A reduction in the growth rate to 1.0% would reduce the recoverable amount by GBP1.1 million. Non-financial assets (primarily goodwill, intangible assets and property plant and equipment) are held within the Group within cash generating units ("CGUs") which are expected to benefit from the assets. Independent review report to Funding Circle Holdings plc, Report on the condensed consolidated interim financial statements. As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. - cost growth at a compound rate of 12.5%. Under the terms of the agreements, the Group is required either to make payments when the underlying borrower fails to meet its obligation under the loan contract or buy the defaulted loan from the investors at its carrying value. Following accreditation to CBILS we also paused all non-CBILS lending from retail and institutional investors to concentrate on supporting the Government's SME guarantee programme. The maximum exposure the Group might have to pay at the balance sheet date if 100% of eligible loans were required to be bought back would be GBP34.1 million (31 December 2019: GBP41.5 million). Cash payments associated with these items totaled GBP2.4 million to 30 June 2020. Interest on borrowings are subject to movements in Libor and the 3 month commercial paper rate, 1 month GBP LIBOR and 3 month USD Libor. Excluding these items, people costs were down GBP1.4m driven by inflationary pay rises in March being more than offset by headcount control, recruitment freezes and redeployment of staff. Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. There was no cash movement in relation to the impairment. As at 30 June 2020, the Group held cash and cash equivalents of GBP131.2m (31 December 2019: GBP164.5m). The GLT is made up of the Executive Directors and other senior management and is responsible for the strategic decision making of the Group. (1) Restructuring provision is in relation to reorganisation of the German and Dutch businesses, see note 6. The Group uses a number of alternative performance measures ("APMs") within its financial reporting. Included within cash and cash equivalents above is a total of GBP58.8 million (31 December 2019: GBP15.4 million) in cash which is restricted in use. 2019 was an amazing year for the Partnerships team, they helped facilitate over £65 million to over 600 businesses. Since then, the US business has approved over $1bn of PPP loans and originated c.$500m. Critical accounting estimates and judgments. Take your next step with fast, affordable business finance. Whilst there is credit risk from the loans defaulting, these SME loans and the associated bank debt or third party bonds are held within bankruptcy remote vehicles. o All UK cohorts expected to deliver positive annualised returns. It is estimated that in both the European markets defaults will accelerate to a peak in H2 2020 and then de-stress gradually afterwards, with Germany expected to fair more favourably than Netherlands as a result of government stimulus programme. Further details of the impairment assessment are detailed within note 3. Fair value movements on investment in SME loans (warehouse), investment in SME loans (securitised), investments in trusts, and bonds (unrated) are recognised through the profit and loss as part of net income. In certain circumstances, in the less mature markets, Funding Circle has entered into arrangements with institutional investors to assume the credit risk on the loan investments made by the institutional investors. o All US cohorts (except 2019) expected to deliver positive annualised returns. Oliver White to succeed Sean Glithero as Chief Financial Officer. Categories. The latest breaking news, comment and features from The Independent. Early Covid-19 trends suggest a permanent change in the SME borrowing market that we believe will benefit Funding Circle in the medium to long term. The estimated fair value and carrying amount of the bonds was GBP5.3 million at 30 June 2020 (31 December 2019: GBP20.0 million). The anticipated cash cost of this restructuring is c.GBP2m. We have reviewed Funding Circle Holdings plc's condensed consolidated interim financial statements (the "interim financial statements") in the 2020 Half Year Results of Funding Circle Holdings plc for the 6 month period ended 30 June 2020. Originations totalled GBP662m, down 17% on H1 2019 reflecting the two month period where limited loans were originated. The Group considers the large majority of this fair value movement is attributable to Covid-19. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. The investments categorised as level 2 all relate to investment in SME loans (curing). This information is provided by RNS, the news service of the London Stock Exchange. The cash and cash equivalents balance is made up of cash, money market funds and bank deposits. The timing of the pandemic meant that it was not feasible to dispose of these horizontal tranches in H1 2020. Covid-19 has had minimal impact on these investments. Interest is payable on the borrowings in the UK at 1.50% plus 1 month LIBOR and in the US at 2.5% plus the 3 month commercial paper rate on the initial facility and at 3 month USD LIBOR + 2% on the new facility respectively. Under IFRS 9, the Group is required to provide for these loan repurchases under the expected credit loss ("ECL") model. Investor returns have also remained resilient during Covid-19 and we expect all cohorts in the UK to deliver positive annualised returns and all cohorts in the US to deliver positive annualised returns, except the 2019 vintage. 596/2014 . The Group's share of losses from associates in the period was GBP1.1 million (30 June 2019: GBPnil). The most significant estimation is with default rates on performing loans. As at June 2020, Funding Circle held horizontals in 3 securitisations which were securitised in H2 2019 (UK and US) and H1 2020 (US). For those small businesses looking for finance, there has been a significant acceleration in online adoption with searches related to business finance terms increasing 2x immediately following the introduction of a national lockdown in the UK. The accounting policies, methods of computation and presentation adopted in the preparation of the condensed interim financial statements are consistent with those followed in the preparation of the consolidated financial statements for the year to 31 December 2019. Nothing contained within this document is or should be relied upon as a warranty, promise or representation, express or implied, as to the future performance of Funding Circle or its business. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. Loan repurchase charges relate to the buyback of certain defaulted loans from certain institutional investors under a loan purchase commitment in return for a fee premium. This also produces an expectation of a peak in defaults in H2 2020 with a tail normalising over 2021 into 2022. The impairment test involved comparing the carrying value of the net assets held for use to their recoverable amount. The recoverable amount represents the higher of the entity's fair value less costs to sell and its value in use. The table below shows how the Group's overall cash has been utilised: In July 2020, the Group announced that it is restructuring the US business to accelerate its path to profitability. 11 August 2020. o Since being accredited, Funding Circle has become the 5th largest CBILS lender in the UK with a market share of c.20% of loans approved. (2) Investment AEBITDA refers to net investment income (being investment income, investment expense and fair value adjustments) as previously reported. The Group's financial risks and risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year to 31 December 2019. It applies the latest default curve and lifetime default rates tailored to each cohort based on the expected lifetime default rate. The timing of the pandemic meant that it was not feasible to dispose of these horizontal tranches in H1 2020. The Group continued its bond programmes which commenced in the prior year in the UK and US, continuing to invest in SME loans during the "warehousing phase" of the programme using both its own cash and amounts borrowed under credit facilities with lending institutions. These are typically held for two to three days before being transferred to independent investors at the principal amount. Nothing in this document should be construed as legal, tax, investment, financial, or accounting advice, or solicitation for or an offer to invest in Funding Circle. They also onboarded numerous partners across the country, who are now able to offer their clients different options and a more enhanced service. We are reinstating previous guidance of close to AEBITDA break-even in H2. Contact us. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The basis of remuneration of key management personnel remains consistent with that disclosed in the 2019 Annual Report and Accounts. The Group has three CGUs, being Funding Circle USA ("FCUSA") and its subsidiaries, Funding Circle Limited ("FCUK") and its subsidiaries and the German and Dutch businesses (Funding Circle Continental Europe or "FCCE"). Management prepared a stress scenario in which: - CBILS in the UK is not extended beyond end of September 2020; - UK and US non-government lending does not meaningfully resume until January 2021; and. The annual goodwill impairment assessment was performed at 31 December 2019. Funding Circle (LSE: FCH) is a small and medium enterprise ("SME") loans platform . Our responsibility is to express a conclusion on the interim financial statements in the 2020 Half Year Results based on our review. The Directors are responsible for the maintenance and integrity of the Company's website. Funding Circle Holdings plc published this content on 24 September 2020 and is solely responsible for the information contained therein. Covid-19 has had minimal impact on these investments. The sensitivity in expected lifetime cumulative defaults should not also be applied to the sensitivity of the credit risk element of the risk-adjusted discount rate and the sensitivities are most meaningful viewed independently of each other. Disclosure of fair value measurements by level is according to the following fair value measurement hierarchy: The fair value hierarchy has the following levels: -- level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; -- level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liabilities, either directly or indirectly; and. 6054785). The facilities are drawn down in order to fund the purchase of SME loans for the warehouses. Whilst SME loans are originated by a Group subsidiary, Funding Circle Focal Point Lending Ltd, which retains legal title to the loans, it holds this legal title of trust on behalf of the investors and therefore the SME loans are not consolidated. There were no critical judgements in the current period. The Group's maximum exposure to credit risk on this financial guarantee were every eligible loan required to be bought back would be GBP34.1 million (31 December 2019: GBP41.5 million). This is significantly higher than the six month period to 30 June 2019 as these programmes had only recently commenced by June 2019.