Bosses at Non-Standard Finance continue talks with FCA over redress programme
Bosses at Non-Standard Finance have said the group's ability to remain a going concern is subject to "material uncertainties", but the directors continue to believe there is a good prospect of resolving this situation.
In a statement, it said: "The group is continuing its discussions with the FCA regarding its redress programme for guarantor loans customers at an estimated total cost of £16.9m that has already been provided for in the group's balance sheet
"The independent regulatory reviews of both branch-based lending and home credit are ongoing
The statement added: "Plans for a substantial capital raise remain subject to, inter alia, the satisfactory completion of the independent regulatory reviews; the continued support of Alchemy and other key shareholders as well as the Group's lenders
"In the absence of the capital raise, the group remains balance sheet insolvent and the group's ability to remain a going concern is subject to material uncertainties, but the directors continue to believe there is a good prospect of resolving this position."
The group's performance in the first half was better than expected and current trading is also encouraging, the statement added.
Jono Gillespie, Group Chief Executive Officer, said: "The group delivered a strong operational performance in the first half and both branch-based lending and home credit enjoyed a much improved financial result versus the prior year that was severely impacted by the pandemic.
"When Non-Standard Finance was founded in 2015 it had one main purpose and belief: that people on low incomes or with a poor credit history deserve access to credit they can afford, provided in a transparent, effective and efficient way that takes account of their needs and individual circumstances. Since then, we have provided credit to more than 428,000 customers, helping them to manage the peaks and troughs in their expenditure, often when they had few other places to turn to.
"Today there are more than 10 million people in Britain whose financial circumstances mean that they are effectively excluded from mainstream credit but whose financial needs - whether to repair a car or buy a new washing machine - still need to be addressed. It is also clear that in the past two years the landscape has changed, prompting the exit of a number of leading companies that have either quit the sector altogether or have severely curtailed their activities, leaving many consumers with even fewer options to access regulated credit.
"After a great deal of work over the past year and despite the challenges presented by the pandemic and a complex regulatory landscape, we are determined to continue to deliver on our original purpose.
"We are progressing our discussions with the FCA and hope to reach a conclusion soon. While this work is ongoing, the group has concluded that an additional exceptional provision of £1.9m is required to cover expected costs of redress due to customers that may have suffered harm. The methodology of this estimate remains unchanged, but the amount has increased due to the continued accrual of estimated penalty interest.
"As soon as we are able to resolve the group's outstanding regulatory issues, we are focused on executing a substantial capital raise of around £80m that will be used to both fund the payment of redress as well as strengthen significantly the Group's balance sheet, underpinning our return to profitable growth."