AMICUS_ASSET_FINANCE_GROU - Accounts

The directors present the Strategic Report for Amicus Asset Finance Group Limited (‘the Company’) together with its consolidated entities (the “Group”) for the year ended 31 December 2022. The Strategic Report has been prepared for the Group as a whole and, therefore gives greater emphasis to those matters which are significant to the Group when viewed as a whole.

General information

Amicus Asset Finance Group Limited is incorporated in England and Wales as a private limited company, limited by shares, with the registered number of 04286156. The Group is an independently owned company with no majority shareholder. All subsidiaries are wholly owned by the Company apart from Amicus Capital Consulting LLP which is 99% owned by the Company and 1% owned by Robert Keep and Jeremy Guilfoyle.

Principal activity

The Group provides specialist lending to small and medium size businesses and individuals in the UK across a diverse range of asset classes such as vehicles, plant and machinery, mission critical business equipment and other fixed assets. Facilities offered to support this activity include hire purchase agreements, finance leases and secured loans.

The Directors are not planning any major changes in the Group’s activity in the next year.

The Group has advanced facilities to small business borrowers using hire purchase, secured loans and finance leasing instruments amounting to £20.5m (2021: £19.8m). Of this, £2.2m (2021: £0.0m) was retained by the Company with £18.3m (2021: £19.8m) sold to its subsidiary companies – Amicus Asset Finance Limited, Amicus Leasing Limited, Amicus Asset Leasing Limited and Amicus Structured Finance Limited. The Group plans to continue advancing facilities for the foreseeable future. The Group made a profit before tax for the year of £253k (2021: £11k). The Directors continue to actively assess the expense base of the Group to make sure that it remains proportionate to expected income. The cash and liquidity position of the Group remains consistent with its performance with sufficient cash generation, debt headroom and issued share capital to maintain its current business level for the foreseeable future. There have been no specific commercial developments during the year.

The Group’s results for the year ended 31 December 2022 are set out within these financial statements. The profit before tax for the financial year was £253k (2021: £11k). EBITDA for the year was £2.2m (2021: 1.9m).

The key performance indicators for the Group are new business origination which has the effect of supporting future cashflows, gross interest income and fees which have the effect of generating gross and net revenues and impairment losses which have the effect of depressing profits. The Directors have selected these KPI’s as they accurately reflect its volume, pricing and risk management outcomes. The Directors do not set targets for future periods that neglect any individual KPI in favour of another. An assessment is made of the general conditions of the market and the Directors, having made that assessment, produce budgets and forecasts consistent with assessment.

The Directors consider the Group to be in a stable ownership structure. The junior and senior debt facilities available to the Group are largely committed in nature and the Group remains cash generative enabling the Directors to budget effectively. The budgets and expectations for the Group for the next few years remain prudent but predict improvements in the Group’s measurable KPI’s. The Directors are engaged in detailed negotiations with several potential providers of senior debt to enable a return to portfolio growth. In addition, the Group has hired two new staff and has identified three further vacancies that it will fill in the coming months to further enhance its new business capability. As the Government led interventions are wound down the Group is experiencing a greater level of new business proposals on terms that are more akin to a normally functioning market, the Directors believe that this will continue to be the case for the foreseeable future enabling consistent portfolio growth and sustainable profits.

The principal risks of the Group are described below and are managed by the directors of the Company. These processes are summarised below:

Liquidity risk

The risk of not being able to meet financial obligations as they fall due.

Key Mitigating Actions

• Liquidity is reported to management on a daily basis.

• Liquidity and funding strategy is monitored by the finance team daily.

• Most of the funding of the group is committed in nature and therefore the terms of funding cannot be changed at short notice.

• Daily liquidity to meet the trading obligations of the Group is provided by profitability and incoming capital and interest repayments from borrowers. Required trading expenses including interest and capital repayments to debt providers are effectively set aside at each point in the trading cycle.

Conduct Risk

The risk of causing unfair outcomes and detriment to our customers, regulatory censure and / or undermining market integrity as a result of our behaviour, decision-making, activities or processes.

Key Mitigating Actions

• Undertaking employee training and awareness programmes.

• Maintaining an established and robust Complaints procedure.

• Maintaining a “four eyes” approach to operational procedures across the business.

Market Risk

The risk to our earnings or capital as a result of matters that are beyond the control of the Directors but are factors of the market itself. These can be summarised as the market being over supplied resulting in a disconnect between risk, pricing and volume aspiration among providers of the facilities on offer from the Group.

Key Mitigating Factors

• The Group is not attempting to achieve exponential growth, is not relaxing its credit appetite or interest income requirements to achieve growth and is not embarked upon a budget programme that exerts unnecessary pressure upon the management to seek growth.

The risk of financial loss arising from a borrower failing to meet their financial obligations to the Group.

Key Mitigating Actions

• Limit concentration risk by size of total loan exposure to a borrower in accordance with published credit policy.

• Focus on sectors and loan types where the Group possesses expertise.

• Obtain suitable and sufficient security for all facilities granted.

• Maintaining a prudent lending criteria with defined limits across loan to value and class of asset.

• Constant portfolio reviews to identify problem borrowers / sectors early and take evasive action as required.

• Robust lending policies in place to ensure responsible business activities.

• Effective arrears and collection teams, supporting comprehensive underwriting and credit sanctioning procedures.

The Group’s principal financial assets are bank balances, loans and advances to customers, trade and other receivables.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 December 2022.

As permitted by the Companies Act 2006, certain information required to be disclosed in the Directors’ Report has been included by way of cross reference to the Strategic Report.

The Group provides specialist lending to small and medium size businesses and individuals in the UK across a diverse range of asset classes such as vehicles, plant and machinery, mission critical business equipment and other fixed assets. Facilities offered to support this activity include hire purchase agreements, finance leases and secured loans.

The Directors are not planning any major changes in the Group’s activity in the next year.

The results for the year are included in the Strategic Report.

No ordinary dividends were paid. The directors do not recommend payment of a further dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

Subsequent to the balance sheet date the Directors have agreed revised terms with the Group’s junior and senior debt providers in relation to the borrowing durations.

Details of future developments are included in the Strategic Report.

As the group has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

The period under review has seen significant and sustained improvement over the prior period.

The period to 31 December 2022 has seen continued improvement in the area of bad debt provision. This along with continued robust arrears collection and asset recovery values have further improved the cash inflows of the Company and Group enabling it to advance further sums to its customers in turn increasing the size of the performing portfolio

The Directors continue to assess the going concern of the Company and the Group and in so doing they routinely consider market conditions and trends, the state of the balance sheet, access to secure funding and projections relating to both profitability and cash flows.

Subsequent to the balance sheet date the Directors have also agreed terms with the Group’s junior and senior debt providers in relation to borrowing durations to the extent that the Directors continue to project that the Company and Group can maintain positive cash balances and satisfy liabilities as they fall due. The Directors remain in contact with potential senior debt providers in order to explore new facilities.

Taking all things into consideration the Directors are able to continue to take a positive view of the prospects for the business.

The Directors believe that there continue to be viable and reasonable management actions that allow the Group to continue for the foreseeable future.

On the basis of the above, the Directors have adopted the going concern basis of accounting in preparing the financial statements.

The Group's activities expose it to a number of risks. These are described in the Principal risks and uncertainties section of the Strategic report.

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and accounting estimates that are reasonable and prudent;

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the ;

•     prepare the on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We have audited the financial statements of Amicus Asset Finance Group Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2022 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the group's and the parent company's affairs as at 31 December 2022 and of the group's profit for the year then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Irregularities including Fraud

Based on our understanding of the company and the industry in which it operates, we identified that the principal risks of non-compliance with laws and regulations related to the acts by the company, which were contrary to applicable laws and regulations including fraud, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to inflated revenue and profit.

Audit procedures performed included: review of the financial statement disclosures to underlying supporting documentation, review of correspondence with and reports to the regulators, enquiries of management, and testing of journals and evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.

There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £1,277,293 (2021 - £197,924 profit).

General information

Amicus Asset Finance Group Limited is a private company limited by shares, incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 30 Crown Place, London, EC2A 4EB.

The nature of the Group’s operations and its principal activities are set out in the Strategic report.

The Group’s and the Company’s financial statements have been prepared in accordance with Financial Reporting Standard 102 (“FRS 102”) and in accordance with the provisions of the Companies Act 2006. Individual income statement and related notes have not been presented for the Company as permitted by section 408 (4) of the Companies Act 2006.

The financial statements have been prepared on the historical cost basis, modified to include certain items at fair value, and in accordance with FRS 102 issued by the Financial Reporting Council.

The financial statements are presented in Pounds Sterling, which is the Group’s and the Company’s functional currency.

The financial statements incorporate the financial statements of the Group and entities controlled by the Company (its ‘Subsidiaries’) made up to 31 December each year.

Control is achieved when the Group:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and/or

• has the ability to use its power to affect returns

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

The Group manages the administration of the assets in certain entities and is exposed to the risks and rewards of these as the risks and rewards from the underlying loans have not been substantially transferred.

Subsidiaries are consolidated from the date on which control is transferred to the Group and are deconsolidated from the date that control ceases. Uniform accounting policies are applied consistently across the Group. Intercompany transactions and balances are eliminated upon consolidation.

The period under review has seen significant and sustained improvement over the prior period

The period to 31 December 2022 has seen continued improvement in the area of bad debt provision. This along with continued robust arrears collection and asset recovery values have further improved the cash inflows of the Company and Group enabling it to advance further sums to its customers in turn increasing the size of the performing portfolio

The Directors continue to assess the going concern of the Company and the Group and in so doing they routinely consider market conditions and trends, the state of the balance sheet, access to secure funding and projections relating to both profitability and cash flows.

Subsequent to the balance sheet date the Directors have also agreed terms with the Group’s junior and senior debt providers in relation to borrowing durations to the extent that the Directors continue to project that the Company and Group can maintain positive cash balances and satisfy liabilities as they fall due. The Directors remain in contact with potential senior debt providers in order to explore new facilities.

Taking all things into consideration the Directors are able to continue to take a positive view of the prospects for the business.

The Directors believe that there continue to be viable and reasonable management actions that allow the Group to continue for the foreseeable future.

On the basis of the above, the Directors have adopted the going concern basis of accounting in preparing the financial statements.

Interest income and expense

Interest income on loans and advances at amortised cost and interest expense on financial liabilities is calculated using the Effective Interest Rate (‘EIR’) basis. The EIR is the rate that, at the inception of the financial asset or liability, exactly discounts expected future cash payments and receipts over the expected life of the instrument back to the initial carrying amount. When calculating the EIR, the Company estimates cash flows considering all contractual terms of the instrument (for example, prepayment options) but does not consider the assets’ future credit losses.

The calculation of the EIR includes all transaction costs and fees paid or received that are an integral part of the interest rate, together with the discounts or premium arising on the acquisition on loans and advances to customers or issuance of financial liabilities. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or liability.

Net fee and commission income

Fee and commission income includes fees relating to services provided to customers which do not meet the criteria for inclusion within interest income.

Other fee and commission income includes fees charged for asset finance services, profit related management and arrears charges.

Arrangement fees on deals retained are spread evenly over the full term of the related loans and advances to customers and are included within interest income.

Other operating income

Other operating income predominantly arises from recoveries of costs incurred on services provided to customers. This income is recognised within other operating income when the service is provided.

Cash and cash equivalents comprises cash balances and balances with a maturity of three months or less, which are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

Recognition

Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Company becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets are derecognised when they are qualifying transfers and:

• the rights to receive cash flows from the assets have ceased; or

• the Group has transferred substantially all the risks and rewards of ownership of the assets

When a financial asset is derecognised in its entirety, the difference between the carrying amounts, the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit and loss.

Offsetting

Financial assets and liabilities are only offset in the statement of financial position when, and only when there exists a legally enforceable right to set off the recognised amounts and the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of loans and receivables

At each reporting date the Group assesses its financial assets, not at fair value through profit or loss, as to whether there is objective evidence that the assets are impaired. Objective evidence that a financial asset or group of financial assets are impaired includes observable data that comes to the attention of the group about the following loss events:

• significant financial difficulty of the borrower;

• a breach of contract such as default or delinquency in interest or principal repayments;

• the granting of a concession for economic or legal reasons relating to the borrower’s financial difficulty that the Group would not otherwise consider;

• indications that a borrower will enter bankruptcy or other financial reorganisation; or

• observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including:

  • adverse changes in the payment status of borrowers in the group; or

  • national or local economic conditions that correlate with defaults on the assets in the group (e.g. a decrease in property prices for loans in the relevant area).

Measurement

Impairment provisions on financial assets individually identified as impaired are calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. Impairment losses are recognised immediately in the income statement and a corresponding reduction in the value of the financial asset is recognised through the use of an allowance account. If, in a subsequent period, the amount of the impairment provision decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised provision is reversed by adjusting the allowance account. The reversal is recognised in the income statement.

A write-off is made when all or part of a financial asset is deemed uncollectible or forgiven after all collection procedures have been completed and the amount of the loss has been determined. Write-offs are charged against amounts previously provided for and any additional amounts recovered after a financial asset has been previously written off are recorded in other income in the income statement once they are received.

Company as lessor

Leases of assets to customers are finance leases, if it transfers substantially all the risks and rewards incident to ownership. Amounts due from lessees under finance leases are recognised as receivables at the amount of the Company’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Company’s net investment outstanding in respect of the leases.

Taxation comprises current and deferred tax, and is recognised in the income statement except to the extent that it relates to items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on taxable income or loss for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

• temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future; or

• taxable temporary differences arising on the initial recognition of goodwill.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Investments in subsidiaries

Investments in subsidiaries and associates are stated at cost less, where appropriate, provisions for impairment.

Effective interest rate

IAS 39 requires interest earned from loans to be measured at the effective interest rate (“EIR”), which is that rate that discounts all future cash flows over the life of the loan to the initial carrying amount. Management must therefore use judgement to estimate the expected life of each type of instrument and, subsequently, the expected cash flows relating to it. The key source of uncertainty is the estimation of the life of the loan which, as a result of altered customer behaviour due to unforeseen market movements, may not reflect historical experience.

Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.

A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.

The preparation of financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The judgements and estimates that have a significant effect on the amounts recognised in the historical financial information noted below.

Loan portfolios across all segments of the Company are reviewed on a regular basis to assess for impairment and those showing potential or actual vulnerability are subject to increased future monitoring. A full review of the whole portfolio at the year end date was undertaken by Senior Management and it was deemed that no additional provisioning was required.

Impairment provisions on financial assets held at amortised cost are described in the accounting policy note 1.8.

Loans and advances to customers are originated by Amicus Asset Finance Group Limited and then transferred to the subsidiary companies. Whilst an element of the ongoing risks relating to the loans and advances are carried by the Company, the relationship between the Company and its subsidiaries is deemed, by the Directors, to be sufficient to satisfy the conditions necessary for the criteria of IAS 39 Financial Instruments (‘Recognition and Measurement’) to have been met.

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below:

The loan impairment provision is management’s best estimate of losses incurred in the loan portfolios at the balance sheet date. Key sources on impairment provision regarding “specific provisions” and “Incurred but not reported provisions” are explained below:

Specific provisions

Impairment provisions are recognised for individual loans when, in the judgement of management, there is observable evidence of a loss event and the estimated repayment realisable from the borrower falls short of the amount of principal and interest outstanding. This determination requires the exercise of considerable judgement, involving consideration of local economic conditions, the financial status of the customer and the realisable value of any security held. Consequently these allowances can be subject to variation as time progresses and the circumstances of the customer become clearer.

Those found not to be specifically impaired are collectively assessed for any impairment that has been incurred but not reported (“IBNR”). The key sources of estimation within this provision are considered to be:

• The probability that loans, which have not yet been identified as impaired, will become impaired in the future (“probability of default”);

• The expected losses on loans that default (“loss given default”); and

• The time taken from the occurrence of a loss event to the Company identifying that the loan is impaired (“emergence period”).

The amount of unobserved impairment loss in the loan portfolio, and therefore the adequacy of the IBNR provision, is inherently uncertain as there may be factors in the portfolio that are not a feature of the past.

The directors have reviewed the whole of the debtor book and have made judgements on the recoverability of the debtors and provided for bad debts on a prudent basis.

The average monthly number of persons (including directors) employed by the group and company during the year was:

Their aggregate remuneration comprised:

The actual credit for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:

Details of the company's subsidiaries at 31 December 2022 are as follows:

Loans and advances to customers includes bad debt provisions of £196,472 (2021: £3,120,281). The directors have reviewed the whole of the debtor book and have made judgements on the recoverability of the debtors and provided for bad debts on a prudent basis.

The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

As an asset finance business, financial instruments are central to the Group's activities. The risk associated with financial instruments represents a significant component of those faced by the Group and is analysed in more detail below. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1.8.

The fair values of the Group's financial assets and liabilities are not materially different from their carrying values. The Group holds no financial instruments that are measured at fair value subsequent to initial recognition.

Credit risk is the risk that the counterparty fails to repay its obligation in respect of amounts owed. The Group has a policy where appropriate security checks are done by the underwriting team before the deal is approved. The Group's lending activities are generally short-term in nature with low average loan size in order to control concentration risk in the loan book and associated collateral. In addition, the Group applies consistent and prudent lending criteria mitigating credit risk. The credit quality of counterparties with whom the Group deposits or whose debt securities are held is monitored within approved limits.

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

During the year, the Company entered into the following transactions with related parties:

• A profit management fee of £2.2m (2021: £1.2m) being profits generated by the subsidiaries;

• A service fee of £0 (2021: £1.4m) from the subsidiaries for management services.