PCF Group (GPW:PCF) — PCF Group AGM

0:01 Good morning, ladies and gentlemen, and welcome to the PCF Group Annual General Meeting. Throughout this recorded meeting, attendees online will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question submitted today. However, all questions will be reviewed with responses published on the Investor Meet company platform where it is appropriate to do so. I would now like to hand you over to chairman, Simon Moore. Good morning. Thank you, Jake, and good morning, everybody. It's a huge pleasure to welcome you here today. Those of you who are in the room, thanks very much. And those of you who watching proceedings on the Meet company link, investor Meet company link, welcome to our twenty twenty three annual general meeting, PCF GROUP PLC.

0:53 My name is Simon Moore, and I'm a non exec director of the company. The board of directors has asked me to act as chairman for today's AGM. Those of you who've attended AGMs for the company previously will know that the formal business today will be dealt with first, and then there'll be the opportunity to take general questions on the company after we've we've concluded after the meeting has concluded. Let me introduce the people on the table with me here. First of all, my nonexecutive directors, Mark Brown and Christine Higgins on this side and Mark Sisviadaruk over here, as well as our executive team of Gary Stern, our Chief Executive and Caroline Richardson, our Chief Financial Officer. It's now 10:00. And as we have a quorum, I declare the meeting open.

1:40 You will all have received a notice of the AGM post on March 7. And with your permission, I will take that notice as read. Good. Thank you very much indeed. Let me just run through the poll processes before we open the poll process itself. On the voting formalities, as previously notified to you today, voting will be by way of poll and not by show of hands. That will give all shareholders the opportunity to vote in proportion to their holding in the company, and it also gives the company better insight, diverting patent to shareholders. In terms of the procedure, a summary of the resolutions will be shown on the screen in front of the room and online, together with a breakdown of the proxy votes that we've received.

2:29 It takes a little bit of time for the poll procedure and the counting of votes to be completed after the poll card has been gathered in. The final results will be announced through Asset Match and published on our website. I assume it's reasonably practical. For those of you who are in the room, you would have been given a poll card in which you've got three options for each resolution. You can either vote for the resolution, proposed resolution, or against the proposed resolution, or you may abstain from voting on the resolution. Alternatively, you may withhold your vote, but a vote withheld in is not a vote in law and won't be counted in the calculation of the final votes for your votes. When you complete your poll card, please tick against the appropriate box in the appropriate box indeed next to the relevant resolution depending on how you wish to cast your votes.

3:21 And once all the votes have been taken, please would you sign with the poll card? I've then asked our company secretary team to collect them from you. If you need any further help, please ask. So turning to the purpose of today's annual general meeting. The meeting is here to consider the following resolutions, which hopefully now are shown on the screen or within a minute. I'll just read them out briefly. Resolution one is the receipt and approval of the directors' report and audited financial statements of the company for the year ended 09/30/2022. Resolution two is the receipt and approval of the report on the directors' remuneration as set out in the audited financial statements for the year ended 09/30/2022.

4:12 Resolution three is for the reappointment of McIntel Hudson LLP as auditors of the company and to authorize the directors to determine their remuneration. Audit Resolution four is to authorize the directors to allot ordinary shares in the capital of the company up to a maximum nominal amount of £25,000,000 There is one special resolution requiring majority of not less than 75% of the votes cast, calling it Resolution five, which is to disapply preemption rights on the allotment of ordinary shares pursuant to the authority conferred by Resolution four. Before we open the poll, I propose to take questions on the individual resolutions first. So I'll quickly run through them and see if we've got questions on the individual resolutions themselves.

5:06 So resolution one, the reporting accounts. Do we have any questions on the reporting accounts? Want to answer Yes. Did you plan to carry on? I mean, what way are you planning to carry on with this with the bank, PCF bank? Do you want to take redundant? I'm sorry. The resolution may be redundant if you decide that you're going to get rid of it of this you already dismissed it. That's not directly a question on the reporting accounts, but as you've asked it now, let let as you've asked it now, let's let's take it. Gary, would you like to talk about Well, I think the the the resolution is about the receipt and approval of this report on accounts. I think you're talking about going forward. Yes. So so I think that the I think that these report on accounts, by the by the mere fact that they cover a a trading period, which has already passed I see. Aren't aren't redundant.

6:08 So I I understand your question, which I think is more strategic of nature in terms of the future of the bank. So maybe we should deal with that in more general questions rather than this resolution. So Are you happy with that, Mary? That's absolutely fine. If you are, we'll we'll hold that question, and we'll come back to it. Okay. Thank you. We won't lose it. Thank you, Gary. Any further questions on resolution one? No. So resolution two is the report report on on directors' remuneration. Do we have any questions on the remuneration report from anybody in the room or on screen? No, sir. Resolution three is the resolution to appoint McDonough Hudson as auditors and to to authorize the directors. No? Good. And resolution four is to authorize directors to unlock shares in the capital of the company, up to 35,000,000.

6:56 No questions? And resolution five is to just apply the preemption rights. Again, no questions on the resolutions. Okay. As I remind you, I'll come back to the general questions after we close the poll. Let's now proceed to the vote by word poll on the resolutions. I'm not gonna go through the resolutions again. I think we've done that enough. But now ask shareholders to present their poll cards on all five resolutions. I declare the poll open. And just to remind you, as explained, a vote on each resolution requires you to tick the appropriate box against each resolution for or against, or you may abstain, or if you choose, you may withhold your vote. I'd also remind people to sign their polling cards, please, if they haven't done so already.

8:03 Jonathan, are ready to collect? Yeah. Excellent. You've closed the ball. Excellent. Thank you very much, Steve. In that case, I declare the poll closed. As you can see from the slides, I can confirm the proxy votes for each of the resolutions received by the company are displayed on the screen. And over 95% of the proxy votes received have been in favor of the resolutions. The detailed results of the voting will be announced on our website and through our information service as soon as reasonably practical. I think that concludes the formal business of the meeting, so I declare the AGM closed.

8:55 However, we do have some time, so there is an opportunity for members to ask questions of their board. Mary, as you've posed a question, why don't we start with yours? Would you like to phrase your question again? And then we can take it. Well, just basically, what's the future for PCF? Good question. One. Chief Seck, if you'd like to. So I think we've made a public announcement, Mary, around the fact that the bank is withdrawing from The UK banking market Okay. Has a plan to realize its assets and to wind up the bank. We've also said is that in doing that, we will be open to exploring any strategic opportunities which come our way. And by strategic opportunities, we obviously mean opportunities to do a corporate transaction, whether that's a merger with somebody, whether that's someone who wants to buy the bank, whether that's some type of accelerated sale of our of our asset book.

10:03 And I suppose the so that is the strategic aim of the bank. How long that runoff takes will be dependent upon a number of factors. That remains the board's core base plan. But as I say, if there if if a strategic opportunity presents itself, we will, of course, talk to people. I suppose the natural follow on is why are we doing that? And and as we've as we've said previously, the the reality of the situation is that for the bank to be sustainable over the long term, it or even the medium term, it would have needed to attract amount of new capital to recapitalize the balance sheet to enable us to lend at a level which would enable us to be profitable.

10:56 And sadly, we weren't able to secure that that level of capital for various reasons, not just PCF and some of the trials and tribulations it's had. But the the reality of the situation is that banking, it does not give it's very difficult for a small bank to give a return on equity for investors, which is competitive, and you need to get a scout. And so the so the board, all things being equal, given that our potential transactions that we explored didn't come to fruition for various reasons as we alluded to in the report reviewing that was in the best interest of the company and by that shareholders to actually take the decision to wind down the banking on good fashion.

11:43 So I hope that's a complete answer for you. That sort of covers all the bases. Yeah. Next question before I move from there is what would that mean when you move on in that direction? Direction? What would that mean for the shareholders, especially retail small share? Yes. Well, it mean it means exactly the same for retail shareholders as institutional shareholders, which is our our job now as a management team is not to grow the business in a cost efficient way. It's to shrink the business in a cost efficient way. Mhmm. And, obviously, our aim and our plan says that we shrink the business in a cost efficient way, bearing in mind that we're still a bank. Whilst we've got depositors, we are still a bank. We still have regulatory, reports and requirements. There are there's all sorts of things that go with the bank. And our intention is to wind down the bank in the most efficient, effective way we can so that at the end of that wind down period, we hope that there will be a distribution available for shareholders.

12:47 And that will be what percentage? That that all depends on what happens in a very uncertain world. So to give you some of the the the variables, which are completely outside of our control, which affect that, macroeconomic environment in terms of the the performance of people paying their loans back, inflationary issues in terms of our cost base because we are a we are a bank. If someone is working for PCF Bank today, it's not like we can promise somebody in Korea given that we've got. So, clearly, there are cost implications of getting the right people to stay with us. So there are a number of variables stuck in that. So I can't say to you, it will be this.

13:35 It will be that. What I can say to you, and then Caroline might be able to talk more on this, our plan works on the basis that the bank will be wound up in a self fashion, and there will be a distribution available to creditors. But that's dependent upon lots of variables. It might get better. It might get worse. But our job job is is to to manage manage those two ends of that spectrum. Carol, don't know if you want to. Yeah. I think you've covered the main variables. It's, you know, it's cost, it's performance of book, and, ultimately, you know, the timing of those collections or potential sales. So, you know, it's about largely about turning the assets into cash and repaying our liabilities as quickly and as efficiently as we can.

14:24 And this team is working incredibly hard to gather as much cash as possible, pay out as few costs as possible, return as much as possible to shareholders. In summary, that's what's happening here. But PCF never provide a full banking service. Correct. That's correct. We only do the loan. Yeah. We're we're we're not And and deposits. And deposits. So we didn't Okay. We we work a bank which provide money transmission facilities. In fact, So so we didn't provide money transmission facilities. It's a bank which took retail deposits and made loans. How long do you anticipate this one being done for last? What period of time? Okay. So that's an interesting one. So that all depends on lots of variables. Okay? So the natural path of the bank. So if we've got seven year deposits, and we've got some which are about seven years. So if you if everything was to go in a natural shape, it it's a it's a seven year plus runoff.

15:27 Clearly, we are doing our best to ensure that it does pass that long. I give you an exact figure, but I think it would not be unreasonable to assume that the board has a view that we would ideally like to achieve this over a three, four year period. But that all depends on what happens in in terms terms of of the the the general dynamics which affect that runoff. Eric, we should take some more questions. Is that is that okay? Is your question answered as best we can? Tim, I think you've got a question for us. So we've got a few questions. The first one, actually, I think, just been answered is how long do you expect that to run up to take? Yeah. Think we're taking that one. Answers. Yep. With the wind up of bank, what does this mean for shareholders? I think we're done with that team.

16:13 Got a question. Please do you explain where Summers fit in to this? Sum Summers are a majority shareholder, and that's where they fit into it. They they are the majority shareholder of the bank, and that's it. They're a shareholder, and we have the conversations with those that any institution would have with the majority shareholder. I think we can also say, Gary, that they've been incredibly supportive. Yeah. I mean, they put money in at five p when we're still listed to keep to keep us afloat, basically. And that's, you know, when it was all pretty awful. Yep. So they've done the right thing. We'll be treated like any other shareholder, but but they have been incredibly supportive.

17:00 I think all shareholders should be should recognize that. In the full knowledge that they will get the same payout to the retail shareholder. Did they get preferential payouts? No. Okay. Exactly the same as you will. Yep. Yeah. So I think in the report and accounts, we actually I actually thank in my statement Summers for their support. And you're and you're right, Mark. The way that they perhaps it was wrong of me not to mention that. Yeah. Summers treated like every other shareholder. They don't get preferential treatment. They we could not have hoped for a more supportive majority shareholder, and they are acting with absolute integrity to to the the benefit of all shareholders. Yeah. So we'll have to tell you. Tip. How is the performance of book as of today in response to your statement of the variables at play?

17:51 How are costs evolving in terms of the other variables at play? Caroline, do wanna make a shot of that? Yeah. And so the performance of the book is holding up very well. The repayments and early settlements are in line with forecast and ahead of forecast in certain aspects. And so the kind of, you know, the overall credit and kind of book performance is strong. On the cost, our cost base reduced significantly. We had a round of redundancies in financial quarter one. So calendar quarter four last year, our headcount came down significantly. So the the costs are running at a much lower level than '22.

18:43 However, because as the book runs off interest income also reduces, we still expect that we're in a loss making situation for the full year. Okay. Is it worth just explaining, Caroline, so that people understand that as we convert assets into cash, that we we grow our cash reserves, that that has an impact on our interest income? So there's two sides to the to the coin. It's a balance. So, obviously, you need to we still need people and systems to support the runoff. But as the interest income comes down, it's a balance that, you you know, know, as to how long that dynamic works. And at some point, it is better to collect the cash earlier and avoid the extra cost.

19:33 And where that balance flips is is down to the variables that we've already discussed. Okay. Tim? Access have you got? Hang on, Mary. Just one second. I'm sorry. There's no there's no more questions on online. Okay. Thank you very much, dude. So let's take one more question then, Mary. Access to Has the bank got the access? Access to No. Excess. Excess cash? Or Both. So we are in a strong liquidity position. We you know, our our liquidity regulatory metrics are very healthy. We because of the nature of the book being fixed rate loans, fixed rates, deposits, and term deposits, you know, the the potential for any liquidity challenges in this sort of medium term is very limited.

20:27 In terms of capital, then we are above our all our capital metrics. You need I think as we've been very clear, our capital has always been our tighter constraint than liquidity. You go back to that in the in the important accounts, you said that we have net asset, probably 38,000,000 as of September 2022. So that's the extent to which our assets exceed our liabilities. Because if we're losing money, which we are, every day that goes down, which is why it's incumbent upon us to find a solution as as quickly as possible, which is what we're trying to do. So that when there is a distribution, hopefully, to shareholders, it maximizes that. The quicker we can do, find a solution, whether it's a transaction or sell the assets, the better it is for shareholders.

21:18 So how much do you go down by each day? It's not always a straight line. No. It it isn't an anticipation. It isn't always a straight line, but I think, you know, we are we without wanting to give kind of forward guidance, I guess, in terms of where where where our results for the year will end up. We are running at somewhere between a 500,000 and £1,000,000 loss a month. So there will be nothing left at the end? Well Well, it depends how long. Well well and, also, it's important to to say that the loss includes noncash items.

22:09 So Mhmm. The the loss doesn't equate to cash because if we IFRS nine, our provisioning, our provisioning model may make a prediction that we're going to lose money in the future. And, you know, some of our losses, some of our profits are noncash items. You shouldn't draw a direct line between 500,000 million pound losses, 500,000 million pound of cash going out of business. It doesn't work like that. Keep this thing simple, Mary. We we're turning our assets, which are our loans, into cash, and we're paying our costs as a small amount as we possibly can. The faster we move to resolution of this company, the more of that $38,000,000 will come to shareholders. You boil it down. That's when it comes to debt. It's a cash balance, and and that that that will reduce. So our job is to keep that reduction down as much as we possibly can and close to the best solution for you and your other shareholders.

23:03 I'm a bit skeptical because you remember in technical finance? Mhmm. They said they'll want it up. They're they're still going because It's very difficult to wind down, bank. It's really difficult. So you got you got the positives, and you're have to you can't just walk away. So I'm just thinking, how much is the how much are your shares realized? No. One share. How much? There's no there's there's no the the the the last price on the screen Mhmm. Was just over a penny. Yes. I got So so there's no we're not publicly closed currently anymore. No. We we we run the we run the asset trade asset match trade, there were no buyers of the shares. There were no trades. What's that? So there was no trades there.

23:58 We say we say in here that our net asset value at the time of these accounts was 38,500,000. At the time of these accounts, we had somewhere, like, 334,000,000 shares in issue parallel, something like that. If you do the sums, 38,500,000 divided by 334,000,000, you come up with a number, which which I I think think is about 10 p. Good. Thank you for all those questions. Much appreciated, your your interest in the company. We will do our best to keep that 10 p as big a number as we possibly can. There being no more questions, we got one more? Excellent. Thanks. If losses are running at £581,000,000 a month and you're expecting runoff to take three to four years, can we conclude that any final distribution would be minimal at best?

24:50 Not not now because But I think it's a three to four years that we're I think you did mention that, but Yeah. Hoping for better than that. Yeah. We're hoping for better, Matt. Yeah. But there's also the point that the the losses don't equate to cash, and it's cash which is distributed to shareholders. It's a quirk of accounting. I'll let CFO do that. And, you know, and that's our that's our current current level. You know, over time, if the book gets smaller, you know, we will we will continue to look at costs and trim those costs. And sorry. Just a point of clarification because Mark brought it up. Maybe I should have been clearer. Three years to close the bank includes the time that it would take. You can't close a bank until the surrender of your banking license has been accepted.

25:41 So we would the way this works for any bank is that we repay our depositors. We do all the things we need to do, and then we surrender the license back to the authorities. And we wait for the authorities to say, yes. We accept the surrender of the license. And they're baked into my three to four years was a period of time for that approval process to take place, just to be clear. Tim, any more? No more questions. No more questions then. Okay. I think in that case, we we are are complete. Thank you, everybody. Thank you for attending. Okay. Thanks. Thank you, everybody online. Much appreciate your questions very much. I declare this part of the meeting closed, and thank you for all for attending, and wish you best of luck in your journey here. Simon, that's great. And thank you very much indeed to the board for updating attendees today.

26:29 Could I please ask attendees online not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the board of PCF GROUP, we would like to thank you for attending today's annual general meeting, and good morning to you all.