The directors of the group have elected not to include a copy of the income statement within the financial statements.
These financial statements have been prepared in accordance with the provisions applicable to groups and companies subject to the small companies regime.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £2,212,207 (2022 - £1,006,511 loss).
etika Finance UK Limited (“the company”) is a private company limited by shares incorporated in England and Wales. The registered office is Colony Suite 2.01, Colony, One Silk Street, Ancoats, Manchester, M4 6AG.
The group consists of etika Finance UK 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 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.
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 under the historical cost convention, modified to include the revaluation of freehold properties and to include investment properties and certain financial instruments at fair value. 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 group 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 group financial statements:
Section 4 ‘Statement of Financial Position’ – Reconciliation of the opening and closing number of shares;
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’ – Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’ – Compensation for key management personnel.
The consolidated group financial statements consist of the financial statements of the parent company etika Finance UK Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 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 group has net assets of £38,275,213 (2022: £39,546,819), and has reported a group loss of £3,271,606 (2022: £1,721,057). At the time of approving the financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus, the directors continue to adopt the going concern basis of accounting in preparing the financial statements
Turnover represents interest received and fees charged in the company's principal activity of providing credit finance.
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 income statement.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible 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.
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.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's statement of financial position when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
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 costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
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.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Black-Scholes model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
The expense in relation to options over the parent company’s shares granted to employees of a subsidiary is recognised by the company as a capital contribution, and presented as an increase in the company’s investment in that subsidiary.
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 estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Trade debtors are recognised at the transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method. Where necessary, provisions for bad debts are considered when there is payment delinquency. Calculation of these provisions includes a model which takes into account the historical data of loan defaults and uses this data to calculate a probability of default for the loans that are in delinquency. This probability is then used and applied to the principle balance of each loan that has evidence of impairment to calculate the bad debt provision.
In the prior year, the total provision of £56,448 in the balance sheet represents the Directors' best estimate of the liability the company will incur due to certain retailers defaulting on loan payments or for recompensing customers for services that were paid for but not received with these retailers. In the prior year, the group performed a review of the retailers for whom they provide finance with a view to reducing the risk of financial loss as a result of retailer business failures. As a result, the group stopped providing finance where the retailer risk was considered too high.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Details of the company's subsidiaries at 31 December 2023 are as follows:
Registered office addresses (all UK unless otherwise indicated):
The above bank loan is due to National Westminster Bank Plc (NatWest). The loan carries an annual interest rate which is the aggregate of the applicable margin and SONIA reference rate (sterling overnight index average). The original loan was agreed on 27 November 2019 and was due to be repaid in 36 months. The bank loan facility was renegotiated on 29 June 2023 and is now due to be repaid 48 months from the seventh amendment date of the agreement which was 14 January 2022.
NatWest has a fixed and floating charge over the assets of Etika Finance UK Loans SPV One Limited. Post year end the loan is being repaid and the balance outstanding to NatWest is £8,000,000 as at the signing date. The surplus available facility has been cancelled.
The £548,974 (2022: £548,974) in other creditors relates to unsecured loan notes owed to Contentis SPV 1 Limited. The loan notes carry an annual interest rate of 7%. These loan notes are due to be repaid on 26 July 2029.
The company operates an Employee Share Ownership Plan whereby the shareholders of Etika Holding Limited have committed to allow the employees of the group below Etika Holding Limited to subscribe to up to 30% of the A ordinary shares in Etika Holding Limited. As at 31 December 2023, 3 employees of Etika Finance UK Limited held 1% of the shares in Etika Holdings Limited.
The employees included within the ESOP have subscribed to the shares at their fair value. Value was measured on the basis of management judgement, taking into account an independent valuation of the Etika Finance UK group in dated 31 December 2019 performed on a discounted cash flow basis updated for the performance of the Etika Holding Limited group since that date. On the basis that the employees have paid fair value of the shares there is no impact on the company’s profit and loss account or balance sheet as a result of the ESOP scheme.
Shares subscribed to by employees are subject to forfeiture if the employee leaves within 3 years of the date the share subscription is agreed with them, otherwise on leaving the employees shares are governed by the articles of the company. All shares held by UK employees are fully vested.
Following the year end on 8 February 2024, the ultimate shareholder offered to purchase the shares within the ESOP scheme for all employees including those employed by Etika Finance UK Limited for £25,000 per employee.
In the prior year, on 14 January 2022 the company’s loan due to its Etika Holdings Limited of 21,759,344 was converted into £0.001 Ordinary shares. On 24 January 2022 the Series B Flowering Shares and Preference shares were re-designated as £0.001 Ordinary shares and £1 ordinary shares. A capital reduction then took place reducing the £1 Ordinary shares created by the re-designation of the Preference shares to £0.0001 Ordinary shares and the £0.001 Ordinary shares to £0.0001 Ordinary shares. The share premium account was also cancelled and credited to a capital reserve.
On 5 June 2023, the company issued 200,000 ordinary shares at £10 per share with a nominal value of £0.0001.
As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006:
The auditor's report was
At year end the company owes £830,897 (2022: £771,826) to Contentis SPV 1 Limited, a company owned by Joost Schuijff who has significant influence over Etika Finance UK Limited.
At year end the company owes £2,115,043 (2022: £62,805) to etika Australia Pty Ltd, a subsidiary of Etika Holding Limited.
At the year end the company is owed £785,651 (2022: owed £712,641) to etika Holding Limited, etika Finance UK Limited's parent company.
The parent company is etika Holding Limited and its registered office is The Scalpel, 18th Floor, 52 Lime Street, London, EC3M 7AF.
The ultimate controlling party is Joost Schuijff.
A prior year restatement has been disclosed to reclassify the non-utilisation fee of £268,609 and bank interest of £282,045 from Cost of sales in the Group Income Statement to the Interest payable and similar expenses in the Group Income Statement. In addition to the above, amortisation costs of £94,212 have been reclassified from Interest payable and similar expenses in the Group Income Statement to Administrative expenses in the Group Income Statement.