customers are now paying again, we're expecting the long term effect to be minimalized from the waiver forbearance last year. The word of caution, guess, around forbearance would be that we will keep an eager eye on the unwinding of the government's furlough scheme later in the year and of course any bumpy or prolonged recovery in The UK economy that might affect businesses in general. And finally, just turning to outlook where through the actions we've taken, we've left ourselves well positioned to see UK recovers from the pandemic.

20:41 We have a quality loan book which underpins our profitability. We have £440,000,000 of 440,000,000 loan book which has income embedded in it. Through our success in forbearance, we're seeing a low realization of actual losses against our impairments provided at the end of September. We've undertaken an operational review looking at costs, efficiencies, digitalization of our platform to prepare ourselves for scale in the future. We'll retain a cautious risk appetite at the current time and I think that's that's appropriate in these circumstances. That will have a short term effect on our net interest margin but we feel as though credit quality should be paramount over that at the current time.

21:33 We'll continue as we have over the last few years to invest in our business lines and our infrastructure and our people. And while we don't have targets and objectives out in the marketplace at the moment, at the appropriate time in the future, we will resume market guidance. That is when we have a clearer roadmap to exit from the pandemic and we have greater certainty of the economic performance and the road to recovery. So I think as normality returns, we have the opportunity to grow, our shareholder value will return, and we have a a great deal of confidence in the future.

22:20 So with that, Tim, I'll hand back to you. Thank you. Thank you, Scott, and thank you to everybody for attending. This has been an unusual AGM this year, and we do hope that we'll be, in a better position to meet people face to face with a better luck next year. But that concludes our meeting today. Thank you for your attendance, and I now declare the meeting closed. Thank you, everybody. Have a good weekend. Thank you Tim. On behalf of the board of PCF GROUP PLC, would like to thank you for attending today's presentation. That concludes the event. Thank you and good morning.