Nucleus_Commercial_Holdin - Accounts

The directors present the Strategic Report of Nucleus Commercial Holdings Limited for the year ended 31 March 2023. In preparing this Strategic Report, the Directors have complied with section 414C of the Companies Act 2006.

The Nucleus Group (the Group) is a leading commercial finance provider to the UK SME market offering a wide range of products including:

• Cash Flow Finance;

• Property Loans;

• Merchant Cash Advance Loans;

• CBILs Loan Scheme (Finished in April 2021)

• Recovery Loan Scheme (RLS) (Finished in June 2022);

• Asset Based Lending (ABL) (See below)

The Group offers a wide range of products ranging from £25,000 to £50,000,000. The Group was also accredited for the government backed Loan Scheme (RLS) in 2021, this scheme completed in June 2022. Nucleus originated c.£142m of RLS loans under this scheme.

Following the cessation of the RLS scheme the Group re-emphasized its focus on commercial lending and undertook a full review of the products to ensure that we continued to be at the forefront in offering products to the market that borrowers wanted.

At the end of FY22 the Group had £297.6m loans under management, in FY23 this had fallen slightly to £271.6m. Against a difficult economic backdrop and with the government lending scheme finishes lower originations were forecast. The ongoing strong performance of the Group is testament to our excellent team and the service they provide to our clients. We continue to invest significant resources in the development of our systems and the latest technology to provide the best, most user-friendly and rapid decision-making for brokers and clients.

General Business Overview

For the previous two financial years the Group had concentrated the majority of its efforts on the government backed CBILs and RLS schemes. With the RLS scheme coming to an end in June 2022 there was a renewed focus on “normal” commercial lending. A full strategic review was undertaken of the market, our current products and structure, and from this we made key decisions for the medium and long term strategy of our business.

The decision was taken to discontinue a number of products and to exit certain markets, such as asset based lending, and focus all our efforts on standard cash flow loans. The historical cash flow product was split into three key offerings, short, medium and long term. We reviewed everything from our origination model, take on procedures, underwriting and loan management to enhance what we had to offer.

Whilst the products in the new form were well received initial demand of “standard” commercial loans was not as high as pre-covid or under the CBILs and RLS schemes. The credit quality of a number of applications was also below what we had seen previously, somewhat expected given the current economic landscape.

With the support of our incumbent investors and lenders we continued to meet the demand, though we suppressed this given the availability of funds, in a difficult market whilst new funding lines were secured.

Against this challenging back-drop we continued to perform well and met a number of our key performance indicators for the financial year, though loan originations were significantly down and with the amortization of the various loan books funds under management also falling.

Key Performance Indicators - Results

A summary of the Key Performance Indicators is included below:

As stated in a challenging market we expected lower originations than we had seen in previous years under the CBILs and RLS programs being in full flow. Originations for FY23 were £61.49m against £128.00 in FY22.

Overall loans under management decreased as expected with capital repayments on the CBILS and RLS books and early repayments coupled with lower originations. The sale of the NCFF, NBCA and NPF1 historical portfolios also accounted for a one-off decrease in loan facilities of c.£12.4m.

Income for the financial year was £38.72m against £36.90m the previous year, due to further originations under the RLS scheme and associated take on fees and interest.

Whilst lower originations and a smaller loan portfolio have directly impacted income we have continued to invest significantly in our in house bespoke IT infrastructure, our people and new products such as Pulse.IO, our financial analysis software to assist UK SMEs.

Operating profit has remained consistent at £17.73 in FY22 to £17.27m in FY23 whilst the Group made a net profit for the year of £11.07m after exceptional items and disposals ((£3.81m) excluding these items).

Financing

The Group continues to seek funding lines with new lenders who fit with our ethos and commitment to provide competitive funding options to our clients.

FY23 wasn’t without its challenges and despite positive discussions with a number of lenders “the Growth Plan” delivered in September 2022 to UK Parliament against the economic backdrop at the time and the global markets reaction thereafter meant that a number of lenders re-evaluated their appetite to enter into new financing agreements.

In the short term we continued to benefit from the support of our existing lenders and new facilities were provided whilst others were extended or increased.

In March-23 we completed a new £50m line which would allow for further origination of our cash flow product whilst we carried on discussions for a new larger facility with greater scope to lend across all the cash flow products.

At the time of issuing the accounts we are in discussions with one senior lender and various mezzanine lenders over new facilities which should provide us with further facilities of close to £250m. This will allow us a lot greater flexibility to provide the full range of products at a more competitive price.

Group Restructure and sale of SPV’s

Nucleus Commercial Finance Limited – Asset Based Lending

Our asset-based lending product was our first offering when we started and we have served our clients by providing over £2.5bn in revolving facilities since 2011. With the changing financial landscape and our key focus being on the cash flow and term loan products the decision was taken to step away from this market in late 2022.

We have stopped originating new business for this product and worked with our existing client base as facilities came to a conclusion to ensure they had a smooth transition to new funders with minimal disruption to their businesses.

At the end of FY 23 we still had 6 clients with total facilities of £15.0m. It is anticipated that the majority of the facilities will be concluded by the end of 2023 with no clients remaining by the end of FY24.

The time, funds and resources freed up from this decision will allow us to concentrate on our new and existing products.

Nucleus Cash Flow Finance Limited (NCFF)

NCFF was incorporated in 2017 and originated cash flow loans up until the covid pandemic in 2020. It was the originator for the CBILs loan scheme, the majority of the loans of which were sold to a separate SPV within the Group.

The cash flow product in its current form has been discontinued and the remaining loan book was sold in 2022 to a third party.

Going forward NCFF will manage the residual CBILs loans that it holds as well as origination of new products if required.

Nucleus Business Cash Advance Limited (NBCA)

NBCA provided merchant cash advance loans to UK SMEs. The product was hugely successful prior to the pandemic with the availability of government backed loans and our own focus on this and other term loan products origination has been significantly lower over a number of years.

Understanding what the market wanted we developed a new streamlined product which was launched in FY23 under Nucleus Revenue Based Loan in a separate SPV (NCFF2). Take up by existing clients and new clients has showed that it has been well received and we will look to grow this further as we move forward.

The NBCA SPV, including the residual loan book, was sold in FY23.

Nucleus Property Finance1 Limited (NPF1)

As part of the Group restructuring we also sold NPF1, including the loan book and debt, to the same entity that purchased NBCA.

The loan book was primarily made up off non-performing loans in collect out. Under the agreement all capital proceeds would be repaid to the senior lender on collection whilst Nucleus continued to assist in servicing the book.

Restructuring Conclusion

The restructuring of the Group, along with the introduction of new and revised products means we are well placed to continue our growth with a renewed focus on key products which have specifically been tailored to the current market.

Section 172 Statement

The directors, in line with their duties under s172 of the Companies Act 2006, act individually and collectively in the way they consider, in good faith, would be most likely to promote the success of the group for the benefit of its members, and in doing so have regard, amongst other matters. While the board accepts that not every decision it makes will result in a equally positive outcome for all of the Group’s stakeholders, by considering the Company’s purpose, mission and values together with its strategic objectives and having a process in place for decision making, the Directors aim to make sure that the Board’s decisions are consistent and do not create unexpected outcomes for stakeholders.

The Group’s key stakeholders are, but not limited to, its people, its customers, its lenders and, the communities in which it operates and the shareholders. The impact of any decisions made by the Directors take account off the impact on the Groups activities and on those actions on the Groups stakeholders.

The directors understand the importance of engagement with all of their stakeholders and regularly seek feedback whether formal or informal from them. Such an example would be the introduction regular staff surveys to understand firsthand what our employees feedback is. The results of this feedback is analyzed and shared with the wider firm and stakeholders. Feedback is then provided to staff on the results with actions plans where appropriate or explanations to why certain courses of action have been taken, or cannot be taken depending on the scenario / issue.

Brokers and Customers

The majority of our loans come through our wider broker network and a lot of the communication with our team initially is with them. Our team are in constant dialogue getting feedback on matters such as quality of customer service and this is feedback to the senior management and director group. The group works closely with its brokers customers to achieve long term client satisfaction through bespoke service delivery and this has been evidenced by a number of awards and recognition in respect of our broker portal that was specially designed after listening to our brokers and customers.

Suppliers

The group works with a range of suppliers and remains committed to being fair and transparent in dealings with all suppliers. The group has, where relevant, procedures in place requiring due diligence of suppliers as to their internal governance, including for example, their anti-bribery and corruption practices, data protection policies and modern slavery matters. The group has systems and processes in place to ensure suppliers are paid in a timely manner.

Environmental, Social & Governance (ESG)

Environmental, Social & Governance is playing an ever increasing role in today’s world and Nucleus is committed to being a sustainable and responsible lender. Over the last 12 months we have reviewed our various policies and brought these together to have a comprehensive ESG policy.

We have a working dedicated ESG group who look at all aspects of the Group’s ESG undertaking who are responsible for looking at ways we can record, improve and communicate what we are doing in respect of ESG issues.

We have made steps to record, and then improve, key metrics relating to ESG issues across the firm including energy consumption, carbon emissions, females in senior positions within the firm (including the Board) and the gender pay gap.

This is an ongoing process and we will look to make continual improvements in our performance and the reporting of them to all of our stakeholders.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 March 2023.

The Group provides the financial expertise and credit facilities of a traditional high street lender with the flexibility and transparency of a peer to peer business lender.

The results for the year are set out on page 12.

Ordinary dividends were paid amounting to £2,000,000 (2022: £Nil). The directors do not recommend payment of a further dividend.

Preference dividends were paid amounting to £318,369 (2022: £nil).

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

The auditor, Moore Kingston Smith LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

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.

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.

We have audited the financial statements of Nucleus Commercial Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2023 which comprise the Group Profit And Loss Account, 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 and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 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 March 2023 and of its 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 group's and 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 group or 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.

As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group's or the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Explanation as to what extent the audit was considered capable of detecting irregularities, including

fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,

including fraud is detailed below.

The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.

Our approach was as follows:

• We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK financial reporting standards as issued by the Financial Reporting Council, and UK taxation legislation.

• We obtained an understanding of how the company complies with these requirements by discussions with management and those charged with governance.

• We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.

• We inquired of management and those charged with governance as to any known instances of noncompliance or suspected non-compliance with laws and regulations.

• Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. 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 for no purpose other than to draw to the attention of the company’s members those matters we are required to include in an auditor's report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party 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.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

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 £1,042,282 (2022: £469,076).

Nucleus Commercial Holdings Limited (“the Company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Mezzanine Floor, St Albans House, 57-59 Haymarket, London SW1Y 4QX.

The Group consists of Nucleus Commercial Holdings Limited and all of its subsidiaries.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared on the historical cost convention. The principal accounting policies adopted are set out below.

The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:

• Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures.

The consolidated financial statements incorporate those of Nucleus Commercial Holdings Limited and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits).

All financial statements are made up to 31 March 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

The financial statements are prepared on a going concern basis as the Directors are satisfied that the Company and Group have the resources to continue for the foreseeable future (which has been taken at least 12 months from the date of approval of the financial statements). In making this assessment, the Directors have considered the performance of the Group, current reserves and the ongoing business prospects.

The Company made significant changes to its business model during the year and made a profit of £11.07m (2022: £1.66m loss) in a challenging market.

The Group has net assets at the end of the year of £14.1m (2022: £5.4m) and unencumbered cash of £9.0m (2022: £8.3m).

The Company has prepared a detailed 5 year plan which takes into account economic stress, new funding lines becoming available and higher originations of its loan products. Prudent provisioning in respect of ongoing defaults on new and historical loan products.

A downside scenario has also been forecast with lower origination forecasts, smaller loan facilities and higher default rates. Current cash reserves and ongoing servicing fees would allow the Group to continue to meets its liabilities as they fall due without the requirement for any significant restructuring of the firm or how it currently operates.

The Company does not rely on any borrowing facilities, drawn or undrawn to trade.

The directors have reviewed the financial covenants that they must adhere to under the terms of the various finance agreements such as unencumbered cash and group tangible net worth and any breach of these covenants under both scenarios is considered remote.

Having carefully reviewed the short, medium and long term prospect of the business in detail the Directors consider that the Group has the ability to remain in operation for the foreseeable future for a period not less than 12 from the date of approval of the Company financial statement and have therefore continued to adopt the going concern basis in preparing the financial statements.

Turnover is recognised at the fair value of the consideration received or receivable for services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.

Interest receivable is recognised on a monthly basis. Facility fee revenue (Nucleus Commercial Finance Limited & Nucleus Commercial Finance1 Limited) is recognised monthly dependent on the agreed contractual terms relating to facility size, drawn balance and refactoring fees. Take on fees are accrued at the point of the start of the contract with the client and are then amortised over the life of the underlying loan. Commitment fees relate to preliminary work carried out to establish the risk profile of the client which are then recharged and are accrued as invoiced. Early exit fees are recognised upon the early termination of a contract. As such there is no material revenue which is subject to the stage of completion of a contract.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

At each reporting period end date, the group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Cash at bank and in hand are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less and bank overdrafts are shown within borrowings in current liabilities.

In accordance with FRS 102 the cash movements associated with the loan books and the associated borrowings have been included within operating activities in the preparation of the Consolidated Statement of Cash Flows and related notes.

Basic financial instruments are measured at cost. The company has no other financial instruments or basic financial instruments measured at fair value.

Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

The costs of short-term employee benefits are recognised as a liability and an expense.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

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.

In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.

The group makes an estimate of the recoverable value of trade debtors. When assessing impairment of trade debtors, management considers the likelihood of recoverability of the debt based on the risk factor of the customer and contractual position.

The group makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current valuation of the assets that the company has security on, the ageing profile of debtors, the overall performance of the loan book and historical experience. See note 17 for the net carrying amount of the debtors and associated impairment provision.

The group has a specific policy for the CBILS and RLS loan books. As these loans are backed by the BBB, when a loan requires a provision, 20% is recognized in the specific bad debt provision. The remaining 80% is claimed from the BBB. This 20% will be held as a provision until confirmation is made that no final dividend is payable.

An analysis of the group's turnover is as follows:

The exceptional item in the profit and loss account is in respect of the sale and subsequent write back of historical debt from Nucleus Cash Flow Finance Limited to Nucleus Property Finance1 Limited that was executed in the financial year as part of a wider re-structuring of the Nucleus Group. The amount recognised above is the element of the write back that took place after Nucleus Property Finance1 Limited left the group.

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

Their aggregate remuneration comprised:

Included in gains on disposals of financial assets held at cost is £14,286,291 (2022: £nil) relating to the disposal of Nucleus Property Finance1 Limited and Nucleus Business Cash Advance Limited. The gain is the equivalent value of the net liabilities of each former group entity at the dates of disposal. See Note 14 for details of the dates of disposal.

Investment income includes the following:

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

On 22 September 2022 acquired 100% of the share capital of Nucleus Cash Flow Finance5 Limited and Nucleus Cash Flow Finance6 Limited.

Nucleus Property Finance1 Limited was disposed of on 29 July 2022 and Nucleus Business Cash Advance Limited was disposed of on 28 February 2023.

Included within trade debtors is a balance of £217,040,900 (2022: £241,414,224) due in more than one year, net of the bad debt provision.

The short and long-term loans are secured by fixed and floating charges over the group's current assets in their respective entities.

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. The pension creditor at the year end amounted to £16,253 (2022: £17,099).

There is a single class of shares with no restrictions on distribution of dividends and the repayment of capital. The ordinary share capital has full rights in the company with respect to voting, dividends and distributions.

At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Details of the company's subsidiaries at 31 March 2023 are as follows:

The registered office for all subsidiaries above is Mezzanine Floor, St Albans House, 57-59 Haymarket,

London, SW1Y 4QX.

On 29 July 2022 the group disposed of its 100% holding in Nucleus Property Finance1 Limited. Included in these financial statements are losses of £10,117,115 arising from the company's interests in Nucleus Property Finance1 Limited up to the date of its disposal.

On 28 February 2023 the group disposed of its 100% holding in Nucleus Business Cash Advance Limited. Included in these financial statements are losses of £542,280 arising from the company's interests in Nucleus Business Cash Advance Limited up to the date of its disposal.

Subsequent to the balance sheet date, Nucleus Asset Finance Limited was placed into liquidation by the directors and was dissolved on 4 April 2023.

The company has taken advantage of the exemption available in accordance with FRS 102 section 33 'Related Party Disclosures' not to disclose transactions entered into between two or more members of a group, as the company is a wholly owned subsidiary undertaking of the group with which it is party to the transactions.

Key management personnel is deemed to be the directors. Aggregate remuneration is disclosed in note 9. At the balance sheet date there is an amount of £4,540 owed to a director by the company (2022: £12,545).

During the year, the group incurred costs totalling £1,427,845 (2022: £894,614) in respect of management recharges and recharged contractor salaries, rent and other overheads from MyPulse.io Private Limited (formerly Quantility Business Solutions PVT Ltd), a company registered in India under the control of C Shah's father. At the balance sheet date there is an amount of £71,516 (2022: £nil) owed to MyPulse.io Private Limited.

During the year the group received income of £32,864 (2022: £137,560) in respect of servicing fees and incurred expenditure of £162,814 (2022: £nil) from Infinity Funding Limited, a company wholly owned by a director. At the year end an amount of £nil (2022: £823,046) was owed by Infinity Funding Limited.

After the sale of Nucleus Property Finance1 Limited by Nucleus Commercial Holdings Limited on 29 July 2022, the exemption noted above for all relevant group entities no longer existed. Nucleus Property Finance1 Limited had transactions totalling £700,000 with Nucleus Commercial Finance Limited, £35,000 with Nucleus Property Finance Limited and £823,557 with Nucleus Cash Flow Finance Limited in the period post sale. There were no amounts outstanding between these entities at 31 March 2023.

After the sale of Nucleus Business Cash Advance Limited by Nucleus Commercial Holdings Limited on 28 February 2023, the exemption noted above for all relevant group entities no longer existed. Nucleus Business Cash Advance Limited had transactions totaling £2,194 with Nucleus Services Limited in the period post sale. There were no amounts due to or from Nucleus Services Limited at 31 March 2023.

The ultimate parent company of Nucleus Commercial Holdings Limited is Nucleus Holdings Limited, a company incorporated in The Isle of Man.