Professional Documents
Culture Documents
NewDay BondCo PLC
NewDay BondCo PLC
Contents
Strategic Report Governance Financial Statements
At a glance 01 Our end-to-end digital Chairman’s introduction Independent
Our Customer Manifesto 02 product solutions 22 to corporate governance 57 auditor’s report 78
NewDay in numbers 04 Acquiring new customers that Board of Directors 60 Income statements
Who we work with 06 create long-term relationships 24 Management Committee 63 and statements of
Delivering strong growth 26 The Board 64 comprehensive income 80
Our business model 10
Key Performance Indicators 28 Board Committee reports 66 Balance sheets 81
Chairman’s statement 12
Financial review 30 Directors’ report 76 Statements of
Chief Executive Officer’s
Operating responsibly 38 changes in equity 82
review 14
Promoting success and Statements of cash flows 83
Market overview 18
stakeholder engagement 46 Notes to the
Leveraging a leading digital
Risk management 48 Financial Statements 84
platform 20
Mapping our risks 52 Our owners 123
Cautionary statement
Please see page 123 of this report for a description of: (i) the basis of preparation of the financial information contained in this report; (ii) the governance and risk frameworks described in this
report; (iii) the use of certain non-IFRS financial measures and forward-looking statements; and (iv) certain other important information. You should review this in full prior to reading this report.
Strategic Report
At a glance
Who we are
We are a leading consumer credit company By understanding the varying needs of our
serving five million customers in the UK through customers, building long-term relationships and
our diverse and growing business. rewarding customers for appropriately managing
their credit we continue to be one of the most
We want to be the UK’s leading digitally enabled inclusive lenders in the UK and are able to fulfil our
consumer finance provider, responsibly saying purpose to help people be better with credit.
“yes” to more people and developing innovative
tools to help people stay in control of their
finances and access credit seamlessly.
What we do
We have proven specialist capabilities in Our access to and understanding of data allows
underwriting credit cards and providing us to generate in-depth customer insights. This
unsecured credit across a range of products enables us to provide valued support to our retail
including our digital revolving credit product partners and evolve our products to meet our
NewPay. Through our Own-brand business, we customers’ rapidly changing needs.
offer near-prime revolving credit and unsecured
loans to customers who may not have easy access Our business is underpinned by an advanced
to mainstream lenders. In our Co-brand business digital platform that allows us to innovate and
we partner with retailers and online e-tailers to respond rapidly to changing needs, whilst
offer credit to their customers together with creating value for our customers, colleagues and
loyalty and other reward programmes. shareholders.
Welcoming We aim to responsibly say “yes” to as Understanding We aim to build lifelong relationships
many people who apply for credit as with customers and recognise that
possible. Customers are assessed to customers may want to change
ensure affordability criteria are met products as their circumstances
and that they are provided with the change. We of fer a range of
right product at an appropriate rate. understandable solutions. If things
are not going quite to plan, we
We strive to provide customers with a offer customer support, agreeing
great experience by offering products appropriate actions for moving
and services that are simple, intuitive forward.
and useful.
We’ve helped customers with their credit questions in ways that work for them:
111m 2.8m
self-service transactions conversations
5
new products
meeting different credit needs:
Continued support of
our community partners
to promote financial inclusion and provide
financial support to those who need it:
• entered a new partnership with Demos,
a leading UK think tank, to fund the launch
• AO Finance – spread the cost of the Good Credit Index with the aim to
of online purchases improve access to affordable, sustainable
• Argos Classic credit card – access and transparent ‘good credit’
to credit for purchases • continued support of our charity partner
• Miss Selfridge, Topman and Family Action to fund the launch of FamilyLine,
Topshop credit cards – learning a seven-day-a-week helpline providing
to manage credit through rewards practical, emotional and financial support
NewDay in numbers
Our business is more digital and growing
£2,164m £992m
£17m
£3,026m
Group closing receivables
£821m
£1,753m
(2018: £2,623m)
£1,566m
£1,326m
4.7
average app store rating
+66
transactional Net Promoter Score (NPS)
(average customer feedback score when rating their
experience on an interaction with us)
(2018: +64)
2.3m
app downloads to date
125m
transactions processed
(2018: 1.4m) (2018: 107m)
1. In 2019, we refined our definition of customers with an improved credit score so that it is assessed only on customers who have had an account with NewDay for at least twelve months. In 2018, the
definition only included accounts that were active as at both the beginning and end of the year. Accordingly, the 2018 comparative has been restated throughout this report.
Our portfolio
Building better credit with Aqua Saving interest with a balance transfer
We know that our customers are more than their credit We launched the Fluid brand in 2018, offering near-prime
scores. For over 18 years, our Aqua brand has been consumers access to competitive balance transfers – a need
responsibly providing credit to consumers who are not easily identified in the market. Fluid helps customers save on
served by mainstream lenders. We meet a very clear near- interest with a 0% interest balance transfer offer with initial
prime customer need – credit building. Aqua offers sensible credit limits of between £300 and £2,500.
credit limits and all the tools and support needed for
customers to begin a journey to be better with credit and
appropriate financial inclusion.
“Feeling trusted again means so much to “I already had a credit card that was at a
me because I can look forward to building higher interest rate. I did a balance transfer
my future” from my other credit card to Fluid which
had 0% interest for nine months. It came
Claire
Aqua customer,
at the right time”
Middlesbrough
Sarah
Fluid customer,
Warminster
Opportunity
Evolving with our In an increasingly digital world, consumer credit behaviours
continue to evolve and technological advancements lead
customers to address to new opportunities for e-commerce and data insight.
changing needs We deploy our specialist knowledge in underwriting credit
and truly agile customer-centric technology platform to
carefully pursue brand and product expansion in a digitising
and growing UK marketplace.
Read more on
page 18.
Enablers
Driving high standards for Helping customers be better with credit and the principles
of our Customer Manifesto remain at the heart of what we do.
our customers, colleagues We design better products and better journeys to meet our
and community through customers’ needs, whilst empowering our colleagues to drive
forward this vision through attracting top new talent to our
our Manifesto growing business.
Read more on
page 02.
Outcomes
Acquiring new customers Our modern and innovative products allow us to continue
to acquire new customers and develop our long-standing
and creating long-term customer relationships. Our deep understanding of customer
relationships behaviour gives us a high level of performance predictability.
Read more on
page 24.
Delivering strong controlled Another strong year for customer acquisition and our
relentless focus on helping customers be better with credit
growth and high performance have delivered another record financial year. Receivables and
predictability total income recorded double-digit growth and impairment
was controlled within acceptable levels.
Read more on
page 30.
Chairman’s
statement
We have continued to deliver on our strategic
priorities and make progress towards our
vision of being the UK’s leading digitally
enabled consumer finance provider
Our vision is to become the UK’s leading of Directors at NewDay. Our customer- Group. This helps us deliver positive
digitally enabled consumer finance centric culture ensures that the focus of outcomes for our customers in the natural
provider. In 2019, we continued to build on the Group is to build long-term positive rhythm of our business and brings the
the strong foundations and scalability of relationships with customers and to work Customer Manifesto to life.
our business model to deliver record with them to meet their changing needs
results and better outcomes for over time. I am delighted to say that in Digital developments
customers. 2019, we helped 2.0m customers improve The Board continues to review the Group’s
their credit score (2018: 1.7m). We also strategic technology journey to ensure we
Our purpose rewarded our customers with £27m in are appropriately positioned to deliver
NewDay exists to help people be better loyalty rewards (2018: £29m) and we against our vision of being the UK’s leading
with credit. This purpose sits at the heart launched new benef its to reward digitally enabled consumer finance
of everything we do and it is enshrined in customers for good credit behaviour. provider. I am pleased to report that we are
our Customer Manifesto. We set out to be making very good progress against this
Welcoming, Understanding, Knowing and I was pleased to see the market recognise objective. Building on the work we did last
Rewarding for our customers, irrespective some of the things we do at NewDay in year across the Own-brand estate, in 2019
of where they sit on the credit spectrum. supporting our customers. NewDay won we brought the Co-brand digital
the Gold Award at the European Contact acquisition platform in-house from Fiserv.
Across our own brands and in partnership Centre and Customer Service Awards for This allows us to be more innovative,
with some of the UK’s most exciting and the ‘Best Use of Customer Insight’. We also flexible, resilient, and to be more
leading brands, we offer credit to a wide won a Silver Award at the UK Customer responsive to the needs of our digital
spectrum of customers, many of whom do Experience Awards for ‘Use of Insights and partners. We also introduced exciting
not have access to credit from mainstream Feedback’. My colleagues at NewDay ChatBot functionality, enhancing the way
lenders. Responsible lending, financial continue to ensure that our Customer we interact with our customers and firing
education and appropriate inclusion Manifesto and our Values are front and the ‘starting gun’ for a range of AI-powered
remain important priorities for the Board centre in decision-making across the innovation in the future.
We continue to develop our apps, the assess access to ‘good credit’ and provide Leadership
embedded functionality and the way our location-based strategies for building In October 2019, we welcomed John
customers can digitally engage. I am better credit across the country. We will Hourican to the Board as Chief Executive
pleased to report that our customers have continue to work with them as they explore Officer as successor to James Corcoran.
reacted well by awarding us an average app how local government, employers and Between 2013 and 2019 John served as
store score of 4.7 stars. The strength of other stakeholders can improve access to Chief Executive Officer of Bank of Cyprus,
our in-house digital team allows us to react affordable, sustainable and transparent the largest banking and financial services
quicker and deliver better, more cost- good credit. group in Cyprus. During his tenure, John
effective solutions to our customers and reshaped the business, re-established its
partners. It was great to see our digital We also recognise that minimising our deposit base, improved the quality of its
team recognised at the European impact on the environment is important loan book and strengthened its financial
Software Testing Awards and winning and we remain committed to ensuring our position and prior to joining Bank of Cyprus,
‘Best Mobile Testing Project’. carbon footprint remains low. We are John served as Chief Executive Officer of
proud our efforts were recognised by the RBS Group’s Investment Bank (Markets
Our colleagues external stakeholders at the Green World and International Banking) from 2008 until
Maintaining the focus and tempo at Awards where we were awarded a Green 2013. I look forward to building on NewDay’s
NewDay requires us to provide an engaging World Ambassador in the financial services strong foundations and financial position
and inclusive working environment. I am sector. Our colleagues also launched their with John in the years ahead.
pleased to report that we have continued own Green Forum, which promotes
to make good progress in building a diverse recycling and green-related matters. I would like to extend my personal thanks
and inclusive environment at NewDay and to James Corcoran on the important role
the results of our regular employee survey Regulation he played in the Group’s evolution over the
show that we are continuing to build a We continue to work closely with last ten years. James led NewDay from
p osi t i ve a n d d y n a m i c wo r k i n g regulators and industry bodies to ensure being a one-product credit card business
environment. This is underpinned by a we deliver positive outcomes for our into one of the UK’s leading specialist
calendar of events and workshops customers and sustainable returns for our credit providers with a leading digital
throughout the year that invests in sha re h o l d e rs . O u r s t ro n g Risk platform and we are fortunate to continue
ensuring we encourage education and Management Framework and credit to benefit from his expertise as a Non-
debate on a variety of topics. The launch of scorecards built from 18 years of Executive Director on the Board.
an Inspirational Speaker Series and a experience give us a deep understanding
programme raising colleague awareness of our markets. This allows us to adapt In addition, Johan Pettersson, a Cinven
on mental health were particularly positive quickly to changing or uncertain economic Investor Director, resigned from the Board
developments during 2019. The Board and political environments and our ‘low and with effect from August 2019 and Arron Wu,
continues to promote a culture that grow’ credit strategy ensures we remain a CVC Investor Director, resigned from the
celebrates diversity in ethnicity, sexual focused on lending responsibly. Board with effect from November 2019.
orientation, gender and opinion. NewDay
continues to offer support to any In 2019, the Board has been particularly Outlook
colleagues who require assistance. focused on supporting individuals There is now more political certainty in the
considered to be in persistent debt UK following the December 2019 General
Our communities following the introduction of the FCA’s final Election, however there are still a number
We recognise that we have a responsibility rules and guidance on the Credit Card of uncertainties with regards to Brexit. We
to positively serve the community we are Market Study from September 2018. have continued to consider and plan for
part of and that we have a wider During the year we supported over potential implications carefully. The Board
responsibility to minimise the impact on 123,000 customers to come out of has reviewed the possible impact on both
our environment. We are extremely proud persistent debt with the interventions we our operations and strategic plans and has
to continue our work with our chosen deployed, and we have continued to considered stress scenarios to ensure we
charity partner, Family Action, who provide develop our strategies to support are well-positioned to promptly respond to
practical, emotional and financial support customers who will have been in persistent different outcomes. Our proactive risk
to those who are experiencing poverty, debt for 36 months by March 2020 and will management approach and strong
disadvantage and social isolation. It was therefore require mandatory intervention. balance sheet, including headroom on
very pleasing that our engagement and funding facilities, allow us to appropriately
support of Family Action was recognised at The Board is committed to balancing manage these risks. We are well placed to
the International CSR Excellence Awards, the needs of our different stakeholders in respond to the external environment and
with a Gold Award for ‘Charitable Giving’. It order to maximise the long-term success make continued progress in our strategic
is also pleasing to see that this charity of the business and considers each key development to deliver attractive returns
partner is embraced across the Company stakeholder group in its decision-making. for our shareholders. We continue to
with a large majority of our colleagues For further details of the Board’s monitor the recent coronavirus outbreak
engaging to make a positive personal considerations and engagement of and the potential impact on performance
contribution. stakeholders, see page 46. We have also during 2020.
closely monitored other regulatory
Financial education and responsible developments, including in relation to the I would like to personally thank the Board
lending are priorities for the Board. We are Second Payment Services Directive and all colleagues across the business for
actively involved in discussions around the (PSD2), the Senior Managers and their hard work and commitment to
role credit plays in financial inclusion. In Certification Regime and the Gambling delivering on our purpose and Customer
2019, we provided financial support to Commission’s ban on using credit cards to Manifesto, which is key to the continued
Demos, a leading UK think tank, who place bets, to ensure the Group is delivery of our strong growth and financial
launched their Good Credit Index that built adequately prepared. performance.
a comprehensive credit map of the UK to
Chief Executive
Officer’s review
2019 was a record year in terms of financial delivery.
Our controlled growth and scalable platform positions
NewDay well into 2020
In 2019, we made very good progress against our stated strategic particularly as the world around us continues to digitise and our
objectives. We further invested in our digital capability. We launched customers quickly evolve to interact with us in an increasingly
five new products with exciting UK brands. We added 1.2m new digital way.
customer accounts to our Group (2018: 1.2m) and we helped 2.0m
customers improve their credit score (2018: 1.7m). These The investment we have made in modernising and bringing in-
achievements combined to deliver a record financial performance house our technological capability provide the foundations for our
in 2019 that my colleagues can be genuinely proud of. It sets the Group’s success. Better, more nimble, faster, scalable and cost-
tone and ambition for the year ahead and provides strong evidence effective technology allows us to support our retail and e-tail
that our controlled approach to growth is the right one. partners in securing customer engagement and creating
frictionless customer experiences. We will continue to invest in
We continue to put our customers at the centre of our business. intelligent digitisation to secure the Group’s emerging reputation
We recognise the purpose of NewDay is to help people be better for innovation and capability.
with credit. We remain focused on ensuring that we provide
appropriate products and tools in support of this objective,
John Hourican
Chief Executive Officer
2.0m customers
percentage points to 11.6%.
In 2019, we continued to diversify our retail
partner network and product proposition The scalability of our business model,
in our Co-brand business. We launched along with ef f iciencies from our have been helped to improve
five new products, each aimed at different streamlined end-to-end digital platform, their credit score
credit needs. We introduced a young led to a reduction in the underlying cost-
fashion proposition in Topshop, Topman income ratio of 2.8 percentage points to
and Miss Selfridge, expanding on our 33.0%. During 2019 we invested a further
product portfolio with Arcadia Group. We £38m in change initiatives to continue to
expanded our digital revolving credit develop our digital capabilities and drive
product (NewPay), in partnership with sustainable long-term growth (2018:
AO.com, allowing their customers to £41m).
spread the cost of their online purchases.
We launched the Argos Classic credit card Our strong but controlled growth along >100,000 chats
and we signed an agreement with M&Co with a well-managed cost base resulted in
who will also utilise NewPay when launched record adjusted EBITDA of £144m, a 75% Integrated intelligent automation into
in 2020. increase year-on-year (2018: £82m). The several customer-facing and back office
statutory profit before tax of £50m processes, including introducing
During the year we provided customers (2018: loss before tax of £7m) includes a ChatBot functionality with over 100,000
with over £27m loyalty rewards in our Co- number of items, detailed on page 31, chats to date
brand business to help build brand loyalty which in our view do not represent the
for our retail partners and encourage Group’s underlying performance.
ongoing spend and long-term utilisation of
our products by customers (2018: £29m). Free cash flow available for growth and
We supported our partners with state-of- debt service of £106m highlights the
the-art analytics to help them engage and strong cash generation of the business
understand customer behaviour. (2018: £109m), providing us with the
Chief Executive Officer’s review Credit Card Market Study (CCMS) Delivering for our colleagues
Continued As we covered in our 2018 Annual Report, Our colleagues are key to delivering a
the final FCA rules and guidance on the positive experience for our customers.
Digital investment CCMS were published in February 2018 Attracting, retaining, engaging and
Our digital transformation remains a and took effect in September of that year. motivating colleagues remains a priority as
priority. In 2019, we invested £38m in The guidance required that, from we strive to be an employer of choice. Our
continuing to develop a best-in-class 1 September 2018, firms should identify bi-annual, externally managed employee
(2018: £41m), frictionless digital customer the subset of their customers in persistent surveys demonstrate high levels of
experience in support of our vision to be debt when assessed over the previous 18 engagement at 77% (2018: 75%) and 74%
the UK’s leading digitally enabled months and recommend a change to of colleagues engaged with our Customer
consumer finance provider. We aim to payment behaviour. The guidance then Manifesto and Values (2018: 75%),
provide a simple, convenient, easy to use prescribed a second intervention point at evidencing that they are embedded
digital customer experience and continue 36 months, at which point firms must throughout the organisation.
to develop our range of apps and increase contact those customers remaining in
functionality to achieve this. In 2019, we persistent debt and propose alternative We are creating a work environment where
delivered a straight-through end-to-end repayment plans to settle the balance over colleagues feel valued and respected and
digital journey for balance transfers and a reasonable period. The first cohort will where they can develop and thrive. Our
money transfers and integrated marketing reach the 36-month intervention point in colleagues interact daily with our
offers into customers’ digital servicing March 2020. customers and therefore are best placed
journeys. Customers gave our apps a to drive continuous improvement in our
combined rating of 4.7 stars and our NES We have previously communicated that we products and services. In support of
for online servicing (which measures how considered circa 8% of our customer base colleague development, in 2019 we
easy it is to navigate through our apps and to be in early stage persistent debt as at launched a learning management system
websites) increased by two points to +70. 31 December 2018. Having now providing all colleagues direct access to a
completed the implementation of the catalogue of soft and function-specific
Following the success in our Own-brand required CCMS interventions and a learning that can be tailored to their
business in 2018, we have transitioned our number of additional preventative individual development needs and
Co-brand digital acquisition platform in- measures, we expect that the first cohort accessed at any time.
house from Fiserv this year. This improves reaching the 36 month intervention point
our agility and resilience as well as allowing in March 2020 will represent circa 2% of our Outlook
us to generate cost eff iciencies. customer base (and account for In 2019, we have continued to make
Additionally we have integrated artificial approximately £210m of receivables). Due signif icant progress in our digital
intelligence into a number of customer- to the measures taken, customers transformation and have fur ther
facing and back office processes, including reaching this intervention point should not diversified our retail partner network away
the launch of ChatBots and the experience a sudden change to their from the challenging conditions on the UK
development of VoiceBots as we continue minimum payment on their existing debt, high street with product offerings that
to develop different ways for customers to and depending on individual continue to meet the changing needs of
interact with us. We are enhancing circumstances, will typically be able to our customers. Our strong controlled
communication channels to ensure we can continue to use their credit facility with growth and the scalability of our operating
help customers address their credit higher minimum payment terms. The platform have generated record profits
questions in ways that suit them, when it impact of the CCMS on the 2019 financial and we have maintained significant
suits them – in 2019 customers had 2.8m statements has been mitigated by our headroom on funding facilities to protect
conversations with our colleagues and underlying business performance as we the business in case of a deterioration in
completed 111m self-service interactions. have continued to grow receivables and capital markets. We are well placed to
delivered strong results. continue to build on this success and
On 3 January 2020, our immediate parent deliver positive outcomes for our
company, Nemean MidCo Limited, agreed Payment Protection Insurance (PPI) customers and shareholders.
terms to acquire Pay4Later Limited The FCA deadline by which customers can
subject to FCA approval. Pay4Later raise a claim with their PPI provider passed I would like to thank all of our colleagues for
Limited trades under the name ‘Deko’ and on 29 August 2019 and, as at 31 December their ongoing commitment and dedication
is a point-of-sale (PoS) finance technology 2019, the Group reported a provision of to supporting our customers and delivering
firm, providing platform and brokerage £10m (2018: £25m) to cover the remaining our vision to be the UK’s leading digitally
services in the PoS finance market working expected costs. Although the deadline for enabled consumer finance provider.
with over 1,500 merchants in the UK. The customers to make complaints which can
acquisition will provide opportunities for be considered by the Financial Ombudsman
Deko and NewDay to leverage their Service has passed, NewDay continues to
respective experience in order to provide receive court claims. In addition, discussions
Deko customers with access to new are being held across the industry in relation
products whilst allowing NewDay to pursue to Deloitte being appointed by the Official
its goal of becoming the UK’s leading Receiver to assist with the submission of
digitally enabled consumer finance queries to PPI providers to establish
provider (and, in particular, proliferate our whether any redress in respect of the sale of
NewPay offering). Nemean MidCo Limited PPI is due to creditors of bankrupts’ estates.
will initially acquire a 50.1% interest in Deko The provision includes our best estimate of
with the remaining 49.9% acquired over a expected costs associated with these
three-year period. The results of Deko will claims.
not be consolidated in the NewDay Group
Financial Statements.
“What is clear is the NewDay is a fast-moving business that Q What are the key challenges
continually challenges the status quo. Our NewDay faces?
commitment of our teams across the business work well Consumer behaviour and trends continue
colleagues to delivering together to identify, deliver and capitalise to change rapidly, particularly in relation to
our Customer Manifesto on opportunities for future growth whilst digital, and we need to ensure we are
ensuring the customer remains at the leading the response to these changes
and driving positive forefront of every decision. within the industry and promptly adapt our
outcomes for our customers” product and service offerings. We have
I would like to extend my personal thanks continued to transform our in-house
to my predecessor, James Corcoran, for digital capabilities allowing us to deliver
Q What attracted you to NewDay? the support he has given to me during our better solutions for our customers quicker
NewDay is at an exciting time in its handover to develop my understanding of and more cost-effectively. I feel we are well
evolution and plays an important role in the foundations of the business’ success placed to continue to meet changing
supporting people who may not have easy to date. He is a hard act to follow but customer needs.
access to credit from mainstream lenders. thankfully he left behind a strong team that
The Group’s strong sense of purpose to is delivering the business plans. Intensifying competition across consumer
help people be better with credit and focus finance continues to be a challenge we
on responsible lending and financial Q What are your key priorities face. We continually develop our product
education enables us to make a real for NewDay? offering and reward structures to ensure
difference to customers’ lives. I am fortunate to have joined a business we meet customer needs, including
with solid foundations and a strong track continuing to build on and leverage
The strength of the Group’s digital record of delivering for its stakeholders. My NewPay, our digital revolving credit
ambition and pace of delivering change aim is to continue to build on this success product. Additionally, our credit scorecards
also stand out to me. Consumer trends and capitalise on further opportunities to built from 18 years of experience provide
and behaviours are changing rapidly and deliver growth and value for our us with a deep understanding of the
the business has transformed its digital stakeholders. This includes continuing to markets we operate in and allow us to
capabilities over recent years. With a leverage our leading digital platform to adapt and respond rapidly to any changes
strong in-house digital team we are well best serve the needs of current and future in the market, whilst ensuring we remain
placed to be more innovative, agile and customers, ensuring we respond rapidly to within our credit risk appetite.
flexible, allowing us to capitalise on future changing consumer trends and deliver a
opportunities and deliver on our vision to frictionless digital customer journey. In There are a number of regulatory
be the UK’s leading digitally enabled addition, I am focused on continuing to developments across the industry to
consumer finance provider. diversify our portfolio and retail partner support positive outcomes for customers.
network to expand our reach and provide We continue to work closely with
Q What are your initial impressions credit solutions to more customers and to regulators and industry bodies to ensure
of NewDay? continue to deliver consistent growth we are fully prepared for these and given
I spent my first few months at NewDay and attractive returns. our purpose to help customers be better
getting to know our colleagues, customers with credit we feel the changes are
and stakeholders and understanding what Our colleagues are at the heart of consistent with our direction.
is important to them. What is clear is the delivering a positive experience for our
commitment of our colleagues to customers, so it is also important to me
delivering our Customer Manifesto and that NewDay is an engaging place to For further information on John’s
driving positive outcomes for our work where colleagues are listened to experience see page 60.
customers. Our colleagues are best placed and are empowered to drive continuous
to understand our customers’ needs and improvement s in our produc t s,
the culture at NewDay encourages them services and processes.
to provide feedback and empowers them
to drive initiatives forward that improve our
customer experience.
Market overview
Overdrafts
Payday loans
NewDay
Other high cost credit products Products not offered by NewDay (other)
Products not offered by NewDay (suitable for customers with higher risk profiles)
Our business
£225bn 65%
We offer a range of revolving credit and instalment-based 1 2
products to serve the specific needs of our customers across our
Own-brand and Co-brand businesses. We distribute through
direct channels, third party aggregators and, in our Co-brand
business, through retail partners (both online and offline). total UK outstanding consumer of adults in the UK have
credit receivables a credit card
1. Bank of England data as at 31 December 2019. 4. UK Finance (www.ukfinance.org.uk): Total Market Data - Credit Card Statistics.
2. UK Finance (www.ukfinance.org.uk): UK Payment Markets 2019. Volumes based on 2018 data. 5. Office for National Statistics.
3. Management estimate based on various sources.
Retail spend
Total retail spend5 (£) NewDay spend (£)
Offline Online Offline Online
312bn 318bn
306bn 3.8bn
4% 21%
299bn
3.3bn
2.7bn
2.4bn
2.0bn
68bn 75bn compound annual 1.7bn compound annual
52bn 60bn 1.2bn
growth rate 0.9bn growth rate
2016 2017 2018 2019 2016 2017 2018 2019
Payment volumes
318bn
Cash usage continues to decline, accounting for 28% of payments Debit card
15bn Credit 3bn 3%
during 2018 compared with 34% in 2017. This decrease is largely
offset by growth in cards, bolstered by increasing popularity and
availability of contactless technology. 39bn2 Cash 11bn 16%
total Credit card
transactions 3bn
Other
With 107m transactions processed during 2018 (increasing by 17% 10bn Debit 15bn 14%
to 125m in 2019), we handled 3% of all credit card payments, Cash
unveiling a substantial, growing, market opportunity. 11bn Other 10bn
Near-prime customers are typically employed but may have Offering a credit product combined with rewards helps retailers
a limited credit history or past adverse credit events which prevent and e-tailers build brand loyalty.
them from easily accessing credit from mainstream lenders. Department stores, supermarkets and fashion outlets have
There is a natural movement of customers in and out of near- historically been the most popular providers of co-branded credit
prime. This has grown over recent years driven primarily by propositions.
improving credit profiles of sub-prime customers. Retail transaction finance has benefitted, and will continue to
benefit, from increased e-commerce activity and technological
change. NewDay is increasing its presence in this digital
e-commerce ecosystem.
Leveraging a leading
digital platform
August
July Digital functionality for
balance transfers and
Open Banking layer
April Account access APIs to meet
money transfers
Straight-through end-to-end
January Credit limit management
PSD2 regulation digital journey for balance
Digital management for t r a n s f e r s a n d m o n ey
Young Fashion mobile-first customers who exceed transfers
proposition initial launch their credit limit
Targeted card proposition eCRM
with mobile-based loyalty Digital delivery of marketing
offers in servicing journeys
February
ChatBot launch
Mobile AI-mediated chat for
marbles customers linked to
agent chat support
Our end-to-end
digital product solutions
In 2019, we launched an exciting partnership with
AO.com, one of the UK’s largest electrical goods
e-tailers. The AO Finance partnership leverages our
NewPay platform which enables AO.com customers a
simpler, hassle-free way to buy the products that
matter most to them
1 2
Promotion Application
•• Competitive credit offers and •• AO Finance is integrated into the •• The customer can complete an
‘always-on’ promotion of AO payment options as part of the eligibility check to understand
Finance throughout the AO.com checkout page if they will be accepted for an
digital channels •• Both the eligibility check and full AO Finance account without
•• AO Finance provides credit application are integrated into impacting their credit score
offers to suit the needs of each the AO.com checkout to ensure a •• Following the eligibility check,
individual customer including seamless customer journey from the customer completes the
interest-free credit, instalment basket to payment application and electronically
plans and buy now pay later signs the credit agreement before
offers. All are accessed through finalising their order
the AO Finance account
3 4 5
Instant spend Repeat spend Servicing
•• Once approved, the credit line •• No need to fill out a new •• The customer can see their
is available instantly and the application form or complete outstanding balance, promotional
customer can purchase the another credit check plans and payment date within
products in their basket •• The customer can log in to their their AO.com account
•• The customer will be able to split AO.com account at any time to •• The customer can track their plans
the purchase over equal monthly view their available credit and see how many months they
payments or take advantage of •• Existing customers will be offered have left to pay
any promotional rate they have targeted promotional offers •• Within the e-servicing portal, the
been offered when they log in customer can view statements,
set up direct debits, make
payments and manage their
account preferences
PR
OF PS
ITA S HI
BL
EA I ON
ND EL AT
CAS
H GENE E RM R
R ATIVE LONG-T
Long-term relationships
Our existing customers generated £240m of adjusted EBITDA in Adjusted EBITDA
2019, an increase of 19% year-on-year.
2018 2019
2018 2019
£201m £240m4
£39m
1. New customer accounts are those that have been with NewDay for less than 12 months.
2. This comprises total income of £95m (2018: £72m), impairment of £111m (2018: £111m)
and total costs net of depreciation and amortisation of £80m (2018: £80m).
3. Existing customer accounts are those that have been with NewDay for over 12 months.
4. This comprises total income of £581m (2018: £519m), impairment of £207m (2018: £191m)
and total costs net of depreciation and amortisation of £134m (2018: £127m).
Delivering
strong growth
2019 delivery and future priorities
Opportunity Enablers
Evolving with our customers Driving high standards for Leveraging a leading
to address changing needs our customers, colleagues digital platform
and the community
through our Manifesto
Outcomes
“2019 was a record year.
We made very good
progress against our
strategic objectives and
further invested in our
Acquiring new customers Delivering strong digital capability“
and creating long-term controlled growth and
relationships high performance John Hourican
predictability Chief Executive Officer
Key Performance
Indicators
Our performance and progress are tracked
using a number of financial and non‑financial
Key Performance Indicators (KPIs)
Definition: The number of new customer accounts Definition: The amount of spend on customers’
originated in the period. cards transacted through a digital channel.
1,204,000
1,199,000
£2.0bn
1,092,000
£1.7bn
Performance: We welcomed 426,0 0 0 new Performance: We continue to see significant
Own‑brand accounts (2018: 456,000). The increases in the amount of customer spend that is
£1.2bn
Co‑brand business opened 752,000 new accounts generated through digital channels. This is driven
(2018: 733,000) and Unsecured Personal Loans both by changing consumer spending behaviour
welcomed 21,000 customers (2018: 15,000). 77% and our ambition to becoming the leading digitally
of accounts were originated digitally (2018: 63%). enabled consumer finance provider in the UK.
Definition: Average customer feedback score when Definition: Gross customer balances outstanding
rating their experience on an interaction with us. at the year end.
+66
£3,026m
+65
+64
£2,623m
across several industry sectors with a score of +66. each portfolio: Own-brand 12%; Co-brand 17%; and
Our NES for online servicing was +70 (2018: +68), Unsecured Personal Loans 73%, with new account
evidencing the benefits from our leading digital originations, our ‘low and grow’ credit limit strategy
platform. and the introduction of new retail partners driving
our growth.
13.0%
14.7%
(£2,752m).
11.6%
13.0%
11.3%
12.4%
Performance: A combination of improved credit
Performance: Our risk-adjusted margin increased quality and ref inements to our impairment
to 13.0%, predominantly driven by a reduction in provisioning model (for further details see page
the impairment rate, resulting from a combination 93) resulted in our impairment rate reducing by 1.4
of improved credit quality and refinements to the percentage points to 11.6%.
Group’s impairment provisioning model, partially
offset by more interest-free promotional period
product offers and higher cost of funds. 2017 2018 2019 2017 2018 2019
Underlying
cost‑income ratio
33.0% Free cash flow for Senior
Secured Debt interest
£50m
(2018: 35.8%) (2018: £41m)
Definition: Underlying costs (servicing, change, Definition: Adjusted EBITDA (£144m) adding back
marketing and partner payment costs, collection the movement in the impairment provision during
35.8%
£50m
fees, salaries, benefits and overheads) (£223m)/ the year (£18m) less changes in working capital,
34.6%
£41m
33.0%
(£7m)
savings and leveraging the scalability of our leading
digital platform resulted in the underlying cost-
income ratio improving to 33.0%. This reduces to Performance: Our business model is cash
30.5% when excluding expenses associated with generative. Free cash flow available for Senior
the Group’s Value Creation Plan, other strategic 2017 2018 2019 Secured Debt interest increased by £9m to £50m 2017 2018 2019
project costs and costs to deliver interventions despite investing £17m in our Value Creation Plan,
aimed at customers considered in persistent debt strategic projects and costs to deliver interventions
(2018: 31.8%). aimed at customers considered in persistent debt
(2018: £24m), as well as £15m of PPI provision
utilisation (2018: £20m). Overall cash increased by
£18m to £152m (2018: £134m).
Definition: Risk-adjusted income (£358m) less Definition: Statutory profit (or loss) before tax per
underlying costs (£223m) adjusted for depreciation the consolidated Group income statement.
£50m
£144m
Performance: Adjusted EBITDA increased by £62m, 17% to £575m (2018: £492m), primarily driven
or 75%, year-on-year. This was driven primarily by receivables growth, and both impairment and
£82m
by strong receivables growth, generating a 14% operating expenses were well-controlled resulting
increase in total income, and a well-maintained in a £57m increase in profit before tax.
(£27m)
1,087t
75%
Performance: We promote an engaging and consumed by the business during the year.
inclusive environment that enables colleagues to
deliver our strategy. In 2019, our engagement index Performance: Reducing our impact on the
improved to 77%. environment is one of our key goals. In 2019,
through the Green World Awards, we were proud
to be awarded Green World Ambassador in the
Financial Services sector category and received a
2017 2018 2019 Gold award for our implementation of our London 2017 2018 2019
office renovation.
1 The impairment charge for 2017 is calculated in accordance with IAS 39 ‘Financial Instruments: NewDay Annual Report and Financial Statements 2019 29
Recognition and Measurement’. The impairment charge for 2018 and 2019 are calculated in
accordance with IFRS 9 ‘Financial Instruments’.
Strategic Report
Financial
review
2019 was another strong year in which we
achieved 75% growth in adjusted EBITDA to £144m.
Existing customers generated £240m of adjusted
EBITDA and £96m of adjusted EBITDA loss
was generated from acquiring new customers
Paul Sheriff
Chief Financial Officer
2019 highlights
• 15% growth in receivables to £3,026m (2018: £2,623m) 2019 was another impressive year for the Group. Strong
and Co-brand surpassed the £1bn milestone in the year receivables growth generated a 14% increase in total income and
a combination of improved credit quality and refinements to our
• 1.2m new accounts opened (2018: 1.2m), of which 77%
impairment provisioning model resulted in the impairment rate
were originated online (2018: 63%) reducing by 1.4 percentage points to 11.6% (2018: 13.0%). We
• 75% growth in adjusted EBITDA to £144m (2018: £82m) continued our focus on cost control and accordingly our underlying
• Existing customers generated adjusted EBITDA of £240m cost-income ratio improved by 2.8 percentage points to 33.0%
(2018: 35.8%) whilst absorbing £38m of investment in change
(2018: £201m) and we incurred a £96m adjusted EBITDA
projects to drive sustainable long-term growth (2018: £41m). This
loss from acquiring new customers (2018: £119m) resulted in adjusted EBITDA increasing by £62m, or 75%, to £144m
• Statutory profit before tax of £50m (2018: loss of £7m) for the year (2018: £82m).
• Free cash flow available for Senior Secured Debt interest
of £50m (2018: £41m) We reported a statutory profit before tax of £50m for the
year ended 31 December 2019 (2018: loss before tax of £7m).
• Total income grew by 14% driven by the strong The statutory profit before tax includes a number of items,
receivables growth explained below, which do not represent the Group’s underlying
• Impairment rate improved to 11.6% (2018: 13.0%) performance:
• Risk-adjusted income increased by 24% to £358m
(2018: £289m) 2019 2018
£m £m
• Underlying cost-income ratio improved to 33.0%
(2018: 35.8%) Statutory profit/(loss) before tax 49.9 (6.9)
Senior Secured Debt interest and
related costs 33.9 33.4
Customer refund provision 0.4 –
Fair value unwind (0.3) 1.6
Other costs – 0.2
Depreciation and amortisation
including amortisation of intangibles
arising on the Acquisition1 60.3 53.9
Adjusted EBITDA 144.2 82.2
1. On 26 January 2017, NewDay Group (Jersey) Limited acquired NewDay Group Holdings S.à r.l.
and its subsidiaries (the Acquisition).
£3,026m £676m
£113m
£992m £14m
£2,623m £591m
£66m £1,160m £6m £202m
£499m £171m
£2,164m £992m
£nil
£17m
£821m £148m
£461m
£415m
£1,753m
£1,566m £351m
£1,326m
Financial review
Continued
Senior Secured Debt interest and related costs include the interest The growth in receivables was achieved with improving credit
charge and other costs associated with the issuance and servicing quality which was in part driven by tightening of credit lending rules
of £425m Senior Secured Notes by NewDay BondCo plc on from 2018. These changes, coupled with refinements to our
25 January 2017 (the Senior Secured Debt) and the Super Senior impairment provisioning methodology, limited the growth in
Revolving Credit Facility entered into by the Company on impairment to £16m, or 5%, compared to 15% receivables growth,
25 January 2017 (the Revolving Credit Facility). with a total impairment charge of £318m (2018: £302m). The
upfront impairment recognition requirements of IFRS 9 ‘Financial
The customer refund provision results from an operational Instruments’ required us to incur a £111m impairment charge from
incident which arose due to receiving incomplete information from new customer accounts with the aim to generate long-term
a third party. The £0.4m expense represents the expected costs relationships. Tightening of credit lending rules from 2018 resulted
to be refunded to customers, net of contributions received from in the proportion of Own-brand customers with two missed
the third party. payments (or more) after six months reducing year-on-year to
10.6% (2018: 11.7%). Within Co-brand, the same metric increased
Fair value unwind reflects the amortisation of fair value to 3.8% (2018: 3.1%) primarily as a result of the planned strategic
adjustments on our acquired portfolios and debt issued. shift towards higher levels of online originated accounts. Our
impairment rate improved by 1.4 percentage points to 11.6%
Depreciation and amortisation primarily includes costs related to (2018: 13.0%) which was primarily driven by credit tightening and
the amortisation of the purchase price that was attributed to refinements to our impairment provisioning methodology.
intangible assets arising on completion of the Acquisition.
Our focus on being an efficient and streamlined end-to-end
Group performance business limited the growth in costs to 6% at £223m (2018:
£211m). This is in comparison to receivables growth of 15% which
We welcomed 1.2m new customers (2018: 1.2m), of which 77%
demonstrates the scalability of our business model. Our
were generated through online channels leveraging our leading
underlying cost-income ratio improved by 2.8 percentage points
digital platform (2018: 63%). Our receivables continue to grow at
to 33.0% (2018: 35.8%) whilst absorbing £38m of investment in
an impressive rate despite tightening of credit lending rules from
change projects to drive sustainable long-term growth (2018:
2018. We reported receivables of £3,026m (2018: £2,623m), with
£41m).
our Co-brand portfolio surpassing the £1bn milestone in the year.
The receivables book is now almost exclusively from our open
The scalability of our operating model and operational benefits
portfolios with the open book accounting for 96% of the total
from the delivery of our Value Creation Plan are evident in servicing
portfolio (2018: 95%).
costs which only increased by 10% to £95m (2018: £87m).
Our ‘low and grow’ strategy for credit limits continues to deliver
We are delivering on our Value Creation Plan initiatives and as a
controlled growth within our Own-brand business. Our Co‑brand
result total change costs reduced by £3m to £38m year-on-year
business successfully launched with two new retail partners, Argos
(2018: £41m). Our investment is enhancing our leading digital
and AO.com, in the year and continues to benefit from growth
platform with 98% of servicing transactions and 78% of collections
driven by the Amazon portfolio. Our Unsecured Personal Loans
now made digitally. During the year we have integrated intelligent
receivables, at £113m (2018: £66m), surpassed £100m in the year
automation in several of our customer-facing and back office
as we continue to control its roll-out.
processes, including the roll-out of ChatBots and the development
of VoiceBots. We have successfully transitioned our Co-brand
Interest income increased by 16% to £674m (2018: £579m) driven
digital acquisition platform in-house from Fiserv so that we can
by the receivables growth but partially offset by more interest-free
adapt quickly to the changing needs of our retail partners.
promotional period product offers.
Marketing and partner payment costs reduced by 2% to £60m
The growth in receivables was funded primarily by borrowings.
(2018: £62m) primarily due to our continued focus on sourcing
Consequently, average borrowings increased in the year by 21%
more cost efficient ways of attracting new customers.
which resulted in a 22% increase in cost of funds. We successfully
refinanced two Own-brand asset-backed securities that matured
Collection fee income of £29m (2018: £30m) was broadly flat year-
in the year and completed a third financing transaction to raise
on-year as a result of refinements to our policy, driven by our
£577m in total.
Customer Manifesto, for charging late fees to customers partially
offset by growth in account volumes.
Our Customer Manifesto is at the heart of everything we do and
drives positive customer outcomes. Accordingly, revisions to our
Salaries, benefits and overheads increased by 13% to £59m (2018:
policy for charging fees to customers limited fee and commission
£52m) driven by higher headcount required to support our growth
income growth to 4% at £66m (2018: £64m).
strategy.
20191 2018
Unsecured Unsecured
Personal Personal
£m Own-brand Co-brand Loans Group Own-brand Co-brand Loans Group
Interest income 456.5 200.5 16.6 673.6 406.5 165.2 7.7 579.4
Cost of funds (41.1) (19.4) (3.0) (63.5) (34.3) (15.8) (1.8) (51.9)
Net interest income 415.4 181.1 13.6 610.1 372.2 149.4 5.9 527.5
Fee and commission income 45.1 20.8 – 65.9 42.3 21.3 – 63.6
Total income 460.5 201.9 13.6 676.0 414.5 170.7 5.9 591.1
Impairment losses on loans
and advances to customers (257.1) (46.2) (14.6) (317.9) (260.8) (33.3) (7.7) (301.8)
Risk-adjusted income/(expense) 203.4 155.7 (1.0) 358.1 153.7 137.4 (1.8) 289.3
Servicing costs (43.1) (50.6) (1.2) (94.9) (36.9) (48.9) (0.8) (86.6)
Change costs (14.2) (9.6) (1.4) (25.2) (12.7) (9.5) (1.8) (24.0)
Value Creation Plan
implementation costs (7.5) (5.5) (0.1) (13.1) (10.2) (6.4) (0.2) (16.8)
Marketing and partner payments (13.8) (45.7) (0.8) (60.3) (18.2) (43.0) (0.3) (61.5)
Collection fees 18.6 10.6 – 29.2 17.8 11.8 – 29.6
Contribution 143.4 54.9 (4.5) 193.8 93.5 41.4 (4.9) 130.0
Salaries, benefits and overheads (58.9) (52.1)
Underlying profit before tax 134.9 77.9
Add back: depreciation and
amortisation 9.3 4.3
Adjusted EBITDA 144.2 82.2
Senior Secured Debt interest
and related costs (33.9) (33.4)
Customer refund provision (0.4) –
Fair value unwind 0.3 (1.6)
Other costs – (0.2)
Depreciation and amortisation
including amortisation of
intangibles arising on the
Acquisition (60.3) (53.9)
Profit/(loss) before tax 49.9 (6.9)
1. In 2019, we revised our methodology for allocating costs between each operating segment. This did not have a material impact on the segmental income statement, accordingly the 2018
comparatives have not been restated.
In preparing the management basis income statement, cost recoveries have been presented as a component of servicing costs rather
than as income (a reconciliation to the statutory income statement is detailed in note 3). Additionally, receivables disclosed in this section
are gross receivables (customer balances excluding any impairment provision and effective interest rate adjustments).
Financial review
Continued
Acquiring new customers EBITDA cost Fee and commission income of £45m increased by 7% year-on-
year (2018: £42m). The growth was lower than the receivables
growth due to fee policy changes, introduced in September 2018,
(£119m)
Co-brand performance
£123m
£138m
Closing receivables
£1,636m
£10m
£1,443m
£14m
£1,188m
£20m
£1,150m
£978m
Open books
£801m
Closed books
2017 2018 2019
Open books
Our Own-brand business welcomed 426,000 new customers Closed books
(2018: 456,000) and reported receivables growth of £187m, or 2017 2018 2019
12%, to £1,753m (2018: £1,566m).
Our Co-brand business welcomed 752,000 new customers (2018:
The receivables growth was driven primarily by our ‘low and grow’
733,000) and reported receivables growth of £168m, or 17%, to
strategy for customer credit limits as well as growth from the
£1,160m (2018: £992m), surpassing the £1bn milestone in the year.
portfolio’s newest offering, Fluid, which targets balance transfers
in the near-prime sector. Our open book now accounts for 93% of
the total portfolio (2018: 92%).
We successfully on-boarded two new partners in the year. In April, Unsecured Personal Loans (UPL) performance
we launched the Argos Classic credit card to Argos customers who Closing receivables
do not qualify for Argos’ own store card offering. Following this, in
August, we launched with AO.com who became our second
£113m
partner to use NewPay, our digital revolving credit product. In 2019,
we also introduced Miss Selfridge, Topman and Topshop credit
cards which aim to help customers build credit through rewards.
£66m
£17m
Net interest income increased by 21% to £181m (2018: £149m)
driven mainly by the growth in receivables. Funding margins, at
2.1%, were marginally higher than last year (2018: 2.0%). 2017 2018 2019
Fee and commission income reduced by 2% to £21m (2018: £21m) We opened 21,000 new loans in the UPL business (2018: 15,000)
partly due to refinements to our policy for charging fees to as it continues to target existing Own-brand customers whilst
customers driven by our Customer Manifesto. building credit experience. Receivables grew by 73% year-on-year
and surpassed £100m in the year to finish at £113m (2018: £66m).
The impairment rate increased to 4.6% (2018: 3.9%), which is in This resulted in total income growing by £8m, or 131%, to £14m
line with the targeted widening of the risk profile of our Co-brand (2018: £6m). Due primarily to the upfront impairment recognition
portfolio, primarily through a change in mix towards online from requirements of IFRS 9, impairment increased by £7m to £15m
in-store customers. (2018: £8m) following the strong receivables growth. Operating
costs increased to £4m to stimulate the growth in receivables
Servicing costs increased by 3% to £51m (2018: £49m) whilst (2018: £3m). As a result of these factors, and primarily due to the
delivering a 17% increase in receivables, evidencing scalability of upfront impairment charge under IFRS 9, the UPL business
our business model. reported a negative contribution of £5m (2018: negative
contribution of £5m).
Total change costs reduced by £1m to £15m (2018: £16m) primarily
due to lower Value Creation Plan spend since we are now delivering
on many of the initiatives. Capital and liquidity
Our free cash flow available for Senior Secured Debt interest
Marketing and partner payment costs increased by £3m to £46m increased by £9m to £50m (2018: £41m) demonstrating that our
(2018: £43m) as we continued to focus on growth and attracting business model continues to be cash generative. Overall cash
new retail partners. increased by £18m to £152m (2018: £134m).
Collection fees reduced by £1m to £11m (2018: £12m) as a result The following table reconciles adjusted EBITDA to the net increase
of refinements to our policy for charging late fees to customers, in cash:
which are driven by our Customer Manifesto, offsetting the growth
in our receivables book.
2019 2018
£m £m
As a result of the factors above, and primarily due to the growth in
net interest income partially offset by a higher impairment charge, Adjusted EBITDA 144.2 82.2
Co-brand contribution increased by £14m, or 33%, to £55m (2018: Change in impairment provision 18.3 60.4
£41m).
Adjusted EBITDA excluding change
We continue to monitor trading conditions on the high street. In in impairment provision 162.5 142.6
March 2019, we novated our retail contract with House of Fraser Change in working capital (22.3) 2.8
to the new House of Fraser business owned by Sports Direct. PPI provision utilisation (15.1) (20.1)
Additionally, in April 2019, Debenhams plc entered administration Capital expenditure (9.6) (9.4)
and the underlying operating companies (including the entities Tax paid (10.0) (6.8)
party to our contract with Debenhams) were sold to a separate
FCF available for growth and
legal entity owned and controlled by certain creditors of
debt service 105.5 109.1
Debenhams plc.
Increase in gross receivables (422.7) (470.9)
Our strategy continues to be the diversification of our Co-brand Net financing cash flow 367.0 402.5
portfolio to become less reliant on the high street and to create a FCF available for Senior Secured
broader retail partner base which has a greater online presence. Debt interest 49.8 40.7
This is achieved primarily through both new partnerships, such as Senior Secured Debt interest paid (31.7) (31.1)
with Amazon and AO.com, and our ongoing investment in NewPay. Net increase in cash 18.1 9.6
Ratio of net corporate Senior Secured
Debt to adjusted EBITDA 1.9x 3.5x
Ratio of adjusted EBITDA to cash
interest expense 4.5x 2.6x
Financial review
Continued
The change in working capital of £22m (2018: positive £3m) was As at 31 December 2019, we maintained significant headroom on
impacted by a one-off payment to House of Fraser to settle daily our variable funding notes of £0.7bn to fund further receivables
customer transactions which accrued during the period prior to growth (2018: £0.9bn) and the average maturity of our debt issued
formal novation of the contract to Sports Direct, of which £15m was two years (2018: three years). The staggered nature of our
was accrued in the Financial Statements as at 31 December 2018. debt maturity profiles means that 24% of committed debt facilities
are due for refinancing in less than one year and 76% are due in one
PPI utilisation reduced by 25% to £15m (2018: £20m). The FCA to five years. We currently intend to raise further funds through
deadline by which customers can raise a claim with their the issue of asset-backed securities during the course of 2020 to
PPI provider passed on 29 August 2019 and, as at 31 December refinance the debt facilities due in less than one year.
2019, we reported a provision of £10m (2018: £25m) to cover the
remaining expected costs. Debt maturity profile
£0.7bn of additional VFN
£294m
£61m
Excluding the impact of the one-off payment to House of Fraser headroom available to fund
future receivables growth.
and PPI utilisation, underlying free cash flow for Senior Secured
£384m
Debt interest increased by 72% to £80m (2018: £46m).
£703m
£658m
Funding
£502m
£150m
In 2019, we raised £577m from three financing transactions in our Asset‑backed securities
£275m
Drawn variable funding notes
Own-brand asset-backed securitisation programme. This (VFNs)
included refinancing two series within our Own-brand asset- Senior Secured Debt
backed securitisation programme that matured in the year which 2020 2021 2022 2023 2024
Capital requirements
There is no regulatory capital requirement for any subsidiary other
than NewDay Ltd owing to its status as an Authorised Payment
Institution. As at 31 December 2019, the levels of capital for
NewDay Ltd exceeded the minimum capital requirement with
headroom of £12m.
The number and nominal value of all the parent company’s shares
are detailed in note 21.
Operating
responsibly
“We believe that our vision can only be delivered when all
stakeholders benefit. The Board is committed to maintaining a high
standard of corporate responsibility in all areas of our operations
which allows us to build long-term, mutually beneficial relationships.
All our customers, colleagues, partners and the communities
we operate in underpin our success”
Sir Michael Rake
Chairman and Non-Executive Director
112,000
helping customers be better with credit
We embraced industry guidance aimed at
through our foundations of being
helping customers whose accounts are
a Welcoming, Understanding, Knowing
defined as being in or near to persistent
and Rewarding business. This focus
debt. We have rolled out a programme
ensures we continue to strive to provide
customers supported with our of support which encourages customers to
excellent customer service and develop
collections toolkit make (in sustainable, af fordable
products and services that evolve in line
(2018: 67,000) increments) higher repayments which,
with our customers’ changing needs in
when made, can lift an account out of
order to build long-term relationships.
persistent debt or avoid a customer
£27m
entering into a state of persistent debt.
We continue to lend responsibly through
Additionally, to support customers who are
the deployment of our ‘low and grow’
considered to have been in persistent debt
strategy, offering our Own-brand
for a prolonged period of three years, we
customers a low initial credit limit until they
given back to customers through have tailored a solution designed to help
demonstrate that they can actively
rewards them come out of persistent debt, without
manage and afford further credit in a
(2018: £29m) adversely impacting affordability, within
responsible and sustainable manner. This
a reasonable period.
is supported by our robust scorecards built
1.05
on 18 years of experience and data
Our objective as a responsible lender is
analytics. In addition, we helped 127,000
always to do the right thing by our
customers with our online financial health
customers, which is monitored through a
check tools in 2019 (2018: 154,000) to
number of KPIs that are reported to the
support them in developing a greater
complaints per 1,000 active accounts Board monthly. Our transactional NPS
understanding of their financial situation.
(2018: 1.25) score of +66 (2018: +64) evidences that
This enables them to become better with
customers value the service they receive
credit and benefit from the rewards
from us and customer complaints of 1.05
we offer.
per 1,000 active accounts (2018: 1.25 per
1,000 active accounts) have decreased
Our collections toolkit has a wide range of
whilst delivering 1.2m new customer
practices that allow us to work with
accounts. Additionally, in our Co-brand
customers where their situations have
business we rewarded our customers with
changed and support them if they fall into
£27m in loyalty rewards (2018: £29m)
arrears. In 2019, we supported 112,000
customers (2018: 67,000) with our
collections toolkit strategies. Our contact
Charity Committee
Our Charity Committee promotes
and organises fundraising initiatives
throughout the year and oversees the
matched-funding scheme to which all
colleagues are eligible to apply. The
matched-funding scheme provides
funding for individual, employee-led charity
activities and during the year colleagues
took part in a number of varied activities to
support their nominated charities. In 2019,
£208k was donated to local community
charities, including charities supported by
our colleagues.
Helping customers
build better credit with Aqua
Our Customer Manifesto in action
“yes”
Aqua says “yes” Aqua looks for ways to responsibly say
Operating responsibly
Continued
Being a responsible employer that will help them develop in their career. Month in October, about what it means to
As a result, 36% of colleagues moved into be black in the UK. We are excited to be
Making NewDay a great place to work
new opportunities internally in the year. continuing these important conversations
We want our colleagues to thrive at
with our colleagues in 2020.
NewDay. Our people strategy drives our
Diversity and inclusion (D&I)
colleague experience and we are proud that
‘We value our differences, together.’ We As at 31 December 2019, the number of
we have increased our engagement index
know that employing people with multiple colleagues totalled 1,221 (2018: 1,208) and
to 77% (2018: 75%) measured through
perspectives and from dif ferent the proportion of females was as follows:
our end-of-year Pulse survey. This shows
backgrounds makes a better business; it
that our colleagues feel that they are part
also means that we better represent and
of something exciting.
serve our diverse customer groups. 2019 2018
females females
Changing ways of working
2019 was a year of firsts for NewDay. Since Colleagues 51% 51%
We have grown quickly. With that has come
starting our D&I journey in 2018 we have Management
an unprecedented and exciting change to
made great progress. We measure our Committee 13% 13%
the way we deliver work and innovate for
achievements through our Pulse survey
our customers. We have brought all our Board 9% 8%
and our latest D&I index is 82% (2018: 79%).
development and design work in-house,
This increase is representative of our
creating fully formed squads to build and
people strategy in practice, but also For further information, view our Gender
deliver innovative changes to our products,
recognising all our colleagues who have Pay Reports published on our website at
which benefit our customers.
helped promote inclusion in gender, race www.newday.co.uk.
and sexual orientation, to name a few.
We have been enhancing our digital
Health and wellbeing
footprint for both customers and
A programme that was particularly well We have comprehensive Health and Safety
colleagues. With that comes the need to
received by our colleagues, was our policies and practices in place and no
upskill and provide continuous learning
Inclusive Leadership training. All of our accidents occurred during the year which
opportunities. We have delivered this
managers have participated in this to required reporting in accordance with the
through the provision of technical training
encourage us to be thoughtful about how Reporting of Injuries, Diseases and
to our Technology and Credit Risk teams,
we work together. We also audited our Dangerous Occurrences Regulations 2013
and we launched Learning Pool, an
recruitment processes for bias, paving the (2018: none).
e-learning portal, allowing all colleagues
way for truly inclusive recruitment
direct access to a catalogue of soft and
and hiring. A strong part of our D&I programme
functional skills which they can access any
involves educating and raising awareness
time as ‘always-on’ training.
Our first employee network was created, about mental health and wellbeing. We ran
the Women’s Network. We supported and a Mental Health Awareness Week in May
Talent and mobility
celebrated International Women’s Day in and we followed this with Wellbeing Week
High-performing teams require great
March with an internal campaign. From this in September covering physical, mental,
talent and throughout 2019 we created
network our Inspirational Speaker Series emotional and financial wellbeing. We
opportunities via different meet-up events
was created, which aims to bring people provide a number of wellbeing resources
covering subjects from data science, UX/
with different points of view into our offices through our programmes and benefits
UI and coding in order to attract new talent
to speak to our colleagues on a diverse platform, all designed to ensure our
into NewDay.
range of topics. colleagues have support when they need it,
wherever they need it.
We also know that we have high-potential
We also took part in Pride in London and
talent across NewDay and we are tapping
Leeds supporting our LGBTQ+ colleagues, We are proud of what we have achieved this
into that. We actively encourage our
have celebrated many faith events and had year and promote a culture where everyone
colleagues to think about lateral moves
a great discussion, as part of Black History is valued and respected.
Operating responsibly
Continued
Working with our colleagues and Our Modern Slavery and Human Trafficking By following a formalised and structured
third parties across our offices on Statement is available on our website at approach, we have developed, and
environmental opportunities www.newday.co.uk/sustainability/modern- continued to refine, our ESG strategy and
Across our offices, we have worked closely slavery-and-human-trafficking-statement/. reporting processes. Formal reporting is
with our colleagues, landlords, facilities and completed through quarterly KPIs that
catering partners to deliver activities to Governance over Environmental, are reviewed by the Operational Risk
reduce our environmental impact. We Social and Governance (ESG) matters Committee and the Board for insights and
introduced various waste and recycling Delivering long-term sustainability is a best practice sharing. External benchmark
projects focused on reducing plastic usage fundamental objective at Board level. We data has been used to define triggers
as well as reviewing our approach to the recognise the importance of minimising and benchmarks across all our reported
energy usage within our buildings. Our our impact on the environment and of ESG measures and our quarterly Board
colleagues have created their own Green being a responsible lender and employer reporting assesses current performance
Forum in Leeds, which promotes recycling, and our ESG framework ensures against these triggers.
waste and any green-related matters, appropriate focus and accountability
championing new ideas across the site. across the business. Our ESG strategy
provides an assessment framework that
Governance in our supply chain considers the significant ESG issues across
In line with internal supplier qualification and the business, the outcomes of which are
ongoing monitoring processes, we ask new used to identify risks and opportunities
and existing suppliers to self-attest their for improvement. The governance in
compliance against key principles relating place assigns roles and responsibilities for
to corporate social responsibility. Our developing and overseeing ESG reporting
Supplier Code of Conduct, found on our processes. Management processes have
w e bs i te a t w w w. n ew d ay.co. u k / been developed to identify ESG issues
sustainability/supplier-code-of-conduct/, and opportunities, with the Board taking
positions our due diligence and contractual responsibility for ESG and reviewing ESG
requirements in this regard. performance at regular intervals.
By understanding the differing needs and concerns of our Detailed below are the Group’s key stakeholders, their material
stakeholders through proactive engagement, the Board can then interests, how we engage with them and key outcomes delivered
ensure careful consideration of the potential impact of their for each group in 2019,
decision-making on each stakeholder group.
The Board and its Committees considered the needs and implementing various options to take account of customers’
concerns of all stakeholders to deliver the outcomes listed above. differing needs whilst also ensuring that the Group’s policies are
A key focus area of the Board during the year, which required in line with the FCA’s final rules and guidance. Alongside this, the
careful consideration across multiple stakeholders, was in relation Board balanced the interests of its shareholders and investors
to CCMS. whilst ensuring appropriate dialogue to promote shareholder and
investor awareness of the changes and the anticipated impact on
Interventions developed to support customers in persistent the Group. For further details see page 16.
debt following the FCA’s CCMS
We actively engaged with the FCA throughout their CCMS, the
direction of which is consistent with our Customer Manifesto. In
approving the Group’s strategic response to the CCMS, the Board
developed solutions to support customers in persistent debt,
Risk
management
NewDay is focused on supplying credit solutions which meet
the needs and expectations of our customers and providing positive
outcomes in all that we do. Our Risk Management Framework helps us
to achieve these objectives providing strong oversight, challenge
and assurance over our internal environment
Identify Qualitative
Quantitative
Control Assess
Stress testing
Monitor Change
Aggregate
Reporting
Name Activity
1st
The leaders of each business area have Executes the business strategy as set by
primary accountability for the performance, the Board. Undertakes day-to-day business
operation, compliance and effective control within the parameters of the defined risk
line of defence of risks affecting their respective business appetite and Risk Management Framework.
areas. Applies controls in day-to-day business
activities, managing and testing controls
on an appropriate periodic basis.
2nd
The Enterprise Risk Function is an Provides independent oversight, challenge
independent risk management capability, and advice over the risk profile of the business
reporting to the Chief Risk Officer. The Chief and operation of the Risk Management
line of defence Risk Officer reports to the Chief Executive Framework.
Officer and independently to the Chairman of
the Board Risk Committee. The Chief Risk
Officer also has independent access to the
business and Board members, as appropriate.
3rd
Assurance is provided by the internal audit Provides independent assurance on the
function which is independent of both the design, operation and effectiveness of
business and the Enterprise Risk Function, the control framework, including activities
line of defence and reports to the Chairman of the Board performed by the first and second lines
Audit Committee. of defence.
Risk Management
Strategy Framework
•• Evolving with our customers to address
changing needs
•• Driving high standards for our customers,
colleagues and community through our
Manifesto
•• Leveraging a leading digital platform
Risk appetite •• Risk governance
Four risk appetite pillars underpin the delivery of our strategic objectives
Our credit appetite is to ensure we Our objective is to maintain a Our objective is to fulf il our Our objective is to treat our
originate and manage customer strong f inancial position by business commitments through customers fairly and to ensure that
receivables with a risk and reward managing profitability and cash systems and processes that are they remain at the hear t of
balance in line with the Group’s generation. This will be achieved appropriately controlled, scalable, everything we do. We will work to
financial and strategic objectives. by ensuring that our financial cost-effective and comply with ensure that our customers do not
strength and liquidit y are applicable external and internal suffer detrimental outcomes as a
maintained at levels that reflect rules, laws and regulations. This result of our product design or sales
NewDay’s desired financial profile, includes having the right number or post-sales processes, correcting
whilst complying with funding of skilled, motivated people in identified errors. Our customer-
covena nt s a n d reg u lator y place and developing and retaining focused ethos is embedded within
requirements. This will apply for t a l e n t . We s e e k to h ave the governance and culture of the
planned grow th in normal appropriate oversight, challenge organisation.
con dit ions an d nav igat in g and governance in place over
stressed environments. planned changes.
Board
Board
governance
Management Committee
Management
Enterprise Risk Management Committee
governance
Customer and
Credit Risk Asset and Liability Operational
Conduct Risk
Committee Risk Committee Risk Committee
Committee
Core
policy
Board Risk Management Policy
Risk Management
Framework
Overarching Risk Management
Mapping our
risks
Our Principal Risks have been under regular review by the Board
and the Board Risk Committee throughout 2019. These risks can
influence how we achieve our strategic objectives. We focus
on those risks that pose the greatest threats to our
business and the achievement of our objectives
Mark Eyre
Chief Risk Officer
Principal risks
Strategic risk Macroeconomic risk
Adverse impacts because of a sub-optimal business Adverse movements in economic trends in the UK
strategy or business model. cause detrimental effects on the anticipated returns
and business strategy of the Group.
Example Example
• A sub-optimal strategy or model could give rise to financial loss, • Factors such as a credit downturn or the UK’s exit of the EU without
reputational damage or failure to meet internal and/or public policy a deal could significantly impact the anticipated returns for the
objectives business and/or interrupt growth strategies
• A downturn may lead to higher unemployment or a retail partner
insolvency which may impact future financial returns
• A significant increase in the impairment charge may also result from a
macroeconomic downturn
Risk factors in-year and key mitigants Risk factors in-year and key mitigants
Challenging high street conditions for our foundation partners have The continued uncertainty around Brexit, the recent outbreak of
remained prominent during the year. coronavirus and challenges surrounding economic growth.
We have managed the risk through the use of the following We have managed the risk through the use of the following
controls/mitigants: controls/mitigants:
• pursuit of business development strategy and diversification in • in response to Brexit we monitored and refined our macroeconomic
terms of potential new partners; dashboard;
• launch of NewPay digital credit product with AO.com; • our macroeconomic panel meets on a quarterly basis to review and
• diversification through online partners; agree stress scenarios;
• working with partners to expand our presence online; • stress testing, including a Brexit-specific stress test scenario, with pre-
• business strategy and annual/dynamic review process; determined mitigating actions agreed by the Board;
• Group budgets defined, allocated and monitored to align with • business strategy and annual review process;
strategic objectives; • budgets defined, allocated and monitored to align with strategic
• risk appetite aligned with strategic objectives and business objectives;
planning; and • risk appetite aligned with strategic objectives and business planning;
• monitoring publicly available information and other gathered • diversification of Co-brand partners and product offerings;
information with regards to trading performance of retailers. • robust outsourcing and supplier oversight processes;
• ability to deploy multiple levers from new business growth, customer
credit limit management and cost controls;
• monitoring of funding-related indicators; and
• funding flexibility and diversification.
Improvements in 2019 and future focus Improvements in 2019 and future focus
• We continued to develop and improve the functionality of • Our macroeconomic response strategies continue to develop,
our e-servicing apps, provided a better customer offering including mapping them to our macroeconomic triggers. We have a
and strengthened our business clear corporate view of what levers to use in different situations under
• In 2020, we will look to expand our footprint and add new different stressed scenarios
Co‑brand partnerships with new retail partners, both large and • In 2020, we will continue to refine our approaches where needed and
small, complementing our existing partners continue to monitor the external environment closely, with particular
attention to the coronavirus outbreak
Example Example
Credit risk losses deviating from expectations because of: • Significant alterations to the business model because of changes in
• ineffective models or scorecards; the law or regulations may have a material impact on the performance
• forecasting models not in line with business processes; and profitability of the business
• poorly designed decisioning strategies; • Non-compliance with laws or regulation could lead to reputational
• collections strategies not working as intended; damage, enforcement action and/or financial loss
• failure to resource collections effectively and/or weak collections
processes; or
• increase in fraud losses due to increases in both first party and third
party fraud losses.
Risk factors in-year and key mitigants Risk factors in-year and key mitigants
Uncertainty in the UK economy and the potential for continued Ensuring regulatory change is understood and implemented compliantly.
economic drag. Customer indebtedness and pressure on low income
households from credit tightening. Customer behaviour patterns We have managed the risk through the use of the following
particularly Individual Voluntary Arrangements (IVAs) and bankruptcies. controls/mitigants:
• completed preparations for the FCA’s Senior Managers and
We have managed the risk through the use of the following Certification Regime (SMCR) that took effect in December 2019;
controls/mitigants: • delivering our PSD2 programme for the development of compliant
• daily performance monitoring with the ability to modify credit and solutions for e-servicing and contactless cards;
collections strategies and actions at short notice; • finalising remedies for persistent debt to meet regulatory
• Credit Risk Committee overseeing the execution of the Credit Risk requirements;
Management Framework; • delivering a programme of GDPR updates to internal processes and
• credit risk strategies, policies and procedures; controls including continued updates to our Records of Processing;
• improvements to both creditworthiness and affordability • overseeing the Conduct Risk Management Framework;
assessments both at origination and in customer management; • monitoring of regulatory radar for upcoming regulatory developments
• significant investment in data science capabilities; and external horizon scanning cascaded internally;
• regular monitoring of impairment performance; • regulatory change gap analyses;
• macroeconomic environment monitored by the Credit Risk • responding to consultation papers through trade bodies; and
Committee with a dashboard prepared with external • policies and procedures reviewed to remain up to date, compliant and
leading economists; and adhered to and to ensure that appropriate processes and controls are
• improved model governance process in place for new models and in place.
scorecards.
Improvements in 2019 and future focus Improvements in 2019 and future focus
• In 2019, further improvements were made to both our • Continue to update existing debt strategies and develop persistent
creditworthiness and affordability assessments debt remedies in accordance with the FCA’s requirements
• IFRS 9 provisioning methodology was closely monitored and • In 2020, we will continue to focus on the regulatory environment,
improvements were made managing change for regulatory driven initiatives
• Model governance process was strengthened throughout • Deliver the next phases of PSD2 developing solutions for e-commerce,
the year e-servicing and contactless cards
• In 2020, we will continue to mature the Credit Risk Management • Update existing processes once the final version of the ePrivacy
Framework, enhancing our capability to assess affordability and Directive is released and continue to monitor the changing Data
deliver improvements to our models and credit decisioning Protection landscape
strategies • Prepare for further SMCR requirements to meet the December 2020
deadline
Example Example
Reputational damage, regulatory censure and/or financial loss could NewDay or its strategic partners experiencing issues with poorly defined
arise from: and managed controls, culture and/or governance could cause customer
• cyber attacks; detriment and in turn this could lead to financial loss, affect reputation and
• pandemic; give rise to regulatory censure.
• loss of customer data;
• internal and external fraud;
• lack of suitably skilled resources or system failures at third parties; or
• human errors in manual processes.
Risk factors in-year and key mitigants Risk factors in-year and key mitigants
The scale and pace of transformation (including digital and data-led Ensuring we lend responsibly and in an affordable way to customers.
projects, use of cloud-based services and automation of manual
processes). Reliance on third party controls in the provision of systems, We have managed the risk through the use of the following
data services and contact centre capabilities. An ever-changing cyber controls/mitigants:
threat, as well as the threat of data leakage. Whilst we have business • Customer and Conduct Risk Committee overseeing the Conduct Risk
continuity plans to mitigate against operational risks certain external Management Framework;
events, such as a pandemic, remains outside of the Group’s control. • our Customer Manifesto, values, and our investment in colleague
training, together with key management communications support our
We have managed the risk through the use of the following company standards and customer outcomes we aim to achieve;
controls/mitigants: • new product approval committee;
• overseeing the Operational Risk Management Framework; • retail partner monitoring and relationship management;
• information security framework; • Executive-led steering committee to manage CCMS implementation;
• business continuity management; • supplier governance programme;
• supplier governance framework; • policies and processes for vulnerable customers;
• new product approval committee; • policies and processes for complaint handling;
• change governance and dedicated project management resources; • PPI redress calculated in line with the FCA’s guidance and provision
• process quality assurance procedures; adequacy actively monitored;
• logical access management; • quality monitoring;
• IT incident management; • performance measurement and reward in risk and control;
• review of our cyber security; • risk and control measured in our colleague survey;
• penetration testing; • review of responsible lending and affordability across the Group and a
• physical security; review of past and current affordability processes undertaken in order
• Payment Card Industry Data Security controls testing; to determine any systemic issues and/or adversely impacted
• financial reconciliation controls; and customers; and
• recruitment, remuneration and performance management. • following the August 2019 PPI deadline for customer complaints, we
monitored emerging new sources of complaints from individuals and
claims management companies, and have continued to enhance our
processes and management of complaints.
Improvements in 2019 and future focus Improvements in 2019 and future focus
• In 2019, we have continued to mature our approach to penetration • We reviewed and enhanced our complaints management model
testing, supplier assurance, business continuity provision and testing • We progressed our remedies for customers considered in persistent
• We have remained alert to the ever-changing threat from cyber activity debt
and continued to invest in security design as we have developed our • We looked at affordability throughout the year and engaged with
architecture and infrastructure relevant regulatory industry reviews
• We continued to invest in rolling out robotic process automation and • Our Customer Manifesto also continued to be a key area of focus
intelligent automation where viable opportunities existed during the year
• We enhanced our customer digital journeys • In 2020, we will continue to stay abreast of the regulatory environment.
• In 2020, we will further mature our risk reporting system to further aid Our focus on responsible lending and customer outcomes will remain
analysis, stay alert in the cyber field and ensure we consider the FCA’s high and we will continue to ensure that our marketing and complaints
consultation paper on Operational Resilience in light of our continued processes deliver effectively for the customer
business strategy and change agenda
• We will implement a new collections system which will reduce our
reliance on manual processes
Example Example
Reputational damage, financial loss and/or withdrawal of funding Interest rate movements expose NewDay to the risk of increased cost
could arise from: of funding.
• misstatement of external reporting (annual and quarterly reports
and financial statements, bank submissions, regulatory reports Increased funding costs and/or not meeting funding requirements
or securitisation reports); could result in higher than anticipated costs, deleveraging and/or
• misstatement of information for internal decision-making; scaling back of business growth.
• non-compliance with tax regulations; or
• incorrect payments to third parties.
Operational cash ensures that the Group can implement its business
plan under normal conditions and within the Board’s agreed cash risk
profile. If there is insufficient cash this could impact the Group’s ability
to meet ongoing financial commitments, invest in new business or
pay Senior Secured Debt interest. Insufficient funding for receivables
would impact the Group’s ability to support customer spending and
receivables growth.
Risk factors in-year and key mitigants Risk factors in-year and key mitigants
Ensuring funding is in place for business growth, new products and The economic environment leads the Bank of England to increase
retailers, and maintenance of cash levels. base rates that would increase funding costs.
Other financial risks include the significant number of change projects The wider macroeconomic situation influences funding markets and
under way, retail partner resilience, reliance on manual controls and we remained reliant on these markets being open and available during
End User Developed applications. the year.
We have managed the risk through the use of the following We have managed the risk through the use of the following
controls/mitigants: controls/mitigants:
• managing the daily cash model which reports and forecasts the • reduced the direct financial risk by introducing the ability to pass on
Group’s daily cash balance at account level; base rate changes to customers;
• maintenance of operational cash levels; • funding strategy executed and improved VFN flexibility and
• execution of funding strategy and maintenance of headroom on capacity; and
funding facilities and extending the timescales on our variable • having headroom on our funding facilities to fund future
funding notes; receivables growth.
• an automated system for securitisation reporting is in the test
phase and implementation will improve control and reduce manual
input;
• monitoring of retail partner performance by the Assets and
Liabilities Risk Committee;
• financial control framework governing processes and procedures
across finance;
• first, second and third line of defence supplemented by external
audit of the Annual Report and Financial Statements; and
• annual completion of stress scenario analysis outlined in the
liquidity and cash management framework which is reported to
the Asset and Liability Risk Committee.
Improvements in 2019 and future focus Improvements in 2019 and future focus
• In 2019, our stress testing capability continued to develop and • We executed our 2019 funding strategy, achieving further
effective and proportionate stress tests were completed for both diversification and increasing our securitisation funding
the half-year forecast and annual budget exercises • In 2020, we will continue to monitor and optimise our funding
• Preparations have been completed for the move from the interim strategy in light of prevailing and emerging risk factors
regulatory reporting regime to the new reporting requirements
under the EU Securitisation Regulations which come into force in
Q1 2020 and apply to our asset-backed securitisation structures
• In 2020, we will continue our work to develop and implement an
automated system for securitisation reporting which will improve
control and reduce manual input
Chairman’s introduction
to corporate governance
We are committed to maintaining high standards of corporate
governance with the aim of ensuring growth is delivered in a controlled
and compliant manner. This is actively endorsed by Cinven, CVC and all
members of management to ensure the business is operated in the
interests of all stakeholders
During the year, John Hourican was appointed as Chief Executive • reviewing our strategic technology journey to ensure we are
of the Group following an extensive search process. James well positioned to deliver our vision to be the leading digitally
Corcoran (our previous Chief Executive with over ten years’ enabled UK consumer finance provider;
service) remains on the Board as a Non-Executive Director. John • oversight of the implementation of our Value Creation Plan
has brought a wealth of experience to the Board, having previously which identified an exciting range of initiatives aimed at
served as Chief Executive of Bank of Cyprus (the largest banking generating incremental value for shareholders whilst ensuring
and finance services group in Cyprus) between 2013 and 2019. the business is adequately protected;
Prior to joining Bank of Cyprus, John served as Chief Executive • reviewing our strategy in relation to Unsecured Personal Loans
Officer of the RBS group’s Investment Bank (Markets & and NewPay;
International Banking). • regularly reviewing customer outcomes and progress against
our Customer Manifesto;
John’s appointment further evidences our continued • oversight of our response to the FCA’s CCMS, in particular with
commitment to ensuring our Board has the correct balance of a view to ensuring appropriate outcomes are achieved for those
skills, knowledge and experience for our next stage of growth. individuals considered to be in persistent debt;
Whilst no significant changes have been made to the Group’s • closely monitoring other regulatory developments to ensure
strong governance framework during 2019, the Directors continue we are aware of matters on the regulatory horizon and are
to monitor governance arrangements to ensure they remain fit adequately prepared for them (including in relation to the
for purpose and reflect the size and ambition of the Group. Second Payment Services Directive (PSD2));
• monitoring macroeconomic conditions (including in relation to
During the year, the Board took a number of key decisions. risks associated with Brexit) to ensure our strategy is
The principal governance matters addressed in 2019 were: appropriate; and
• delivering on our strategy for continued growth and leveraging • oversight of the risks and effectiveness of controls in place
investments made to deliver shareholder returns; around cyber security and security of customer data.
Governance framework Other than as set out on pages 76 and 77, the governance and risk
During 2019, the commercial aspects of the Group’s UK framework described in this report relates to the governance and
subsidiaries were managed by the Board of NewDay Group UK risk framework established for the Group’s UK subsidiaries and
Limited (the Board), a wholly owned subsidiary of NewDay Group references to the ‘Board’, ‘Group’, ‘NewDay’ and ‘Company’ should
(Jersey) Limited, the Jersey-based parent company. be construed accordingly (where appropriate).
The Directors of NewDay Group (Jersey) Limited were responsible The Board’s role and composition are regularly reviewed to ensure
for the matters relating to NewDay Group (Jersey) Limited and that they are well defined and appropriate, and support the long-
their report for the year is set out on page 76. In addition, the term development of the Group.
Managers of NewDay Group Holdings S.à r.l. (the parent company
of the Predecessor Group) remain responsible for matters relating The day-to-day responsibility for managing the Group’s business
to NewDay Group Holdings S.à r.l.. is delegated to the Chief Executive Officer who, supported by the
Management Committee, implements the decisions and policies
approved by the Board and deals with matters within the ordinary
course of business.
Board
Enterprise Risk
Remuneration
Management Internal audit
and Nomination
Customer, Conduct Committee
Committee
& Complaints Committee
Operational Risk Committee
Commercial
Operations
People
For the year ended 31 December 2019, the Board has applied the share ownership structure of the Group; and (ii) the Guidelines for
Wates Corporate Governance Principles for Large Private Disclosure and Transparency in Private Equity, which can be found
Companies (published by the Financial Reporting Council (FRC) online at .
and available on the FRC’s website) (the ‘Wates Principles’). In
addition, the Group complies with: (i) the FRC’s UK Corporate A summary of how the Group has complied with the Wates
Governance Code (which can also be found on the FRC’s website) Principles is set out below:
where deemed appropriate taking account of the size, nature and
Principle 1
An effective Board develops and promotes the purpose of a Our purpose is to help people be better with credit. This is at the
company, and ensures that its values, strategy and culture align heart of everything we do and is supported by our Customer
with that purpose. Manifesto. Detailed disclosures regarding our Customer Manifesto
and strategy can be found on pages 2 and 10.
Principle 2
Effective Board composition requires an effective chair and a We have a highly experienced Board with a diverse range of skills
balance of skills, backgrounds, experience and knowledge, with and experience reflecting the needs of the business. Board
individual directors having sufficient capacity to make a valuable biographies can be found on pages 60 to 62. Details on how the
contribution. The size of a Board should be guided by the scale and Board operates, together with further details on its composition
complexity of the company. and committee structure, can be found on pages 58 and 64.
Principle 3
The Board and individual directors should have a clear The Board executes its responsibilities through its own decision-
understanding of their accountability and responsibilities. The making and by delegating responsibility to Board committees and
Board’s policies and procedures should support effective decision- to the Chief Executive Officer, with support from the Management
making and independent challenge. Committee. Responsibilities are appropriately defined in terms of
reference to ensure there are clear lines of accountability between
the Board and the other committees. Further details on: (i) the
Group’s committee structure and their responsibilities can be
found on page 58; and (ii) how our Board operates can be found on
page 64.
Principle 4
A Board should promote the long-term sustainable success of the Following the acquisition of the Group by funds advised by Cinven
company by identifying opportunities to create and preserve and CVC, we developed a Value Creation Plan to support the
value, and establishing oversight for the identification and achievement of our strategic priorities. Progress against the Value
mitigation of risks. Creation Plan is monitored at every Board meeting. In addition,
strategic opportunities are considered through the annual
strategy process culminating in the Board’s Annual Strategy Day.
Principle 5
A Board should promote executive remuneration structures The Board Remuneration and Nomination Committee oversees
aligned to the long-term sustainable success of a company, taking our remuneration policy with the aim of ensuring the long-term
into account pay and conditions elsewhere in the company. health and success of the Group. Further details can be on page 74.
Principle 6
Directors should foster effective stakeholder relationships aligned We are committed to ensuring we maintain strong relationships
to the company’s purpose. The Board is responsible for overseeing with all stakeholders (including employees) and actively engage
meaningful engagement with stakeholders, including the with them on an ongoing basis. Further details are provided on
workforce, and having regard to their views when taking decisions. page 46.
Board of Directors
Sir Michael Rake, knighted in John Hourican has more than Paul Sheriff has over 25 years Alison Reed has extensive
2007, is Chairman of Great 28 years of global financial of experience in f inancial business knowledge and
Ormond Street Hospital (2017) services experience. John ser vices organisations experience from her previous
and Phoenix Global Resources began his career at Price spanning banking, asset senior business roles as Chief
(2017). He is also Chairman Waterhouse working in Dublin, management and insurance. Financial Officer at Marks and
of Majid Al Futtaim Holdings Hong Kong and London Paul joined from Legatum, a Spencer Group plc and Group
LLC (2010) and is a Director before moving to Royal Bank private investment firm based Finance Director at Standard
of Worldpay Inc (Chairman of Scotland in 1997. During his in Dubai where he was CFO/ Life plc (including Standard Life
Worldpay Group plc 2015- time at Royal Bank of Scotland COO for three years, having Assurance Company). Alison is
2018) and of S&P Global (2008). John held a number of senior previously been CFO/COO a Non-Executive Director and
Sir Michael’s business advisory posts including serving as of Record plc, a main market Deputy Chairman of British
roles include Chairman of Chief Executive of the Group’s listed asset management Airways plc, a Non-Executive
the International Chamber of Investment Bank (Markets business. Prior to this he was Director of CGI Group Inc.
Commerce UK, Chairman of & International Banking) for Group Finance Director at and a Member of Council
the Advisory Board for Engie five years. Between 2013 and Arbuthnot Banking Group plc, and the Audit Committee of
UK, Advisor to Teneo Holdings, 2019 John served as CEO of a listed banking group, and Exeter University. Alison was
a Senior Adviser for Chatham Bank of Cyprus, the largest Commercial Finance Director previously a Non-Executive
House and a member of the banking and financial services of the Prudential’s UK and Director at Darty plc and HSBC
Oxford University Centre for group in Cyprus. During his European business. Earlier in Bank plc. Alison is a member
Corporate Reputation Global tenure, John reshaped the his career he spent five years of the Institute of Chartered
Advisory Board. business, re-established its in private equity and qualified Accountants in England and
deposit base, improved the as a Chartered Accountant Wales.
Sir Michael’s former principal quality of its loan book and with Arthur Andersen. He is
roles include Chairman of BT strengthened its f inancial a member of the Institute of
Group Plc, Chairman (both UK position. John was named Chartered Accountants in
and International) of KPMG, Euromoney’s Banker of the England and Wales.
Chairman of easyJet, President Year in 2015. John is a fellow
of the Confederation of British of the Institute of Chartered
Industry, Deputy Chairman Accountants in Ireland.
of Barclays and Director of the
Financial Reporting Council.
Board of Directors
Continued
Management
Committee
Whilst the Board, among other things, directs the Group’s strategy, the
Management Committee supports the Chief Executive Officer in the
management of the Group’s day-to-day operations. The Management
Committee comprises the Chief Executive Officer (who acts as Chair)
and Chief Financial Officer together with the following individuals:
Damaris joined NewDay in Mark joined NewDay in 2014 Rob joined NewDay in 2012 Stephen joined NewDay in
2013. Damaris joined to lead from Deloitte, where he was from Santander UK where 2011 from Santander UK,
the People team at NewDay a Director in the Risk and he held various leadership where he was Legal and
f ro m H i l l a n d K n ow l to n Regulation practice, providing roles spanning Credit Risk, Compliance Director for the
Strategies UK, where she was advisory support to financial Collections, Commercial and UK Cards business for two
Chief Operating Officer and services firms regarding risk Marketing Analytics. Prior to years. Prior to this, Stephen
where talent strategy was a management and regulation. this, Rob worked for HBOS, worked in the legal team at GE
key priority. Prior to this, Mark worked at Capital One and PwC in a Capital for four years and in
Barclays for 17 years reporting career spanning over 20 years practice at Baker & McKenzie
to the Group Chief Risk Officer. in financial services. for five years.
The Board
The Board is responsible for overseeing the Group’s activities.
The Directors are apprised of, debate and challenge strategy, mergers
and acquisitions, operational performance metrics, risk matters,
customer and conduct-related matters and receive reports
on current strategic initiatives
The Directors bring many skills and a breadth of experience to the Attendance at Board and Committee meetings
Board, including strategic experience, commercial knowledge,
retail and investment banking experience, UK regulatory Board
knowledge, customer management and conduct expertise, Remuneration
and
treasury and funding experience, risk management expertise and Board Audit Board Risk Nomination
operational, IT and accounting experience. This enables Board Board Committee Committee Committee
meetings meetings meetings meetings
members to make informed decisions on key issues facing Member attended attended attended attended
the business.
Sir Michael Rake 8/8 N/A N/A 3/3
Throughout the year, the Group maintained appropriate insurance John Hourican 1
3/8 N/A N/A 1/3
cover to protect the Directors from liabilities that may arise against
them personally in connection with the performance of their role. Paul Sheriff 8/8 N/A N/A N/A
In addition: (i) the Articles of Association of NewDay Group (Jersey) Alison Reed 8/8 7/7 6/6 N/A
Limited contain an indemnity in favour of its Directors so far as is
permitted under Jersey law; and (ii) certain of the Group’s UK Rupert Keeley 7/8 N/A N/A 3/3
subsidiaries have similar provisions in their Articles of Association Sir Malcolm Williamson 7/8 N/A N/A 3/3
providing qualifying third party indemnities for the benefit of the
Directors of such entities. James Corcoran 1
8/8 N/A N/A 2/3
Caspar Berendsen 7/8 N/A 5/6 3/3
Role of the Board
Peter Rutland 8/8 1/7 6/6 3/3
The Board is responsible for creating a foundation for growth and
attractive shareholder returns. It determines the vision, strategy David Giroflier 8/8 7/7 N/A N/A
and high-level policies of the Group, striking an appropriate
balance between risk and reward, whilst ensuring positive Arron Wu2 6/8 6/7 N/A N/A
customer outcomes. It sets out the guidelines within which the Johan Pettersson 3
4/8 N/A N/A N/A
business, including those parts of the business that are
outsourced, is managed and controlled. It monitors business Pev Hooper 5/8 N/A N/A N/A
performance against agreed targets, within an agreed budget,
to support the strategic objectives of the business. Note:
1. On 16 October 2019, John Hourican was appointed: (i) to the Board in his capacity as
Chief Executive Officer of the Group; and (ii) as a member of the Board Remuneration and
It also provides oversight and independent challenge, particularly Nomination Committee. James Corcoran remained on the Board as a Non-Executive Director
and resigned as a member of the Board Remuneration and Nomination Committee. John
with regard to the business’ culture and values. Hourican was eligible to attend three Board meetings and one Board Remuneration and
Nomination Committee meeting during the year.
The Board executes these responsibilities through its own 2. Arron Wu resigned as a Director on 14 November 2019. Arron Wu resigned as a member of the
Board Audit Committee on the same date and Peter Rutland was appointed in his place. Peter
decision-making and by delegating responsibility to Board Rutland was eligible to attend one Board Audit Committee meeting during the year.
Committees and to the Chief Executive Officer, with support from 3. Johan Pettersson resigned as a Director on 8 August 2019.
the Management Committee. The Board has three sub-
committees: (i) the Board Audit Committee; (ii) the Board Risk
Committee; and (iii) the Board Remuneration and Nomination
Committee. The roles and responsibilities of each committee are
documented in Board-approved terms of reference. However,
some matters are reserved for consideration by the Board. These
include matters relating to: (i) strategy and management; (ii)
structure, capital and funding; (iii) financial reporting and controls;
(iv) internal controls and risk management; (v) material contracts;
(vi) external communications requiring Board approval; (vii)
changes to the Board’s structure and remuneration and senior
management arrangements; (viii) delegation of authority; and (ix)
corporate governance matters.
Chairman and Chief Executive Officer Relations with Cinven and CVC
The roles of the Chairman and Chief Executive Officer are separate As noted above, Cinven and CVC have each appointed two
and clearly defined. Investor Directors to the Board. In addition, four experienced
Independent Non-Executive Directors, one Non-Executive
The Chairman is responsible for overseeing the Board and its Director and two Executive Directors sit on the Board. Cinven and
meetings to ensure that: (i) the Board meets its responsibilities; (ii) CVC are able to appoint and/or remove sufficient Directors to
effective communications are maintained with stakeholders; and ensure they control the Board for voting purposes.
(iii) Directors receive accurate, timely and clear information
regarding the Group. The Boards of NewDay Ltd and NewDay Cards Ltd, the regulated
entities within the Group, do not have Investor Directors and are
The Chief Executive Officer is responsible for overseeing the comprised only of Executive Directors (together with, in the case
Group and the management of its senior executives within of NewDay Ltd only, the Independent Non-Executive Directors
parameters set by the Board. and Non-Executive Director).
The Chief Executive Officer is also responsible for the Engagement with Cinven and CVC is encouraged through
development, recommendation and implementation of the attendance at Board meetings and, in months in which there is no
Group’s strategic plans, which are approved by the Board. Board meeting, specific investor meetings are arranged. As part
The Management Committee supports the Chief Executive of this process, representatives of Cinven and CVC receive
Officer in the performance of his duties. updates on key Group initiatives.
Training
Directors have access to relevant training courses during the year.
To continue to ensure that Board members are up to date on the
latest developments and maximise their effectiveness, during
2019 training focused on Agile Working and the FCA’s Senior
Managers and Certification Regime.
Supply of information
An online repository for Board materials is used to supply
appropriate and good-quality information to the Board.
All Directors have access to the services of the Company
Secretary and other staff, as required.
Political donations
The Group did not incur any political expenditure or make
any political donations to political parties, other political
organisations, or any independent election candidates during
the year.
Board
Audit Committee
Alison Reed
Senior Independent Non-Executive Director,
Chairman of the Board Audit Committee
In addition to the review of areas of significant judgements and • to review the findings of the external auditor;
complexity, the Committee provides robust challenge to the • to monitor management’s response to the findings and
integrity and accuracy of externally reported financial information recommendations of internal and external audit;
to ensure it is fair, balanced and understandable, before • to review compliance with legal and regulatory requirements;
recommending for approval to the Board. This incorporates all • to report the outcome of meetings to the Board, identifying
quarterly, half-yearly and Annual Reports, Financial Statements any matters in respect of which it considers that action or
and investor presentations. improvement is needed, and making recommendations as to
the steps to be taken;
The Committee also oversaw the in-house internal audit function, • to monitor, and challenge where appropriate, the
including monitoring its ongoing effectiveness and audit plan in whistleblowing arrangements as set out in the whistleblowing
light of the pace of change in the business and evolving risks arising policy; and
from both the regulatory and market environment. • to review procedures for detecting fraud, including the systems
and controls for the prevention of bribery.
Committee composition, skills and experience
The following Directors are members of the Board Audit Key activities of the Board Audit Committee in 2019
Committee: The Committee convened seven times during the year and
• Alison Reed, Senior Independent Non-Executive Director; delivered the following key outcomes:
• David Giroflier, Investor Director (Cinven); and • reviewed the 2018 Annual Report and Financial Statements
• Peter Rutland, Investor Director (CVC). and each of the quarterly investor reports and presentations
to ensure that, taken as a whole, they were fair, balanced and
Alison Reed is the Chairman of the Committee and has significant understandable and advised the Board to that effect;
accounting and financial reporting experience. On 14 November • reviewed and challenged the appropriateness of the Group’s
2019, Peter Rutland replaced Arron Wu as a member of the Board accounting policies, critical accounting estimates and key
Audit Committee. judgements which were presented to the Committee quarterly.
This included discussions with management on provisioning
The diverse backgrounds of the Committee members and our methodology, most notably in relation to the impairment of
combined skills and range of accounting and financial reporting, loans and advances to customers and PPI;
risk and business experience (as detailed on pages 60 and 62) • widened the scope of the Group’s significant judgements
enable us to fulfil the Committee’s remit, as set out in the terms to include the EIR method of accounting for loans and advances
of reference, which are reviewed annually. to customers;
• reviewed and approved the refinements made to the
The Committee acts independently from the Executive team impairment provisioning methodology in the year;
to ensure shareholders’ interests are protected in relation to • monitored developments with respect to ongoing challenges
financial reporting and internal control. The internal and external on the high street and potential implications for our retail
auditors attend all meetings and we regularly meet with them partners, including the administration of Debenhams. We
in private. assessed the impact of these updates on the Group’s goodwill
and certain acquired intangible asset balances to assess
Although not members of the Committee, the Chairman, whether an impairment assessment was required;
Chief Executive Officer, Chief Financial Officer and Company • oversaw the relationship with the internal and external auditor
Secretary attend each meeting. Other Directors are invited as and including consideration of the terms of engagement and
when required, to ensure that we have all the information required assessing the effectiveness of both the internal and external
to operate effectively. audit functions;
• monitored the development and training of the in-house
Roles and responsibilities internal audit function and approved the audit plan for the year
to ensure it reflected planned areas of growth in the business;
The main roles and responsibilities of the Committee, as set out
• evaluated the reports and findings of the internal and external
in the terms of reference, are:
auditors, including management’s response to any
• to monitor the integrity of the Financial Statements, review and
recommendations along with status updates on the resolution
challenge significant financial reporting issues and assess the
of agreed actions;
judgements made;
• reviewed and approved the Group’s tax strategy and received
• to review the financial reports for publication and to ensure
regular updates on tax-related matters;
compliance with accounting policies and standards and ensure
• oversaw the continued development and growth of the
that, taken as a whole, they are fair, balanced and
Financial Control Framework to ensure it adapted in line with
understandable;
the pace of change in the business;
• to review and approve financial control and liquidity frameworks;
• reviewed regular updates on whistleblowing; and
• to review the internal financial control and risk management
• considered and challenged management forecasts of Group
systems and to review risk exposures and steps taken to
cash flows and net debt, as well as financing facilities available
monitor and mitigate them;
to the Group. Following this review, we confirmed the
• to monitor and review the effectiveness of the internal audit
appropriateness of the going concern basis of accounting in
function;
the Financial Statements to the Board.
• to make recommendations to the Board in relation to the
appointment, remuneration and terms of engagement of
the external auditor; Financial reporting
• to review and monitor the external auditor’s independence, The main areas of judgement we considered in relation to the
objectivity and effectiveness, taking into consideration relevant Financial Statements for the year ended 31 December 2019 are
UK professional and regulatory requirements; detailed in the following table. These issues were closely examined
• to develop and implement an approach on the engagement of with the external auditor during the year.
the external auditor to supply non-audit services, taking into
account relevant ethical guidance regarding the provision of
non-audit services by the external audit firm;
Key issues and judgements in financial reporting Board Audit Committee’s review and conclusions
Expected credit loss (ECL) allowance on loans and advances
to customers
Following the transition to IFRS 9 in 2018, we have closely The Committee regularly reviews and challenges the key
monitored the appropriateness of our impairment provisioning judgements applied, including the determination of a significant
methodology and made refinements to it where necessary to increase in credit risk, the definition of default and incorporation
ensure it remains fit for purpose. of forward-looking information. In considering the appropriateness
we reviewed the rationale and impact of variations to each of the
ECL allowances are recognised on origination of a financial asset, key assumptions.
based on its anticipated credit loss. Our ECL allowance is the
product of the probability of default, exposure at default and loss The Committee received regular updates facilitating detailed
given default, discounted at the original effective interest rate. The discussion and challenge on the refinements to the provisioning
assessment of credit risk and the estimation of ECL are required methodology to ensure it continues to meet the requirements of
to be unbiased and probability-weighted, and should incorporate the standard and remains fit for purpose.
all available information relevant to the assessment, including
information about past events, current conditions and reasonable The Committee reviewed the disclosures in the Financial
and supportable forecasts of economic conditions at the Statements to ensure they were appropriate and addressed
reporting date. the requirements of IFRS 9.
ECL allowances and credit risk remains a significant area of risk and The Committee was satisfied that the ECL allowance was
audit focus in the Financial Statements as a result of the various appropriate.
assumptions and judgements that are necessary.
Refer to note 2.3 for further details on the judgements inherent The Committee was satisfied that the provision was appropriate
within the PPI provision. given the information available.
Impairment of goodwill and acquired intangible assets
The carrying value of goodwill and certain acquired intangible The Committee challenged the assumptions within
assets have been subject to an impairment review. The impairment the impairment review of goodwill and acquired intangible assets.
review is conducted by comparing the discounted estimated This included consideration of the rationale and impact of
future cash flows of the cash-generating units with the carrying variations to each of the key assumptions, including scenario
value in the Financial Statements. analysis with regard to retailer performance given challenges seen
on the high street.
Acquired intangible assets of £250m and goodwill of £280m have
been recorded in the balance sheet as at 31 December 2019 (2018: The Committee was satisfied that the carrying value of goodwill
£301m and £280m respectively). and acquired intangible assets were appropriate.
Key issues and judgements in financial reporting Board Audit Committee’s review and conclusions
EIR method of accounting for loans and advances to
customers
The Group applies the requirements of IFRS 9 through the The Committee received regular updates on several aspects
EIR method for the recognition and measurement of interest of the EIR accounting adjustments and focused specifically on the
income for loans and advances to customers, including customers significant judgements used in the adjustment to loans and
who have been offered interest-free promotional periods. advances to customers in respect of interest-free promotional
periods. These judgements, which include the expected
The EIR is determined on inception as management’s best repayment activity and customer retention after the end of
estimate of future cash flows based on historical information, the promotional period, were reviewed and approved by the
where available, and considers the repayment activity and Committee throughout the year. Whilst other aspects of
the retention of the customer balance after the end of the the EIR accounting adjustments include judgements, these
promotional period. judgements are not considered by the Committee to be significant
as they incorporate low levels of estimation uncertainty.
As such, in the case of interest-free promotional period offers, the
EIR method introduces estimation uncertainty which, if the actual The Committee was satisfied that the carrying value of the EIR
cash flows differ from the estimate, could result in an adjustment adjustment to loans and advances to customers in respect of
to the carrying value of the asset recognised from interest accrued interest-free periods was appropriate.
in the interest-free promotional period.
The level of provisioning is subject to management judgement on Having reviewed the information available to determine what was
the basis of legal advice and is therefore an area of focus for both probable and could be reliably estimated, the Committee
the Committee. agreed that the level of provision at the year end was appropriate.
Internal audit reports issued in the year covered the following The Committee reviewed and approved the annual external audit
areas: plan, including the methodology and risk identification processes
• customer credit management; used, and we reviewed the findings of the external audit including
• implementation of balance transfers and money transfers; key judgements and the level of challenge provided. We assess
• credit bureau data usage and reporting; the performance of the external auditor on an ongoing basis to
• debt sales processes, accounting for debt sales and oversight ensure we are satisfied with the quality of the services provided,
of debt purchasers; which includes consideration of the experience and capabilities of
• digital development operations change management; the auditor, the delivery of its audit work in accordance with the
• data security and data protection; agreed plan and the quality of its reports and communications to
• securitisation deal implementation, asset data accuracy us.
and reporting;
• taxation control framework; The Committee has kept under review regulatory and legislative
• customer complaints identification and outcomes; developments around the tenure of the auditor. Having reviewed
• Credit Card Market Study; this, along with the assessment of the effectiveness of the
• UPL follow-up; external auditor, the Committee has recommended to the Board
• NewPay new product approval process; and that KPMG LLP be reappointed as external auditor for the financial
• technology risk and data governance framework – year ending 31 December 2020.
cyber security.
Board
Risk Committee
The Committee oversaw the ongoing management and The diverse backgrounds of the Committee members and their
mitigation of risks arising in the business, including major projects combined skills and range of risk and business experience
and business initiatives, and also emerging risks. It monitored risk (as detailed on pages 60 to 62) enable us to fulfil the Committee’s
management practices to ensure that they continued to be fit for remit, as set out in the terms of reference, which are reviewed
purpose in the face of a significant business and technology annually. Although not members of the Committee, the Chief
change agenda. It continued to monitor the macroeconomic Executive Officer, Chief Risk Officer, Chief Financial Officer and
environment and the impact on credit risk. Director of Internal Audit attend each meeting. Other Directors,
colleagues and the external auditors are invited as and when
We continue to manage our regulatory requirements whilst required to ensure that the Committee has all the information it
monitoring the horizon for emerging regulatory risks. During 2019, requires to operate effectively.
the business contributed to two industry-wide FCA information
requests – ‘Review of Affordability’ and ‘Lending Decisions and
Credit Information Market Study’, and provided information on
operational resilience, complaints performance and consecutive
fees. The business continues to monitor the impact of the
persistent debt initiatives implemented in 2018, following the
FCA’s Credit Card Market Study, and is in the process of rolling out
further communications to impacted customers during Q1 2020.
In line with our Customer Manifesto-led outlook we will continue
to monitor the impacts on our customers during 2020.
Chairman’s overview Finally, the Committee oversees the Group’s remuneration policy
The Board Remuneration and Nomination Committee’s main (the ‘Reward Policy’) and other key people-related policies and
roles and responsibilities are set out in its terms of reference which matters. In line with this, the Committee helps set the overall
are reviewed regularly. Responsibilities include supporting the direction of employee remuneration and people practices. The
Chairman in reviewing and recommending changes to the Committee reviews a range of business performance targets
composition of the Board and its various committees. The which, once approved by the Board, are used to finalise annual
Committee oversees the procedure for the appointment of bonuses and remuneration awards. A balanced scorecard of
Directors and recommends to the Board appropriate candidates. metrics is discussed annually and recommended to the Board for
In 2019, the Committee confirmed the appointment of John approval, ensuring that rewards reflect achievement against
Hourican as NewDay’s new Chief Executive Officer and a member a broad range of performance and risk-related goals, helping to
of the Board, following a thorough external search. ensure the long-term health and success of the Group.
Rupert Keeley
Independent Non-Executive Director,
Chairman of the Board Remuneration and Nomination Committee
Directors’
report
The Directors of the Company present their Annual Report and
Financial Statements for the year ended 31 December 2019
Group business review and results We believe that our existing plans and projections of business
The Group’s business model is outlined on page 10 and the KPIs performance will be sufficient to allow us to continue to meet all
and financial review on pages 28 to 37 contain highlights of the of our current obligations, including financial covenants and cash
financial performance and capital structure for the year. The requirements, for a period of at least 12 months following the
Group generated a profit before tax for the year ended approval of the Financial Statements. Whilst the UK’s economic
31 December 2019 of £50m. A reconciliation of the statutory profit outlook as a result of Brexit remains uncertain, we have considered
to adjusted EBITDA, referred to throughout the strategic report, the impact to the Group including conducting scenario analysis of
is provided on page 31. the potential impact of Brexit on profitability and the capital
markets and assessing our ability to refinance in such a scenario.
The Chief Executive Officer’s review on page 14 and the strategic Considering the scenario analysis and our current funding position,
priorities on page 26 provide details of future business we feel that we are well placed to meet our strategic objectives.
developments. For this reason the Board has adopted the going concern basis in
preparing these Financial Statements.
We do not propose the payment of a dividend for the year ended
31 December 2019. Transparency in reporting
In preparing the Annual Report and Financial Statements, we have
Principal risks and management fully complied with the best practice principles set out in ‘The
The principal risks and management thereof are described on Walker Guidelines for Disclosure and Transparency in Private
pages 53 to 56. Equity’, which were established to provide oversight on disclosure
issues and, specifically, to demonstrate private equity companies’
commitment to transparency.
Going concern
The Group’s business activities, together with the factors likely to Environmental, social and governance matters
affect its future development, performance and position, as well
as the overall financial position of the Group, its cash flows, liquidity We are committed to conducting our business in a manner that
position and borrowing facilities, are described in the KPIs and protects the environment. This means ensuring that all relevant
financial review on pages 28 to 37 and within the Financial environmental legislation and regulations are met and reducing
Statements. The notes to the Financial Statements include our consumption of these resources. For further details see page 45.
objectives, policies and processes for managing capital, financial
risk management objectives, details of financial instruments and Modern slavery and human trafficking
our exposures to credit risk and liquidity risk. We aim to act fairly, ethically and openly in everything that we do
and are committed to carrying out our business responsibly. This
We continue to note the levels of credit card debt in the UK, as well includes ensuring that modern slavery and human trafficking are
as the FCA’s concerns around persistent debt in the market. We not taking place in any part of our business or supply chain. The
have a robust credit Risk Management Framework in place to limit Group’s statement on modern slavery is available on its website
unexpected losses arising as a result of customers failing to meet at www.newday.co.uk.
their repayment obligations. We also depend on the availability of
external borrowing to finance our existing customer receivables Business relationships and employee engagement
as well as fund future growth. During the year we raised £577m
from our asset-backed term debt securitisation programme, The Group is committed to ensuring it maintains strong
including $205m raised in US capital markets, and successfully relationships with all stakeholders (including employees) and
refinanced all debt maturing in 2019 to facilitate continued support actively engages with them on an ongoing basis. Further details
of the business. are provided on page 46.
Matters on which we are required to report The purpose of our audit work and to whom
by exception we owe our responsibilities
Under the Companies (Jersey) Law 1991, we are required to report This report is made solely to the Company’s members, as a body,
to you if, in our opinion: in accordance with Article 113A of the Companies (Jersey) Law
• adequate accounting records have not been kept by the 1991. Our audit work has been undertaken so that we might state
Company, or returns adequate for our audit have not been to the Company’s members those matters we are required to
received from branches not visited by us; or state to them in an auditor’s report and for no other purpose. To
• the Company Financial Statements are not in agreement the fullest extent permitted by law, we do not accept or assume
with the accounting records and returns; or responsibility to anyone other than the Company and the
• certain disclosures of Directors’ remuneration specified by Company’s members, as a body, for our audit work, for this report,
law are not made; or or for the opinions we have formed.
• we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects. Simon Ryder (Senior Statutory Auditor)
for and on behalf of KPMG LLP
Directors’ responsibilities Chartered Accountants
1 Sovereign Square
As explained more fully in their statement set out on page 77, the
Sovereign Street
Directors are responsible for: the preparation of the Financial
Leeds
Statements and for being satisfied that they give a true and fair
LS1 4DA
view; such internal control as they determine is necessary to
5 March 2020
enable the preparation of Financial Statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and 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 they either
intend to liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
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 our
opinion in an auditor’s report. Reasonable assurance is a high level
of assurance, but does not 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 aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the Financial Statements.
The notes on pages 84 to 122 form an integral part of these statutory Financial Statements.
Balance sheets
Group Company
Assets
Loans and advances to banks 10 205.7 184.0 25.6 0.9
Loans and advances to customers 11 2,709.8 2,303.3 – –
Other assets 12 56.6 58.4 538.6 547.9
Derivative financial assets 13 – 2.5 – –
Current tax assets 0.7 0.8 – –
Deferred tax assets 0.4 0.4 – –
Property and equipment 14 22.3 9.0 – –
Intangible assets 15 266.2 313.9 – –
Investment in subsidiaries 16 – – 511.4 511.4
Goodwill 17 279.9 279.9 – –
Total assets 3,541.6 3,152.2 1,075.6 1,060.2
Liabilities
Debt issued and other borrowed funds 18 3,020.5 2,664.3 425.6 423.4
Other liabilities 19 82.8 90.1 – 0.1
Derivative financial liabilities 13 17.0 – – –
Current tax liabilities 4.9 2.3 – –
Provisions 20 20.9 35.7 – –
Total liabilities 3,146.1 2,792.4 425.6 423.5
Net assets 395.5 359.8 650.0 636.7
The notes on pages 84 to 122 form an integral part of these statutory Financial Statements.
The Financial Statements on pages 80 to 122 were approved and authorised for issue by the Board of Directors on 5 March 2020 and
signed on its behalf by:
Statements of changes
in equity
Share capital
and share Equity Capital Hedging Retained Total
premium instruments contribution reserve losses equity
Group £m £m £m £m £m £m
The notes on pages 84 to 122 form an integral part of these statutory Financial Statements.
Statements of
cash flows
Group Company
Operating activities
Profit/(loss) after tax 40.0 (13.6) 13.3 38.2
Reconciliation of profit/(loss) after tax to net cash (used in)/generated
from operating activities:
Tax expense 9 9.9 6.7 – –
Interest and similar expense 5 101.0 88.9 33.9 33.4
Depreciation of property and equipment 14 5.0 2.0 – –
Amortisation and impairment of intangible assets 15 55.3 51.9 – –
Impairment losses on loans and advances to customers 11 318.5 302.2 – –
Changes in operating assets and liabilities:
Increase in restricted cash (3.6) (6.5) – –
Increase in loans and advances to customers (725.0) (714.2) – –
Decrease/(increase) in other assets 1.4 9.2 9.3 (32.7)
(Decrease)/increase in other liabilities (20.5) 4.6 (0.1) (1.4)
Decrease in provisions (12.0) (24.1) – –
Interest and similar expense paid (95.8) (83.8) (31.7) (31.3)
Tax paid (10.0) (6.8) – –
Net cash (used in)/generated from operating activities (335.8) (383.5) 24.7 6.2
Net increase/(decrease) in cash and cash equivalents 18.1 9.6 24.7 (0.3)
Cash and cash equivalents at the start of the year 134.0 124.4 0.9 1.2
Cash and cash equivalents at the end of the year 10 152.1 134.0 25.6 0.9
The notes on pages 84 to 122 form an integral part of these statutory Financial Statements.
Notes to the
Financial Statements
1. Corporate information
NewDay Group (Jersey) Limited (the Company) was incorporated in Jersey as a private limited company on 26 September 2016.
The address of its registered office is 27 Esplanade, St Helier, Jersey, JE1 1SG. Nemean MidCo Limited has been the sole shareholder
of the Company since incorporation. The ultimate parent undertaking is Nemean TopCo Limited, a private limited company incorporated
in Jersey.
2. Accounting policies
2.1 Basis of preparation
The consolidated Group and Company Financial Statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU) and International Financial Reporting Interpretations Committee (IFRIC)
interpretations.
The Financial Statements of the Group and Company have been prepared on a historical cost basis except for derivative financial
instruments which have been measured at fair value.
The consolidated Group and Company Financial Statements for the year ended 31 December 2019 were approved by the Board of
Directors on 5 March 2020.
Going concern
As at 5 March 2020, the Group has £657.8m of asset-backed securities (ABSs) that reach their maturity date within the next 12 months
and the Directors’ intentions are to refinance this funding with new ABSs. The Directors note that the Group can, if required, exercise a
contractual extension option where each ABS can be extended by up to one year from its scheduled maturity date. As at 5 March 2020,
the Group has undrawn funding facilities (mainly in the form of variable funding notes) of £716.1m which can be used to fund future
growth.
As a result, the Directors are satisfied that the Group and Company has the resources necessary to continue in business for a period of
at least 12 months after the approval of the Financial Statements. Management forecasts the performance of the Group and undertakes
various stress scenarios to assess the impact on profitability, cash flows, the balance sheet and compliance with covenants. This
information is formally presented to the Board for review, and has been approved by the Board, along with consideration of the potential
impact of contingent liabilities on the Group.
The Directors also considered the impact of Brexit on the Group including conducting scenario analysis of the potential impact on
profitability and the capital markets and assessing the Group’s ability to refinance in this scenario. Considering the scenario analysis
and the Group’s current funding position, the Directors are not aware of any material uncertainties that may cast significant doubt upon
the Group and Company’s ability to continue as a going concern. Therefore, the Financial Statements continue to be prepared on the
going concern basis as outlined in the statement of Directors’ responsibilities.
Financial assets and financial liabilities are offset with the net amount reported in the balance sheet only when there is a legally enforceable
right to offset and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Income
and expenses are not offset in the income statement unless required or permitted by an accounting standard or interpretation, and
specifically disclosed in the accounting policies of the Group.
Basis of consolidation
The consolidated Financial Statements comprise the Financial Statements of the Group and its subsidiaries (together with certain
structured entities (SEs) that the Group consolidates) as at 31 December 2019. The subsidiaries and SEs are disclosed in note 26. The
Financial Statements of the Group’s subsidiaries (including SEs that the Group consolidates) are prepared for the same reporting period
as the Company using consistent accounting policies with the exception of NewDay Funding 2019-2 plc which has elected to apply a
long period of account for its first Financial Statements and subsequently has a reporting period ending 31 December 2020.
Subsidiaries are fully consolidated from the date that control is transferred to the Group. Control is achieved where the Group has the
power to govern the financial and operating policies of an entity, has the exposure or rights to the variable returns from the involvement
with the entity, and is able to use its power to affect the amount of returns for the Group.
SEs are fully consolidated based on the power of the Group to direct relevant activities, and its exposure to the variable returns of the
SE. In assessing whether the Group controls a SE, judgement is exercised to determine the following: whether the activities of the SE
are being conducted on behalf of the Group to obtain benefits from the SE’s operation; whether the Group has the decision-making
powers to control or to obtain control of the SE or its assets; whether the Group is exposed to the variable returns from the SE’s activities;
and whether the Group is able to use its power to affect the amount of returns. The Group’s involvement with SEs is detailed in note 27.
All intra-Group balances, transactions, income and expenses are eliminated in full.
84 NewDay Annual Report and Financial Statements 2019
Financial Statements
The right-of-use asset is subsequently depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis
and recorded as an expense in other operating expenses. All of the Group’s right-of-use assets relate to property leases and the useful
lives on transition to IFRS 16 were between six and eight years.
Transition to IFRS 16
On transition to IFRS 16 the Group elected to apply the modified retrospective approach and has adopted the following permitted
practical expedients:
• to apply IFRS 16 to contracts that were previously identified as leases under IAS 17;
• to apply a single discount rate to a portfolio of leases with reasonably similar characteristics; and
• to not apply IFRS 16 to leases where the lease term ends within 12 months of the date of initial application.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to its property leases which had previously been classified as
operating leases under IAS 17. These lease liabilities were measured at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted average incremental borrowing rate applied to the
Group’s leases on transition was 4.4%.
In line with the transition options of IFRS 16, the associated right-of-use assets were measured as if IFRS 16 had always been applied to
the lease but adjusted for accrued or prepaid lease-related expenses recognised on the balance sheet as at 31 December 2018. The
Group’s transition to IFRS 16 resulted in an opening reserves adjustment of £0.7m which has been recognised in retained losses as at
1 January 2019. The following table shows the impact of transition to IFRS 16 on the balance sheet position as at 1 January 2019.
1 On transition to IFRS 16, the net book value of dilapidation costs for the Group’s property leases were incorporated into the right-of-use asset and therefore were reclassified from
leasehold improvements.
£m
The Group has elected not to restate any of its prior year comparative information throughout these Financial Statements.
2.2 Summary of significant accounting policies applied in the year ended 31 December 2019
(1) Foreign currency translation
The Financial Statements are presented in Sterling which is the presentational and functional currency of the Group and Company. The
Group transacts mainly in Sterling. Transactions that are not Sterling denominated are recorded at the rate of exchange ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the relevant functional
currency at the exchange rates ruling at the balance sheet date. Differences arising on translation are charged or credited to the income
statement, except when deferred in equity as effective cash flow hedges.
Financial liabilities are held either as fair value or amortised cost depending on the nature of the underlying instrument.
After initial measurement, debt issued and other borrowed funds are measured at amortised cost using the EIR. Amortised cost is
calculated by taking into account any discount or premium on issue and directly attributable, incremental issue costs (such as debt
funding issuance fees) that are an integral part of the EIR.
The Group enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all or substantially all
of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognised. For
example, the Group has issued asset-backed securities to fund certain loans and advances to customers. In cases where the securitisation
vehicles are funded by the issue of debt, on terms whereby the majority of the risks and rewards of the portfolio of the securitised lending
are retained by the Group, these loans and advances to customers continue to be recognised in the Group’s balance sheet, together
with a corresponding liability for the debt issued.
In transactions in which the Group neither retains nor transfers substantially all of the risks and rewards of ownership of a financial asset
but it retains control over the asset, the Group continues to recognise the asset to the extent of its continuing involvement determined
by the extent to which it is exposed to changes in the value of the transferred asset.
IFRS 9 prescribes a forward-looking ECL model for financial assets measured at amortised cost. An impairment provision is recognised
on origination of a financial asset, based on its anticipated credit loss. Under IFRS 9, expected loss allowances are measured on either
of the following bases:
• 12-month ECLs. These are ECLs that result from possible default events within the 12 months after the reporting date; and
• lifetime ECLs. These are ECLs that result from all possible default events over the expected life of a financial instrument.
Lifetime ECL measurement applies if the credit risk of a financial asset at the reporting date has increased significantly since initial
recognition (including those which are credit-impaired) or if it was purchased or originated credit-impaired (POCI), otherwise the
12-month ECL measurement applies.
Financial assets where 12-month ECL is recognised are classified as ‘stage 1’; financial assets that are considered to have experienced
a significant increase in credit risk since initial recognition but are not credit-impaired, are classified as ‘stage 2’; and financial assets for
which there is objective evidence of impairment, so are considered to be in default or otherwise credit-impaired, are classified as ‘stage
3’. Financial assets that were credit-impaired when purchased by the Group through the Acquisition (being the purchase by NewDay
Group (Jersey) Limited of NewDay Group Holdings S.àr.l. and its subsidiaries on 26 January 2017) are classified as ‘POCI’ for the remainder
of their life and cannot transition out of this classification. The assessment of whether a significant increase in credit risk has occurred
is a key aspect of the IFRS 9 methodology which includes quantitative and qualitative measures and therefore requires management
judgement as disclosed in note 2.3.
ECL is the product of the probability of default (PD), exposure at default (EAD) and loss given default (LGD), discounted at the original
effective interest rate. The assessment of credit risk and the estimation of ECL are required to be unbiased, probability-weighted, and
should incorporate all available information relevant to the assessment, including information about past events, current conditions
and reasonable and supportable forecasts of economic conditions at the reporting date. The forward-looking aspect of IFRS 9 requires
judgement as to how changes in economic factors affect ECL. See note 2.3 for further details of the significant accounting judgements
and estimates used in the ECL allowance.
When calculating the EIR for financial instruments, other than for POCI financial assets, the Group estimates future cash flows considering
all contractual terms of the financial instrument but not ECL. The calculation of the EIR includes transaction costs and fees and points
paid or received that are an integral part of the EIR. Transaction costs include incremental costs that are directly attributable to the
acquisition or issue of a financial asset or liability. As at 31 December 2019, the Group reported a £51.8m asset (2% of loans and advances
to customers), in line with the requirements of IFRS 9, for the incremental and directly attributable transaction costs deferred through
the EIR method (31 December 2018: £42.9m). For POCI financial assets, a credit-adjusted EIR is calculated using estimated future cash
flows including ECL.
In calculating interest income and expense, the EIR is applied to the gross carrying value of the asset (when the asset is not credit-
impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial
recognition and are therefore classified as stage 3, interest income is calculated by applying the EIR to the carrying value of the financial
asset net of the ECL allowance. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross
basis. For POCI financial assets, interest income is calculated by applying the EIR to the carrying value of the financial asset net of the
ECL allowance and does not revert to a gross basis, even if the credit risk of the asset improves.
As prescribed by IFRS 9, the Group recognises interest and similar income using the EIR on loans and advances to customers that have
been offered interest-free promotional periods. The EIR is determined on inception as management’s best estimate of expected future
cash flows based on historical information, where available. See note 2.3 for further details of the significant accounting judgements
and estimates used in the EIR method.
Where loyalty points and vouchers expire before they are utilised by customers, the accrual is reversed in the period in which they expire.
The costs are calculated individually for each scheme in place and are accrued within commissions to retailers, advertising and marketing
costs in other operating expenses.
(7) Tax
(i) Current tax
Current tax assets and liabilities arising in current and prior periods are measured at the amount expected to be recovered from or paid
to the tax authorities. The tax rates and tax laws used to compute the tax balances are those that are enacted or substantively enacted
by the reporting date.
Current tax relating to items recognised directly in equity is also recognised in equity and not in the income statement.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses,
to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry
forward of unused tax credits and unused tax losses can be utilised, except:
• where the deferred tax assets relating to the deductible temporary difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss; and
• in respect of deductible temporary differences associated with investments in subsidiaries, where deferred tax assets are
recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised directly in equity are also recognised in equity and not in the income statement.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current
tax liabilities and the deferred taxes relate to the same taxable entity and the same tax authority.
All derivative financial instruments are assessed against the hedge accounting criteria set out in IFRS 9. The Group’s derivatives are
cash flow hedges and meet the hedge accounting requirements of IFRS 9.
Derivatives are recognised initially at the fair value on the date a derivative contract is entered into and are remeasured subsequently
at each reporting date at their fair value. Where derivatives do not qualify for hedge accounting, movements in their fair value are
recognised immediately in the income statement.
For derivatives that are designated as cash flow hedges and where the hedge accounting criteria are met, the effective portion of
changes in the fair value is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised
immediately in the income statement. Amounts accumulated in equity are recognised in the income statement when the income or
expense on the hedged item is recognised in the income statement.
Goodwill is allocated to cash-generating units for the purposes of impairment assessments. The allocation is made to those cash-
generating units that are expected to benefit from the business combination in which the goodwill arose.
Goodwill is tested annually for impairment and is carried at cost less accumulated impairment losses. Impairment is tested by comparing
the carrying value of the cash-generating unit to the discounted expected future cash flows from the relevant cash-generating unit.
Any impairment is recognised immediately in the income statement.
See note 2.3 for further details on the significant accounting judgements, estimates and assumptions that affect the carrying value of
goodwill.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired as part of a
business combination is their fair value at the date of acquisition.
Internally generated intangible assets include computer software and core operating platforms. These assets are capitalised as an
intangible asset based on the costs incurred to acquire, develop and bring it into use. An intangible asset is recognised only when an
asset is created that can be identified, its cost can be measured reliably and it is probable that the expected future economic benefits
that are attributable to it will flow to the Group. Expenditure incurred in relation to scoping, planning and researching the build of an asset
as part of a project is expensed as incurred.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment
losses. The useful economic lives of intangible assets are assessed to be either finite or infinite. Intangible assets with finite lives are
amortised over their useful economic life. Amortisation is calculated using the straight-line method to write down the cost of intangible
assets to their residual values over their estimated useful economic lives, which are generally estimated to be:
• computer software and core operating platforms 3–5 years
• acquired customer and retail partner relationships 7–13 years
• acquired brand and trade names 20 years
• acquired intellectual property (credit scoring models) 7 years
The Group has no intangible assets with an infinite useful economic life. The amortisation expense on intangible assets with finite lives
is recognised within other operating expenses in the income statement.
Changes in the expected useful economic life or the expected pattern of consumption of future economic benefits embodied in the
asset are accounted for by changing the amortisation period or method, as appropriate, and they are treated as changes in accounting
estimates.
Intangible assets are assessed for indications of impairment at each balance sheet date, or more frequently where changes in
circumstances exist. The carrying value of assets is compared to their recoverable amount, being the higher of their fair value less costs
to sell and their value in use. Any impairment is recognised immediately in the income statement.
See note 2.3 for further details on the significant accounting judgements, estimates and assumptions that affect the carrying value of
intangibles.
Depreciation is calculated using the straight-line method to write down the cost of property and equipment to their residual values over
their estimated useful economic lives. The estimated useful economic lives are as follows:
• computer equipment 3–5 years
• fixtures and fittings 3–5 years
• leasehold improvements over the lease term
Property and equipment is derecognised on disposal or when no future economic benefits are expected from its use. Any gain or loss
arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying value of the
asset) is recognised in other operating expenses in the income statement in the period in which the asset is derecognised.
An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s recoverable amount. A previously
recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable
amount since the last impairment loss was recognised.
The reversal is limited so that the carrying value of the asset does not exceed its recoverable amount, nor exceeds the carrying value
that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised for the asset in prior
periods. Such reversal is recognised in the income statement.
(13) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
an outflow of resources representing economic benefits will be required to settle the obligation and a reliable estimate can be made of
the amount of the obligation. The expense relating to any provision is presented in other operating expenses in the income statement
net of any reimbursement.
See note 2.3 for further details of the significant accounting judgements, estimates and assumptions that affect certain provisions.
Ordinary shares are classified as equity. Dividends on ordinary shares are recognised as a liability and deducted from equity when they
are approved by the Group’s shareholders. Interim dividends are deducted from equity when they are declared and are therefore no
longer at the discretion of the Group. Dividends for the year that are approved after the reporting date are disclosed as a post balance
sheet event.
Issued financial instruments or their components are classified as liabilities if the contractual arrangement results in the Group having
a present obligation to either deliver cash or another financial asset, or a variable number of equity shares, to the holder of the instrument.
If this is not the case, the instrument is generally an equity instrument and the proceeds are included in equity, net of transaction costs.
2.2.1 Significant accounting policies applied in the year ended 31 December 2018 which are not applicable for the year ended
31 December 2019
(1) Leasing
The determination of whether an arrangement is a lease, or it contains a lease, is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset.
Leases that do not transfer to the Group substantially all the risks and rewards incidental to ownership of the leased items are operating
leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.
Contingent rent payable is recognised as an expense in the period in which it is incurred. A lease is classified at the inception date as a
finance lease or an operating lease.
Dilapidations are provided for on leasehold properties where the terms of the lease require the tenant to make good any changes made
to the property at the end of the lease period. The provision is discounted over the remaining period of the lease at the risk-free rate.
The discount unwind is recognised in other operating expenses in the income statement.
The following table details the movements in the ECL allowance for changes in the significant modelling estimates, being the PD and
expected recoveries incorporated in the LGD.
31 December 31 December
2019 2018
Group £m £m
In 2019, the Group refined its methodology for measuring the lifetime PD to enhance the accuracy of this estimate, specifically the
Group refined the scalars it uses to extrapolate the lifetime PD from the 12-month PD. See note 23.2 for the movement in the ECL
allowance during the year including the impact of methodology refinements.
The qualitative criteria were added to the Group’s provisioning methodology in 2019 to improve the definition, based on historical
experience, of what constitutes a significant increase in credit risk since origination. In most instances an account has to meet both the
quantitative and at least one qualitative criteria before it is deemed to have experienced a significant increase in credit risk since
origination. See note 23.2 for the movement in the ECL allowance during the year including the impact of methodology refinements.
An account is moved back to stage 1 when it no longer meets these criteria for a period of three consecutive months.
As at 31 December 2019, a 10% increase/decrease in the significant increase in credit risk PD thresholds (for example, from a 1.0 to 1.1
times uplift) results in a £2.5m reduction or £3.7m increase in the Group’s ECL allowance respectively (31 December 2018: £3.6m
reduction or £8.6m increase).
Where the performance of the asset improves to the extent that it no longer meets any of the default criteria for three consecutive
months, or twelve consecutive months for accounts that were in default through forbearance measures, it transitions out of stage 3.
31 December 2019
Upside 3.8%/3.6% 2.4%/1.7% 3.7% 2.1% 384.7 9%
Base 4.2%/3.8% 1.6%/1.2% 4.1% 1.5% 399.8 59%
Downside 1 5.4%/3.8% 1.4%/(0.1)% 5.0% 1.0% 428.1 24%
Downside 2 6.7%/3.8% 1.2%/(1.4)% 6.0% 0.5% 473.0 8%
31 December 2018
Upside 4.1%/3.6% 2.4%/1.5% 3.8% 2.1% 361.1 2%
Base 4.5%/4.1% 1.8%/1.3% 4.3% 1.6% 375.1 45%
Downside 1 5.6%/4.1% 1.7%/0.2% 5.3% 1.2% 412.6 40%
Downside 2 6.9%/4.1% 1.6%/(1.1)% 6.3% 0.8% 464.2 13%
As at 31 December 2019, the impact of weighting these scenarios and overlaying other forward-looking information increased the ECL
allowance on loans and advances to customers by £24.9m compared to the base forecast (31 December 2018: £31.3m).
For further details of the Group’s ECL allowance see note 23.2.
The FCA’s deadline by which customers can raise a claim, which can be considered by the Financial Ombudsman Service, with their PPI
provider passed on 29 August 2019. The provision reflects the Group’s current view of the expected cost to settle the claims still to be
processed, including those raised by the Official Receiver, and to close any outstanding litigation. The Group has calculated the provision
by making a number of assumptions based upon current and historical experience and management judgement regarding future
expectations.
The total cost associated with PPI for the Group since its inception is estimated at £55.8m, out of which £15.1m was remediated in the
year ended 31 December 2019 (2018: £20.1m), leaving a provision of £9.9m in respect of anticipated future costs (2018: £25.0m).
The principal sensitivity of the PPI provision calculation is the average redress amount, if this were to move by +/-10% the PPI provision
would increase/decrease by +/-£0.7m (2018: +/-£2.3m).
The EIR is determined on inception as management’s best estimate of future cash flows based on historical information, where available,
and considers the repayment activity and the retention of the customer balance after the end of the promotional period.
As such the EIR method introduces estimation uncertainty which, if the actual cash flows differ from that estimate, could result in an
adjustment to the carrying value of the asset which reflects the value of interest recorded during the interest-free promotional period.
As at 31 December 2019, the Group reported an EIR adjustment to loans and advances to customers in respect of interest-free periods
of £23.4m (31 December 2018: £14.1m). Net interest and similar income recognised in relation to the interest-free promotional periods
totalled £9.3m, or 1% of interest and similar income for the year ended 31 December 2019 (2018: £3.4m or 1%).
If the estimated cash flows used in the EIR model for interest-free promotional periods changed by +/-5% the EIR adjustment to loans
and advances to customers would increase/decrease by £0.9m/£0.9m.
The impairment review on goodwill is conducted by comparing the discounted estimated future cash flows of the cash-generating
units with their carrying value including goodwill. The impairment review requires a number of key assumptions which have a significant
impact on the outcome including:
• the cash flow forecasts utilised. These were extracted from the Group’s Board-approved five-year budget and inherently include a
number of judgements and estimates, particularly in relation to new customer account originations, impairment rates and the
ongoing cost base of the cash-generating units. Cash flows were extrapolated into perpetuity, reflecting the fact they are held for
long-term investment, with no further growth assumed during the extrapolated period; and
• the discount rate which has been estimated based on the cost of equity relevant to each cash-generating unit.
The nature and inherent uncertainty relating to the above judgements and estimates means that the forecast cash flows may be
materially different from actual cash flows. A material reduction in future cash flows from these assets would necessitate a full impairment
review and the possibility of a material impairment charge in future years.
As at 31 December 2019, to the extent that discount rates were to increase by 25%, from 11% to 14%, there would be no increase to
the goodwill impairment charge.
In accordance with IAS 36, intangible assets arising on the Acquisition are measured at fair value on the date they were acquired less
accumulated amortisation and impairment losses. Accordingly at each reporting date the Group is required to assess whether there is
any indication that the assets may be impaired. If there is an indication that an asset may be impaired, the asset’s recoverable amount
must be calculated and the carrying value should be reduced to the recoverable amount should it be lower. The Group has reviewed all
available information that may indicate impairment of its acquired intangible assets and has assessed the recoverable amount of certain
acquired intangible assets (in relation to the Group’s customer and retail partnership relationships and brand names) by reference to
the expected cash flows from the underlying assets, including completing stress scenario analysis. This resulted in an impairment charge
of £1.3m in 2019 (2018: £nil). The £1.3m charge represents the write-off of a brand name that, following a strategic review, the Group is
no longer expected to use for new customers from 2020 onwards.
IFRS 16 also became effective on 1 January 2019. The key changes to the Group’s accounting policies from implementing this standard
are detailed in note 2.1.
3. Segment information
The Group’s operating performance on a segmental basis is regularly reviewed by management. These segmental results contain
various reclassifications from the statutory results. The Group’s reportable segments comprise Own-brand, Co-brand and Unsecured
Personal Loans, which are the segments reported to the chief operating decision maker, which is deemed to be the Chief Executive
Officer and the Management Committee. Each segment offers different products and services and is managed in line with the Group’s
management and internal reporting structure. The segments are as follows:
• Own-brand: this segment serves near-prime customers who are typically new to credit or have a poor or limited credit history.
The segment issues credit cards under the Aqua, marbles and Fluid brands and also includes two closed portfolios;
• Co-brand: this segment provides credit products in partnership with established retail and consumer brands. These products
include store cards, co-branded credit cards, and the Group’s digital revolving credit product, NewPay. In addition, the Group also
has a small portfolio of other closed credit cards and point-of-sale finance products; and
• Unsecured Personal Loans (UPL): this segment, launched in December 2016 with a controlled build up to date, provides unsecured
personal loan products to existing Own-brand customers.
These segments reflect how internal reporting is provided to management and how management allocates resources and assesses
performance. Segment performance is assessed on the basis of contribution. The accounting policies of the reportable segments are
consistent with the Group’s accounting policies. The Group’s activities are managed across Jersey, Luxembourg and the UK. However,
the Group only offers products to customers in the UK and Channel Islands. Capital expenditure is not allocated to individual segments
as property and equipment is managed at a Group level.
The table below presents the Group’s performance on a segmental basis in line with reporting to the chief operating decision maker:
Unsecured
Personal
Own-brand Co-brand Loans Total
Year ended 31 December 2019 £m £m £m £m
The table below presents a reconciliation of the reclassifications from the statutory performance to the results shown in the segmental
analysis:
Senior
Cost Secured Debt
Fair value recovery interest and Segmental
Statutory unwind fees related costs Other basis
Year ended 31 December 2019 reconciling items £m £m £m £m £m £m
Fair value unwind reflects the amortisation of fair value adjustments on the Group’s acquired receivables and debt issued which are
excluded from underlying profit on a segmental basis.
Senior Secured Debt interest and related costs represents the £33.9m interest and related costs on the £425.0m Senior Secured Debt
and £30.0m revolving credit facility, which are excluded from underlying profit on a segmental basis.
The table below presents the Group’s performance on a segmental basis for the year ended 31 December 2018 in line with reporting
to the chief operating decision maker:
Unsecured
Own-brand Co-brand Personal Loans Total
Year ended 31 December 2018 £m £m £m £m
In 2019, the Group revised its methodology for allocating costs between each operating segment. This did not have a material impact
on the segmental income statement, accordingly the 2018 comparatives have not been restated.
The table below presents a reconciliation of the reclassifications from the statutory performance to the results shown in the
segmental analysis:
Senior Secured
Debt interest
Fair value Cost recovery and related Segmental
Statutory unwind fees costs Other basis
Year ended 31 December 2018 reconciling items £m £m £m £m £m £m
Group Company
The Company’s interest and similar income consists of interest on a loan note issued by NewDay UK Limited and, in 2018, interest on
Tracking Preferred Equity Certificates (TPECs) issued by NewDay Group Holdings S.à r.l..
Group Company
Interest expense on debt issued and other borrowed funds 97.9 85.7 2.5 2.4
Interest expense on amounts owed to Group undertakings – – 31.4 31.0
Fair value unwind 1.9 3.1 – –
Other 1.2 0.1 – –
Interest and similar expense 101.0 88.9 33.9 33.4
Other includes £0.9m of cost which represents the interest expense arising from the unwind of lease liabilities required under IFRS 16.
Group Company
7. Personnel expense
Group Company
In 2019, the Group incurred £18.4m of project-related personnel expenses (2018: £19.0m).
The Company has no employees (2018: none). No Directors’ remuneration was paid by the Company during the year (2018: £nil).
Remuneration for the Directors listed in the Board of Directors section on page 60 is borne by NewDay Cards Ltd (for the Executive
Directors) and NewDay Group UK Limited (for the Non-Executive Directors).
Group Company
Professional fees include fees payable to the auditor, KPMG LLP, in relation to:
Group Company
Audit of consolidated Group and Company Financial Statements 0.2 0.2 0.2 0.2
Audit of the Financial Statements of the Company’s subsidiaries 0.4 0.5 – –
Other assurance services 0.1 0.1 – –
0.7 0.8 0.2 0.2
The auditor may undertake work in other areas where it is permissible under the Ethical Standard, it is the most suitable supplier and the
terms and conditions of the engagement, including the fee, do not impair its objectivity or independence.
9. Tax expense
Group Company
Group Company
1. Disallowable items and allowable deductions largely relates to disallowable amortisation and depreciation.
For the year ended 31 December 2019, the enacted UK corporation tax rate applicable to the Group was 19% (2018: 19%). The average
tax rate for the year ended 31 December 2019 was 19% (2018: 19%).
For the year ended 31 December 2019, the Jersey tax regime rate applicable to the Company was 0% (2018: 0%).
The Group holds a deferred tax asset of £0.4m (2018: £0.4m) resulting from temporary differences. There was no tax recognised through
the Group’s or Company’s statement of other comprehensive income in the year (2018: £nil).
Group Company
Loans and advances to banks are held with large commercial banks. Restricted cash of £53.6m (2018: £50.0m) is restricted for more
than three months and consists of ring-fenced cash for credit balances on loans and advances to customers, as well as cash restricted
due to covenants in place in accordance with the Group’s funding structure.
Group Company
There is no fixed term for repayment of credit card loans other than a contractual requirement for customers to make a minimum
monthly repayment towards their outstanding balance. Unsecured personal loans have a fixed repayment term ranging between
12 months and 60 months.
For details of the ECL assessment performed on loans and advances to customers see note 23.2.
Group Company
On 28 April 2017, the Company acquired from NewDay Group Holdings S.à r.l. a loan note issued by NewDay UK Limited of £483.7m at
an interest rate of 9% per annum due 2027. The loan note was listed on the International Stock Exchange on 12 October 2017. The
outstanding balance is included within amounts due from Group undertakings.
Amounts due from related parties consist of a term loan facility to Nemean TopCo Limited issued on 11 January 2018, see note 26
for details.
The Group has designated its derivative financial instruments as hedging instruments in qualifying cash flow hedges. Their fair value
has been calculated by discounting contractual future cash flows using relevant market interest rate yield curves and forward foreign
exchange rates prevailing at the balance sheet date. The notional amounts and fair values of derivative financial instruments at the year
end were as follows:
Notional Notional
amount Liabilities amount Assets
Group £m £m £m £m
All cash flow hedges are deemed to be effective and the fair value thereof has been deferred in equity within the hedging reserve. There
was no impact on the income statement in the year in respect of the movement in the fair value of ineffective cash flow hedges (2018: £nil).
The Company held no derivative financial instruments during the year (2018: £nil).
Total property
Computer Fixtures and Leasehold Right-of-use and
equipment fittings improvements assets equipment
Group £m £m £m £m £m
Net book value as at 31 December 2019 1.6 0.8 5.2 14.7 22.3
Net book value as at 31 December 2018 1.0 0.9 7.1 – 9.0
1 The present value of the lease payments on the underlying asset were revised; accordingly the cost of the right-of-use asset has been updated.
The right-of-use assets consist solely of land and buildings leased by the Group. The total cash outflow in the year arising from right-of-
use leases was £4.5m.
The Company held no property and equipment during the year (2018: £nil).
Internally Total
Acquired generated intangible
intangibles intangibles assets
Group £m £m £m
Internally generated intangibles include computer software and core operating platforms. For details of the significant accounting
judgements, estimates and assumptions in the acquired intangibles see note 2.3.
The Company held no intangible assets during the year (2018: £nil).
Company £m
The Company holds 100% of the ordinary shares of NewDay Group UK Limited and NewDay Group Holdings S.à r.l..
On 28 April 2017, NewDay Group Holdings S.à r.l. assigned to the Company a loan note issued by NewDay UK Limited for £483.7m, at an
interest rate of 9% per annum due 2027 in consideration for: (i) the repurchase of 312,500 A9 NewDay Group Holdings S.à r.l. shares for
£324.6m; (ii) redemption of £68.5m Interest Free Preferred Equity Certificates; and (iii) repayment of £92.5m Tracking Preferred Equity
Certificate interest.
On 1 January 2018, the Company made a capital contribution to NewDay Group Holdings S.à r.l. of £6.5m.
As at 31 December 2019, an impairment assessment was performed on the carrying value of the investments in subsidiaries which
concluded that no impairment was required (31 December 2018: £nil).
17. Goodwill
Group £m
On 26 January 2017, the Company acquired 100% of the issued share capital and preferred equity certificates in NewDay Group Holdings
S.à r.l. for cash consideration of £990.5m (the Acquisition). NewDay Group Holdings S.à r.l. was the parent company of the Predecessor
Group.
The allocation of the consideration was subject to a purchase price allocation exercise. The excess of consideration over the net assets
acquired was allocated to goodwill. Goodwill is allocated to those cash-generating units that are expected to benefit from the business
combination in which the goodwill arose. £240.5m of goodwill was allocated to Own-brand and £39.4m was allocated to Co-brand.
In line with the requirements of IAS 38, an annual impairment assessment has been completed and no impairment was identified; see
note 2.3 for further details (2018: £nil).
Group Company
Senior Secured Debt and associated facilities 435.4 435.4 0.1 0.1
Asset-backed term debt 1,865.3 1,781.7 – –
Variable funding notes 739.8 468.7 – –
Intercompany loan agreement – – 435.3 435.3
3,040.5 2,685.8 435.4 435.4
Capitalised debt funding fees (20.0) (21.5) (9.8) (12.0)
Debt issued and other borrowed funds 3,020.5 2,664.3 425.6 423.4
In connection with the Acquisition, on 25 January 2017 NewDay BondCo plc (formerly Nemean BondCo plc) issued £425.0m Senior
Secured Notes comprising £275.0m Fixed Rate Senior Secured Notes due 2024 and £150.0m Floating Rate Senior Secured Notes due
2023. In addition, the Company and certain subsidiaries of the Group entered into a £30.0m Super Senior Revolving Credit Facility.
Debt issued and other borrowed funds includes publicly listed asset-backed securities and variable funding notes provided by a number
of different investors. This debt issued, provided at LIBOR or SONIA (in some instances through interest rate swaps) plus margin, is
backed by securitised outstanding loans and advances to customers. As at 31 December 2019, £1,457.7m is used to fund the Own-brand
portfolio (31 December 2018: £1,303.1m), £1,070.7m is used to fund the Co-brand portfolio (31 December 2018: £902.7m) and £76.7m
is used to fund the Unsecured Personal Loans business (31 December 2018: £44.6m).
Of the debt issued and other borrowed funds, £342.5m is denominated in US Dollars (31 December 2018: £191.7m) with the remaining
denominated in Sterling.
A reconciliation of debt issued and other borrowed funds during the year is as follows:
Non-cash
Cash flows movements
As at Proceeds As at
1 January from debt Repayment of 31 December
2019 issued debt issued Other 2019
Group £m £m £m £m £m
Non-cash
Cash flows movements
As at Proceeds As at
1 January from debt Repayment of 31 December
2018 issued debt issued Other 2018
Group £m £m £m £m £m
On 26 January 2017, the Company entered into an intercompany loan agreement with NewDay UK Limited pursuant to which the
Company borrowed £425.0m comprising: (i) a fixed rate loan of £275.0m at an interest rate of 7.375% per annum due 2024; and (ii)
a floating rate loan of £150.0m at an interest rate of three-month LIBOR plus a margin of 6.5% per annum due 2023.
The scheduled maturities of debt issued and other borrowed funds are as follows:
Group Company
Group Company
Lease liabilities consist of leases held by the Group for land and buildings. The scheduled maturities of the leases are as follows:
Group
31 December
2019
£m
Lease liabilities:
Less than one year 1.7
Between one and two years 2.6
Between two and five years 8.5
More than five years 4.3
17.1
20. Provisions
The Company held no provisions during the year ended 31 December 2019 (2018: £nil).
As at 31 December 2019, the Group held a provision of £9.9m in respect of the anticipated costs of PPI redress (31 December 2018:
£25.0m), which includes a provision of £0.1m in relation to administrative expenses (31 December 2018: £1.0m). There are still a number
of uncertainties as to the eventual PPI redress costs, however, management consider the amounts provided at the year end appropriately
reflect the expected cost to the Group.
See note 2.3 for details of the significant accounting judgements and estimates in the PPI provision.
Dilapidations provision
A provision of £2.1m is held as at 31 December 2019 (31 December 2018: £1.9m) for dilapidation of the leased Leeds and London offices.
Other provisions
Other provisions largely consists of £4.6m associated with non-customer related regulatory enquiries (31 December 2018: £7.4m).
The Group is, from time to time and in the normal course of business, subject to a variety of legal or regulatory claims, actions or
proceedings. When such circumstances arise management provides for its best estimate of cost where an outflow of economic
resources is considered probable. The Group also reported a £2.2m provision (31 December 2018: £nil) for the expected costs to
be refunded to customers following an operational incident which arose due to the Group receiving incomplete information from a
third party. A corresponding asset of £1.8m is recorded in other receivables for costs anticipated to be recovered from the third party.
Group Company
Company
Nominal
Number of value
Called up share capital ordinary shares (1 pence) shares £
Share capital consists of 101 fully paid up ordinary shares at a nominal value of 1 pence each.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash
flow hedges net of income statement transfers.
Capital management
The Group manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk
characteristics of its activities. In order to maintain or adjust the capital structure, the Group may return capital to shareholders or issue
capital securities. The objectives, policies and processes are under constant review by the Directors.
The Group maintains an actively managed capital base to cover risks inherent in the business and specifically for NewDay Ltd, to meet
the capital adequacy requirements of the FCA under the Payment Services Regulations (2017) for Authorised Payment Institutions.
During the year, the Group complied with its externally imposed capital requirements (31 December 2018: complied).
Derivative financial instruments are recognised at fair value and are classified as level 2 (31 December 2018: level 2) as they are not traded
in an active market and the fair value is therefore determined by discounting expected future cash flows using interest rate yield curves
and forward foreign exchange rates prevailing at the year end. See note 13 for further details.
Total
carrying
Group Level 1 Level 2 Level 3 value Fair value
As at 31 December 2019 £m £m £m £m £m
Financial assets
Loans and advances to banks – 205.7 – 205.7 205.7
Loans and advances to customers – – 2,709.8 2,709.8 2,867.8
Other assets – 29.0 – 29.0 29.0
Total financial assets – 234.7 2,709.8 2,944.5 3,102.5
Financial liabilities
Debt issued and other borrowed funds – (3,020.5) – (3,020.5) (3,006.6)
Other liabilities – (82.3) – (82.3) (82.3)
Total financial liabilities – (3,102.8) – (3,102.8) (3,088.9)
Total
carrying
Group Level 1 Level 2 Level 3 value Fair value
As at 31 December 2018 £m £m £m £m £m
Financial assets
Loans and advances to banks – 184.0 – 184.0 184.0
Loans and advances to customers – – 2,303.3 2,303.3 2,447.7
Other assets – 27.6 – 27.6 27.6
Total financial assets – 211.6 2,303.3 2,514.9 2,659.3
Financial liabilities
Debt issued and other borrowed funds – (2,664.3) – (2,664.3) (2,608.6)
Other liabilities – (89.6) – (89.6) (89.6)
Total financial liabilities – (2,753.9) – (2,753.9) (2,698.2)
Total
carrying
Company Level 1 Level 2 Level 3 value Fair value
As at 31 December 2019 £m £m £m £m £m
Financial assets
Loans and advances to banks – 25.6 – 25.6 25.6
Other assets – – 538.6 538.6 538.6
Total financial assets – 25.6 538.6 564.2 564.2
Financial liabilities
Debt issued and other borrowed funds – (425.6) – (425.6) (414.9)
Other liabilities – – – – –
Total financial liabilities – (425.6) – (425.6) (414.9)
Total
carrying
Company Level 1 Level 2 Level 3 value Fair value
As at 31 December 2018 £m £m £m £m £m
Financial assets
Loans and advances to banks – 0.9 – 0.9 0.9
Other assets – – 547.9 547.9 547.9
Total financial assets – 0.9 547.9 548.8 548.8
Financial liabilities
Debt issued and other borrowed funds – (423.4) – (423.4) (370.3)
Other liabilities – (0.1) – (0.1) (0.1)
Total financial liabilities – (423.5) – (423.5) (370.4)
Other assets of the Company primarily consist of the loan note issued by NewDay UK Limited. The loan note cannot be repriced using
market observable data and therefore has been classified as level 3.
Debt issued and other borrowed funds of the Company consists of the intercompany loan with NewDay UK Limited. The fair value is
determined by using the market price quoted by banks on the publicly listed bonds issued by NewDay BondCo plc, another Group entity,
whose terms are identical. Therefore these have been classified as level 2.
Other liabilities
Other liabilities of the Group largely consist of accounts payable. The fair value of other liabilities approximates to their carrying value
because there have been no significant changes to market conditions that would have caused a difference between these two values.
These have been classified as level 2 because these items can be repriced using market observable inputs.
Sound risk management is critical to ensure the Group meets its regulatory requirements, and delivers on the strategic and financial
goals agreed with shareholders, whilst also preserving the Group’s brand and reputation. The financial risks faced by the Group include:
• credit risk;
• liquidity, funding and cash management risk;
• market risk; and
• regulatory and conduct risk.
Whilst the UK’s economic outlook as a result of Brexit remains uncertain, the Group’s proactive risk management approach means it is
well-positioned to react. All of the Group’s operations take place within the UK and therefore it does not currently expect there to be a
material impact on the operational side of the business. As at 31 December 2019, the Group had £0.7bn of headroom on facilities to
fund future growth and an average funding maturity of two years. Furthermore, the Group continues to demonstrate its ability to raise
additional funding in the current environment. The Group will continue to monitor developments, including the impact on financial
markets and macroeconomic conditions, and will react as appropriate.
The Group uses qualitative and quantitative methods (including the use of statistical models) to compute both expected and
unexpected losses.
Monitoring and control processes are set by the Board, delegated to the Board Risk Committee and subsequently delegated down to
the individual business committees and ultimately to all employees of the Group.
Information is compiled from all parts of the business in order to identify, analyse and control risks on a timely basis. Appropriate key risk
indicators and other information are presented and discussed at the Board Risk Committee (on a quarterly basis), Enterprise Risk
Management Committee and specific sub-committees on a monthly basis, or more frequently as required.
Credit risk exposure from customers is managed throughout the lifecycle, underpinned by proprietary credit models which have been
developed from customers’ historical credit performance and are used to forecast a probability of default for a given level of credit.
At the point of originating a new account, the risk profile is assessed against the credit policy and scorecard cut-off, aligned to the product
applied for, to determine the terms and credit limit offered. Credit assessment utilises a combination of customer-provided data as well
as data sourced from multiple credit reference agencies. A monthly assessment of existing customers’ risk profiles determines if their
credit limit is still appropriate for their borrowing needs. The proprietary credit models utilise spend and payment behaviour from products
held by the Group as well as products with other providers to determine if a credit limit increase or decrease, or loan, should be extended
to the customer.
Risk-based arrears management combined with specific contact strategies ensure that letters, inbound and outbound telephony, use
of SMS and email are deployed in a way which manages credit risk and aims to ensure appropriate customer outcomes. Contact is
established with customers to understand the reason behind missed payments and to understand if potential future concerns exist
over payments due. Strategies are then deployed to ensure that customers in arrears are supported in returning to an up-to-date
position or appropriate forbearance arrangements are put in place.
The Group has a range of treatments for customers who are experiencing financial stress through concessions which can be applied
on a short-term or permanent basis where there is no detriment to the customer. Forbearance or other temporary arrangements are
designed with the aim of ensuring that the customer’s product remains sustainable and aligned to their personal circumstances.
A customer identified as being in financial difficulty will be managed on an individual basis, with the appropriate understanding of their
personal circumstances and priority debt being key factors in judging if a suitable arrangement can be made so the debt repayment
becomes affordable and sustainable.
The provision of such arrangements is managed through the operational centres and governed using several methods, including, but not
limited to: operational policy framework; controls against the execution of the policy; regular quality assurance reviews; and monitoring
of customer outcomes through regular reporting.
Forbearance arrangements span a vast spectrum of relief and time, ranging from a temporary suspension of fees and interest, which
allows a customer the time to assess their options and complete an income and expenditure assessment, through matched contributions
to bring customers back into a more sustainable position and extending to an indefinite suspension of fees and interest with a contribution
from the customer being made on a monthly basis.
The Group has established a credit quality review process to provide early identification of possible changes in the creditworthiness of
customers. Credit limits are established using a credit risk classification system, which assigns each customer a risk rating. Customer
risk ratings are subject to regular revision. The credit quality review process aims to allow the Group to assess the potential loss as a result
of the risks to which it is exposed and to take corrective action where appropriate.
Risk grade 1 0%-5.89% Up-to-date accounts which have a very high likelihood of being fully recovered
Risk grade 2 5.90%-19.99% Up-to-date accounts which have a high likelihood of being fully recovered
Risk grade 3 20.00%-99.99% Up-to-date accounts which may be fully recovered but where the likelihood of
default is higher
Delinquent Accounts that are up to two monthly payments in arrears and have not
defaulted
Defaulted Accounts that are at least three monthly payments in arrears, forborne,
insolvent or bankrupt
Loans and advances to customers in risk grades 1, 2 and 3 are currently continuing to make payments when due.
As at 31 December 2019
As at 31 December 2018
The proportion of gross loans and advances to customers in stage 2 has decreased in 2019 due to, in part, refinements to the Group’s
methodology for: (i) estimating the lifetime PD; and (ii) the definition of a significant increase in credit risk since origination, see note 2.3
for further details. The proportion of gross loans and advances to customers in stage 3 has increased in 2019 due to an operational
decision to retain certain forborne debt and collect internally rather than sell to third party entities.
Loans and advances to banks and other financial assets are all classified as stage 1 as at 31 December 2019 (31 December 2018: stage 1).
The following tables present the credit risk exposure of the Group’s loan and advances to customers on a segmental basis:
As at 31 December 2019
As at 31 December 2018
As at 31 December 2019
As at 31 December 2018
As at 31 December 2019
As at 31 December 2018
Impairment assessment
In accordance with IFRS 9, the Group uses a forward-looking ECL model. An ECL allowance is to be recognised on origination of a credit
agreement, based on its anticipated credit loss. Allowances are assessed collectively for ECL on loans and advances to customers due
to the fact that balances are not individually significant.
The measurement of ECL is calculated using three main components: (i) PD; (ii) EAD; and (iii) LGD. The ECL is calculated by multiplying
the PD, EAD and the LGD. ECL for exposures in stage 1 is calculated by multiplying the 12-month PD by the LGD and EAD. Lifetime ECL
is reported for all assets other than those in stage 1 and is calculated by multiplying the lifetime PD by the LGD and EAD. On origination,
and other than for POCI assets, an asset is reported in stage 1 and subsequently transferred to stage 2 if it has experienced a significant
increase in credit risk since origination. Once defaulted, and therefore credit-impaired, an asset is transferred to stage 3. An asset can
transition backwards out of stage 2 or 3 if it has evidenced that it has no longer experienced a significant increase in credit risk since
origination or it is no longer credit-impaired respectively. An originated credit-impaired asset is classified as POCI and remains in this
classification even if it is no longer credit-impaired. The Group monitors performance and default information about its credit risk
exposures and employs statistical models to analyse the data collected and generate estimates of the PD.
EAD represents the expected exposure in the event of a default. The Group derives the EAD from the current exposure on the underlying
asset as well as expected drawdowns of unutilised, but committed, credit limits. LGD is the magnitude of the likely loss if there is a default.
The Group estimates LGD parameters based on the history of recovery rates on defaulted assets.
Subject to using a maximum of a 12-month PD for stage 1 financial assets, the Group measures ECL considering the risk of default over
the maximum contractual period over which it is exposed to credit risk. For credit card facilities this period is extended to the behavioural
life of the facility if the Group’s contractual ability to demand repayment and cancel the undrawn commitment does not limit the Group’s
exposure to credit losses to the contractual period. This longer period is estimated taking into account the credit risk management
actions that the Group expects to take, and that serve to mitigate ECL, including reducing credit limits and cancellation of the facility.
The provisioning methodology together with significant modelling techniques and assumptions are assessed for appropriateness
annually through a model validation exercise. The significant judgements in the provisioning methodology are also regularly reviewed
by the Board Audit Committee, see page 68 for further details.
See note 2.3 for further details of the significant accounting judgements, estimates and assumptions in the ECL on loans and advances
to customers.
The following table reconciles the movement in the ECL allowance during the year:
Collateral held
The Group’s primary business is to provide short-term credit to customers using the Group’s various branded store and credit products
and unsecured personal loans. In the course of providing credit to customers, the Group has credit risk assessment practices which
provide approval for individuals to be extended credit. In providing these products it is not the policy of the Group to obtain collateral or
other credit enhancements which reduce exposure to credit risk, other than the individual’s commitment to repay outstanding balances.
Of the £3,040.5m debt issued, which includes the accrued interest, £718.7m has a scheduled maturity of less than one year, £2,321.8m
has a scheduled maturity of one to five years and £nil has a scheduled maturity of over five years.
Financial liabilities
Debt issued and other borrowed funds – 22.7 780.3 2,448.1 – 3,251.1
Other liabilities – 82.3 – – – 82.3
– 105.0 780.3 2,448.1 – 3,333.4
Financial liabilities
Debt issued and other borrowed funds – 64.5 536.1 2,043.5 276.7 2,920.8
Other liabilities – 89.6 – – – 89.6
– 154.1 536.1 2,043.5 276.7 3,010.4
Securitisation vehicles
In the ordinary course of business, the Group enters into transactions that result in the transfer of the right to receive repayments in
respect of loans and advances to customers to securitisation vehicles. In accordance with the accounting policy set out in note 2.2(3),
the transferred loans and advances to customers continue to be recognised in their entirety or to the extent of the Group’s continuing
involvement, or are derecognised in their entirety.
The Group transfers financial assets that are not derecognised in their entirety or for which the Group has continuing involvement
through securitisation activities. The Group transfers loans and advances to customers to securitisation vehicles but retains substantially
all of the risks and rewards of ownership. The Group benefits to the extent that the surplus income generated by the transferred assets
exceeds the administration costs of the securitisations, the cost of funding the assets and the cost of any losses associated with the
assets and the administration costs of servicing the assets. Refer to note 27 for further details on the structure.
The results of the securitisation vehicles are consolidated into the Group. The following table shows the carrying value and fair value
of the assets transferred to securitisation vehicles and the related carrying value and fair value of the associated liability.
The main source of interest rate risk for the Group arises where there is a significant difference between the interest rate bases on
assets compared to liabilities. The Group’s assets are predominantly variable rate and are sensitive to interest rate movements to the
extent that the Group is prohibited from repricing the portfolio of assets. In 2018, the Group completed a project to reissue terms and
conditions to allow it to choose to pass on any increases in the Bank of England base rate to customers holding certain products of the
Group, insulating the Group against future bank base rate rises by hedging against interest expenses. The Group’s funding is
predominantly LIBOR and SONIA based floating rate and therefore is also sensitive to interest rate movements. The Group also issues
US Dollar denominated funding which accrues interest linked to USD LIBOR and USD SOFR. This funding has been hedged either to
LIBOR or SONIA through cross-currency interest rate swaps. The following tables analyse the Group’s assets and liabilities by reference
to the period of time before that asset or liability can be repriced to realign interest rates.
Non- repricing
Less than Over or non-interest
Group 3 months 3 to 12 months 1 year bearing Total
As at 31 December 2019 £m £m £m £m £m
Financial assets
Loans and advances to banks 188.9 – – 16.8 205.7
Loans and advances to customers 2,201.7 105.6 – 402.5 2,709.8
Other assets – – – 29.0 29.0
Financial liabilities
Debt issued and other borrowed funds (2,595.0) (151.9) – (273.6) (3,020.5)
Other liabilities – – – (82.3) (82.3)
Derivative financial liabilities (17.0) – – – (17.0)
Net repricing difference (221.4) (46.3) – 92.4 (175.3)
Non- repricing
Less than Over or non-interest
Group 3 months 3 to 12 months 1 year bearing Total
As at 31 December 2018 £m £m £m £m £m
Financial assets
Loans and advances to banks 167.6 – – 16.4 184.0
Loans and advances to customers 1,859.3 64.5 1.6 377.9 2,303.3
Other assets – – – 27.6 27.6
Derivative financial assets 2.5 – – – 2.5
Financial liabilities
Debt issued and other borrowed funds (2,241.1) (151.9) – (271.3) (2,664.3)
Other liabilities – – – (89.6) (89.6)
Net repricing difference (211.7) (87.4) 1.6 61.0 (236.5)
Conduct risk is the risk of customer detriment arising from inappropriate culture, products and processes. Conduct risk can arise through
the design of products that do not meet customers’ needs, mishandling complaints where the Group has behaved inappropriately
towards its customers, inappropriate sale processes and exhibiting behaviour that does not meet market or regulatory standards.
Avoiding poor customer outcomes requires focus on treating customers fairly including assessing affordability and sustainability of
lending and handling vulnerable customers sensitively. The Group prevents conduct risk by ensuring colleagues have appropriate training
and mitigates it by monitoring various operational metrics through the customer outcomes radar and by tracking activities which affect
customers, monitoring customer complaints, implementing process improvements and adhering to service standards. The outcomes
of this reporting are monitored by the Board and the Board Risk Committee.
< 12 months > 12 months Total < 12 months > 12 months Total
Group £m £m £m £m £m £m
Assets
Loans and advances to banks 152.1 53.6 205.7 134.0 50.0 184.0
Loans and advances to customers 2,239.5 470.3 2,709.8 1,885.6 417.7 2,303.3
Other assets 49.2 7.4 56.6 50.5 7.9 58.4
Derivative financial assets – – – – 2.5 2.5
Current tax assets 0.7 – 0.7 0.8 – 0.8
Deferred tax assets – 0.4 0.4 – 0.4 0.4
Property and equipment – 22.3 22.3 – 9.0 9.0
Intangible assets – 266.2 266.2 – 313.9 313.9
Goodwill – 279.9 279.9 – 279.9 279.9
Total assets 2,441.5 1,100.1 3,541.6 2,070.9 1,081.3 3,152.2
Liabilities
Debt issued and other borrowed funds (717.4) (2,303.1) (3,020.5) (523.8) (2,140.5) (2,664.3)
Other liabilities (67.4) (15.4) (82.8) (90.1) – (90.1)
Derivative financial liabilities (4.5) (12.5) (17.0) – – –
Current tax liabilities (4.9) – (4.9) (2.3) – (2.3)
Provisions (18.8) (2.1) (20.9) (33.8) (1.9) (35.7)
Total liabilities (813.0) (2,333.1) (3,146.1) (650.0) (2,142.4) (2,792.4)
< 12 months > 12 months Total < 12 months > 12 months Total
Company £m £m £m £m £m £m
Assets
Loans and advances to banks 25.6 – 25.6 0.9 – 0.9
Other assets 51.4 487.2 538.6 60.7 487.2 547.9
Investment in subsidiaries – 511.4 511.4 – 511.4 511.4
Total assets 77.0 998.6 1,075.6 61.6 998.6 1,060.2
Liabilities
Debt issued and other borrowed funds – (425.6) (425.6) – (423.4) (423.4)
Other liabilities – – – (0.1) – (0.1)
Total liabilities – (425.6) (425.6) (0.1) (423.4) (423.5)
Commitments
The Group had capital expenditure commitments contracted with third parties but not provided for of £0.4m as at 31 December 2019
(31 December 2018: £0.3m).
Key management personnel refers to the Management Committee of NewDay Group UK Limited and Non-Executive Directors.
Credit card balances outstanding to key management personnel of the Group and their connected parties as at 31 December 2019
were £51k (31 December 2018: £26k). All transactions are subject to standard commercial interest rates on an arm’s length basis.
On 11 January 2018, the Company issued a term loan facility agreement to Nemean TopCo Limited for £7.5m. The facility can be drawn
upon at any time and accrues interest at 9% per annum. As at 31 December 2019, £0.4m has been drawn on the facility (31 December
2018: £0.4m).
In 2019, the Company paid £12k to a related party in relation to services provided by the Directors (2018: £63k).
Share class held as % equity interest Share class held as % equity interest as
Country of at 31 December as at 31 December at 31 December at 31 December
Name incorporation 2019 2019 2018 2018
Share class held as % equity interest Share class held as % equity interest as
Country of at 31 December as at 31 December at 31 December at 31 December
Name incorporation 2019 2019 2018 2018
1. These subsidiaries are dormant entities as at 31 December 2019 and 31 December 2018.
The Company’s immediate parent company is Nemean MidCo Limited. The ultimate parent undertaking is Nemean TopCo Limited,
a private limited company incorporated in Jersey.
With the exception of the following entities the principal place of business for the subsidiaries and structured entities listed above is the
UK and their registered address is 7 Handyside Street, London, N1C 4DA.
Principal place of
Name business Registered address
NewDay Group Holdings S.à r.l. Luxembourg 4, rue Albert Borschette, L-1246 Luxembourg
NewDay Partnership Receivables Trustee Ltd Jersey 44 Esplanade, St Helier, Jersey, JE4 9WG
NewDay Partnership Loan Note Issuer Ltd UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Partnership Funding 2014-1 plc UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Partnership Funding 2015-1 plc UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Partnership Funding 2017-1 plc UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Funding 2015-1 plc UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Funding 2015-2 plc UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Funding 2016-1 plc UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Funding 2017-1 plc UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Funding 2018-1 plc UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Funding 2018-2 plc UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Funding 2019-1 plc UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Funding 2019-2 plc UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Funding Loan Note Issuer Ltd UK 35 Great St. Helen’s, London, EC3A 6AP
NewDay Funding Receivables Trustee Ltd Jersey 44 Esplanade, St Helier, Jersey, JE4 9WG
NewDay Secondary Funding Limited UK 20 Farringdon Street, 8th floor, London, EC4A 3AB
NewDay Partnership Secondary Funding Ltd UK 20 Farringdon Street, 8th floor, London, EC4A 3AB
The Co-brand business is funded by a master trust securitisation and a private securitisation. The structures have issued multiple series
of debt instruments external to the Group, backed by the cash flow of the Co-brand receivables portfolio. As at 31 December 2019, the
master trust has in issue two series of publicly listed term debt sold to capital market investors and a series of senior variable funding
notes sold to a syndicate of four major banks which acts as a revolving facility. As at 31 December 2019, the private securitisation has
issued a series of senior mezzanine variable funding notes sold to a major bank which acts as a revolving facility.
The Own-brand business is also funded by a master trust securitisation and a private securitisation. The structures have issued multiple
series of debt instruments external to the Group, backed by the cash flow of the Own-brand receivables portfolio. As at 31 December
2019, the master trust has in issue five series of publicly listed term debt sold to a mixture of capital market investors and a series of
senior variable funding notes sold to a syndicate of four major banks, which acts as a revolving facility. As at 31 December 2019, the
private securitisation has issued a series of senior variable funding notes to a major bank which acts as a revolving facility.
The Unsecured Personal Loans business is funded by a private securitisation. The private securitisation has issued a senior variable
funding note to a major bank which acts as a revolving facility.
Within the funding structure of the Own-brand and Co-brand portfolios are various structured entities where all of the ordinary shares
are held by a third party trustee for charitable purposes. The consolidated subsidiary and structured entities table in note 26 has further
details of the structured entities consolidated into the Group’s Financial Statements for the year ended 31 December 2019, on the basis
that the Group has the power to direct relevant activities, is exposed to variable returns of the entities and is able to use its power to
affect those returns. Within the master trust securitisations, there are also entities which are not consolidated into the Financial
Statements of the Group on the basis that the Group does not have control over these entities because it is not exposed, or does not
have rights, to variable returns of the entities. These entities are NewDay Partnership Securitisation Holdings Ltd in the Co-brand master
trust securitisation and NewDay Funding Securitisation Holdings Ltd in the Own-brand master trust securitisation.
Notwithstanding the above, as set out on page 58, with the exception of the Directors’ report set The information contained in this report should be considered in the context of the circumstances
out on page 76 to 77, the governance and risk framework described in this report relate to the prevailing at the time and will not be updated to reflect material developments that may occur
governance and risk framework established for the Group’s UK subsidiaries. References to the after the date of this report. The information and opinions in this report are provided as at the
‘Board’, ‘Group’, ‘NewDay’ and ‘Company’ should be construed accordingly (where appropriate). date of this report and are subject to change without notice. None of the Company, any member
of the Group, any of their respective affiliates, advisors or representatives or any other person
shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from
any use of this report or its contents or otherwise arising in connection with this report, or any
action taken by you or any of your officers, employees, agents or associates on the basis of the
information in this report.
This report does not constitute or form part of any offer or invitation to sell, or any solicitation of
any offer to purchase any shares or other securities in any member of the Group, nor shall it or
any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any
contract or commitment or investment decisions relating thereto. Statements in this report
reflect the knowledge and information available at the time of its preparation. Liability arising
from anything in this report shall be governed by Jersey law.
NewDay
7 Handyside Street
London
N1C 4DA
Email: investor.relations@newday.co.uk
Website: www.newday.co.uk
Registered in Jersey
Registration number 122135