TIDMZAIM
RNS Number : 1442X
ZAIM Credit Systems PLC
30 April 2021
Not for release or distribution, directly or indirectly, within,
into or in the United States or to or for the account or benefit of
persons in the United States, Australia, Canada, Japan or any other
jurisdiction where such offer or sale would violate the relevant
securities laws of such jurisdiction
For Immediate Release
30 April 2021
Zaim Credit Systems Plc
("Zaim" or the "Group")
Audited financial results for the year ended 31 December
2020
Zaim Credit Systems plc (the 'Group' or 'Zaim'), the Russian
focused fintech group, is pleased to announce its audited financial
results for the year ended 31 December 2020.
Key highlights
-- Group Net Profit for the second half of 2020 of GBP0.7m (1H 20 loss of GBP1.3m)
-- Adjusted EBIT profit for the second half of 2020 of GBP0.8m (1H 20 loss of GBP0.9m)
-- Adjusted EBIT loss for the year of GBP0.1m (FY 19 loss of GBP0.2m)
-- Achieving profitability in the second half of the year
extremely encouraging given the backdrop of the COVID-19
restrictions
-- Rapid transition to a predominantly online business model
underlines the resilience and adaptability of the Group which is
now well placed to capitalise on further growth
-- Transition from offline-centered to online-centered business
model mid-way through 2020 resulted in significantly lower fixed
costs and higher scalability of the business
-- Total loans issued increased by 15% to GBP10.4m (FY19
GBP9.0m) in FY20 and by 52% from GBP4.1m in 1H20 to GBP6.3m in
2H20
o The growth experienced in 2H is robust, sustainable and
expected to continue as it is a result of the revised business
model to focus the Groups resources online
o The rate of growth is expected to be stable as Zaim continues
to take market share and not a result of any rebound from reduced
business 1H or other short term result
-- Growth of the loans issued was driven by the sharp increase
in the online business, which grew 16 fold from GBP0.3m in 2019 to
GBP5m in 2020. This growth was especially notable in 2H20 vs. 1H20
after the successful transformation to a predominantly online
business model, generating an increase in loans issued of 540% from
GBP0.7m in 1H20 to GBP4.3m in 2H20
-- In December 2020, the online business represented 82% of
total loans issued compared to 13% in March 2020 at the outset of
COVID-19 and just 9% in December 2019
Financial highlights
FY 2020 FY 2019 2 H 2020 1H 20 20
GBP'000 GBP'000 GBP'000 GBP'000
------- ------- --------- ---------
Loans issued during the period 10,392 9,028 6,275 4,117
------- ------- --------- ---------
Interest income 4,857 3, 941 2,112 2,745
------- ------- --------- ---------
Operating income 3,363 4,324 2,369 994
------- ------- --------- ---------
Net profit ( loss ) (615) (892) 720 (1,335)
------- ------- --------- ---------
Operating margin(1) 27 .3% 41.2% 26.5% 28.8%
------- ------- --------- ---------
Adjusted EBIT(2) for the
period (125) (177) 808 (933)
------- ------- --------- ---------
As at 31 December As at As at 31
2020 30 June December
2020 20 19
GBP'000 GBP'000 GBP'000
----------------- --------- ----------
Gross outstanding loans to customers 28,298 30,844 32,078
----------------- --------- ----------
Total outstanding loans, measured
at amortised cost 1,269 718 786
----------------- --------- ----------
Cash and cash equivalents 641 810 1,583
----------------- --------- ----------
1 Operating margin is calculated as net operating cash flow (net
cash received for the period (including collecting claims) less
loans provided including insurances) divided by total loans
provided including insurances
2 Adjusted EBIT is calculated by taking loss for the year adding
back accrued interest, non-cash share-based payment charges, costs
related to the IPO and one-off restructuring costs which are
non-recurring.
Zaim's CEO, Siro Cicconi commented:
"Following the successful completion of the IPO on November 4,
2019 the business was outperforming the internal growth plan and
gaining very good momentum during the first two months of 2020.
This was unfortunately impacted quite severely during March - June
2020 due to the Covid-19 pandemic and still to a slightly lesser
extent for the remainder of 2020. This posed a serious challenge
for our management team and the whole business at every level and I
would like to thank all of our employees, customers, consultants
and the management team for their hard work and dedication through
the difficult time.
During the quarantine period in the Q2 2020 , the Group rapidly
accelerated the shift in its business model to remote lending via
the Internet, which resulted in a significant increase in access to
our products without the need to visit our stores and at the same
time decreasing the fixed costs base. The Group proceeded to
optimise the physical store business, including the closure of
loss-making outlets and moved forward focussing the majority of the
Group's resource towards the online business. This was executed
well and I am pleased with the results demonstrated by the
profitability in the second half of 2020.
The Group experienced exceptional growth in lending volumes over
the second half of 2020 and continues to see a large opportunity
for our business to continue its current trajectory. I am both
excited and optimistic about what the future holds for our Company
and look forward to updating the market in the future."
A copy of the Report and Accounts will be available on the
Company's website, www. zaimcreditsystemsplc .com/english and also
from the National Storage Mechanism.
Enquiries:
Zaim Credit Systems Plc
Simon Retter
Siro Cicconi Tel: +44 (0) 73 9377 9849
Alex Boreyko Tel: +7 925 708 98 16
investors@zaimcreditsystemsplc.com
Beaumont Cornish Limited
Roland Cornish / James Biddle Tel: +44 (0) 20 7628 3396
Optiva Securities Limited
Jeremy King / Vishal Balasingham Tel: +44 (0) 20 3137 1902
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 as it forms part of
UK Domestic Law by virtue of the European Union (Withdrawal) Act
2018 ("UK MAR")
Chairman's Statement
Dear Shareholders,
It is hard to imagine our life now without digital or online
services. Over the past several years, most of us have transferred
traditional "real-life" activities online. Activities such as
shopping, education, communication, entertainment, ordering
delivery from a restaurant or meeting any other essential needs can
now be undertaken exclusively online.
Quarantine measures undertaken by the governments of most
countries during 2020 as a reaction to the COVID-19 pandemic
accelerated this shift in many cases and generated substantial
additional demand for online services. Despite this, many of these
services are difficult or even impossible to access without an
online banking presence or a bank card. At the same time as
services and activities that can be undertaken online are rapidly
expanding, many people are excluded from this "online world." This
phenomenon is quite noticeable in Russia, where in 2020, 65% of the
population did not have a bank deposit account and 85% did not have
a credit card .
Traditional banks are reluctant to approve credit to a large
percentage of Russian borrowers with poor or no credit history as
well as those from less well-off sections of society. This creates
a significant segment of the population that is excluded from the
online world and the modern standard of living.
Zaim has always built its business on ethical principles. Our
mission is to provide access to financial services in the age of
the Internet to those people who are not eligible for mainstream
financial services. With this mission in mind, several years ago,
Zaim created the Zaim MasterCard, an inclusivity tool that can be
easily issued and delivered to those who lack the "key" to the
modern online world.
With our motto "fast and flawless," we help people efficiently
resolve their temporary financial difficulties without the need for
collateral or guarantors, with funds usually delivered within a few
minutes. In order to provide our customers with a quick and easy
way to borrow money on transparent terms, we set a very high
standard in customer service and we give full training to every one
of our employees. We strive to provide financial support to a whole
sector of the Russian population that has been ignored by
conventional banks. Our best-in-class technology offering enables
Zaim to do this and maximise shareholder returns at the same
time.
This market still has a great potential. Penetration of the
microfinance industry in the Russian market is less than 2% of the
adult population, while in some mature markets, it ranges between
5% and 10%. Russian household debt in September 2020 was only 21%
of the Russian GDP compared to 89% in the UK and 78% in the USA .
Over the past several years, the microfinance market has grown by
about 25% per annum, with the majority of this growth driven by the
online segment. In addition, online lending in Russia has been
doubling year after year. During 2020, which was hopefully an
exceptional year for uncertainty and general economic turmoil, the
total balance of Russian microfinance loans grew by 18% to 249
billion rubles (ca. GBP2.5 billion) .
We used the COVID-19 restrictions and change in habits of
individuals as an opportunity to significantly accelerate the
online transformation of our business. At the beginning of the
year, we had a dominant share of the market in the Moscow region
where our existing outlet network was based, even having only a
very small-scale online business at the time. By the end of the
year, we found ourselves in the enviable position of being able to
provide the majority of our loans via remote channels and we are
now able to include the whole of the Russian population as our
market.
During the past few years, Zaim has been developing and
executing a strategy of profitable growth whilst dealing with some
significant headwinds. Zaim has successfully addressed the
tightening of regulatory requirements experienced between
2016-2019, including a reduction in the maximum interest charges.
In 2020, while our team focused on the implementation of our
post-IPO strategy, COVID-19 emerged as a truly unforeseeable event
but, once again, the team swiftly amended the strategy and ensured
our prompt return to profitability and a leaner, more efficient and
optimized business.
I would like to thank the management, employees, consultants and
my fellow board members for their commitment and hard work in
delivering these tremendous results and navigating the Group to a
rapidly growing and profitable business in the second half of
2020.
We remain committed to strengthening our position as a leading
Russian fintech company and will strive to keep delivering a fast
and flawless solution to our customers.
Malcolm Groat
Chairman
29 April 2021
Chief Executive's Review
Dear fellow Stakeholders,
2020 became the year of great challenges not only for our
company, but for the whole of humanity. I am extremely proud of our
team that has successfully addressed these global challenges and
turned a potential heavy threat to the business into an opportunity
to increase growth and undertake an incredibly fast move to an
online model. Our management has successfully navigated the
difficulties connected with COVID-19 and its consequences as well
as the tightening regulations in the microfinance field in Russia
and has built a solid and reliable growth platform, generating
significant profits in the second half of the year.
In the middle of 2019, the Russian financial regulator-the
Central Bank of the Russian Federation-tightened restrictions for
all operators in the microfinance market by reducing the maximum
interest rate by 33%, in accordance to sector re-organization plan
announced in 2016. The new rate is in line with international
markets level. This lower interest rate affected us most
significantly during 2020, the first full year of its impact, but
despite this, the Group reported an increase in interest income of
23% during the year. This was driven by an increase in the amount
of loans issued during the year to GBP10.4m (2019: GBP9.0m). During
the year, it was observed that on average, customers held our loans
for slightly longer (67 days; 2019: 52 days), predominantly due to
the lower interest rates, resulting in an increased working capital
requirement.
In 2020 we observed a significant threat to our business, as did
a lot of other traditional businesses across the globe, with the
emergence of the COVID-19 pandemic and associated restrictions
imposed by governments. I am immensely proud of our team at all
levels of the organisation who handled the situation in a calm,
professional and conscientious manner and I would like to thank
everybody for their great teamwork that has turned this significant
risk into a successful opportunity to build our growing, profitable
business.
Over the past 10 years, Zaim has developed a bespoke IT system
that allows it to receive and repay loans remotely with an
automated scoring process taking less than 10 minutes to approve or
reject new applicants. 2020 saw the prioritization of the
development of our online business and subsequent rapid expansion
of lending volumes. At the same time, the physical outlet business
was streamlined by reducing the number of outlets to 31 from 91 at
the end of December 2020 and then to 27 as at 31 March 2021. As a
result, the share of loans issued online dramatically increased
from 9% in December 2019 to 82% in December 2020.
These swift and decisive actions resulted in an immediate
improvement to the profitability of the Group with profits achieved
on a quarterly basis in both Q3 and Q4 2020. While in the first
half of 2020 the Group generated an adjusted EBIT loss of GBP0.9m,
in the second half, it generated an adjusted EBIT profit of
GBP0.8m, which is an impressive turnaround in performance.
This trend of strong growth in business volumes has continued
during Q1 2021, with key performance indicators indicating healthy
growth, and I look forward to providing more news in the Q1 trading
update.
I am glad to note that the switch to an online-focused business
model continues to outperform management's expectations and now
that the platform has been successfully deployed and fine-tuned,
our attention is turning to other business development
opportunities and to further enhancements to our existing
offerings. As part of this, the team is focusing on further
improving the level of services, implementing new tools and, on top
of this, we are glad to announce that we are releasing a mobile
app. This gives us an opportunity to stay connected to our clients
24/7 and increase the potential for repeat business.
We are now ready to expand our portfolio of services and raise
the fintech profile of the Group. Along with this, we are currently
exploring opportunities with colleges and universities to create a
mechanism for broadening access to financial services for people
who are neglected by conventional providers. Once again, we confirm
that the key words for our business are inclusivity and
profitability.
I would like to thank the Directors and the management for
navigating the successful return of the Group to net profitability.
We are currently uniquely positioned to address market challenges
and turn them into market opportunities with our consistent
commitment to adding value and generating profitability for all of
our stakeholders.
Siro Donato Cicconi
CEO
29 April 2021
Independent Auditor's Report to the Shareholders of Zaim Credit
Systems plc
Opinion
We have audited the financial statements of Zaim Credit Systems
plc (the 'parent company)' and its subsidiaries (the 'group') for
the year ended 31 December 2020 which comprise the Consolidated
Statement of Profit or Loss and Other Comprehensive Income,
Consolidated and Company Statement of Financial Position,
Consolidated and Company Statement of Changes in Equity,
Consolidated and Company Statement of Cash Flows and notes to the
financial statements, including significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The financial reporting framework that has been
applied in the preparation of the parent company financial
statements is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and of the parent company's affairs as at 31
December 2020 and of the group's loss for the year then ended;
-- the group and the parent company financial statements have
been properly prepared in accordance with International accounting
standards in conformity with the requirements of the Companies Act
2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006; and, as regards
the group financial statements, Article 4 of the IAS
Regulation.
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 the 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 as applied to listed
public interest entities, 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
director's use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors' assessment of the entity's
ability to continue to adopt the going concern basis of accounting
included carrying out a risk assessment which covered the nature of
the group, its business model and related risks including where
relevant the impact of Coronavirus, the requirements of the
applicable financial reporting framework and the system of internal
control. We evaluated the directors' assessment of the group's
ability to continue as a going concern, including challenging the
underlying data and key assumptions used to make the assessment,
and evaluated the directors' plans for future actions in relation
to their going concern assessment.
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
company's or group'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.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance on our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Risk Our response to the risk Our response and observation
Impact of COVID-19
There is a risk that the We read the Directors' assessment The disclosures in
group may not be considered of the risks and impacts of the financial statements
a going concern as a result COVID-19 on the business. adequately reflect
of the impact of COVID-19 We compared this assessment the Directors' conclusions
(Coronavirus). to our own understanding of around the uncertainties
the risks, and the nature and impact of COVID-19
of the group's operations, and, that the going
products and customer base. concern assumption
We then conducted a review remains appropriate.
of going concern in respect
of COVID-19 which included
reviewing forecasts and current
trading performance, and carrying
out stress testing. The work
undertaken considered a period
of at least twelve months
from the date of approving
these financial statements.
------------------------------------- --------------------------------
Recoverability of loans
to customers We understood the group's We did not identify
Given the extended credit process for estimating the any evidence of material
terms that were provided expected credit loss provision misstatement related
to customers, judgement under IFRS 9. Loans to customers to carrying value of
is required to establish were tested on a sample basis receivables. Management
how much of the loan receivables which included considering continue to apply an
balance is recoverable. the recoverability of the appropriate expected
There is a risk that management's balances post year end. Overdue credit loss provision.
judgements and estimates balances were discussed with
over recoverability are management and we assessed
inappropriate, when considering whether the accounting provision
the specific balances appropriately reflects the
and the requirements of facts and circumstances.
IFRS 9.
------------------------------------- --------------------------------
Risk of fraud in revenue
recognition We reviewed the group's revenue Revenue was recognised
There is a risk that revenue recognition policies and how in accordance with
is materially understated they are applied. Revenue the group's accounting
due to fraud. was then tested on a sample policy and we concluded
basis to confirm that transactions that no evidence of
have been appropriately recorded fraud or other understatement
in line with IFRS 15. was identified.
------------------------------------- --------------------------------
Risk that management is
able to override controls We examined journals posted We identified no evidence
Journals can be posted around the year end, specifically of management override
that significantly alter focusing on areas which are in respect of inappropriate
the financial statements. more easily manipulated. manual journals recorded
in any section of the
financial statements.
------------------------------------- --------------------------------
Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be charged or
influenced. We use materiality both in planning and in the scope of
our audit work and in evaluating the results of our work.
We determine materiality for the group and the parent company to
be GBP96,983 and this financial benchmark, which has been used
throughout the audit, was determined by way of a standard formula
being applied to key financial results and balances presented in
the financial statements. Where considered relevant the materiality
is adjusted to suit the specific risk profile of the group.
Performance materiality is the application of materiality at the
individual account or balance level set at an amount to reduce to
an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality.
Performance materiality for both the group and the parent company
was set at 75% of the above materiality levels, which equates to
GBP72,737. We agreed with the audit committee that we would report
to the committee all individual audit differences identified during
the course of our audit in excess of GBP4,849. We also agreed to
report differences below these thresholds that, in our view
warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding of the
group and its environment, including the group's system of internal
control, and assessing the risks of material misstatement in the
financial statements at the group level.
Whilst Zaim Credit Systems plc is a company registered in
England & Wales and its head office is located in the UK, the
group's principal operations are located in Russia. In approaching
the audit, we considered how the group is organised and managed. We
assessed the activities of the group as being the issuance of
microfinance loans to Russian individuals.
Our group audit scope focused on the group's principal operating
subsidiary, being Zaim Express LLC, which was subject to a full
scope audit together with the parent company. Shipleys LLP
performed the audit of the parent company and BDO Unicon
Aktsionernoe Obshchevstvo performed the audit of the Russian
component.
The group audit team was actively involved in the direction of
the audit and specific audit procedures performed by the component
auditor along with the consideration of findings and determination
of conclusions drawn. As part of our audit strategy, we issued
group audit engagement instructions and discussed the instructions
with the component auditor. A senior member of the group audit team
met with the component auditor and local management performed a
review of the component audit files and we discussed the audit
findings with the component auditor.
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.
In this context, matters that we are specifically required to
report to you as uncorrected material misstatements of the other
information include where we conclude that:
-- Fair, balanced and understandable - the statement given by
the directors that the y consider the annual report and financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the groups' position and performance, business model and strategy,
is materially inconsistent with our knowledge obtained in the
audit; or
-- Audit committee reporting - the section describing the work
of the audit committee does not appropriately address matters
communicated by us to the audit committee; or
We have nothing to report in respect of these matters.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion the part of the directors' remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the 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
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
the parent company and its 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 and the part of the
directors' remuneration report to be audited 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.
Responsibilities of directors
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 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
company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the audit of the financial
statements
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.
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. Our approach was as
follows:
-- We obtained an understanding of the legal and regulatory
frameworks that are applicable to the group and determined the most
significant are those that relate to the reporting framework (IFRS,
the Companies Act 2006) and the relevant tax compliance regulations
in the jurisdictions in which the group operates.
-- We understood how Zaim Credit Systems plc is complying with
those frameworks by making enquiries on management, the Company
Secretary, and those responsible for legal and compliance
procedures. We corroborated our enquiries through our review of
board minutes, papers provided to the Audit Committee, discussion
with the Audit Committee and any correspondence received from
regulatory bodies.
-- We assessed the susceptibility of the group's financial
statements to material misstatement, including how fraud might
occur by enquiring with management and the Audit Committee during
the planning and execution phase of our audit. We considered the
programs and controls that the group has established to address
risks identified, or that otherwise prevent, deter and detect fraud
and how senior management monitors those programs and controls.
Where the risk was considered to be higher, we performed audit
procedures to address each identified fraud risk including revenue
recognition as discussed above. These procedures included testing
manual journals and were designed to provide reasonable assurance
that the financial statements were free from fraud or error.
-- Based on this understanding we designed our audit procedures
to identify non-compliance with such laws and regulations
identified in the paragraphs above. Our procedures involved journal
entry testing, with a focus on manual journals and journals
indicating large or unusual transactions based on our understanding
of the business; enquiries of the Company Secretary and management;
and focused testing, as referred to in the key audit matters
section above.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising that
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,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed 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 are to become aware of it.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at
https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor's report.
Other matters which we are required to address
We were initially appointed by the board on 23 October 2019 to
audit the financial statements for the period ending 31 December
2018. Our total uninterrupted period of engagement is 3 years,
covering the periods ending 31 December 2018 to 31 December
2020.
The non-audit services prohibited by the FRC's Ethical Standard
were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our
audit.
Our audit opinion is consistent with the additional report to
the audit committee.
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.
BENJAMIN BIDNELL
For and on behalf of SHIPLEYS LLP, Chartered Accountants and
Statutory Auditor
10 Orange Street, Haymarket, London, WC2H 7DQ
29 April 2021
Zaim Credit Systems plc
Consolidated Statement of Financial Position as at 31 December
2020
(in British pounds sterling)
Company Registered number 11418575 Note 2020 2019
-------------------------------------------- ------- ------------- -----------
Assets
Cash and cash equivalents 5 640, 8 71 1 , 582,751
Loans to customers 6 1 ,269 ,313 786,346
Property and equipment 5,677 11,967
Right-of- use assets under lease agreements 7 297,925 2,549,233
Other assets 8 25 1 ,2 97 222,117
Total assets 2,465, 083 5,152,414
-------------------------------------------- ------- ------------- -------------
Liabilities
Loans received 9 735,646 742,603
Lease liabilities 7 347,216 2,555,648
Other liabilities 10 823,830 664,905
Total liabilities 1,906,6 92 3,963,156
-------------------------------------------- ------- ------------- -----------
Equity
Charter capital 11 4,369,750 4,369,750
Shares to be issued Reserve 26 800 , 000 -
Additional capital 11, 2 5 6,078,128 6,078,128
Foreign currency translation reserve 11 4, 3 90,225 4,457,788
23 , 764
Merger reserve 11, 26 2 2,9 64 ,800 ,800
Share options reserve 11 218 , 099 166,883
(38, 262 , (37, 648
Accumulated deficit 11 611 ) ,0 92 )
-------------------------------------------- ------- ------------- -----------
Total equity 558,391 1,189,258
-------------------------------------------- ------- ------------- -----------
Total liabilities and equity 2,465,083 5,152,414
-------------------------------------------- ------- ------------- -----------
Siro Donato Cicconi,
Chief Executive Officer
Simon James Retter,
Finance Director
29 April 2021
Zaim Credit Systems plc
Company Statement of Financial Position as at 31 December
2020
(in British pounds sterling)
Company Registered number 11418575
Note 2020 2019
----------------------------- ---- ---------- -----------
Assets
Cash and cash equivalents 5 1 61 ,163 1 , 310,655
Other assets 8 126, 477 68,122
10 , 0 96
Investment in Subsidiary 1 ,089 8,705 ,663
10,084,44
Total assets 10,383,729 0
----------------------------- ---- ---------- -------------
Liabilities
Other liabilities 10 186,739 162,666
Total liabilities 186,739 162,666
----------------------------- ---- ---------- -----------
Equity
Charter capital 11 4,369,750 4,369,750
Shares to be issued Reserve 26 800 ,000 -
Additional capital 11 6,078,128 6,078,128
Share options reserve 12 218,099 166 , 883
(1 ,268 , ( 692 ,
Accumulated deficit 9 8 7 ) 987 )
----------------------------- ---- ---------- -----------
Total equity 10,196,990 9,921,774
----------------------------- ---- ---------- -----------
Total liabilities and equity 10,383,729 10,084,440
----------------------------- ---- ---------- -----------
The above Company Statement of Financial Position should be read
in conjunction with the accompanying notes, the loss for the period
was GBP576,000 (2019: GBP626,317). As permitted by section 408 of
the Companies Act 2006, the statement of comprehensive income of
the Parent Company is not presented as part of these Financial
Statements.
The Financial Statements were authorised for issue by the Board
of Directors on 29 April 2021 and were signed on its behalf
Siro Donato Cicconi,
Chief Executive Officer
Simon James Retter,
Finance Director
Zaim Credit Systems Group
Consolidated Statement of Profit or
Loss and Other Comprehensive Income
for the Year Ended 31 December 2020
(in British pounds sterling) Note 2020 2019
------------------------------------------- -------- ------------- -----------
Interest income 13 4,857,496 3,940,747
(12,8 35
Interest expenses ) (28,018)
Interest expense - lease liabilities 13 (92,442) (243,281)
------------------------------------------- -------- ------------- -----------
Net interest income 4,752,218 3,669,448
Allowance for ECL/impairment of loans (1, 790,
to customers 6 ,8, 15 718) (231,681)
Net interest income after allowance
for ECL/impairment of loans to customers 2,961,501 3,437,767
Gains less losses from dealing in (189 ,127
foreign currency 14 ) 95,497
Other operating income 16 590,502 790,554
------------------------------------------- -------- ------------- -----------
Operating income 3,362,875 4,323,818
Staff costs 17 (1,810,443) (2,006,265)
Charge for share based options 12 (51,216) (166,883)
Operating expenses 18 (2, 11 5,735) (2,523,112)
( 369 , 146
Costs of IPO 18 - )
( 150 , 000
Deemed cost of listing 26 - )
------------------------------------------- -------- ------------- -----------
Loss before income tax (614,519) (891,589)
Income tax expense 19 - -
------------------------------------------- -------- ------------- -----------
Net loss (61 4 ,519) (891,589)
------------------------------------------- -------- ------------- -----------
Net other comprehensive income that
may be reclassified to profit or loss
Foreign exchange differences arising
on translation into presentation currency (67,563) (39,942)
------------------------------------------- -------- ------------- -----------
Total comprehensive expense (682,083) (931,531)
------------------------------------------- -------- ------------- -----------
Earnings per share 11
Basic, profit for the year attributable to
ordinary equity holders of the parent 0.14p 0.77p
Diluted, profit for the year attributable to
ordinary equity holders of the parent 0.14p 0.77p
Zaim Credit Systems Group
Consolidated Statement of Changes in Equity for the Year Ended
31 December 2020
(in British pounds sterling)
Foreign Share
Shares currency Merger reserve options
to be translation reserve
Charter issued Additional reserve Accumulated Total
capital Reserve capital (FCTR ) deficit equity
--------------- ---------- -------- ------------ ----------- --------------- --------- ---------------- ---------
Balance at 31
December 2018 2,492,363 - 29,122,880 4,497,731 - - (36,689,833) (576,859)
--------------- ---------- -------- ------------ ----------- --------------- --------- ---------------- ---------
Reverse
acquisition
in 2019 1 ,877,387 - (23,044,752) - 23,764,800 - ( 66,670 ) 2,530,765
Comprehensive
loss for 2019 - - - (39,942) - (891,589) (931,531)
Share-based
payments 166 ,883 - 166,883
Balance at 31
December 2019 4,369,750 - 6,078,128 4,457,788 23,764,800 166,883 (37, 648 ,0 92 ) 1,189,258
--------------- ---------- -------- ------------ ----------- --------------- --------- ---------------- ---------
Comprehensive
loss for 2020 - - (67,563) - - (614,519) (682,083)
Contingent
consideration - 800 , 000 - - (800,000) -
Share-based
payments 51,216 - 51,216
Balance at 31
December 2020 4,369,750 800,000 6,078,128 4,390,225 22,964,800 218,099 (38, 262 , 6 1 1 ) 558,391
--------------- --------- ----------- ---------- --------- --------------- --------- ------------------ ---------
Zaim Credit Systems Group
Company Statement of Changes in Equity for the Year Ended 31 December 2020
(in British pounds sterling)
Share options
Shares to be Additional Accumulated reserve Total
Charter capital issued Reserve capital deficit equity
----------------- --------------- --------------- ---------------- ---------------- ---------------- -----------
Balance at 31
December 2018 60 ,000 - - (66,670) (6,670)
----------------- --------------- --------------- ---------------- ---------------- ---------------- -----------
Issue during
the year 4 ,309,7 50 - 6,406,699 - - 10,716,449
Expenses on
issue of shares - - (328 ,570) - - (328,570)
Comprehensive
loss for 2019 - - - (626,317) - (626,31 7 )
Share-based
payments - - - - 166 , 883 166,883
Balance at 31
December 2019 4,369,750 - 6,078,128 ( 692 , 987 ) 166,883 9,9 21 ,774
----------------- --------------- --------------- ---------------- ---------------- ---------------- -----------
Comprehensive loss for 2020 - - - (576,000) - (576,000)
Contingent consideration - 800 ,000 - - - 800,000
Share-based payments - - - - 51,216 5 1,216
Balance at 31 December 2020 4,369,750 800,000 6,078,128 (1 ,268 , 9 8 7 ) 218,099 10 , 1 96,990
----------------------------- --------- -------- --------- ----------------- ------- -------------
Zaim Credit Systems plc
Consolidated Statement of Cash Flows for the
year ended 31 December 2020
(in British pounds sterling) 2020 2019
---------------------------------------------------- ------------- -------------
Cash flows from operating activities
Interest received 4,219,635 2,332,339
Interest paid (105,273) (400,142)
Gains less losses from dealing in foreign currency (7, 460 ) (9, 448 )
Other operating income 559,981 198,600
Staff costs (1,854,393) (2,005,236)
Operating expenses ( 1, 226,365) ( 1, 440,487)
Cash flows from/(used in) operating activities
before changes in operating assets and liabilities 1, 586,125 ( 1, 324,373)
Net (increase)/decrease in operating assets
( 1,848,483
Loans to customers ) 1,259,013
(109 ,06
Other assets 3) 4,126
Net decrease in operating liabilities
Other liabilities 57 ,357 1 62,957
---------------------------------------------------- ------------- -------------
(314 ,064
Net cash flows from operating activities ) 101,723
---------------------------------------------------- ------------- -------------
Cash flows from investing activities
Purchases of property and equipment - (2,130)
Net cash flows from investing activities - (2,130)
---------------------------------------------------- ------------- -------------
Cash flows from financing activities
Repayment of lease liabilities (536,120) (1,389,284)
Loans received 259,266 653,530
Repayment of loans received (259,266) (653,530)
Issue of ordinary shares (including share premium) - 2,716,449
Share issue costs - ( 328,570)
---------------------------------------------------- ------------- -------------
(536 ,120
Net cash flows from financing activities ) 998,594
---------------------------------------------------- ------------- -------------
Effect of exchange rate changes on cash and (91 ,696
cash equivalents ) 30,015
(941 ,880
Net change in cash and cash equivalents ) 1,128,202
Cash and cash equivalents at the beginning of
the year 1 ,582 ,751 454,549
---------------------------------------------------- ------------- -------------
Cash and cash equivalents at the end of the
year (Note 5) 640, 8 71 1,582,751
---------------------------------------------------- ------------- -------------
Zaim Credit Systems plc
Company Statement of Cash Flows for the year ended 31 December
2020
(in British pounds sterling)
2020 2019
---------------------------------------------------- ----------- -------------
Cash flows from operating activities
Loss for the period (576,000) (626,317)
Correction for non-cash transaction (charge
for share options granted) 51,216 166,883
Cash flows from/(used in) operating activities ( 524 ,
before changes in operating assets and liabilities 78 4) ( 459 ,433)
Adjustments for
Increase in trade and other receivables , VAT ( 5 8,355) (8,122)
Increase in trade and other payables 24,073 95,995
( 559 ,0 ( 371 , 560
Cash generated from operations 6 6) )
---------------------------------------------------- ----------- -------------
(559,0 66
Net cash flows used in operating activities ) (371,560)
---------------------------------------------------- ----------- -------------
Cash flows from investing activities
Investment in Subsidiary (590,426) (705,663)
Net cash flows from investing activities (5 90 ,426) (705,663)
---------------------------------------------------- ----------- -------------
Cash flows from financing activities
Issue of ordinary shares (including share premium) - 2,716,449
Share issue costs - ( 328,570)
---------------------------------------------------- ----------- -------------
Net cash flows from financing activities - 2,38 7 ,878
---------------------------------------------------- ----------- -------------
(1,149,
Net change in cash and cash equivalents 492) 1,310,655
Cash and cash equivalents at the beginning of
the year 1 , 310,655 -
---------------------------------------------------- ----------- -------------
Cash and cash equivalents at the end of the
year (Note 5) 161,163 1,310,655
---------------------------------------------------- ----------- -------------
1. Principal Activities of the Group
The principal activity of Zaim Credit Systems plc ("the
Company") and its subsidiary Zaim-Express , LLC (together "the
Group") is the issuance of microloans to individuals (retail
customers). The Company was incorporated as Agana Holdings Plc and
registered in England and Wales on 15 June 2018 as a public limited
company with company registration number 11418575 and LEI,
213800Z4MI9KSZA2VW72 and on 22 July 2019 the Company changed its
name to Zaim Credit Systems Plc.
On 18 September 2019 the Company acquired the entire issued
share capital of Zaim-Express LLC. The Company is now the holding
company of a Russian based financial services company Zaim-Express
LLC (S ubsidiary), so the main function of the Company is to
provide holding company services and undertake management of their
listed activities on the stock exchange. These business
combinations in 2019 was stated in consolidated financial
statements as reverse acquisitions under IFRS 3.
The organisational structure of Group:
The share votes of the Company
---------------------------------
The name of Subsidiary Country of registration 31.12.2020 31.12.201 9
----------------------- --------------------------- -------------------- -----------
Z aim-Express LLC Russia 100% 100%
The Subsidiary's principal activity is the issuance of
microloans through its network of branches in Russian cities
(mainly - in Moscow and the Moscow region, St. Petersburg). The
Subsidiary was entered in the state register of microfinance
organisations on 29 August 2011, registration number 2110177000440.
The Subsidiary's assets and liabilities are located in the Russian
Federation. The average number of Subsidiary's employees is as
follows:
The average number of Subsidiary's employees, by groups 2020 2019
------------------------------------------------------------ ---------------------- -------------------
Central office 47 42
Call center 22 23
Other spe c ialists 143 208
------------------------------------------------------------ ---------------------- -------------------
Total average number of employees 212 273
The average number of parent Company's employees (directors) is
as follows:
The average number of parent Company's employees 2020 201 9
-------------------------------------------------- ---- -----
Directors 5 3
As at 31 December 2020, the main shareholder of the Company is
Zaim Holdings SA (with a 73.23 % equity holding; 31 December 2019 -
with a 73.23 % equity holding). The ultimate controlling party of
the Group is an individual - Mr. Siro Donato Cicconi
(Director).
2. Operating Environment of the Group
General
The economy of the Russian Federation continues to demonstrate
certain characteristics of an emerging market . They include, in
particular, inconvertibility of the Russian rouble in most
countries outside of Russia and relatively high inflation . The
current Russian tax, currency and customs legislation is subject to
various interpretations and frequent changes. The country's economy
depends on oil and gas prices. Russia continues to develop the
legal, tax and administrative infrastructure to meet the market
economy requirements. The economic reforms implemented by the
government are aimed at modernisation of the Russian economy,
development of high-tech production, improvement of labour
productivity and competitiveness of the Russian products on the
global market.
Due to the consequences of the coronavirus pandemic in 2020,
Russia faced the forced introduction of quarantine measures, the
closure of enterprises and borders, and a sharp collapse in oil
prices. At the same time, the economic downturn was not so
large-scale as in a number of other states. Experts believe that
this is primarily the result of timely state support measures for
businesses and the population. In addition, 2020 saw the Central
Bank rate plunge to a record-low, significant fluctuations in
exchange rates and surging demand in the real estate market. The
collapse in oil prices that occurred in the spring had a negative
impact on national budget revenues and the dynamics of the national
currency. At the same time, the pandemic did not result in any
fundamental adverse changes in the Russian economy.
In the second half of 2020, as the restrictive measures imposed
due to the pandemic were lifted and eco-nomic activity recovered,
the consumer credit market -experienced an upturn, and microfinance
volumes returned to the levels of the start of the year. Most of
the MFI offices that were closed in the spring have resumed their
work. In the context of restrictive measures that were introduced
in April-May 2020 due to the deterioration- of the pandemic
situation, online sales channels and customer interaction began- to
play a special role in ensuring the continuity of MFI activities.
Remote service channels will remain relevant in the future due to
the pandemic and the continuing measures of social distancing. An
accelerated transition to online- service may have a long-term
effect and promote faster implementation of remote- service
channels.
In general, the global and Russian economies are in the state of
high uncertainty due to new lockdowns, but governments, central
banks and businesses have already gained useful experience in
dealing with the pandemic. The results of economic development in
the 3rd and 4th quarters of 2020 in Russia and other countries
showed potential for rapid recovery in the case of a declining
epidemic threat. The financial system has demonstrated a fairly
high degree of sustainability. According to the Central Bank of
Russia, in the future, the risks associated with the solvency of
the corporate sector will gradually become the highest on the
agenda.
During the quarantine period, the Group changed its business
model to one of remote lending via the Internet. All operations
necessary for the performance of this activity were carried out by
the employees remotely, which allowed the Group to maintain
regularity and continuity of business processes. Based on the
analysis conducted, the Group's management believes that the
expected recession will not have any significant negative impact on
the Group's financial performance in the short term. The management
of the Group believes it is taking all the necessary measures to
support the sustainability and further development of the Group's
business operations in these circumstances.
As at 31 December 2020, the CBR's key rate was 4.25% (31
December 2019: 6.25%).
The future economic development of the Russian Federation is
largely dependent upon the effectiveness of economic measures,
financial mechanisms and monetary policies adopted by the
Government, together with tax, regulatory, and political
developments.
Inflation
The Russian economy experiences relatively high levels of
inflation. The inflation indices for the last five years are given
in the table below:
Inflation for
The year ended the period
----------------- --------------
31 December 2020 4.9%
31 December 2019 3.0%
31 December 2018 4.3%
31 December 2017 2.1%
31 December 2016 5.4%
Foreign exchange transactions
Foreign currencies, especially the US Dollar, Euro, and British
pound sterling play a significant role in determining economic
parameters of many economic transactions carried out in Russia. The
table below shows the CBR exchange rates of RUB relative to USD and
EUR:
Date USD EUR GBP
----------------- ------- ------- ---------
31 December 2020 73.8757 90.6824 100.0425
31 December 2019 61.9057 69.3406 81.146
31 December 2018 69.4706 79.4605 88.2832
31 December 2017 57.6002 68.8668 77.6739
31 December 2016 60.6569 63.8111 74.5595
Management takes all necessary measures to ensure the
sustainability of the Group's operations. However, the future
impact of the current economic situation is difficult to predict
and management's current expectations and estimates may differ from
actual results.
For the purpose of estimating expected credit losses, the Group
uses forward-looking information, including projections of
macroeconomic variables. The Group takes these forecasts into
account when providing its best estimate of outcomes. However, as
with any economic forecast, the projections and likelihoods of
their occurrence are subject to a high degree of inherent
uncertainty and therefore the actual outcomes may be significantly
different from those projected. Note 6 provides additional
information on how the Group incorporates forward-looking
information in its expected credit loss models.
Functional and presentation currency
The functional currency is the currency that mainly influences
sales prices for goods and services (this will often be the
currency in which sales prices for goods and services are
denominated and settled) and which mainly influences labour,
material and other costs of providing goods or services (this will
often be the currency in which such costs are denominated and
settled) . The Group's functional currency is the Russian
rouble.
The presentation currency is the currency in which financial
statements are presented .
The consolidated financial statements are presented in British
pounds sterling. The reasons why the functional currency differs
from the presentation currency are the consolidation of Subsidiary
's financial statements with the parent Company accounts which have
been presented in GBP and investors' interests.
3. Basis of Presentation
General principles
These consolidated financial statements of the Group are
prepared in accordance with International Financial Reporting
Standards (IFRSs). The Group maintains its records in compliance
with the applicable legislation of the United Kingdom . These
financial statements have been prepared on the basis of those
accounting records and adjusted as necessary in order to comply, in
all material respects, with IFRSs.
Going concern
These consolidated financial statements reflect the Group
management's current assessment of the impact of the Russian
business environment on the operations and the financial position
of the Group. The future economic direction of the Russian
Federation is largely dependent upon the effectiveness of measures
undertaken by the RF Government and other factors, including
regulatory and political developments which are beyond the Group's
control. The Group's management cannot predict what impact these
factors will have on the Group's financial position in future. As a
result, adjustments related to this risk have not been included in
the accompanying financial statements.
As at 31 December 2020, the Group has an accumulated deficit of
GBP 38, 262 , 6 1 1 (2019: GBP 37, 648 , 092 ) , and incurred a net
loss of GBP 614 , 519 during the year ended 31 December 2020 (2019:
GBP 891,589 ).
The Group's business activities together with the factors likely
to affect its future development, performance and position are set
out in the Chairman's Statement and Chief Executive Review . In
addition note 3 to the Financial Statements includes the Group's
objectives, policies and processes for managing its capital; its
financial risk management objectives; details of its financial
instruments and its exposure to credit and liquidity risk.
The Financial Statements have been prepared on a going concern
basis. In 2020, the Group changed its business model to one of
remote lending via the Internet, which resulted in a significant
decrease in fixed lease and staff costs and a decrease in the share
of lending costs within total expenses. The Group is planning to
optimise the network operation, including removal of loss-making
outlets and enhancement of the Internet channel to attract
customers.
The Group is actively collecting overdue debts, inter alia,
through legal action. Despite temporary suspension of judicial and
enforcement proceedings during the COVID-19 pandemic, the proceeds
from the loans of Stage 3 in 2020 increased by 87% compared to
2019.
The CBR sets the minimum mandatory liquidity ratio at over 70%.
The Subsidiary meets the mandatory liquidity ratio: as at 31
December 2020 - 153.74% (unaudited) and as at 31 December 2019 -
132.89% (un- audited).
As a result of considerations noted above, the Directors have a
reasonable expectation that the Group and Company have adequate
resources to continue in operational existence for the foreseeable
future. Thus, they continue to adopt the going concern basis of
accounting in preparing these Financial Statements.
Basis of consolidation and business acquisitions
On 18 September 2019 Company acquired the entire issued share
capital of Zaim-Express (LLC) by way of a share for share exchange.
The transaction was treated as a reverse acquisition and was
accounted for using the merger accounting method as the entities
were under common control before and after the acquisition.
A Subsidiary is an entity controlled by the Group. Control is
achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
The Group considers all relevant facts and circumstances in
assessing whether it has power over an investee, including:
- The contractual arrangement with the other vote holders of the investee.
- Rights arising from other contractual arrangements.
- The Group's voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income, and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the
subsidiary.
Other than for the acquisition of the Subsidiary as noted above,
the Group uses the acquisition method of accounting to account for
business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair value of the assets
transferred, the liabilities incurred, and the equity interests
issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent
consideration arrangement. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values as at the
acquisition date. Acquisition-related costs are expensed as
incurred unless they result from the issuance of shares, in which
case they are offset against the premium on those shares within
equity.
If an acquisition is achieved in stages, the acquisition date
carrying the value of the acquirer's previously held equity
interest in the acquiree is remeasured to its fair value at the
acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or a liability is recognised in accordance
with IFRS9 either in profit or loss or as a change in other
comprehensive income. The unwinding of the discount on contingent
consideration liabilities is recognised as a finance charge within
profit or loss. Contingent consideration that is classified as
equity is not remeasured, and its subsequent settlement is
accounted for within equity.
The excess of the consideration transferred and the fair value
as at the acquisition date of any previous equity interest in the
acquiree over the fair value of the Group's share of the
identifiable net assets acquired is recorded as goodwill. If this
is less than the fair value of the net assets of the subsidiary
acquired in the case of a bargain purchase, the difference is
recognised directly in profit or loss.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Accounting
policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the Group.
Investments in subsidiaries are accounted for at cost less
impairment.
Subsidiaries and Acquisitions
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. Control is
recognised where an investor is expected, or has rights, to
variable returns from its investment with the investee, and has the
ability to affect these returns through its power over the
investee. Based on the circumstances of the acquisition an
assessment will be made as to whether the acquisition represents an
acquisition of an asset or the acquisition of business . In the
event of a business acquisition, the assets, liabilities and
contingent liabilities of a subsidiary are measured at their fair
value at the date of acquisition. Any excess of the cost of the
acquisition over the fair values of the identifiable net assets
acquired is recognised as a "fair value" adjustment.
If the cost of the acquisition is less than the fair value of
the net assets of the subsidiary acquired, the difference is
recognised directly in profit or loss. In the event of an asset
acquisition, assets and liabilities are assigned a carrying amount
based on relative fair value.
The results of subsidiaries acquired or disposed of during the
year are included in the statement of comprehensive income from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies into
line with those used by the Group.
Contingent consideration as a result of business acquisitions is
included in the cost at its acquisition date assessed value and, in
the case of contingent consideration classified as a financial
liability, remeasured subsequently through profit and loss.
Critical Accounting Estimates and Judgments in Applying
Accounting Policies
The Group makes estimates and assumptions that affect the
amounts recognised in the financial statements and the carrying
amounts of assets and liabilities in the next financial year.
Judgements that have the most significant effect on the amounts
recognised in the financial statements and estimates that can cause
a significant adjustment to the carrying amount of assets and
liabilities in the next financial year include:
Fair value of financial instruments
Information on the fair value of financial instruments measured
on the basis of assumptions that use observable market prices is
disclosed in Note 23.
ECL measurement
Calculation and measurement of ECLs is an area of significant
judgement and involves methodology, models and data inputs. The
methodology used by the Group for assessment of expected credit
losses is disclosed in Note 6. The following components of ECL
calculation have a major impact on the allowance for ECLs: default
definition, significant increase in credit risk (SICR), probability
of default (PD), exposure at default (EAD), loss given default
(LGD), macro-models and scenario analysis for impaired loans. The
Group regularly reviews and validates models and inputs to the
models to reduce any differences between expected credit loss
estimates and actual credit loss experience.
Significant increase in credit risk (SICR)
In order to determine whether there has been a significant
increase in credit risk, the Group compares the risk of a default
occurring over the expected life of a financial instrument at the
reporting date with the risk of default at the date of initial
recognition. IFRS 9 requires an assessment of relative increases in
credit risk rather than the identification of a specific level of
credit risk at the reporting date. In this assessment, the Group
considers a range of indicators, including behavioural indicators
based on historical information as well as reasonable and
supportable forward-looking information available without undue
cost and effort. The most significant judgments include identifying
behavioural indicators of increases in credit risk prior to default
and incorporating appropriate forward-looking information into the
assessment, either at an individual instrument, or on a portfolio
level.
Due to the coronavirus pandemic, the Group updated the
prospective information used in the models intended for the
assessment of expected credit losses and reassessed the Probability
of default during the 12 months for adequate reflection of the
uncertainties caused by the decrease in market prices and the
spread of the COVID-19 pandemic, taking into account:
- GDP drop and decline in income of individuals due to restricted economic activity;
- state support measures;
- real wage level;
- real disposable income of the population.
Determining business model and applying SPPI test
In determining the appropriate measurement category for debt
financial instruments, the Group applies two approaches : a
business model assessment for managing the assets and the SPPI test
based on contractual cash flow characteristics on initial
recognition to determine whether they are solely payments of
principal and interest. The business model assessment is performed
at a certain level of aggregation and the Group will need to apply
judgement to determine the level at which the business model
condition is applied .
The assessment of the SPPI criterion performed on initial
recognition of financial assets involves the use of significant
estimates in quantitative testing and requires considerable
judgement in determining whether quantitative testing is required,
what scenarios are reasonably possible and should be considered,
and in interpreting the outcomes of quantitative testing (i.e.
determining what represents a significant difference in cash
flows).
Substantial modification of financial assets
When the contractual terms of financial assets are modified
(e.g. renegotiated), the Group assesses whether the modification is
substantial and should result in derecognition of the original
asset and recognition of a new asset at fair value. This assessment
is based primarily on qualitative factors described in the relevant
accounting policy and requires significant judgment.
Recognition of a deferred tax asset
The recognised deferred tax asset represents the amount of
income tax that can be offset against future income taxes and is
recognised in the statement of financial position. A deferred tax
asset is recognized only to the extent that realisation of the
related tax benefit is probable. The future taxable profits and the
amount of tax benefits that are probable in the future are based on
medium-term forecasts prepared by management.
Changes in accounting policies
The revised standards presented below became mandatory for the
Group since 1 January 2020, but had no material impact on the
Group:
For the reporting periods beginning on or after 1 January 2020,
the amendments to the standards presented below shall be
effective:
-- Amendments to IAS 1 Presentation of Financial Statements and
IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors - Definition of Material
-- Amendments to IFRS 3 Business Combinations - Definition of a Business;
-- Amendments to References to the Conceptual Framework in IFRS Standards;
-- Amendments to IFRS 9 "Financial Instruments", IAS 39
"Financial Instruments: Recognition and Measurement" and IFRS 7
"Financial Instruments: Disclosures" (issued on 26 September 2019)
that provide temporary relief from specific hedge accounting
requirements to hedging relationships directly affected by the IBOR
reform.
The above amendments to the standards had no material impact on
the financial statements.
The IASB issued a number of standards and amendments to them
that will become effective in the next reporting periods and will
not be early applied by the Group. The most significant ones are as
follows:
-- Amendments to IFRS 16 Leases - Covid-19-Related Rent
Concessions (effective for annual periods beginning on or after 1
June 2020);
-- Interest Rate Benchmark Reform and its Effects on Financial
Reporting - Phase 2 (effective on 1 January 2021);
-- Annual Improvements to IFRSs - 2018-2020 cycle of amendments
(effective on 1 January 2022);
-- Amendments to IAS 16 Property, Plant and Equipment - Proceeds
before Intended Use (effective on 1 January 2022);
-- Amendments to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets - Onerous Contracts - Cost of Fulfilling a
Contract (effective on 1 January 2022);
-- IFRS 17 Insurance Contracts (effective on 1 January 2023);
-- Amendments to IAS 1 Presentation of Financial Statements and
IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors - Classification of Liabilities as Current or Non-Current
(effective on 1 January 2023);
Unless otherwise described above, the new standards and
interpretations are not expected to significantly impact the
Group's financial statements.
4. Summary of Significant Accounting Policies
Fair value measurement
The fair value is the price that would be received when selling
an asset, or paid to transfer a liability in an orderly transaction
in the principal (or most advantageous) market at the measurement
date under current market conditions (i.e. an exit price)
regardless of whether that price is directly observable or
estimated using another valuation technique.
All assets and liabilities for which a fair value is recognised
or disclosed are categorised within the fair value hierarchy,
described as below, based on the lowest level input that is
significant to the fair value measurement as a whole:
- Level 1 - quoted market prices in an active market (that are
unadjusted) for identical assets or liabilities;
- Level 2 - valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable;
- Level 3 - valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are remeasured in the financial
statements at fair value on a recurring basis, the Group determines
whether transfers have occurred between the Levels in the hierarchy
by re-assessing categorisation (based on the lowest level input
that is significant to the fair value measurement as a whole) at
the end of each reporting period.
For the purpose of fair value disclosures, the Group has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy as explained below (Note 23).
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, current
accounts and deposits with banks with original maturity of three
months or less. Cash and cash equivalents are stated at amortised
cost in the statement of financial position.
Financial instruments
Key measurement terms
Depending on their classification, financial instruments are
carried at fair value or amortised cost, as described below .
Fair value is the price that would be received when selling an
asset, or paid to transfer a liability in an orderly transaction
between market participants at the measurement date . Fair value
measurement assumes that the transaction to sell the asset or
transfer the liability takes place in the principal market for the
asset or liability or, in the absence of a principal market, the
most advantageous market for the asset or liability . Fair value is
the current bid price for financial assets or current ask price for
financial liabilities .
A mortised cost is the amount at which the financial asset or
financial liability is measured at initial recognition minus
principal repayments, plus or minus the cumulative amortisation
using the effective interest method of any difference between that
initial amount and the maturity amount, and for financial assets,
adjusted for any loss allowance.
The gross carrying amount of a financial asset is the amortised
cost of a financial asset , before adjusting for any expected
credit loss allowance .
The effective interest method is a method of calculating the
amortised cost of a financial asset or a financial liability and of
allocating or recognising the interest income or interest expense
over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash payments or receipts
over the expected life of the financial asset or financial
liability to the gross carrying amount of the financial asset or to
the amortised cost of a financial liability . When calculating the
effective interest rate, the Group shall estimate cash flows
considering all contractual terms of the financial instrument but
shall not consider future credit losses. The calculation includes
all fees and points paid or received between parties to the
contract that are an integral part of the effective interest rate,
transaction costs, and all other premiums or discounts. There is a
presumption that the cash flows and the expected life of a group of
similar financial instruments can be estimated reliably. However,
in those rare cases when it is not possible to estimate
reliably the cash flows or the expected life of a financial
instrument, the Group shall use the contractual cash flows over the
full contractual term of the financial instrument .
Initial recognition of financial instruments
The Group recognises financial assets and financial liabilities
in its statement of financial position when it becomes a party to
the contractual obligations of the respective financial instrument.
The regular way the purchase and sale of the financial assets and
liabilities is recognised is by using settlement date
accounting.
Classification and measurement of financial instruments
The Group classifies financial assets into the following
categories:
- financial assets at fair value through profit or loss;
- financial assets at fair value through other comprehensive income;
- financial assets measured at amortised cost.
Classification and subsequent measurement of debt financial
assets depends on:
1) the business model used by the Group to manage the asset;
and
2) characteristics of cash flows on the asset.
The business model is determined for a group of assets (on a
portfolio basis) based on all relevant evidence of activities that
the Group intends to undertake to achieve the objectives set out
for the portfolio available as at the measurement date.
Loans to customers meeting the SPPI criterion are held for the
purpose of collecting contractual cash flows and are carried at
amortised cost.
Reclassifications
Financial assets are not reclassified after initial recognition
unless the Group has changed its business model for managing
financial assets.
Financial liabilities are not reclassified after initial
recognition.
Derecognition
A financial asset is derecognised where:
-- the rights to receive cash flows from the asset have expired;
-- the Group has transferred its rights to receive cash flows
from the asset, or retained the right to receive cash flows from
the asset, but has assumed an obligation to pay them in full
without material delay to a third party;
-- the Group either has transferred substantially all the risks
and rewards of the asset or has neither transferred nor retained
substantially all the risks and rewards of the asset but has
transferred control of the asset. If the transferee has no
practical ability to sell the asset in its entirety to an unrelated
third party without needing to impose additional restrictions on
the transfer, the entity has retained control.
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires.
Loans to customers
Based on cash flow characteristics, the Group classifies loans
and advances to customers into the measurement category:
1) at amortised cost: loans held to collect contractual cash
flows, if these cash flows are SPPI and are not classified at fair
value through profit or loss, are measured at amortised cost;
Loans to customers are recorded when cash is advanced to
borrowers. Impairment of loans at amortised cost or at FVOCI is
assessed using a forward-looking ECL model. The Group does not
acquire loans from third parties.
Impairment of financial assets : ECL allowance
The Group assesses, on a forward-looking basis, the ECL for debt
instruments measured at amortised cost and FVOCI and for the
exposures arising from credit related commitments and financial
guarantee contracts. The Group measures ECL and recognises credit
loss allowances at each reporting date. The measurement of ECL
reflects:
(i) an unbiased and probability weighted amount that is
determined by evaluating a range of possible outcomes,
(ii) time value of money, and
(iii) all reasonable and supportable information that is
available without undue cost and effort at the reporting date about
past events, current conditions and forecasts of future economic
conditions.
Debt instruments measured at amortised cost are presented in the
statement of financial position net of the ECL allowance.
The Group applies a three-stage model for impairment, based on
changes in credit quality since initial recognition, in accordance
with IFRS 9.
1) A financial instrument that is not credit-impaired on initial
recognition is classified into Stage 1. Financial assets in Stage 1
have their ECL measured at an amount equal to the portion of
lifetime ECL that results from default events possible within the
next 12 months (12m ECL).
2) If the Group identifies a significant increase in credit risk
(SICR) since initial recognition, the asset is transferred to Stage
2 and its ECL is measured based on a lifetime basis (lifetime ECL).
Refer to Note 3 for a description of how the Group determines when
a SICR has occurred.
3) If the Group determines that a financial asset is
credit-impaired, the asset is transferred to Stage 3 and its ECL is
measured as a lifetime ECL. Assets that are more than 60 days past
due are considered to be defaulted.
For financial assets that are purchased or originated
credit-impaired (POCI assets), the ECL is always measured as a
lifetime ECL.
Note 6 provides information about inputs, assumptions and
estimation techniques used in measuring ECL, including an
explanation of how the Group incorporates forward-looking
information in the ECL models .
Modification of financial assets
Sometimes the Group reviews or otherwise modifies the
contractual terms of financial assets. The Group estimates that the
modification of contractual cash flows is significant taking into
account, among other factors: the existence of new contractual
terms that indicate a significant change in interest rates, which
have a significant effect on the credit risk associated with the
asset, a significant extension of the loan term in cases where the
borrower is in financial difficulty.
If the modified terms significantly differ so that the rights to
cash flows from the original asset are deemed expired, the Group
derecognizes the original financial asset and recognizes the new
asset at fair value. The date of renegotiation is considered to be
the date of initial recognition for impairment calculation
purposes, including determination of whether credit risk has
increased significantly. The Group also evaluates the compliance of
the new loan with the criterion of making payments solely against
principal and interest. In situations where the renegotiation was
caused by the debtor's financial difficulties and inability to make
the originally agreed payments, the Group assesses whether the
modified loan is considered impaired on initial recognition. The
difference in the carrying amount is recognised in profit or
loss.
If the conditions of the modified asset do not differ
significantly, the modification does not result in derecognition.
The Group restates its gross carrying amount based on revised cash
flows by discounting the modified cash flows at the original
effective interest rate ( or credit-adjusted effective interest
rate for purchased or originated credit-impaired financial assets )
and recognises a gain or loss on modification in profit or
loss.
Loans received
Loans received include loans received from the participant and
are carried at amortised cost .
Property and equipment
Property and equipment are stated at cost, less accumulated
depreciation and impairment allowance.
At the end of the reporting period the Group assesses whether
there is any indication of impairment of property and equipment. If
such an indication exists, the Group estimates the recoverable
amount, which is determined as the higher of an asset's fair value
less costs to sell or its value in use . Where the carrying amount
of property and equipment is greater than their estimated
recoverable amount, it is written down to their recoverable amount
and the difference is charged as impairment loss to the statement
of profit or loss and other comprehensive income.
Gains and losses on disposal of property and equipment are
determined by reference to their carrying amount and recorded as
operating expenses in the statement of profit or loss and other
comprehensive income .
Repairs and maintenance are charged to the statement of profit
or loss and other comprehensive income when the expense is
incurred.
Depreciation
Depreciation of an asset begins when it is available for use.
Depreciation is charged on a straight-line basis over the following
useful lives of the assets:
-- Equipment - 2- 7 years.
Lease
The Group classifies its lease agreements as finance or
operating leases.
The right-of-use asset and the lease liability are recognized by
the lessee at the lease commencement date.
The original cost of the right-of-use asset includes the
following:
-- the amount of the initial measurement of the lease liability;
-- lease payments at or before the lease commencement date less any
lease incentives received;
-- any initial direct costs incurred by the Group; and
-- an estimate of costs to be incurred by the lessee in
dismantling, removing, restoring the site or restoring the
underlying asset to the condition required by terms of the lease,
unless those costs are incurred to produce inventories.
The right-of-use asset shall be amortised on a straight-line
basis over the shorter of the asset's useful life and the lease
term.
At the lease commencement date, the Group measures the lease
liability at the present value of the lease payments that have not
yet been made at that date. Lease payments shall be discounted
using the interest rate implicit in the lease if that rate can be
easily determined. If such rate cannot be easily determined, the
Group uses the incremental borrowing rate at the lease commencement
date.
If finance lease agreements provide for lease extension options,
the Group plans to use these options for 3 years.
At the lease commencement date, lease payments that are included
in the measurement of the lease liability consist of the following
payments for the right to use the underlying asset during the lease
term that have not yet been made at the lease commencement
date:
-- fixed payments (including in-substance fixed payments) less
any lease incentives receivable ;
-- variable lease payments that depend on an index or rate,
initially measured using an index or a rate as at the lease
commencement date;
-- the amounts expected to be payable by the lessee under the residual value guarantees;
-- the exercise price of a purchase option that the lessee is
reasonably certain to exercise; and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising an option to terminate the
lease.
After initial recognition, the right-of-use assets related to
property, plant and equipment shall be measured by the Group using
the historical cost model less accumulated depreciation and
accumulated impairment losses.
A right-of-use asset shall be assessed for impairment at the end
of each reporting year in accordance with IAS 36 Impairment of
Assets.
After initial recognition, the lease liability shall be
increased by the amount of accrued interest and decreased by the
amount of lease payments paid.
The carrying amount of the lease liability shall be remeasured,
if there is a change in future lease payments resulting from
changes in an index or a rate, there is a change in the amounts
expected to be payable under a residual value guarantee, or, as
appropriate, there is a change in the assessment of whether it is
reasonably certain that the purchase option or the lease extension
option will be exercised, or that the lease termination option will
not be exercised. The lease liability shall be remeasured to
reflect changes in lease payments.
When determining the lease term, the following periods shall be
considered, as well as the Group's management's assessment of the
probability that lease extension options and lease termination
options will be exercised:
-- the non-cancellable period of lease not subject to early termination;
-- periods covered by an extension option if exercise of that
option by the lessee is reasonably certain;
-- periods covered by a termination option if the lessee is
reasonably certain not to exercise that option.
As at the reporting date, right-of-use assets are disclosed in
the "Right-of-use assets" line item of the statement of financial
position. Lease liabilities are disclosed in the "Lease
liabilities" line item of the statement of financial position.
Finance costs are disclosed in the "Interest expense - lease
liabilities" line item of the statement of profit or loss and other
comprehensive income to provide a fixed periodic interest rate on
the remaining lease liability for each period. Depreciation of
right-of-use assets is disclosed in the "Operating expenses" line
item in the statement of profit or loss and other comprehensive
income. The cash outflow on the lease interest repaid is disclosed
in the "Cash from operating activities" section of the statement of
cash flows, and the amount of cash paid to repay the principal is
disclosed in the "Cash from financing activities" section of the
statement of cash flows.
Operating lease - the Group as lessee
A lease is classified as an operating lease if it does not
transfer substantially all the risks and rewards incidental to
ownership. The underlying asset is classified as a low-value asset
based on professional judgement.
Payments for short-term leases and low-value asset leases are
recognised as expenses on a straight-line basis over the lease term
and included into operating expenses in the statement of profit or
loss and other comprehensive income . A short-term lease has a
lease term of 12 months or less. Low-value assets represent leased
property with the value not exceeding the value limit determined by
the Group's accounting policy.
Lease payments under short-term leases or leases where the
underlying asset is of low value are recognized as an expense over
the lease term.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, and it is
probable that an outflow of resources embodying future economic
benefits will be required to settle the obligation, and a reliable
estimate of the amount of the obligation can be made .
Taxation
The income tax charge/recovery comprises current tax and
deferred tax and is recorded in the statement of profit or loss and
other comprehensive income. Income tax expense is recorded in the
financial statements in accordance with the applicable legislation
of the Russian Federation . Current tax is calculated on the basis
of the estimated taxable profit for the year, using the tax rates
enacted during the reporting period .
Current tax is the amount expected to be paid to or recovered
from the taxation authorities in respect of taxable profits or
losses for the current or prior periods. Tax amounts are based on
estimates if financial statements are authorised prior to filing
relevant tax returns.
Deferred income tax is provided using the balance sheet
liability method for tax losses carried forward and temporary
differences arising between the tax bases of assets and liabilities
and their carrying amounts for financial statement purposes.
Income and expense recognition
Interest income and expenses are recorded in the statement of
profit or loss and other comprehensive income for all debt
instruments on an accrual basis using the effective interest
method. The effective interest method is a method of calculating
the amortised cost of a financial asset or a financial liability
and of allocating the interest income or interest expense over the
relevant period . The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts over
the expected life of the financial instrument to the net carrying
amount of the financial asset or financial liability . When
calculating the effective interest rate, the Group estimates cash
flows considering all contractual terms of the financial instrument
but does not consider future credit losses. The calculation
includes all commissions and fees paid or received by the parties
to the contract that are an integral part of the effective interest
rate, transaction costs, and all other premiums or discounts .
When loans become doubtful of collection, they are written down
to their recoverable amounts and interest income is thereafter
recognised based on the rate of interest that was used to discount
the future cash flows for the purpose of measuring the recoverable
amount.
Employee benefits and social insurance contributions
The Group pays social insurance contributions predominantly in
the Russian Federation. Social insurance contributions are recorded
on an accrual basis and comprise contributions to the Russian
Federation state pension, social insurance, and obligatory medical
insurance funds in respect of the Group's employees. The Group does
not have pension arrangements separate from the state pension
system of the Russian Federation. Wages, salaries, contributions to
the Russian Federation state pension and social insurance funds,
paid annual leaves and paid sick leaves, bonuses and non-monetary
benefits are accrued as the Group's employees render the related
service .
Foreign currency
(a) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where such items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies
are recognised in profit or loss.
Gains and losses on purchase and sale of foreign currency are
determined as a difference between the selling price and the
carrying amount at the date of the transaction.
(b) Group companies
The results and financial position of all the Group's entities
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
1. assets and liabilities for each statement of financial
position presented are translated at the closing rate at the date
of the statement of financial position; 2. each component of profit
or loss is translated at average exchange rates during the
accounting period (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the dates of the transactions); and 3. all resulting
exchange differences are recognised in other comprehensive
income.
5. Cash and Cash Equivalents
Group 2020 2019
-------------------------------- -------- -----------
Cash on hand 30,811 84,098
Accounts with other banks 610,060 1 , 498,653
Total cash and cash equivalents 640 ,871 1, 582,751
-------------------------------- -------- -----------
Company 2020 2019
-------------------------------- ------- -----------
Cash on hand - -
Accounts with other banks 161,163 1 , 310,655
Total cash and cash equivalents 161,163 1, 310,655
-------------------------------- ------- -----------
As at 31 December 2020, the Group has 2 counterparties (2019: 2
counterparties) with balances exceeding 10% of total cash and cash
equivalents in the amount of GBP 524 ,431 (2019: GBP 1 , 310 ,655
).
The table below presents the credit quality analysis of cash and
cash equivalents based on credit risk levels as at 31 December
2020.
Group Accounts with other banks Total
--------------------------------------------------- --------------------------- ---------
Minimum credit risk 610 , 060 610 , 060
Total cash and cash equivalents, less cash on hand 610,060 610,060
--------------------------------------------------- --------------------------- ---------
Company Accounts with other banks Total
--------------------------------------------------- --------------------------- ---------
Minimum credit risk 161 , 163 161 , 163
Total cash and cash equivalents, less cash on hand 161,163 161,163
--------------------------------------------------- --------------------------- ---------
The table below presents the credit quality analysis of cash and
cash equivalents based on credit risk levels as at 31 December
2019.
Group Accounts with other RF banks Total
--------------------------------------------------- ---------------------------- -----------
Minimum credit risk 1,498 , 653 1,498 , 653
Total cash and cash equivalents, less cash on hand 1,498,653 1,498,653
--------------------------------------------------- ---------------------------- -----------
Company Accounts with other RF banks Total
--------------------------------------------------- ---------------------------- -----------
Minimum credit risk 1,310 , 655 1,310 , 655
Total cash and cash equivalents, less cash on hand 1,310,655 1,310,655
--------------------------------------------------- ---------------------------- -----------
For the purpose of assessing expected credit losses, cash and
cash equivalent balances are included in Stage 1. The expected
credit losses on these balances represent insignificant amounts,
therefore, the Group does not create an ECL allowance for cash and
cash equivalents.
Below is the credit quality analysis of cash and cash
equivalents as at 31 December 2020 in accordance with ratings of
international agencies:
Group Fitch A+ Fitch BB S&P from BB- to BB+ No rating assigned Total
-------------------------- ----------------- --------- -------------------- ------------------- ----------
Accounts with other banks 54,936 - - 555,124 610,060
Total 54,936 - - 555,124 6 1 0 ,060
-------------------------- ----------------- --------- -------------------- ------------------- ----------
Company Fitch A+ Fitch BB S&P from BB- to BB+ No rating assigned Total
-------------------------- ----------------- --------- -------------------- ------------------- --------
Accounts with other banks 54,936 - - 106 ,227 161,163
Total 54,936 - - 106, 227 161,163
-------------------------- ----------------- --------- -------------------- ------------------- --------
Below is the credit quality analysis of cash and cash
equivalents as at 31 December 2019 in accordance with ratings from
international agencies:
Group Fitch A+ Fitch BB S&P from BB- to BB+ No rating assigned Total
-------------------------- ----------------- --------- -------------------- ------------------- ---------
Accounts with other banks 528,551 782,104 93,047 94,951 1,498,653
Total 528,551 782,104 93,047 94,951 1,498,653
-------------------------- ----------------- --------- -------------------- ------------------- ---------
Company Fitch A+ Fitch BB S&P from BB- to BB+ No rating assigned Total
-------------------------- ----------------- --------- -------------------- ------------------- ----------
Accounts with other banks 528,551 782,104 - - 1,310,655
Total 528,551 782,104 - - 1,310,655
-------------------------- ----------------- --------- -------------------- ------------------- ----------
6. Loans to Customers
Group 2020 2019
------------------------------------------- ------------ ------------
Loans to customers 28,298,290 32,078,150
Less: ECL allowance (27,028,977) (31,291,804)
------------------------------------------- ------------ ------------
Total loans to customers at amortised cost 1,269,313 786,346
------------------------------------------- ------------ ------------
Company 2020 2019
------------------------------------------ ---- ----
Loans to customers - -
Less: ECL allowance - -
------------------------------------------ ---- ----
Total loans to customers at amortised cost - -
------------------------------------------ ---- ----
Below is analysis of movements in the ECL allowance during 2020
(by type of loans specified in the first table of the Note):
Group Stage 1 Stage 2 Stage 3 Total
-------------------------- ---------- ---------- ----------- -----------
ECL allowance as at 1
January 20 20 128,028 288,985 30,874,790 31,291,804
Assets recognised for
the period 697,907 - - 697,907
Assets derecognised or
collected (47,273) (33,654) (629,075) (710,002)
Transfers to Stage 2 (189,937) 189,937 - -
Transfers to Stage 3 (355,164) (187,618) 542,782 -
Net loss on ECL allowance
charge/(reversal) - 414,887 1,377,954 1,792,841
Effect of exchange rate
differences (32,067) (83,237) (5,928,268) (6,043,572)
ECL allowance as at 31 26 , 238 27 , 028
December 20 20 201 , 494 589 , 300 , 183 , 977
-------------------------- ---------- ---------- ----------- -----------
Analysis of movements in the ECL allowance during 2019 is as
follows:
Group Stage 1 Stage 2 Stage 3 Total
-------------------------- --------- --------- ---------- -----------
ECL allowance as at 1
January 2019 139,800 424,712 27,982,210 28,546,722
Assets recognised for
the period 687,271 - - 687,271
Assets derecognised or
collected (95,125) (102,217) (842,085) (1,039,427)
Transfers to Stage 2 (206,503) 206,503 - -
Transfers to Stage 3 (409,279) (326,329) 735,608 -
Net loss on ECL allowance
charge/(reversal) 52,065 530,141 582,206
Effect of exchange rate
differences 11,864 34,252 2,468,916 2,515,032
ECL allowance as at 31
December 2019 128,028 288,985 30,874,790 31,291,804
-------------------------- --------- --------- ---------- -----------
The ECL allowance for loans and advances to customers recognised
during the period is impacted by various factors. The table below
describes the main changes:
transfers between Stages 1 and 2 and Stage 3 due to significant
increases (or decreases) in credit exposure or impairment during
the period and subsequent increases (or decreases) in the estimated
ECL level: for 12 months or over the entire period;
accrual of additional allowances for new financial instruments
recognised during the period, as well as reduction in the allowance
as a result of derecognition of financial instruments during the
period;
impact on ECL estimation due to changes in model assumptions,
including changes in the probability of default, EAD and LGD during
the period resulting from regular updating of the model inputs.
Following is the credit quality analysis of loans to customers
as at 31 December 2020:
Group Stage 1 Stage 2 Stage 3 Total
--------------------------------------------- ------------- ----------- ----------------- ----------------
Loans to customers
Minimum credit risk 1 , 222 , 507 - - 1 , 222 , 507
Low credit risk - 177 , 117 - 177 , 117
Moderate credit risk - 388 , 723 - 388 , 723
High credit risk - 271 , 760 - 271 , 760
Defaulted assets - - 26 , 238 , 183 26 , 238 , 183
Total loans to customers before allowance 1 , 222 , 507 837 , 600 26 , 238 , 183 28 , 298 , 290
--------------------------------------------- ------------- ----------- ----------------- ----------------
ECL allowance (201 , 494) (589 , 300) (26 , 238 , 183) (27 , 028 , 977)
--------------------------------------------- ------------- ----------- ----------------- ----------------
Total loans to customers after ECL allowance 1 , 021 , 012 248 , 300 - 1 , 269 , 313
--------------------------------------------- ------------- ----------- ----------------- ----------------
Following is the credit quality analysis of loans to customers
as at 31 December 2019:
Group Stage 1 Stage 2 Stage 3 Total
--------------------------------------------- --------- --------- ------------- ------------
Loans to customers
Minimum credit risk 568,567 - 568,567
Low credit risk - 374,288 - 374,288
Moderate credit risk - 164,962 - 164,962
High credit risk - 95,507 - 95,507
Defaulted assets - 30,874,826 30,874,826
Total loans to customers before allowance 568,567 634,757 30,874,826 32,078,150
--------------------------------------------- --------- --------- ------------- ------------
ECL allowance (128,028) (288,986) (30,874,790) (31,291,804)
--------------------------------------------- --------- --------- ------------- ------------
Total loans to customers after ECL allowance 440,539 345,771 36 786,346
--------------------------------------------- --------- --------- ------------- ------------
The ECL allowance for loans to customers recognized during the
period is impacted by different factors. Information on the
assessment of expected credit losses is disclosed in Note 3.
The Group uses the following approach to measurement of expected
credit losses:
-- portfolio-based measurement: internal ratings are assigned
individually, but the same credit risk parameters (e.g. PD, LGD)
are applied to similar credit risk ratings and homogeneous credit
portfolio segments in the process of ELC estimation.
This approach provides for aggregation of the portfolio into
homogeneous segments on the basis of specific information on
borrowers, such as delinquent loans, historic data on prior period
losses and forward-looking macroeconomic information.
The amounts of loans recognised as "past due" represent the
entire balance of such loans rather than the overdue amounts of
individual payments.
7. Lease
The Group has agreements for lease of premises .
The Group did not apply a simplified approach to recognise lease
modifications allowed due to the COVID-19 pandemic.
The carrying amount of right-of- use assets and its movements
during the period are presented below :
Group Real Estate Total
-------------------------------------------------- ------------ ------------
As at 1 January 2020 2,549,233 2,549,233
Depreciation charge (661,165) (661,165)
M odifications and remeasurement (248,309) (248,309)
D erecognition (1,003,208) (1,003,208)
Effect of translation into presentation currency (338,626) (338,626)
-------------------------------------------------- ------------ ------------
As at 31 December 2020 297,925 297,925
-------------------------------------------------- ------------ ------------
Group Real Estate Total
-------------------------------------------------- ------------ ------------
As at 1 January 2019 3,407,065 3,407,065
Additions 112,021 112,021
Depreciation charge (1,248,758) (1,248,758)
Effect of translation into presentation currency 278,905 278,905
-------------------------------------------------- ------------ ------------
As at 31 December 2019 2,549,233 2,549,233
-------------------------------------------------- ------------ ------------
The carrying amounts of lease liabilities and their movements
during the period are set out below:
Group
Lease liabilities Real Estate Total
-------------------------------------------------- ------------ ------------
As at 1 January 2020 2,555,648 2,555,648
Interest expense on lease liabilities 92,442 92,442
Lease payments (628,563) (628,563)
M odifications and remeasurement (248,309) (248,309)
D erecognition (1,080,605) (1,080,605)
Effect of translation into presentation currency (343,397) (343,397)
-------------------------------------------------- ------------ ------------
As at 31 December 2020 347,216 347,216
-------------------------------------------------- ------------ ------------
Group
Lease liabilities Real Estate Total
-------------------------------------------------- ------------ ------------
As at 1 January 2019 3,325,625 3,325,625
Additions 108,875 108,875
Interest expense on lease liabilities 243,281 243,281
Lease payments (1,395,580) (1,395,580)
Effect of translation into presentation currency 273,447 273,447
-------------------------------------------------- ------------ ------------
As at 31 December 2019 2,555,648 2,555,648
-------------------------------------------------- ------------ ------------
The Group exercises options to extend signed lease agreements
for at least 3 years given the ongoing profitability of the loan
outlet (in the ordinary course of business). During the current
period, the Group exercised lease termination options. There were
no early termination penalties under these agreements.
8. Other Assets
Group 2020 2019
--------------------------------- --------- --------
Other non-financial assets
Lease prepayments 23,062 16,603
Settlements with suppliers 35,211 29,440
Taxes other than income tax 110,980 139,069
Other receivables 104 , 193 52,937
( 22,149
Less: impairment allowance ) (15,932)
--------------------------------- --------- --------
Total other non-financial assets 251,297 222,117
--------------------------------- --------- --------
Total other assets 251,297 222,117
--------------------------------- --------- --------
Company 2020 2019
--------------------------------- -------- ------
Other non-financial assets
Settlements with suppliers - -
Taxes other than income tax 80 , 732 68,122
Other receivables 45 , 745 -
Less: impairment allowance - -
--------------------------------- -------- ------
126 ,
Total other non-financial assets 477 68,122
--------------------------------- -------- ------
126 ,
Total other assets 477 68,122
--------------------------------- -------- ------
Analysis of movements in the impairment allowance for
non-financial assets during 2020 is presented below:
Group Non-financial assets Total
------------------------------------------------------------- -------------------- -----------
Impairment allowance for other assets as at 1 January 2020 15,932 15,932
Impairment allowance charge during 20 20 9 , 972 9 , 972
Effect of translation into presentation currency ( 3 , 754 ) ( 3 , 754 )
Impairment allowance for other assets as at 31 December
2020 22,149 22,149
------------------------------------------------------------- -------------------- -----------
Analysis of movements in the impairment allowance for
non-financial assets during 2019 is presented below:
Group Non-financial assets Total
------------------------------------------------------------- -------------------- ------
Impairment allowance for other assets as at 1 January 2019 13,117 13,117
Impairment allowance charge during 2019 1,631 1,631
Effect of translation into presentation currency 1,184 1,184
Impairment allowance for other assets as at 31 December
2019 15,932 15,932
------------------------------------------------------------- -------------------- ------
The Group has no collateral for impaired assets recognised
within other assets.
9. Loans Received
Group 2020 2019
------------------------ ------- -------
Loan from related party 735,646 742,603
Total loans received 735,646 742,603
------------------------ ------- -------
On 31 December 2020, the Group entered into an agreement
amending the loan terms - coming into effect from January 2021, the
interest rate on the above loan is set at 13.42 % per annum, and
the loan repayment period is extended until 31 December 2023.
Company 2020 2019
----------------------- ------------------------------- ----
Loan from related party - -
Total loans received - -
----------------------- ------------------------------- ----
10. Other Liabilities
Group 2020 2019
------------------------------------------ ------- -------
Other financial liabilities
Payables 326,692 200,618
Other settlements with customers on loan
's agreements 200,019 97,322
Other 7,195 16,732
Other non-financial liabilities
Taxes other than income tax 26,412 16,982
Provision for unused vacations 104,353 144,024
Payables to employees and payroll related
taxes 159,159 189,227
Total other liabilities 823,830 664,905
------------------------------------------- ------- -------
Company 2020 2019
------------------------------------------ --------- -------
Other financial liabilities
Payables 119,057 126,057
Other 27 27
Other non-financial liabilities
Payables to employees and payroll related 67, 65
taxes 5 36,582
Total other liabilities 1 8 6,739 162,666
------------------------------------------- --------- -------
11. Charter and Additional Capital , Other reserves . Earnings
per share
As at 31 December 2018, the Charter capital states the amount of
Share capital of the Subsidiary - the authorised capital represents
the contribution made by the sole participant of the Subsidiary
.
D uring 2019 the reverse acquisition was stated in the
consolidated financial statements, as a result, the Charter capital
as at 31 December 2019 states the Share capital of the legal parent
Company, totalling
GBP4,369,750. All the shares issued have equal voting rights .
Below is a reconciliation of the movement in the legal parent
Company Share capital during 2019:
31 Dec
Group and Company 2018 Amount
Issued and fully paid Number , GBP
----------------------------------- ---------- -------
6 , 000
Ordinary shares of GBP0, 01 each , 000 60,000
6 ,000,000 60,000
----------------------------------- ---------- -------
For the year 2019 ( Ordinary shares issue of GBP0.01 each):
Group and Company Number Amount, GBP
320 , 000 3 ,200
Consideration shares (acquisition of Subsidiary) , 000 ,000
IPO 104 ,000,000 1,040,000
Fee shares 6 ,975,000 69,750
430 ,975,000 4 , 309,750
------------------------------------------------------------ --------------- -----------
31 Dec
Group and Company 2019 Amount
Issued and fully paid Number , GBP
------------------------------------------------------------- ----------- -----------
436 , 975
Ordinary shares of GBP0 . 01 each , 000 4,369,750
436 ,975,000 4,369,750
------------------------------------------------------------ --------------- -----------
T here are no changes in the structure and amount of the share capital during 2020.
31 Dec
Group and Company 2020 Amount
Issued and fully paid Number , GBP
----------------------------------------- ------------ ---------- ---------
436 , 975
Ordinary shares of GBP0 . 01 each , 000 4,369,750
436 ,975,000 4,369,750
-------------------------------------------------- -------------- ---------
As at 31 December 2018 the amount of Additional capital stated
in the agreement on in-kind contribution (debt on the loan) of the
Subsidiary was - GBP29,122,880.
Amounts of Additional capital as at 31 December 2018 were
restated as at the date of the agreement on in-kind contribution
(debt on the loan).
Group
Date of exchange rate
for translation to Exchange
presentation currency Amount in RUB rate Amount in GBP
------------------------ --------- --------------
29.12.2018 2,561,820,344 87.9659 29,122,880
Total additional capital at
31 December , 2018 29,122,880
---------------------------------------- --------- --------------
As a result of the reverse acquisition , which was stated in the
consolidated financial statements in 2019, the Additional capital
as at 31 December 2019 of the legal parent Company was
GBP6,078,128.
Below there is reconciliation of movement in Additional capital
(share premium) of legal parent Company during 2019:
For the year 2019:
Group and Company Amount, GBP
As at 1 January 2019 -
Premium arising on issue of ordinary shares 6,406,699
Issue costs (328,570)
As at 31 December 2019 6 , 078,128
---------------------------------------------- -----------
T here are no changes in the structure and amount of additional capital during 2020.
Group and Company Amount, GBP
Share premium (with consideration of issue 6, 078
costs) ,128
As at 31 December 2020 6 , 078,128
----------------------------------------------- -----------
Other reserves
Shares Share
to be option
issued Merger reserve Translation
Group Reserve reserve reserve
------------------------------------ --------- ---------- ----------- ---------- ------------
4,497,
As at 1 January 2019 - - - 731
Merger reserve - 23,764,800
166
Share based payments - ,883
Translation differences - - - (39,942)
As at 31 December 2019 - 23 ,764,800 166,883 4,457,788
--------------------------------------------- ----------- ----------- ---------- ------------
800 ,
Contingent consideration 000
Merger reserve - (800,000) - -
Share based payments - 51,216
Translation differences - - - (67,563)
22 ,
As at 31 December 2020 800,000 9 64,800 218,099 4,390,225
----------------------------------------------- ---------- ----------- ---------- ------------
The merger and foreign currency translation reserve as at 31
December 2019 arose on consolidation as a result of merger
accounting for the acquisition of the entire issued share capital
of the Subsidiary during 2019 and represents the difference between
the value of the share capital issued for the acquisition of the
Subsidiary and investments made in the Subsidiary and that of the
acquired share capital of the Subsidiary.
Share options reserve - this reserve represents cumulative
share-based payment expense for the Group's share option schemes.
See Note 12 Share-based payments.
Shares to be issued Reserve - this reserve represents shares to
be issues in respect of contingent consideration, see note 26
Business Combination for further details.
Currency translation differences relate to the translation of
the Subsidiary that have a functional currency different from the
presentation currency (refer note 2). Movements in the translation
reserve are linked to the changes in the value of the Russian Ruble
against the Pound Sterling: the business of the Group is located in
Russian Federation, and the Subsidiary's functional currency is the
Russian Ruble, which had substantial volatility against Sterling
during the year.
Accumulated deficit represents retained earnings.
Earnings per share . The basic loss per share of 0.14p loss per
share (2019 loss per share: 0.77p) is calculated by dividing the
loss attributable to owners of the parent by the weighted average
number of ordinary shares in issue during the year.
Group 2020 2019
------------------------------------ ---------------------------------------- -----------------
Loss attributable to owners of the parent ( 614 ,519) ( 891 ,589)
Weighted average number of ordinary
shares in issue 436,975,000 115,689,178
The basic and diluted loss per share for the years ended 31
December 2020 and 31 December 2019 are the same as the current year
result was a loss, the options and warrants outstanding would be
anti-dilutive. Therefore, the dilutive loss per share is considered
the same as the basic loss per shares.
Group 2020 2019
------------------------------ ---------------------------------------- ---------------------
Loss attributable to owners of the
parent (614,519) (891,589)
Weighted average number of ordinary
shares in issue outstanding for the
effects of all dilutive potential
ordinary
shares 436,975,000 115,689,178
12. Share-based payments
In October 2019, a total of 32,250,000 options were issued to certain
directors, senior management and other advisers in recognition
of the work undertaken for Zaim prior to the IPO. In addition the
Company issued a total of 13,600,000 warrants to advisers in relation
to the funds raised at the time of the IPO. All the options were
issued with an exercise price of 2.5 pence per share and expire
after 5 years from the date of issue. 17,200,000 of the options
vest immediately and have no employment related conditions, the
remaining 15,050,000 vest over 1-2 years from the date of issue
and, should the individual end their employment, the options either
expire immediately or are valid for a further 6 months (depending
on the circumstances of the departure of the individual). All the
warrants have a contractual term of 3 years from the date of issue,
have no performance related terms attached and have a strike price
of 2.5 pence per share.
In addition to the options noted above as set out in the prospectus
at the time of the IPO the Directors have the discretion to issue
a further 10,750,000 options to key employees and consultants of
the Group as an incentivising tool to retain key individuals. As
at the date of this report these have not been issued and have
therefore not been included in the calculations. Neither the Company
nor the Group has any legal or constructive obligation to settle
or repurchase the options in cash.
Movements on number of share options and their related exercise
price are as follows:
Weighted
N umber exercise
of options& price
warrants 2019,
Group 2019 GBP
--------------------------------- ------------ ---------
Outstanding at 1 January 2019 - -
Granted 40,650,000 2.50
Forfeited - -
Outstanding at 3 1 December 2019 40,650,000 2.50
Exercisable at 31 December 2019 25,600,000 2.50
--------------------------------- ------------ ---------
On 24 September 2020, 2,000,000 options were issued to Paul Auger
a non-executive director of the company at a price of 2.7p. The
options vest equally over one year from the date of grant and express
after 5 years.
On 26 November 2020, 1,000,000 options were issued to an employee
of the Group at a price of 2.7p. The options vest equally over
2 years from the date of the grant and express after 5 years.
Weighted
N umber exercise
of options& price
warrants 2020,
Group 2020 GBP
--------------------------------- ------------ ---------
Outstanding at 1 January 2020 40 ,650,000 2 .50
Granted 3,000,000 -
Forfeited - -
2. 5
Outstanding at 3 1 December 2020 43,650,000 0
2. 5
Exercisable at 31 December 2020 34,200,000 0
--------------------------------- ------------ ---------
The options & warrants outstanding at 31 December 2020 had a weighted
average remaining contractual life of 3.8 years.
The fair value of the share options and warrants was determined
using the Black-Scholes valuation model.
The parameters used are detailed below.
For the year 2019 :
2019
Group and Company options
----------------------------------------------- -------------
Date of Grant 29 Oct 20 19
Weighted average share price 2.50 pence
Weighted average exercise price 2.50 pence
Weighted average fair value at the measurement 0 .57 penc
date
Expiry date 29 Oct 20 24
Options granted 40 ,650,000
Volatility 20%
Dividend yield Nil
Option life 5 year
Annual risk free interest rate 2.83%
------------------------------------------------ -------------
For the year 2020:
2020
Group and Company Options
----------------------------------------------- ------------
Date of Grant 29 Oct 2019
Weighted average share price 2.60 pence
Weighted average exercise price 2.70 pence
Weighted average fair value at the measurement 0 .7 8 penc
date
Expiry date 29 Oct 20 24
Options granted 40 ,650,000
Volatility 30%
Dividend yield Nil
Option life 5 year
Annual risk free interest rate 2 . 83%
------------------------------------------------ ------------
13. Interest Income and Expense
Group 202 0 2019
----------------------- --------- ---------
Interest income
Loans to customers 4,857,496 3,940,747
Total interest income 4,857,496 3,940,747
----------------------- --------- ---------
Interest expense
Loans received (12,836) (28,018)
Lease liabilities (92,442) (243,281)
Total interest expense (105,277) (271,299)
Net interest income 4,752,218 3,669,448
----------------------- --------- ---------
14. Gains less Losses from Dealing in Foreign Currency
Group 2020 2019
--------------------------------------------- --------- ------
Gain/loss on revaluation of financial assets (181 , 102 ,
and liabilities 466) 327
Realised gain/ (loss) from foreign exchange (6,830
transactions (7 , 661) )
Total gains less losses from dealing in
foreign currency (189,127) 95,497
---------------------------------------------- --------- ------
15. Allowance for Expected Credit Losses / Impairment of Other
Assets
Group Note 2020 2019
------------------------------------------- ---- ------- -------
1 , 780
Loans to customers 6 , 746 230,050
Other assets 8 9 , 972 1,631
Total allowance for expected credit losses 1 , 790
/ impairment of other assets , 718 231,681
------------------------------------------- ---- ------- -------
16. Other Operating Income
Group 2020 2019
---------------------------------------------------- -------- -------
253 ,
Agent's fee 889 150,036
158 ,
Fines received under loan agreements 32 2 34,846
Financial result from derecognition of lease assets 126 ,
and liabilities 091
Taxes other than income tax - 591,965
Other income 52 , 200 13,707
590 ,
Total other operating income 502 790,554
----------------------------------------------------- -------- -------
17. Staff Costs
Group 20 2 0 2019
---------------------- --------- ---------
1 , 429
Salary , 920 1,722,792
Payroll related taxes 380 , 523 283,473
1 , 810
Total staff costs , 443 2,006,265
----------------------- --------- ---------
18. Operating Expenses
Group 2020 2019
------------------------------------ --------- ---------
Depreciation of right-of-use assets 661,165 1,248,759
State duty 283,523 23,036
Advertising and marketing 269,304 25,736
Investor Relations 181,456 -
Consulting services 209,828 851,223
Communication 98,172 87,83
Postal services 91,328 38,491
Banking services 87,558 43,246
Rental expenses 66,434 257,639
Material expenses 33,920 3,412
Security 22,023 42,594
Office equipment - 17,274
Repairs - 2,038
Representative and travel expenses - 81,250
Other expenses 111,025 169,730
Total operating expenses 2,115,735 2,892,258
------------------------------------- --------- ---------
19. Income Tax
As at 31 December 2020 and 31 December 2019, the Group has no
current income tax expense. The current income tax rate applicable
to the majority of the Group's profit is 20% (2019: 20%).
A reconciliation between the theoretical and the actual taxation
charge is provided below.
Group 2020 2019
--------------------------------------------------- --------- ------------
(614, 5 (891, 5 89
IFRS loss before taxation 19 ) )
Theoretical tax charge at the applicable statutory
rate 122,904 178,318
Non-deductible expenses and other differences 29 , 521 ( 19,132 )
(152 ,4
) Unrecognised deferred tax asset 25) (159,186)
Income tax expense for the year - -
--------------------------------------------------- --------- ------------
The Company has a potential deferred tax asset of GBP153,847
(2019: GBP56,987) as a result of trade losses to be offset against
future profits, should they arise.
Differences between IFRS and statutory taxation regulations of
the Russian Federation give rise to certain temporary differences
between the carrying amount of certain assets and liabilities for
financial statement purposes and for the Group's income tax
purposes.
Effect Change recognised
of exchange in profit
2019 rate differences and loss 2020
------------------------------------- --------- ------------------ ------------------ ------------
Tax effect of deductible temporary
differences
( 15 , ( 24 , 565
Loans to customers 91 , 779 500 ) ) 51 , 714
( 3 , 749 ( 12 , 752
Other assets 24 , 891 ) ) 8 , 390
( 1 , 234
Intangible assets - ) 16 , 521 15 , 287
511 , ( 68 , ( 373 ,
Lease liabilities 130 680 ) 007 ) 69 , 443
( 1 , 199 ( 8 , 517
Other liabilities 9 , 716 ) ) -
3 , 882 ( 734 , 3 , 330
Tax loss , 681 761 ) 182 , 082 , 002
------------------------------------- --------- ------------------ ------------------ ------------
3 , 474
4 , 520 ( 825 (220 , , 8 3
D eferred tax assets , 197 , 123 ) 2 38 ) 6
------------------------------------- --------- ------------------ ------------------ ------------
Tax effect of taxable temporary
differences
( 10,745
Other liabilities - 803 ) (9 , 942)
Property and equipment (1 , 857) 28 7 871 (700)
Right-of-use assets under (509 , (59 ,
lease agreements 846) 67 , 725 382 , 536 585)
(511 (70 ,
Gross deferred tax liabilities , 703) 68 , 815 372 , 663 227)
4 , 008 (756 ,
Total net deferred tax asset , 494 310) 152 , 425 3 , 404,608
------------------------------------- --------- ------------------ ------------------ ------------
(4 , (3 ,
008 , 756 , (152 , 404,608
Unrecognised tax assets 494) 310 4 2 5 ) )
------------------------------------- --------- ------------------ ------------------ ------------
Recognised tax liabilities - - -
------------------------------------- --------- ------------------ ------------------ ------------
Change recognised Effect of
in profit exchange
Group 2018 and loss rate differences 2019
------------------------------------- ----------- ------------------ ------------------ ------------
Tax effect of deductible temporary
differences
Loans to customers 97,301 (13,827) 8,305 91,779
Other assets 42,397 (20,854) 3,348 24,891
Lease liabilities - 501,961 9,169 511,130
Other liabilities 54,654 (48,853) 3,915 9,716
Tax loss carried forwards 3,342,776 241,480 298,425 3,882,681
------------------------------------- ----------- ------------------ ------------------ ------------
Deferred tax assets 3,537,128 659,907 323,162 4,520,197
------------------------------------- ----------- ------------------ ------------------ ------------
Tax effect of taxable temporary
differences
Property and equipment (1,688) (20) (149) (1,857)
Right-of-use assets under lease
agreements (500,701) (9,145) (509,846)
Gross deferred tax liabilities (1,688) (500,721) (9,294) (511,703)
Total net deferred tax asset 3,535,440 159,186 313,868 4,008,494
------------------------------------- ----------- ------------------ ------------------ ------------
Unrecognised tax assets (3,535,440) (159,186) (313,868) (4,008,494)
------------------------------------- ----------- ------------------ ------------------ ------------
Recognised tax liabilities - - - -
------------------------------------- ----------- ------------------ ------------------ ------------
20. Risk Management
The risk management function within the Group is carried out in
respect of financial risks (credit, market, currency, liquidity and
interest rate), operational, and legal risks. The primary
objectives of the financial risk management function are to
establish risk limits and then ensure that exposure to risks stays
within these limits. The assessment of exposure to risks also
serves as a basis for optimal distribution of risk-adjusted
capital, transaction pricing and business performance assessment.
The operational and legal risk management functions are intended to
ensure proper functioning of internal policies and procedures to
minimise operational and legal risks.
Credit risk
The Group assumes a credit risk, namely the risk that a
counterparty will fail to meet its debt obligations within the
specified period. The Group has developed policies and procedures
for the management of credit exposures (both for recognised
financial assets and unrecognised contractual commitments),
including requirements for establishment and monitoring of the loan
portfolio concentration limits.
The credit policy establishes:
procedures for review and approval of loan applications,
methodology for assessment of the borrowers' solvency,
credit documentation requirements,
procedures for the ongoing monitoring of loans and other credit
exposures.
The Group continuously monitors the status of individual loans
and regularly reassesses the creditworthiness of its customers. The
review is based on the most recent loan delinquency statistics
.
The Group applies the expected credit loss model for the purpose
of provisioning for financial debt instruments, the key principle
of which is timely reflection of deterioration or improvement in
the credit quality of debt financial instruments based on current
and forward-looking information.
The amount of the ECL recognised as a credit loss allowance
depends on the extent of credit quality deterioration since initial
recognition of a debt financial instrument .
Credit risk classification system . Each level of credit risk is
assigned a certain degree of solvency, using a single scoring
system:
minimum credit risk - high credit quality with low expected
credit risk, debt is not past due;
low credit risk - sufficient credit quality with average credit
risk, debt is prolonged and not past due;
moderate credit risk - average credit quality with satisfactory
credit risk, the debt is from 1 to 30 days past due;
high credit risk - low credit quality with unsatisfactory credit
risk, high probability of default, the debt is from 31 to 60 days
past due;
default - assets that meet the definition of default, the debt
is more than 60 days past due.
Expected credit losses on financial assets that are not impaired
are usually measured on the basis of default risk over one or two
different time periods, depending on whether there has been a
significant increase in the borrower's credit risk since initial
recognition.
The Group performs collective assessment of loans to
individuals. This approach provides for the aggregation of the
portfolio into homogeneous segments based on specific information
about borrowers, such as delinquent loans, historic data on prior
period losses and forward-looking macroeconomic information.
Collective assessment principles : for assessing risk stages and
estimating ECL on a collective basis, the Group combines its loans
into segments based on shared credit risk characteristics, so that
exposure within a grouping has a homogeneous pattern.
Market risk
The Group assumes a market risk. Market risk is the risk that
the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices. Market risk
comprises currency risk, interest rate risk and other price risks.
Market risk arises from open positions in interest rates, currency
and equity financial instruments which are exposed to general and
specific market movements and changes in the volatility levels of
market prices.
The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while
optimising the return on risk .
Currency risk
Currency risk is the risk that the fair value or the future cash
flows of a financial instrument will fluctuate because of changes
in foreign currency exchange rates.
The Group accepts the risk of effect of foreign currency
exchange rate fluctuations on its financial position and cash
flows. Currency risk arises when the existing or prospective assets
in foreign currencies are greater or lower than the existing or
prospective liabilities in the same currencies. The Group's
management controls the exposure to currency risk on a regular
basis.
The table below provides the analysis of the Group's currency
risk as at 31 December 2020.
Group RUB GBP EUR Total
--------------------------------- --------- -------- --------- ---------
Assets
640,8
Cash and cash equivalents 479,708 161,095 68 71
Loans to customers 1,269,313 - - 1,269,313
Property and equipment 5,676 - - 5,676
Right-of-use assets under lease
agreements 297,925 - - 297,925
251, 29
Other assets 124,821 126,477 - 8
2,4 6
Total assets 2,177,443 287,571 68 5,083
--------------------------------- --------- -------- --------- ---------
Liabilities
Loans received - - 735,646 735,646
Lease liabilities 347,216 - - 347,216
Other liabilities 637,091 186,739 - 823,830
1,9 06
Total liabilities 984,307 186,739 735,646 ,692
--------------------------------- --------- -------- --------- ---------
Net balance sheet position 1,193,136 100,832 (735,578) 558 ,391
--------------------------------- --------- -------- --------- ---------
The table below provides the analysis of the Group's currency
risk as at 31 December 2019.
Group RUB USD GBP EUR Total
--------------------------------- --------- --- ----------- --------- ----------
Assets
Cash and cash equivalents 271,229 867 1 ,310,393 263 1, 582,751
Loans to customers 786,346 - - - 786,346
Property and equipment 11,967 - - - 11,967
Right-of-use assets under lease
agreements 2,549,233 - - - 2,549,233
Other assets 150,525 - 68,122 3,470 222,117
Total assets 3,769,300 867 1,378,514 3,733 5,152,414
--------------------------------- --------- --- ----------- --------- ----------
Liabilities
Loans received - - - 742,603 742,603
Lease liabilities 2,555,648 - - - 2,555,648
664,9
Other liabilities 499,077 - 162,666 3,162 05
Total liabilities 3,054,725 - 162,666 745,765 3,963,156
--------------------------------- --------- --- ----------- --------- ----------
Net balance sheet position 714,575 867 1,215,849 (742,032) 1,189,258
--------------------------------- --------- --- ----------- --------- ----------
The table below presents a change in the financial result and
equity due to possible fluctuations of exchange rates used at the
end of the reporting period if all other conditions remain
unchanged. Reasonable exchange rate changes for each currency were
projected on the basis of historical information on maximum daily
exchange rate fluctuations in December 2020.
31 December 2020
---------------------------------
Effect on
profit or loss before Effect on
Group taxation equity
----------------- ---------------------- ---------
EUR appreciation
by 2 0% (147,129) (117,703)
EUR depreciation
by 20% 147,129 117,703
----------------- ---------------------- ---------
The table below presents a change in the financial result and
equity due to possible fluctuations of exchange rates used at the
end of the reporting period if all other conditions remain
unchanged. Reasonable exchange rate changes for each currency were
projected on the basis of historical information on maximum daily
exchange rate fluctuations in December 2019.
31 December 2019
---------------------------------
Effect on
profit or loss before Effect on
Group taxation equity
----------------- ---------------------- ---------
EUR appreciation
by 10% (74,229) (59,383)
EUR depreciation
by 10% 74,229 59,383
----------------- ---------------------- ---------
Liquidity risk
Liquidity risk arises when the maturity of assets and
liabilities do not match. The Group does not accumulate cash
resources to meet all liabilities mentioned above, as based on the
existing practice it is possible to forecast with a sufficient
degree of certainty the required level of cash funds necessary to
meet the above obligations.
To manage its liquidity, the Group is required to analyse the
level of liquid assets needed to settle the liabilities when they
mature, provide access to various sources of financing, draw up
plans to solve the problems with financing, and exercise control
over the compliance of the liquidity ratios with the statutory laws
and regulations.
The CBR sets and monitors liquidity requirements for
microfinance organisations. The Group calculates the liquidity
ratio in accordance with Instruction No. 5 114 -U of the Central
Bank of the Russian Federation "On establishment of economic
standards for a microloan company attracting loan funds from
individuals, including individual entrepreneurs who are founders
(participants, shareholders), and (or) legal entities" dated 2
April 2019. As at 31 December 2020 and 31 December 2019, the
minimum liquidity ratio was 70%. The Group provides the territorial
CBR division that supervises its activities with information on
mandatory liquidity ratios in accordance with the set format on a
quarterly basis as at the first day of each month. Also, if the
liquidity ratio values approach the limit set by the CBR, this
information is communicated to the Group's management. The Group
complies with the liquidity ratio as at 31 December 2020
(unaudited) and as at 31 December 2019 ( unaudited) .
The table below shows the maturity profile of financial
liabilities as at 31 December 2020:
On demand From From
and less From 6 months 1 to
than 1 1 to 3 months to 1 3 years
month 3 months to 6 months year Total
-------------------------- --------- --------- ------------ --------- -------- -------
Liabilities
Loans received - 51,582 77,373 154,745 618,982 902,682
Lease liabilities - 83,486 86,451 161,569 31,707 363,213
Other liabilities 533,909 - - - - 533,909
-------------------------- --------- --------- ------------ --------- -------- -------
Total potential future
payments under financial 1, 799
liabilities 533,909 135,068 163,824 316,314 650,689 , 804
-------------------------- --------- --------- ------------ --------- -------- -------
The table below shows the maturity profile of financial
liabilities as at 31 December 2019:
On demand From From
and less From 6 months 1 to
than 1 1 to 3 months to 12 3 years
Group month 3 months to 6 months years Total
-------------------------- --------- --------- ------------ --------- --------- ---------
Liabilities
Loans received 742,603 - - - - 742,603
Lease liabilities - 396,064 396,064 787,925 3,069,025 4,649,078
Other liabilities 351,253 - - - - 351,253
-------------------------- --------- --------- ------------ --------- --------- ---------
Total potential future
payments under financial 1,093
liabilities ,856 396,064 396,064 787,925 3,069,025 5,742,934
-------------------------- --------- --------- ------------ --------- --------- ---------
The Group does not use the above undiscounted amounts in the
maturity analysis to monitor the liquidity profile. Instead, the
Group monitors the expected maturity limits that are shown in the
table below as at 31 December 2020:
On demand No stated
and less From From From 6 maturity
than 1 to 3 to months More than
1 month 3 months 6 months to 1 year 1 year Overdue Total
--------------------- --------- --------- ---------- ---------- --------- ------- --------- ---------
Assets
Cash and cash 640,8 640,8
equivalents 71 - - - - - - 71
Loans to customers 1,168,937 - - - - 100,376 - 1,269,313
Property and
equipment - - - - - - 5,676 5,676
Right-of-use
assets under
lease agreements - - - - - - 297,925 297,925
156,7
Other assets 12 29 415 862 162 - 93,118 251,297
396,7
Total assets 1,966,520 29 415 862 162 100,376 20 2,465,084
--------------------- --------- --------- ---------- ---------- --------- ------- --------- ---------
Liabilities
Loans received - 27,345 54,270 113,642 540,389 - - 735,646
Lease liabilities - 77,397 81,779 157,129 30,911 - - 347,216
Other liabilities 719 ,477 - - - - - 104,353 823,830
Total liabilities 719,477 104,742 136,049 270,771 571,300 - 104,353 1,906,692
--------------------- --------- --------- ---------- ---------- --------- ------- --------- ---------
Net liquidity
gap as at 31 1,247,04
December 2020 3 (104,713) (135,634) (269,909) (571,138) 100,376 292,367 558,391
--------------------- --------- --------- ---------- ---------- --------- ------- --------- ---------
Cumulative liquidity
gap as at 31 736,78
December 2020 1,247,043 1,142,329 1, 006,695 7 165,648 266,024 558,391
--------------------- --------- --------- ---------- ---------- --------- ------- --------- ---------
The table below present the maturity profile of assets and
liabilities as at 31 December 2019:
On demand No stated
and less From From From 6 maturity
than 1 to 3 to to 12 More than
Group 1 month 3 months 6 months months 1 year Overdue Total
--------------------- --------- --------- --------- --------- ----------- ---------- ----------- ---------
Assets
Cash and cash
equivalents 1,582,751 - - - - - - 1,582,751
Loans to customers 786,346 - - - - - 786,346
Property and
equipment - - - - - - 11,967 11,967
Right-of-use
assets under
lease agreements - - - - - - 2,549,233 2,549,233
Other assets 131,938 - - 2,218 - 12,649 7 5 ,312 222,117
2,501,0
Total assets 35 - - 2,218 - 12,649 2,636,512 5,152,414
--------------------- --------- --------- --------- --------- ----------- ---------- ----------- ---------
Liabilities
Loans received 742,603 - - - - - - 742,603
Lease liabilities 227,558 352,680 725,218 1,250,193 - - 2,555,648
Other liabilities 520,880 - - - - - 144,025 664,905
Total liabilities 1,263,483 227,558 352,680 725,218 1,250,193 - 144,025 3,963,157
--------------------- --------- --------- --------- --------- ----------- ---------- ----------- ---------
Net liquidity
gap at 31 December 1 ,
2019 237,552 (227,557) (352,680) (723,000) (1,250,193) 12,649 2,492,487 1,189,257
--------------------- --------- --------- --------- --------- ----------- ---------- ----------- ---------
Cumulative liquidity
gap as at 31 1 , (65,685 (1,315,878 (1,303,229
December 2019 237,552 1,009,995 657,315 ) ) ) 1 , 189,257
--------------------- --------- --------- --------- --------- ----------- ---------- ----------- ---------
Interest rate risk
The Group assumes the risk associated with the effects of
fluctuations in market interest rates on its financial position and
cash flows. Interest margins may increase as a result of such
changes but may also decrease or create losses in the event of
unexpected movements in interest rates.
The Group is exposed to interest rate risk primarily as a result
of its lending activities at fixed interest rates, in amounts and
for periods which differ from those of fixed interest rate
borrowings (Loans to customers as at 31 December 2020: 1, 269,313
and as at 31 December 2019: 786,346 British pounds sterling) . In
practice, interest rates are usually set for short periods. In
addition, interest rates recorded in both asset and liability
contracts are often revised by mutual agreement in accordance with
current market conditions. I n 2019 the maximum daily interest rate
was limited to 1.5% per day in the first half of the year and 1%
the second half of 2019.
Also, the Group's lease liabilities are exposed to interest rate
risk (as at 31 December 2020: 347,216 and as at 31 December 2019: 2
, 555,648 British pounds sterling) .
Other assets and liabilities are not exposed to interest rate
risk.
21. Capital management
The Group's objectives when managing capital are to comply with
the capital requirements set by the Central Bank of Russia , as the
main area of business of the Group is in the Russian Federation ,
and to ensure the Group's ability to continue as a going concern
and maintain a capital base at the level necessary to achieve the
capital adequacy ratio of 5% in accordance with the CBR
requirements.
The Group provides the territorial division of the CBR
supervising its operations with information on the mandatory
capital adequacy ratio in accordance with the established format
quarterly as at the first day of each month.
The statutory requirements for own funds (equity) as at 31
December 2020 are set at one million roubles. The Group is in
compliance with the above requirements.
22. Contingencies
Litigations. In the ordinary course of business, the Group is
subject to legal actions and complaints. Management believes that
the ultimate liability, if any, arising from such actions or
complaints will not have a material adverse effect on the Group's
financial condition or the results of its future operations.
Tax legislation. As the main business of Group is in Russia ,
Russian tax legislation is subject to varying interpretations, and
changes, which can occur frequently. Management's interpretation of
such legislation as applied to the transactions and activities of
the Group's companies may be challenged by the relevant regional or
federal authorities. Current trends in the Russian Federation
suggest that the tax authorities are taking a more assertive
position in their interpretation of the legislation and
assessments. As a result, tax authorities may challenge
transactions and accounting methods for which they have not
previously challenged. As a result, significant additional taxes,
penalties, and fines may be assessed.
As at 31 December 2020, management believes that its
interpretation of the relevant legislation is appropriate and the
Group's tax, currency and customs positions will be sustained by
the regulatory authorities. Management believes that the Group has
accrued all relevant taxes.
Operating lease commitments. In the course of its business, the
Group enters into a number of lease agreements. These agreements
are not irrevocable. The minimum future lease payments under
operating leases where the Group is the lessee are presented
below:
Group 31 December 20 20 31 December 20 19
----------------------------------- ----------------- -----------------
Less than 1 year - 66,434
Total operating lease commitments - 66,434
----------------------------------- ----------------- -----------------
23. Fair Value of Financial Instruments
A quoted market price in an active market is the best evidence
of fair value. As no readily available market exists for the major
part of the Group's financial instruments, their fair value is
based on current economic conditions and the specific risks
attributable to the instrument. The estimates presented below are
not necessarily indicative of the amounts the Group could realise
in a market exchange from the sale of its full holdings of a
particular instrument.
Below is the estimated fair value of the Group's financial
instruments as at 31 December 2020 and
31 December 2019:
2020 2019
--------------------- -----------------------
Carrying Carrying
Group value Fair value value Fair value
Financial assets
Cash 640,871 640,871 1 ,582 ,751 1,582,751
Loans to customers 1,269,313 1,269,313 786,346 786,346
Financial liabilities
Loans received 735,646 735,646 742,603 742,603
Other liabilities 533,907 533,907 351,253 351,253
---------------------- --------- ---------- ----------- ----------
The Group uses the following methods and assumptions to estimate
the fair value of these financial instruments:
Cash and cash equivalents. The estimated fair value of cash and
cash equivalents does not differ from their carrying amounts due to
the nature of these financial instruments.
Loans to customers . Loans to customers are reported net of
impairment allowance. The estimated fair value of loans to
customers represents the discounted amount of estimated future cash
flows expected to be received. To determine fair value, expected
cash flows are discounted at current market rates (the interest
rate on loans in 2020 was 1%, and in 2019 - from 1.5% to 1%).
Loans received. The fair value of other fixed interest-bearing
borrowed funds is based on discounted cash flows using interest
rates for instruments with similar maturity and in similar
currency. The lending rates are equal to the market rates .
To present information on the fair value hierarchy of financial
instruments as required by IFRS 13 Fair Value Measurement, the
management of the Group assigns the above financial assets and
liabilities as at 31 December 2019 and 31 December 2018, excluding
cash and cash equivalents (Level 1 = GBP 640,871 at 31 December
2020 and GBP 1 ,582 ,751 at 31 December 2019) to Level 3 of the
fair value hierarchy of inputs.
24. Reconciliation of Classes of Financial Instruments with
Measurement Categories
In accordance with IFRS 9 "Financial Instruments", the Group
classifies its financial assets and liabilities into the following
categories: (a) financial assets at fair value through profit or
loss; (b) financial assets at fair value through other
comprehensive income; and (c) financial assets at amortised
cost.
At the same time, in accordance with the requirements of IFRS 7
"Financial Instruments: Disclosures", the Group discloses various
classes of financial instruments.
As at 31 December 2020 and 31 December 2019, all financial
assets and liabilities of the Group are classified as financial
assets and liabilities measured at amortised cost.
25. Related Party Transactions
For the purposes of these consolidated financial statements,
parties are considered to be related if one party has the ability
to control or exercise significant influence over the other party
in making financial or operational decisions as defined by IAS 24
Related Party Disclosures. In considering each possible related
party relationship, attention is directed to the economic substance
of the relationship, not merely the legal form.
In the normal course of business, the Group enters into
transactions with its sole participant and directors. These
transactions include settlements, payment of remuneration to
employees, and loan draw downs. According to the Group's policy,
the terms of related party transactions are equivalent to those
prevailing in arm's length transactions.
The outstanding balances at the year end and liability
transactions with related parties for 2019 are as follows:
Transactions with party under common ultimate control 2020 2019
------------------------------------------------------ ------- -------
Loans received (balance) 735,646 742,603
------------------------------------------------------ ------- -------
No interest was accrued in 2020 and 2019 (see Note 9 Loans
received) .
As at 31 December 2020 and at 31 December 2019, the balance on
loans received represents the obligation to pay interest on the
loan , which was forgiven in 2018.
Transactions with ultimate beneficiary 2020 2019
--------------------------------------- ----------------------------- -------
Loan to beneficiary (55,559)
Loan offset 55,559
Services rendered - 206,718
--------------------------------------- ----------------------------- -------
Transactions with parent company 2020 2019
----------------------------------- -------------------------- ----
Loan issued 45,411 -
Interest income 334 -
Total balance as at 31 December , 2020 45,745 -
For the year ended 31 December 2020, the total remuneration of
key management personnel of the Subsidiary was GBP 27 4 ,28 1 ,
including social insurance contributions of GBP 44,106 (2019: GBP
267,128, including social insurance contributions of GBP 39,7 65 ).
The Group does not provide key management personnel with
post-employment and employment termination benefits. The
remuneration of the Board of Directors of the Group for the year
2020 was as follows:
Below is the summary of remuneration for each Director for
2020:
Salary, GBP Bonus for Shares held Stock options
, for the the year
year 2020 2020
Malcolm Groat 25,000 - 0 2,150,000
------------ ---------- ------------ --------------
Siro Donato
Cicconi 100,000 35 ,000 320,000,000 10,750,000
------------ ---------- ------------ --------------
Vladimir Golovko 124,361 3,500 0 8,600,000
------------ ---------- ------------ --------------
Simon James
Retter 60,000 21,000 3,600,000 6,450,000
------------ ---------- ------------ --------------
Paul James
Auger 20,000 - 0 2 ,000,000
------------ ---------- ------------ --------------
The social insurance contributions , paid by the Company for the
year 2020 on remuneration, was GBP17,388.
Out of pocket expenses totalling GBP78,055 were incurred by Siro
Donato Cicconi in 2019 and as at 31 December
2020 GBP48,055 remained payable ( as at 31 December 2019 : GBP78,055 ) .
26. Business combination
On 19 September 2019 Zaim Credit Systems plc (Parent Company)
became the legal parent of Zaim Express LLC (Subsidiary) by way of
reverse acquisition. The cost of the acquisition is deemed to have
been incurred by Zaim Express LLC, the legal subsidiary, in the
form of equity instruments issued to the owners of the legal
parent. This acquisition has been accounted for as a reverse
acquisition as described in Note 3, Basis of Preparation.
The fair value of the shares in Zaim Express LLC have been
determined from the admission price of the Zaim Credit Systems plc
shares on re-admission to trading on the LSE for 2.5 pence per
share. The value of the consideration shares was GBP8,000,000. The
fair value of the notional number of equity instruments that the
legal subsidiary would have had to have issued to the legal parent
to give the owners of the legal parent the same percentage
ownership in the combined entity is 1.84 per cent of the market
value of the shares after issues, being GBP150,000. The difference
between the notional consideration paid by Zaim Credit Systems plc
for Zaim Express LLC and the Zaim Credit Systems plc net assets
acquired of GBPnil has been charged to the Consolidated Statement
of Comprehensive Income as a deemed cost of the listing amounting
to GBP150,000 with a corresponding entry to the reverse acquisition
reserve.
Details of net assets acquired and the deemed cost of the
listing were as follows:
GBP
Consideration effectively received 150,000
Less net asset required:
Cash and cash equivalents 52,055
Debtors and prepayments 11,982
Current liabilities (64,037)
Total net asset required: -
Deemed cost of listing 150,000
T he terms of the share purchase agreement between the Company
and Zaim Express LLC were as follows : there are certain
circumstances under which deferred contingent consideration might
become payable. Should the Company record a monthly EBITDA figure
in accordance with IFRS of GBP200k per month for a continuous
period of four months and there be no reasonable expectation that
this should fall below this level for a further period of six
months then a further 16,000,000 new ordinary shares in the Company
shall become payable. Additional consideration of 16,000,000 shares
over and above that already mentioned shall become payable should
the Company record a monthly EBITDA figure of GBP350k per calendar
month with the same continuous period clause as noted above. At the
IPO price per share these deferred contingent considerations would
have a value of GBP400k each for a combined value of GBP800k. It
has been considered by the Directors at this time that, in light of
the Covid-19 pandemic it remains difficult to predict if and when
this might occur. This combined with the current low probability of
these milestones being met in the current environment, mean t that
no fair value has been calculated for such deferred
considerations.
Under the terms of the share purchase agreement between the
Com-pany and Zaim Express LLC ( Subsidiary) there are certain
circumstances under which deferred contingent consideration might
become payable. Should the Company record a monthly EBITDA figure
in accordance with IFRS of GBP200k per month for a continuous
period of four months and there be no reasonable expectation that
this should fall below this level for a further period of six
months then a further 16,000,000 new ordinary shares in the Company
shall become payable. Addition-al consideration of 16,000,000 over
and above that already mentioned shall become payable should the
Company record a monthly EBITDA figure of GBP350k per calendar
month with the same continuous period clause as noted above. At the
IPO price per share these deferred contingent considerations would
have a value of GBP400k each for a combined GBP800k in value. It
has been considered by the Directors that given the improvement in
outlook for the business that this additional consideration is
likely to become payable in the near future and therefore a reserve
of shares to be issued has been recognised and associated increase
in carrying value of the investment in Zaim Express LLC
(Subsidiary) as a result of this consideration.
27. Auditor's remuneration
31.12.20 31.12.19
Audit GBP GBP
Fees payable to the company's
auditor for the audit of the
annual parent company and consolidated
accounts 40 000 40 000
Fees payable to the company's - -
auditor for other services provided
to the company and its subsidiaries:
The audit of the company's subsidiaries - -
under legislative requirements
--------------- -----------
Total audit 40 000 40 000
=============== ===========
28. Events after the Reporting Period
Currently the Group does not consider the impact of COVID-19 to
be significant to the business going forward.
On 6th April 2021, Zaim Express LLC, the Groups wholly owned
Subsidiary, entered into an agreement for an unsecured loan of RUB
50M for a period until September 2022 with an interest rate of 15%
per annum.
There are not considered to be any other events after the
reporting date.
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END
FR DKCBNFBKDPQB
(END) Dow Jones Newswires
April 30, 2021 02:00 ET (06:00 GMT)
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