FAST
FAST
and f l a w l e s s
Аnnual report 2019
Financial
STATEMENTS
Company
OVERVIEW
1 PAGE
4
COMPANY IN BRIEF
CHAIRMAN’S STATEMENT
CHIEF EXECUTIVE’S REVIEW
2 PAGE
16
Strategic
REPORT
MARKET OVERVIEW
OPERATIONAL OVERVIEW
FINANCIAL OVERVIEW
STRATEGY AND DEVELOPMENT PLANS
RISK MANAGEMENT
SUSTAINABILITY
Corporate
GOVERNANCE
3
PAGE
32
BOARD OF DIRECTORS
KEY MANAGEMENT
DIRECTORS’ REPORT
REMUNERATION REPORT
CORPORATE GOVERNANCE REPORT
DIRECTORS’ RESPONSIBILITY STATEMENT
6
10
12
18
22
26
27
28
31
34
36
37
41
43
47
4
PAGE
48
Financial
STATEMENTS
Corporate
INFORMATION
& glossary
5
PAGE
78
Company
OVERVIEW
1
COMPANY IN BRIEF
CHAIRMAN’S STATEMENT
CHIEF EXECUTIVE’S REVIEW
6
10
12
Company
OVERVIEW
Сompany
IN BRIEF
Our vision
TThe combined effect of the tightening of
financial regulations and the growing
technology-driven complexity has forced
a growing number of people into a sector of
the society where it is very hard to access
financial services, the “No service zone.”
“Unnbanked” or “Unbankable” individuals
are neglected by the mainstream banking
system and have no access to any financial
service or support.
We look at this sector of society as an oppor-
tunity to make a transparent, solid, healthy and
profitable business by creating conditions for
these people to improve their status and progres-
sively mingle with the world of financial services.
Our mission
We are focused on developing our
business which generates solutions
to problems and issues around
Unbankable individuals. We provide
access to financial services and an
online, electronic and internet-based
world (“Online”) to those who are not
eligible for the mainstream financial
services.
Our guiding principles
• • Any and all services we provide, now and in the
future, are conceived with the highest standards of
transparency, efficiency and compliance, with utmost
respect for our customers;
• • Any and all clients, now and in the future, are
supported and helped to improve their financial status
and to access the online world;
Company in brief
Zaim Credit Systems Plc (ZCS) is the
UK holding company of Zaim Express
LLC (“Zaim”), a Russian-based fintech
company providing small short-term
loans to customers.
6
• • Our employees are the most valuable resource and we
focus on creating a comfortable working environment;
• • A solid, transparent and profitable business is
the result and consequence of full and complete
implementation of the above.
ZZaim has been operating in the microcredit market
Russia since 2011. Today, Zaim occupies one of the
leading positions in the Russian microcredit mar-
ket and is one of the largest companies in terms of the
number of offices in Moscow and the Moscow region.
Zaim currently provides loans with an average size
of 8,000 Russian rubles(“RUB”) (about £88) with a
maximum amount of RUB30,000 (£325) for an average
duration of less than one month.
АNNUAL REPORT 2019 Since establishment Zaim
has developed a bespoke
fully integrated business
platform and operating tools
to drive efficiency in its system
driven driven by automation
and a constantly improving
credit scoring system.
Zaim-Express today:
As of December 31, 2019,
Zaim directly operated
stores
9292
Saint Petersburg
Moscow
and the Moscow Region
Tula
Obninsk
Orel
Samara
Volgograd
As of December 31, 2019, the total number of
employees of the Company was
Zaim currently provides loans
with an average size of
317317
8,000 Russian
8,000
rubles
for an average duration of less
than one month
As of December 31, 2019, Zaim directly operated 92
stores. These stores are generally near to densely popu-
lated residential communities in urban areas, as well as
locations near to the transport infrastructure of Moscow
and the Moscow Region and other cities of Western
Russia (Saint Petersburg, Volgograd, Samara, etc.)
Since establishment Zaim has developed a bespoke fully
integrated business platform and operating tools to
drive efficiency in its system driven by automation and
a constantly improving credit scoring system. Internal
teams, with a limited recourse to specific external skills,
are constantly monitoring and improving the systems.
Zaim’s platform allows for the remote transfer of money
to the client’s own card (can be newly issued by Zaim) or
other receiving facilities (be it bank accounts or any oth-
er system allowed in the Market by Russian Authorities)
within minutes of the online application.
Among other products, Zaim has created a pre-paid
Master Card product branded with the Zaim’s logo, to
which Zaim can credit loan amounts directly to custom-
ers who can then spend them online or via POS termi-
nals. It is also possible for customers to withdraw funds
at ATMs. This card was conceived and implemented to be
the most convenient and cheapest device on the market
and it is aimed to remove the entrance barrier to the
online world.
Zaim card users can apply to any and all services availa-
ble in the Mastercard worldwide network.
Total loans to customers amounted to £32.1 million as at
December 31, 20191 though the loan book had a carrying
value of £786k as a result of historic impairments.
As of December 31, 2019 the total number of employees
of the Company was 317.
1
Loans to customers before ECL allowance
FAST AND FLAWLESS
7
Zaim History
20112011
20162016
Zaim was established on March 14, 2011, as a limited liability
company under the laws of the Russian Federation.
On August 29, 2011, Zaim was authorised to conduct microf-
inance activities in the Russian Federation and added in the
State Registry of Microfinance Organisations (the “Registry”)
maintained initially by the Russian Ministry of Finance and
later by the Central Bank of Russia (“CBR”).
In 2016, Zaim obtained its current status as a micro-
credit company (“MCC”) which allows it to engage in
microfinance activity in the territory of the Russian
Federation.
8 years
on the
market
Strong
management
team
Cash
generation
potential
COMPANY’S
STRENGTH
Best practice
corporate
governance
Successful IPO
on the London
Stock Exchange
State-of-the-art IT
platform allowing for
credit risk management
Scalability
of the online
business model
8
АNNUAL REPORT 2019 20172017
20202020
On February 20, 2017 Zaim’s shareholders approved
the change of the Company's name from LLC MO
Zaim-Express to LLC Zaim-Express.
On November 04, 2019, ZCS, Zaim’s holding company
made successful initial public offering (IPO) of its or-
dinary shares on the standard segment of the London
Stock Exchange raising gross cash proceeds of £2.6m.
Loans are from
repeat customers2
95%95%
Providing loans
for over
768768 mn rubles
a year
377,000
377,000
active
customers
Share capital
Free
float
OTHER
SHAREHOLDERS
21,4%
MPM&PARTNERS
4,6%
SIMON J/ RETTER
0,8%
Total number of Ordinary Shares in issue
following Fundraise and Admission
436,975,000
436,975,000
2 Average for 2019
Shareh
old
e
r
s
S
t
r
u
c
t
u
r
e
ZAIM HOLDING SA
73,2%
Subject to
12-month
lock-up
period
FAST AND FLAWLESS
9
Chairman’s
STATEMENT
Dear Stakeholders,
Our life is becoming increasingly
digital with more and more activities
performed via the internet and without
physical presence. This trend of the
recent years or even decades became
uncontested with the COVID-19
pandemic due to the quarantine
measures taken by the governments
of most of the world’s countries.
Being locked in our houses, we work,
learn, create, communicate and now
entertain ourselves and even travel
online without leaving our homes.
Since its inception, Zaim has had an ambition to help
people break this digital divide and provide financial
and life inclusion to the people with low and unstable
income. We saw it as a business opportunity to build an
efficient, transparent, inclusive and profitable business
model.
With our motto “fast and flawless”, we are helping people
efficiently resolve their temporary financial difficulties
without collateral or guarantors with funds delivered
usually within a few minutes. In order to provide our
customers with quick and easy ways to borrow money
on transparent conditions, we set high standards in cus-
tomer service and conduct trainings for our employees.
We are striving to provide financial support to a whole
sector of the Russian population, population ignored by
banks due to the high risks and low profitability of small
loans.
AAt the same time, a significant part of the
population with low or unstable income, which
is going to become even larger because of the
pandemic and its socio-economic impact, has no access
to traditional financial services. As a result of this, banks
are reluctant to approve credit to a large percentage
of Russian borrowers with poor or no credit history and
from less well-off sections of society.
In the current environment, it means a large portion of
the population has no access to vital services that are
linked to bankcards, including access to the internet,
phones, online purchases of goods and services, learn-
ing, working, communicating, entertaining and using
other digital platforms. These things are becoming
increasingly vital in the era of isolation and are expected
to have knock-on effects even when the effects of the
COVID-19 pandemic recede.
10
АNNUAL REPORT 2019 In our work, we are guided by certain principles:
• • To help our customers fix their credit history, Zaim
provides the opportunity to correct bad credit history,
but also to create it from scratch. The latter is
especially important as it’s difficult or impossible to
get a loan from a bank without a credit history. Thanks
to our company, a borrower with a clean credit history
can get and return several small loans and acquire
a positive credit history. This will help to arrange a
future bank loan on more favorable terms.
• • We also provide an opportunity to quickly receive
the required amount before the salary payment. Our
clients are able to get quick cash or funds added to
a card for any purpose in a short period of time, and
accordingly our borrowers do not need to constantly
borrow money from friends or relatives.
• • We make borrowing money available to customers.
Our client can get a loan with only one document and
most importantly without guarantors and collateral. It
can be done not only in our office, but from anywhere.
Funds may be added to our corporate card through
just one phone call or via the internet. A client simply
needs to submit an application remotely, fill out a
questionnaire, choose a method of receipt, confirm
the conditions with a code from an SMS and we will
send the money instantly to the client in the chosen
way. Everything is fast and straightforward, from
application to receipt of funds.
• • We treat our customers as loyally as possible. Loyalty
in relation to borrowers, approval of applicants
with delinquency, high debt load, lack of official or
permanent work and other circumstances are what
sets our company apart from the competition. We
understand that due to certain life situations, our
clients may have had issues with repaying their debts
to banks or other financial institutions. This is not
usually a problem for us, as we believe that everyone
deserves access to financial services regardless of
their circumstances.
• • We give our customers the opportunity to choose the
loan amount and term themselves. All our clients can
receive any amount up to RUB30,000 for up to 30 days
and can also prolong the contract thereby increasing
the repayment term for the loan if necessary.
• • Zaim issue loans for a minimum set of documents and
with minimum customer requirements: the age of 18
years and the citizenship of the Russian Federation, a
passport and a mobile phone.
• • The goal is to increase the financial and technical
literacy of the population by actively transferring
clients to remote methods of communication with
the company and remote systems in order to receive
money without leaving home. Our clients have the
opportunity not only to arrange loans remotely, but
also to receive the necessary information on the
loan and pay the loan simply and from anywhere in
the world. We do everything to make our services
comfortable, easy and fast to use.
With the ongoing COVID-19 pandemic and its social and
economic consequences, we expect increasing demand
for microloans, as with the increase in the number of
people receiving irregular salary payments and poten-
tially decreasing levels of income, banks will be tighten-
ing their lending policy creating less alternatives avail-
able to people with short-term financial requirements.
Last year, we achieved an important milestone in the
Company’s development being successful IPO of ZCS on
the London Stock Exchange on November 04, 2019, rais-
ing £2.6 million. I would like to thank directors, manage-
ment and all the employees of the company for making
it happen.
The ongoing COVID-19 pandemic represents an unprec-
edented challenge for humanity, the global economy
and brings significant change to everyone’s life. We are
confident that the company is strong enough to weather
the measures that have been put in place in Russia to
protect the citizens and maintain social distancing and
in doing so we will keep delivering our mission of helping
people to solve their life challenges by providing them
fast and flawless financial services.
Malcolm Groat
Chairman
June 16, 2020
FAST AND FLAWLESS
11
Сhief executive’s
REVIEW
Dear Stakeholders,
I am delighted to write to you in what
is the first Аnnual report of ZCS as
a publicly listed company on the
London Stock Exchange. I will use this
section to give you an overview of
our business model, which we believe
would work to our advantage even in
the current challenging times.
banking system and may require microfinance services.
Less than 2% of the Russian adult population use such
services, while in some other markets, this percentage
ranges between 5% and 10%. Russian households’ debt
in 2019 was also very low at 17% of the GDP compared to
87% in the UK and 76% in the US7.
After the 2015 crisis, the CBR has overtaken the regula-
tion and oversight of the entire Financial Industry in the
Russian Federation. Within a few months of this, the CBR
announced the Microfinance Sector Reforms plan and
started its implementation. As a result of this strong,
steady and consistent action, which lasted almost 4
years, the sector has been provided with a modern,
transparent, professional and high-end Regulatory
Framework. The last step of the implementation was
announced in 2018 and finalized in 2 steps on February
01, 2019, and July 01, 2019, when the yearly rate cap, inter-
est accrual cap and other parameters were set at the
announced target levels.
Market Environment
TThe Russian microfinance market was one of the
fastest growing sectors of the economy, with an
average Аnnual growth rate of approximately 25%.
The online segment is growing much faster, doubling
in monetary volumes each year. As of the end of 2019,
according to the Central Bank of Russia (CBR) statistics3,
the microloans portfolio was 212 billion Russian rubles
(approximately £2.61 billion4). According to Expert RA, the
amount of loans issued to the customers in 2019 was 412
billion Russian rubles (approximately £5 billion5).
At the same time, the market remains underdeveloped
and very well positioned for further growth. According
to the CBR6, in 2018, only 34.6% of the Russian adult
working population had any kind of bank deposit. Only
15% of Russian adults have credit cards and those are
primarily used for cash withdrawal. This is significantly
below the level of the developed and many developing
countries and means that a relatively high portion of the
population is presently underserved by the traditional
The Central Bank of Russia: Trends of microfinance market in 2019, p. 5
At the rate on December 31, 2019
At the weighted average exchange rate for 2019
The Central Bank of Russia: Survey on the status of financial inclusion in the Russian Federation in 2018, p. 31.
3
4
5
6
12
АNNUAL REPORT 2019 Сhief executive’s
REVIEW
Implementation of the reforms resulted in a signifi-
cant increase in transparency and professionalism and
those that are non-compliant or not performing to the
required standards have been obliged to shut down. This
has resulted in the overall number of licenses reducing
by more than a half over the past 5 years. According to
the CBR statistics, the number of microcredit organisa-
tions decreased from 4,200 as of December 31, 2014, to
1,774 as of December 31, 2019 representing a reduction of
57.8%.
We are proud to say that Zaim has internally processed
all these evolutions and immediately implemented and
tested them within the integrated system that has
grown in parallel with the regulations.
In several recent articles and statements, the CBR of-
ficers have declared that the Microfinance Reform Plan
has been implemented and the current framework has
to be considered the final framework in which to oper-
ate. This is a very positive sentiment for Zaim as a stable
regulatory environment is key to maximizing efficiency
and improving the quality of services we can provide our
customers.
We believe that Zaim is uniquely positioned in a fast
growing market where tight regulation and strong over-
sight are operating a natural selection of competitors.
Zaim Business Model
SSince obtaining its official status in 2011, Zaim
has developed a bespoke IT system, created a
distribution network and raised capital to fund
its loan book. Since that time, Zaim has developed its
retail distribution outlets and, as of December 31, 20198,
operated 92 sites located predominantly in Moscow and
Moscow Region7 and Western Russia regional centers.
Zaim established branches in close proximity to densely
populated residential communities in urban areas, as
well as locations near to the transport infrastructure of
Moscow.
Zaim has also developed a pre-paid product with Mas-
terCard, “Zaim Express” card. The Company can transfer
money online, directly to Zaim Express cards, or to
the customers’ own banking cards or facilities. Zaim’s
strategy is to further diversify its offering taking advan-
tage of the increasing availability of POS devices and
online purchases that facilitate card payments and the
proliferation of mobile devices and improved access to
the internet, which improve the retail customers’ ability
to organise their finances online. All these trends have
been further amplified by the “stay at home” approach
taken by the authorities to contain the spread of
COVID-19 pandemic, driving demand for food and goods
delivery, educational, informational and recreational
services.
Given the dramatic evolution of the regulatory framework
which occurred in 2015-2017, Zaim undertook a significant
restructuring of its financial and corporate structure. This
process has been implemented in parallel with a business
model evolution over 2017 and 2018. This restructuring was
conceived with the aim to get the existing liabilities arising
from the EER Master Debenture Agreement compliant
with the required Capital Adequacy ratios imposed by
the CBR. This restructuring was finalised at the end of
December 2018 with the contribution to equity of the
liabilities which was the preliminary step to the long path
to IPO which started in late November 2018 and was origi-
nally planned to be finalized in July 2019. Zaim entered 2019
with a solid financial structure and with the plan to raise
funds to increase its loan book through IPO. Due to the
difficult environment of 2019 (Brexit, China/US sanctions,
and other disturbing events, 2019 has been the record low
year for IPOs on the London Stock Exchange Standard
Market and Zaim was the sole IPO successfully finalized
after April 2019) the IPO was successfully completed in No-
vember 2019. This delay caused a lack of funds to support
the growing demand of the business and a consequent
reduction of the business volumes during 2019. Loans
issued are lower than expected because of lack of funds,
revenues are lower than expected because of reduction
of Loans funded and reduction of rates. Despite the lower
than anticipated levels of lending, careful and accurate
management action has resulted in several good achieve-
ments for the year:
• • The default rate continuously reduced from 22% as
of December 2018 to less than 5% in September 2019.
This decrease is a direct consequence of continual
improvements of the IT platform and scoring
system. It is important to know that the default rate
increased slightly in the last quarter 2019 to 8.1% as
a consequence of the decision to accept new clients
and accelerate growth. The default rate is strictly and
constantly monitored by Zaim management
7
8
According to The Bank for International Settlements
As of December 31, 2019
FAST AND FLAWLESS
13
• • The operating cost structure has been carefully
reorganised and prepared for the expected growth of
business subsequent to the IPO whilst maintaining the
same cost base.
The Company’s loans to customers before ECL allowance
as of December 31, 2019, was £32.1 million, growing by 10%
compared to £29.2 million in 2018. It is now one of the
largest microfinance companies in the Moscow region
of Russia calculated by the Аnnual value of loans made.
During our 8-year history, Zaim has provided its clients
with over 1 million loans.
After the successful IPO, Zaim received £2.1 million
(after costs of £500k) and is well positioned to increase
lending volumes and scale up its business. As sufficient
investment has already been made in Zaim’s IT systems,
the Company is able to cope with a much larger vol-
ume of loans with only a small increase in operational
expenditure and benefit from the use of low-cost digital
marketing. We believe that the Company should gener-
ate a stable return on capital with an increasing loan
book year-on-year with Zaim’s increased capital base
going forward.
The Company’s loans to customers before ECL
allowance as of December 31, 2019, was
£32.1 millionmillion
£32.1
growing by 10% compared to
£29.2 million in 2018
During our 8-year history, Zaim
has provided its clients with over 1 1 million
million
loans
loans
14
АNNUAL REPORT 2019 Recent Developments and Outlook
IIn the near term, the Group plans to expand its
online offering whilst maintaining its existing levels
of funding via the existing stores within Moscow and
the surrounding regions. The recent changes in regu-
lation enable Zaim to remotely identify new customers
online. We believe that this development has created
an opportunity for the Group to rapidly access a much
larger target customer base.
The COVID-19 outbreak which started to affect Russia
along with most of the western economies in the first
quarter of 2020 has become the key challenge for us
and the main source of uncertainty for Russia and glob-
al economies. We have promptly changed the Company
plans in order to properly face the new reality. Well-
being of our customers and colleagues is a top priority
for us and I have been very pleased by promptness and
effective actions of the team in adapting our business
practices to ensure that we continue to safely support
our customers.
The long-term impact of COVID-19 on the Russian econ-
omy remains largely uncertain. While we have solid ex-
perience in running our business during crisis periods,
we feel the current “lockdown” period is new to us, and
so we have decided to reduce the loan amounts issued
in order to keep business at a financial and economic
break-even level on the cashflow basis for the period of
“lockdown”, i.e., no net funds are going to be introduced
and existing loans will fund new loans to be made. We
believe this is manageable given our reduced default
levels and should protect the Company from potential
unexpected cash outflows.
In addition, Zaim has enacted a series of measures to
reduce the cost base of operating its physical stores.
This has been achieved by way of negotiating rent
reductions with landlords as well as salary reductions
for staff. Together, these measures are expected to
enable Zaim to navigate the current uncertainty and be
well positioned to capitalize on the expected rebound
in business opportunities once restrictions start to be
eased.
Our strong capital and liquidity positions make us con-
fident in the sustainability of the Company’s operations
and it is our intention to re-start our growth plans as
soon as we we have a clearer view of the situation. We
believe that we will continue growing our business due
to the crucial nature of our services for the less well-
off part of the society”.
Siro Donato Cicconi
CEO
June 16, 2020
FAST AND FLAWLESS
15
2
trategic
SStrategic
REPORT
REPORT
MARKET OVERVIEW
OPERATIONAL OVERVIEW
FINANCIAL OVERVIEW
STRATEGY AND DEVELOPMENT PLANS
RISK MANAGEMENT
SUSTAINABILITY
18
22
26
27
28
31
SStrategic
trategic
REPORT
REPORT
Market
OVERVIEW
The Market for Microfinance in Russia
MMicrofinance involves providing individuals who do not have
access to the banking system with small credits, or
loans to help them to cover their expenses. Mi-
crofinance activities in Russia started in the 1990s in the
post-Soviet era. Until 2010, the provision of consumer
loans was largely an unregulated market segment.
Microfinance Business Law was released in 2010 and
created the microcredit companies (“MCCs” or “MCOs”),
a new special category of financial organisations.
Microcredit Companies were permitted to provide loans
on a regular basis subject to strict regulations. Although
some banks structured their consumer lending branches
as MFCs, due in part to the financial crisis in Russia in 2014
and 2015, the banking sector largely neglected small busi-
nesses and the less well-off section of society.
25%25%
Currently, Russian
microfinance market is
growing by approx. 25%
per annum with the online
segment growing close to
100% year-on-year.
Following the introduction of the Microfinance Law and the disengage-
ment of the core banking sector from the microfinance sector, the micro-
finance market grew rapidly from 21 million Russian rubles (approximately
£250,000) of loans made during 2012 to 412 billion Russian rubles (approxi-
mately £5 billion9) of loans made during 201910.
Russian microfinance market (loans issued), RUB bn
412
300
256
195
500
400
300
200
100
0
Rapid market growth is clear evidence of a
strong need in of financial services among the
less well-off segments of population combined
with the technological capability to provide the
said services in a simple way and at convenient
conditions.
2016
2017
2018
2019
Source: Expert RA
9
At the average exchange rate for 2019
10
Expert RA: Results of 2019 and forecast for 2020 for the MFO market: transformation period
18
АNNUAL REPORT 2019 Market
OVERVIEW
Tightening Microfinance Market Regulation Reducing Competition
Since 2014, the CBR has been implementing reforms in
the microfinance sector to ensure consumer protection,
increase levels of transparency and quality of servic-
es in the sector. This has led to introduction of KYC
procedures, AML and other compliances in line with the
best world practices, minimum capital requirements,
economic ratios for microfinance institutions, require-
ments in relation to accounting and risk management
procedures, maximum interest rates and charges, limi-
tation on the total amount of liability in consumer loan
products, etc. As a result of this, smaller and inadequate
players withdrew from the market.
Number of microcredit licenses in issue
3688
5000
4200
4000
3000
2000
1000
0
2588
2271
2002
1774
2014
2015
2016
2017
2018
2019
Source: Central Bank of Russian Federation
According to the CBR statistics, the number of MCOs
decreased from 4,200 as of December 31, 2014, to 1,774
as of December 31, 2019, representing a reduction of
approximately 57.8%. Additional restrictions on consumer
loans came into effect on July 01, 2019, reducing the daily
interest rate by 1% and a maximum recovery amount rep-
resenting a sum of interest, penalties and other charges
and commissions being limited to 200% of the principal
amount of the loan (“Maximum Recovery Rate”). The
Maximum Recovery Rate was further reduced to 150% of
the principal amount of the loan from January 01, 2020,
resulting in a further reduction in the number of MCCs
and MFCs operating in the sector.
Reduced Offer of financial services from Banking Sector
As of January 01, 2020, there were
402 banks operating in Russia,
whereas on January 01, 2013, Russia
had a total of 956 banks in oper-
ation. Over the past 7 years, the
Central Bank of Russia has revoked
over 550 banking licenses.
Number of bank licenses in issue
956
1000
923
834
800
600
400
200
0
733
623
561
440
402
2014
2015
2016
2017
2018
2018
2018
2019
Source: Central Bank of Russian Federatoin
AAs of 2018, the government’s stake in the Russian
banking sector had increased by two thirds as a
result of the country’s largest banks undergoing
financial rehabilitation. Reduction of bank licenses and
desks have widened the unbanked segment of the pop-
ulation. Many low-income households therefore do not
have access to credit from traditional commercial credit
institutions, since they do not have enough collateral.
This, combined with the low social security protections
in Russia hastened by the onset of the financial crisis
and the growth of the Russian free-market economy,
has driven those on low or unstable incomes to seek
alternative sources of finance. This trend is expected to
be further amplified by the economic turmoil caused by
the coronavirus pandemics.
FAST AND FLAWLESS
19
Russian Microfinance Market Potential
As a result of the above mentioned factors Russia has far lower financial
services penetration, especially online, than virtually all other European
countries and many developed countries.
34.6%
Only 34.6% of Russian adult working
population had a bank deposit in 2018,
according to the CBR11
15%
Only 15% of Russian adults have credit
cards that is primarily used for cash
withdrawal.
Penetration of the microfinance industry
in the Russian market is less than 2% of
the adult population, while in some other
markets, it ranges between 5% and 10%.
DEBT
RF
UK
US
17%
Russian households’ debt
in 2019 was only 17% of the
GDP compared to 87% in the
UK and 76% in the US12.
86.5%
77%
These factors show that the Russian microfinance market
is still at its initial stage and is expected to grow,
potentially to multiples of its current size.
At the same time, we see a significant reduction
of the competition in the microfinance market.
The CBR actions on the microfinance market
have caused a dramatic increase in the com-
plexity which caused the reduction of number
of players. Given the specific conditions of
the industry (small transaction size and very
short terms which cause the need to process
thousands of micro transactions every day), all
players have faced the increase of operational
costs and/or IT system evolution CAPEX which have
“eaten up” profitability of small and inadequately
organised players.
20
АNNUAL REPORT 2019 Future Trends in Microfinance in Russia
Potential
for the Microfinance market
to grow at least by
20%
per year
AAccording to the Russian statistical agency Rosstat, in 2019,
12.3% of the Russian population lived below the poverty
line. This has created a significant segment of the Russian
population with such income levels that could potentially benefit
from micro lending services. The current source of finance for
Russians on low incomes is often informal, very often illegal
and expensive. Microfinance represents a transparent,
compliant, reliable, cheaper and safer option. There is
a particular need in the Russian regions further from
Moscow and in rural areas where the poorest are
concentrated and where bank coverage is at its
thinnest. Therefore, there is potential for the Microf-
inance market to grow at least by 20% per year11.
By 2020, internet
loans re expected
to reach
50%
The demand for microfinance services is particu-
larly prevalent online. Estimates from early 2019
place internet penetration at approximately 76%
and the number of Russians having access to the
internet being over 100 million. In 2018, 31% of micro
loans were applied for online, amounting to RUB41
billion of loans; this is almost 70% more than in 2017.
In terms of loans made by Zaim to individuals, the
online segment of the portfolio grew by 18% in 2017 and
by 34% in 2018, with some analysts predicting that it will
grow by 70% by 2022. Currently, only 35% of MFCs already
provide micro loans on the internet; by 2020, this share is ex-
pected to reach 50%. This means that more loans will be issued
by remote means and to electronic payment wallets.
dramatic increase
in the complexity
IT system
evolution
reduction
of number of players
need to process
thousands
of micro transactions
every day
increase
of operational
costs
11
Expert RA: Results of 2019 and forecast for 2020 for the MFO market: transformation period
FAST AND FLAWLESS
21
Operational
OVERVIEW
Zaim’s Business
Zaim’s core product is providing microloans to Russian consumers. Zaim
provides its loans in cash and to its Zaim Express branded bank cards. Loans
offered are RUB30,000 or less, with a maximum duration of 30 days. The
standard interest rates on these loans was 547.5% as of February 01, 2019,
but as of July 01, 2019, the maximum interest rate was capped at 365% p.a
with a Maximum Recovery Rate of 200%.
SIMPLE BUSINESS MODEL
1 SINGLE PRODUCT
MAXIMUM ALLOWED
AVERAGE
Loan amount
30,000 RuR (325 £)
7,500 RuR (81 £)
Loan duration
Daily rate 12
30 days
1%
20-25 days
1%
THROUGH 2 DISTRIBUTION CHANNELS
Mozhaysk
Directly opeated stores
ENTIRE COUNTRY
MOSCOW AND
THE MOSCOW REGION
92 stores
Online
Operated in the entire country
12 Interest accrual is capped at 150% of the loan principal
22
Dubna
Taldom
Redkino
Lotoshino
Klin
Dmitrov
Sergiev Posad
Solnechnogorsk
Lobnya
Pushkino
Ivanteevka
Volokolamsk
Istra
Shakhovskaya
Khimki
Mytishchi
Shchelkovo
Noginsk
Krasnogorsk
Moscow
Balashikha
Electrostal
Pavlovsky Posad
Ruza
Odintsovo
Orekhovo Zuevo
Lyubertsy
Ramenskoye
Vidnoye
Lytkarino
Butovo
Shrerbinka
Shatura
Naro-Fominsk
Domodedovo
Yegoryevsk
Voskresensk
Podolsk
Klimovsk
Obninsk
Chekhov
Kolomna
Serpukhov
Stupino
Lukhovitsy
Kashira
Ozery
Zaraysk
Serebryanye Prudy
АNNUAL REPORT 2019 Operational
OVERVIEW
The Zaim Express Card functions in much the same way
as a debit card issued by a traditional bank, except that
the consumer is limited to using the funds loaded to the
bank card and Zaim does not provide overdraft facili-
ties. Zaim’s loans have historically been distributed by
the Group’s existing outlets which predominantly target
a relatively small, densely populated residential com-
munities, as we all as being within walking distance of
transport infrastructure and being approximately 10 to
30 sq. m in size.
The clients of these outlets typically live very locally to a
Zaim outlet. Zaim’s customers take out loans on average
two to three times per calendar year and approximately
95% of Zaim’s customers in 2019 were repeat custom-
ers. Although this provides a stable base, the growth of
the outlets is limited by their geographical reach which
is typically less than two miles from the consumer’s
residence.
As a direct result of the continued strategy of optimiza-
tion of the business model and ensuring maximum re-
turns for shareholders, the number of stores have been
reduced from 113 as of December 31, 2018, to 92 stores as
of December 31, 2019, and further reduced to 76 stores
as of April 27, 2020. The stores that were closed were the
weakest performing and indications were that, given the
slow recovery in the amounts funded post-IPO and the
anticipated reduction in demand due to COVID-19, these
should be closed.
Geographic Footprint
Dubna
Taldom
Redkino
Lotoshino
Klin
Dmitrov
Sergiev Posad
Volokolamsk
Solnechnogorsk
Lobnya
Pushkino
Ivanteevka
Shakhovskaya
Khimki
Mytishchi
Shchelkovo
Noginsk
Istra
Krasnogorsk
Moscow
Balashikha
Electrostal
Pavlovsky Posad
Ruza
Odintsovo
Lyubertsy
Orekhovo Zuevo
Mozhaysk
Vidnoye
Lytkarino
Butovo
Shrerbinka
Ramenskoye
Shatura
Naro-Fominsk
Domodedovo
Podolsk
Klimovsk
Obninsk
Yegoryevsk
Voskresensk
Chekhov
Kolomna
Serpukhov
Stupino
Lukhovitsy
Kashira
Ozery
Zaraysk
Serebryanye Prudy
FAST AND FLAWLESS
23
Company infrastructure
A A key component of the Zaim’s business offering
is its bespoke IT platform that manages and
executes client acquisition, scoring assessment
and financing authorization in less than 5 minutes. All
back-office functions are fully automated and managed
by the integrated IT system, which includes:
• • automatically generating important customer
communications, including notifying customers of the
key repayment date;
• • call centre personnel will be provided with
instructions to contact customers regarding overdue
payments on a pre-assigned date to assist with debt
collection; some phone calls are automated; and
• • in the event that loans are not repaid and are
considered bad debts or where a consumer is
otherwise declared bankrupt, such claims will be
submitted to the relevant Court or state agency (as
applicable) for adjudication.
Current level of automation allows Zaim to efficiently
process large volumes of micro size transactions. The
Group’s IT system is set up to receive data from the
Group’s preferred credit bureaux and independent refer-
encing agencies (including Equifax). These data sources,
when combined with the Zaim’s own scoring algorithm,
assess the credit worthiness of borrowers.
Weighted Average Default Rate
Zaim’s scoring algorithm is a mathematical multi-pa-
rameter regression model that forecasts the likelihood
of default of the client on the basis of the information
about the client in the moment of approval of the loan
application: application data, our database information,
the Bureau of credit history and other third-party sourc-
es. Zaim undertakes a regular review of the model’s
parameters to determine whether any fine tuning is
required.
This system has been successful in reducing the num-
ber of non-performing loans and the weighted average
default rate from 22% in February 2017 to 5.6% by August
2019. Subsequently, this number increased to 11% in
December 2019 due to the more aggressive marketing
and higher proportion of loans made to new customers
that usually carry higher risk of default than repeated
customers do. Zaim customers may repay loans in-store,
via call centres, through the website and internet bank-
ing. The Company has developed a number of convenient
alternative methods of repayment.
Source: Company
25%
20%
15%
10%
5%
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Zaim’s customers may also repay their outstanding
loans by a QIWI e-wallet, which is one of the most
popular e-wallets in Russia. Customers may load cash
to their QIWI wallets using various methods, including
at POS terminals, ATMs and at dedicated QIWI kiosks.
Consumers may use QIWI’s dedicated kiosks to repay
their loan with Zaim and to undertake a wide variety
of transactions, including repayment of bills to utility
companies, mobile phone providers and to complete
other online purchases. QIWI operates approximately
170,000 kiosks throughout Russia and has a customer
base of 65 million customers, who pay more than 39
billion Russian rubles each month. Zaim is also able to
use the QIWI “Contact” Payment System which enables
Zaim to provide an online application to obtain a cash
loan in any region of Russia.
24
АNNUAL REPORT 2019 Zaim Master Card
IIn 2015, Zaim entered into an agreement with Master-
Card Circuit to have its own branded and operated
MasterCard.
After a long and intensive negotiation with MasterCard
and related Due Diligence, in 2017, Zaim finally got its own
card “made to measure“ to microfinance clients’ needs.
This card has specific and highly customised operational
tools which have been determined by the Zaim manage-
ment in order to have an operational tool coherent with
the microfinance market and clients: simple, friendly
and with no hidden costs or fees on transactions.
These card can be used by the low-income segment
of the population to access various digital and online
services, becoming the key tool of the inclusivity. From
the possibility to rent a movie on stream to buying food
online, non-availability of a card will severely impact the
lifestyle of people and their participation in the society.
The card is a “vector“ for Zaim services, but in the future,
it could become a vector for any third-party services,
too. Zaim management is working on getting majority of
its clients to get their own card. Since its launch, Zaim
has released over 56,000 branded MasterCards.
Zaim’s business model
ZZaim has worked on developing its own unique
business model based on its bespoke IT system
and a network of directly managed stores. Since
2014, Zaim has raised significant capital from a group
of private investors in the form of the EER Loan Facility
Agreements (approximately €35m or an equivalent of
approximately £31.4m) and the EER Master Debenture
Agreements, which has enabled it to experience growth
and led to Zaim becoming a significant business in the
microfinance market in Moscow, Moscow Region and
Western Russia.
The decision to concentrate its efforts in a specific
region of Russia has led to optimization of a number of
business factors, including staff and cash availability in
stores, creating strong brand awareness. Zaim’s bespoke
IT and operational platforms have been purpose-built
to support its lending activities, enabling consistent op-
erational performance and speed to market, as well as
high level of customer service. Its success in customer
service is illustrated by its high repeat customer rate.
Zaim’s 8-year presence in the microfinance loan market
has enabled it to develop highly effective credit score-
cards. Zaim is able to use the data in its scorecards, loan
performance analysis and underwriting decisions, giving
it a significant competitive differentiator and particular
advantages against new entrants to the market. As a re-
sult, the Group is well positioned to participate substan-
tively in the further growth potential in the non-standard
lending market. This is because sufficient investment
has already been made in Zaim’s systems so that they
are able to cope with a much larger volume of loans with
only a small increase in operational expenditures and at
the same time the Board is planning to grow the Zaim’s
customer base using low-cost digital marketing without
significantly increasing store numbers and the fixed cost
base.
Compliance is important to the Group’s business and
culture and is implemented through its customer service
processes and its underwriting and collection proce-
dures. The Group seeks to treat all of its customers fairly
and offers customers in financial difficulty a number of
payment options tailored to their individual circumstanc-
es. For example, Zaim’s policies include never under-
taking collection activities or selling unrecovered debts
to third parties who might seek to enforce and collect
defaulted loans. Zaim reviews all of its customer-facing
employees at least weekly and operates an ongoing
refresher training to ensure that ethical behaviour and
the principles of treating customers fairly are embedded
in its culture.
FAST AND FLAWLESS
25
Financial
OVERVIEW
Loans to customers
Total loans to customers measured
at amortized cost
Total assets
Net assets (Total equity)
Cash and cash equivalents
Interest income
Staff costs
Operating expenses
Operating expenses related to IPO
Operating margin13
Net loss
2019, £
32,078,150
2018, £
29,187,093
786,346
640,371
5,152,414
1,189,258
1,582,751
3,940,747
(2,006,265)
(2,523,112)
(369,146)
41.2%
(891,589)
1,337,605
(576,859)
454,549
10,226,071
(2,339,965)
(2,762,326)
-
46.5%
(1,545,631)
2019 represented a year of considerable changes within the
business with the recapitalisation of the group into an equi-
ty-funded Group, the successful IPO, as well as the improve-
ments in the credit scoring system. Generally, trading in 2019
was hampered by the lack of available liquidity due to the
restructuring of the historic bonds and IPO in London taking
place later in the year than expected (November 04, 2019).
Despite the lack of liquidity and a relatively small value of
the loan book (£786k as of December 31, 2019) the business
performed well and in line with management and the market
expectations. The default rates have seen a steady improve-
ment since the beginning of 2019 as a result of continual
technical improvements being implemented to the credit
scoring system.
Loans to customers increased by 10% to £32.1 million com-
pared to £29.2 million as of December 31, 2019. This is a
reflection of the Zaim’s strategy to gradually grow its loan
book after receiving IPO funds on November 04, 2019, without
compromising its customers’ quality.
Total loans to customers measured at amortized cost had
increased by 23% from £640k to £786k reflecting increased
amount funded through offline and online channels.
Total assets had increased to £5.2 million compared to £1.3
million as of December 31, 2018, due to the proceeds received
from the IPO. The substantial growth of assets is mainly ex-
plained by two factors: a substantial increase in cash balance
by £1.1 million and recognition of an asset in the form of Right-
of-use assets under lease agreements of £2.55 million due to
the leasing brought onto the balance sheet for the first time in
2019 as a result of amendments to IFRS 16, including require-
ments. The Group recognized assets in the amount of £ 2.55
million and liabilities of £2.56 million.
Cash and cash equivalents increased from £455k as of
December 31, 2018, to £1.6 million as of the end of 2019. A
substantial increase in cash balance by £1.13 million was a
result of the IPO in 2019.
Interest income had decreased by 61% from £10.2 million to
£3.9 million due to the business restructuring and optimi-
zation. Zaim had scaled down the business in 2018 and the
first half of 2019 due to the lack of financing available and
resumed the growth path following use of the proceeds of
the IPO to build its loan book.
Staff costs decreased by 14% from £2.3 million to £2.0 million
due to the overall business optimization and reduction of the
headcount of Zaim by 16% from 378 as of December 31, 2018,
to 317 as of December 31, 2019.
Operating expenses increased by 5% from £2.8 million to £2.9
million due to the one-off costs of the IPO amounting to £369k.
Excluding these costs, there was a 9% decrease in operating
expenses, driven largely by a reduction of rental expenses,
as well as communication, security costs, bank and postal
services.
Operating margin increased from 46.5% in 2018 to 41.2% as a
result of the restrictions on consumer loans that came into
effect on July 01, 2019, reducing the daily interest rate to 1%.
The net loss generated by the Company decreased from £1.5
million to £892k reflecting an improvement in the flexibility
of the business model and growing cost efficiency. Excluding
one-off IPO costs in an amount of £519k and the non-cash
share-based payment charge of £167k, the net loss of the
Company was £206k.
In 2018, the Group eliminated a substantial amount of its his-
toric debt thereby significantly reducing associated interest
payments and, as of the end of 2019, remains predominantly
equity-funded.
With available equity financing and necessary investments
already made into the online platform, Zaim is now well
positioned to grow its business and capture the demand
of its target customer base. However, in 2020, due to the
uncertainty caused by the COVID-19 pandemic, Zaim further
decreased the cost base and decided to reduce the loan
amounts issued in order to keep business at a financial and
economic break-even level on the cash basis for the period
of “lockdown”. This has served to protect the Company from
potential unexpected cash outflows and provides financial
and operating stability during the turbulent times.
Operating margin is calculated as the net operating cash flow (net cash received for the period (including collecting claims) less loans provided, including
13
insurances) divided by the total loans provided, including insurances
26
АNNUAL REPORT 2019 Financial
OVERVIEW
Strategy and development
PLANS
Profitable
Growth
Increase in store
utilisation
Growth of online
offering
Improvement in debt
collection
The Group’s strategy includes the
maintenance of its core stores to
enable lending to higher quality
customers (with comparably
low historic defaults), including
a number of repeat customers
at a similar level along with the
development of the Group’s
online platform.
TThe physical and online business model should allow
for growth in the lending book and the number of
loans made without the capital and operational
expenditures of a purely store-based model. In addition,
the Group continues to refine its lending and credit ratings’
criteria based on experience to reduce default rates and
thereby improve operating margins. The Directors believe
that these factors will enable the Group to grow revenue
and operating margins.
Furthermore, Directors believe that there is a potential to
increase revenue by increasing store utilization (by servicing
more customers and issuing more loans in one store). This
can be achieved by adjusting the scoring system to increase
loan provision.
The Group’s main strategy is therefore to develop and
improve its online offering and to increase the number of
customers obtaining loans online through Zaim’s online
presence. As no significant capital has yet been deployed to
promote the “Zaim” brand online, it does not currently have
a strong online presence, but demand is already proving
strong for this online product.
A significant portion of future funds available are expected
to be used to grow the online loan book using targeted
online lead generation and search engine optimisation. It
is also the group’s strategy to develop the Group’s online
presence to enhance its attractiveness and differentiate it
from the competition. The Board will aim over the next 12-18
months to continuously grow the online loan book, which
can be achieved with minimal further capital expenditures
as a result of the historic investments made by Zaim in its IT
platform. The Board believes there is a significant oppor-
tunity to gain market share compounded by the number of
competitors being reduced due to increased regulation.
Internally developed scoring system
Bespoke IT platform
Existing store network
In 2019, Zaim as an MCC gained access to the Russian Unified
Identification and Authentication System (USIA) for the
purpose of undertaking client identification checks in respect
of loans not exceeding 15,000 rubles. The USIA is a state-con-
trolled system commonly used by Russian citizens to access
various state services, such as online payment of state duties
and fines, various remote registrations and applications. An
individual may use the USIA for the purpose of confirming
their identity and Zaim can therefore rely upon verification
provided by the USIA in respect of a consumer loan not
exceeding 15,000 rubles.
As of December 05, 2018, over half of the Russian population,
approximately 84 million Russian citizens, had registered
with the USIA system. In addition, since October 01, 2019, Zaim
as an MCC has been able to connect to the State database
in order to make a request to the State database for cross
verification of the data provided by the customer and for
verifying the mobile phone number of the customer through
an acknowledged secret text. This change also enables Zaim
to carry out these cross checks through banks or other credit
organisations. Access to these cross checks is particularly
important as they enable Zaim to take on clients without ne-
cessitating a face to face meeting. Bypass of the requirement
for ‘face to face’ meetings and the acceptance by the Compa-
ny of self-certified ID documents enable the Group to provide
an online offering to customers in other parts of Russia in a
manner which is reliable and less susceptible to fraud.
Going online will enable Zaim to access areas outside of the
urban areas where it has a physical footprint, with minimal
additional capital or operating cost. Zaim also intends to use
the proceeds of the IPO to increase distribution of the Zaim’s
Express Card within targeted locations based upon consumer
data and to its increasing online customer base.
FAST AND FLAWLESS
27
Risk
MANAGEMENT
Zaim manages its risk exposures
in respect of financial risks (credit,
market, currency, liquidity and interest
rate), operational and legal risks.
The primary objectives of the financial risk management
function are to establish risk limits and then ensure that
exposure to risks stays within these limits. The assess-
ment of exposure to risks also serves as a basis for opti-
mal distribution of the risk-adjusted, transaction pricing
and business performance assessment. The operational
and legal risk management functions are intended to
ensure proper functioning of internal policies and proce-
dures to minimise operational and legal risks.
Credit risk
TThe Company is exposed to the credit risk of its
customers, as the Company makes unsecured
personal loans to a segment of the population that
have difficulty obtaining credit from mainstream financial
institutions. The Group uses internally developed models for
assessing credit risk and credit worthiness.
Credit risk is the risk of financial loss to Zaim if a counter-
party to a financial instrument fails to meet its contractual
obligations within the specified period. Zaim has policies
and procedures for the management of credit exposures
(both for recognised financial assets and unrecognised
contractual commitments), including requirements for
establishment and monitoring of loan portfolio concentra-
tion limits.
The credit policy establishes:
• • procedures for review and approval of loan applications,
• • methodology for assessment of a borrower’s solvency,
• • credit documentation requirements,
• • procedures for the ongoing monitoring of loans and
other credit exposures.
Zaim continuously monitors the performance of individual
loans and regularly reassesses the creditworthiness of its
customers. The review is based on the most recent delin-
quency statistics. Zaim applies the expected credit loss
model for the purpose of provisioning for financial debt
instruments, the key principle of which is timely reflection
of deterioration or improvement in the credit quality of
debt financial instruments based on the current and for-
ward-looking information.
28
Market
risk
Legal
risk
RISK
MANAGEMENT
Credit
risk
Operatonal
risk
Foreign
currency
exchange
risk
Interest
rate
risk
Epidemic
risk
Liquidity
risk
The amount of expected credit losses recognised as a
credit loss allowance depends on the extent of credit qual-
ity deterioration since initial recognition of a debt financial
instrument.
Credit risk classification system
Each level of credit risk is assigned a certain degree of
solvency using a single scoring system:
• • minimum credit risk – high credit quality with low
expected credit risk, debt is not past due;
• • low credit risk – sufficient credit quality with average
credit risk, debt is prolonged and not past due;
• • moderate credit risk – average credit quality with
satisfactory credit risk, the debt is from 1 to 30 days past
due;
• • high credit risk – low credit quality with unsatisfactory
credit risk, high probability of default, the debt is from 31
to 60 days past due;
• • default – assets that meet the definition of default, the
debt is more than 60 days past due.Expected credit loss-
es on financial assets that are not impaired are usually
measured on the basis of default risk over one or two
different time periods, depending on whether there has
been a significant increase in the borrower’s credit risk
since initial recognition.
АNNUAL REPORT 2019 Risk
MANAGEMENT
Zaim-Express performs collective assessment of loans to
individuals. This approach provides for aggregation of the
portfolio into homogeneous segments based on specific
information about borrowers, such as delinquent loans,
historic data on prior period losses and forward-looking
macroeconomic information.
Collective assessment principles: for assessing risk stages
and estimating ECL on a collective basis, Zaim-Express
combines its loans into segments based on shared credit
risk characteristics, so that exposure within a grouping has
a homogeneous pattern.
Zaim carries out an affordability assessment of the bor-
rower before a loan can be paid out. As a separate exercise
using the knowledge and data from its 8-year presence in
the loan market, each potential loan undergoes a cred-
itworthiness assessment based on the applicant’s credit
history. No formal collateral or guarantees are held against
the borrower.
Zaim manages credit risk by actively managing the blend of
risk in its portfolio to achieve the desired impairment rates
in the long term. Zaim aims to achieve the desired risk in
the portfolio by managing its scorecards and the maximum
amount borrowers are able to borrow depending on their
circumstance and credit history. The factors Zaim considers
in monitoring the overall impairment rates include the total
value of the loan, the home owner status of the guarantor,
whether loans are new or repeat loans and whether these
are pilot loans. Using the data and expected loss curves for
the different scorecards, the business can vary its origina-
tion levels to target an expected loss rate, impairment level
and manage the balance sheet risk.
In assessing the level of impairment, the business makes
provision for a percentage of loans that are currently up
to date. As part of its procedures, the Directors expect
that at any time, there will be an element of loans that are
currently up-to-date, but where the customer may have
an unreported difficulty in repaying the loan and therefore
Zaim’s practice is to make provision for the estimated ef-
fect. In addition, should a customer enter into a repayment
plan, Zaim does not reschedule the terms for its internal
reporting. Instead, the business calculates the arrears level
with reference to the original terms.
Market risk
MMarket risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate
because of changes in market prices. Market
risk comprises currency risk, interest rate risk and other
price risks. Market risk arises from open positions in inter-
est rate, currency and equity financial instruments, which
are exposed to general and specific market movements
and changes in the level of volatility of market prices. The
Group’s exposure is primarily to the risk of changes in
interest rates.
The objective of market risk management is to manage and
control market risk exposures within acceptable parame-
ters, while optimising the return on risk.
Currency risk
CCurrency risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate
because of changes in foreign currency exchange
rates. Zaim accepts the risk of effect of foreign currency
exchange rate fluctuations on its financial position and
cash flows. Currency risk arises when the existing or
prospective assets in foreign currencies are greater or
lower than the existing or prospective liabilities in the same
currencies.
The main operating subsidiary of the Group, Zaim Express
LLC, operates in Russian rubles, with the majority of trans-
actions with customers and suppliers occurring domes-
tically within the Russian Federation. The Group has its
parent company and head office activities operating in the
United Kingdom and raises finance from shareholders in
Pounds Sterling. The Group is therefore exposed to foreign
exchange risks relating to both £ and RUB.
Exchange rate exposures are managed within approved
policy parameters. Zaim-Express’s management controls
the exposure to currency risk on a regular basis.
Please see Note 20 to Financial Statements for further
information on the currency risk.
Interest rate risk
TThe Company historically relied on debt finance to
fund its loan book. Such indebtedness may expose
the Company to the risks associated with move-
ments in prevailing interest rates. However, after its IPO,
Zaim relies on equity financing to fund its loan book; that
keeps the interest rate risk at minimum.
Changes in the level of interest rates can affect, among
other things:
• • the cost and availability of debt financing and hence the
Company’s ability to achieve attractive rates of return on
its assets;
• • the debt financing capability of the Zaim business;
This exposure may be reduced by introducing a combina-
tion of fixed and floating interest rates or through the use
of hedging transactions (such as derivative transactions,
including swaps or caps). Interest rate hedging transac-
tions will only be undertaken for the purpose of efficient
portfolio management and will not be carried out for
speculative purposes.
Please see Note 20 to Financial Statements for further
information on the interest rate risk.
FAST AND FLAWLESS
29
Liquidity risk
LLiquidity risk arises when the maturity of assets and
liabilities does not match. Zaim does not accumulate
cash resources to meet calls on all the liabilities
above, as based on the existing practice it is possible to
forecast with a sufficient degree of certainty the required
level of cash funds necessary to meet the above obligations.
The directors have the responsibility of liquidity risk man-
agement. The directors monitor rolling forecasts of the
Company’s liquidity requirements to ensure it has sufficient
cash to meet operational needs while maintaining sufficient
headroom on its banking facilities at all times.
To manage its liquidity, Zaim is required to analyze the level
of liquid assets needed to settle the liabilities on their matu-
rity, provide access to various sources of financing, draw up
plans to solve the problems with financing and exercise con-
trol over compliance of the liquidity ratios with the statutory
laws and regulations.
Liquidity risk is managed by the Group’s central finance
department through daily monitoring of expected cash flows,
ensuring sufficient funds are drawn against the Group’s
finance facilities to meet obligations as they fall due. The
Group’s forecasts and projections, which cover a period of
more than 12 months, take into account expected origina-
tions, collections, and payments and allow the Group to plan
for future liquidity needs.
The CBR sets and monitors liquidity requirements for microf-
inance institutions. The Company calculates its liquidity ratio
in accordance with CBR instruction No. 4384-U dated 24 May
2017 “On establishing economic norms for a microcredit com-
pany that attracts funds from individuals, including individual
entrepreneurs who are founders (participants, shareholders)
and/or legal entities in the form of loans”. As of December
31, 2019, and December 31, 2018, the minimum liquidity ratio
was 70%. The Company provides the territorial division of the
Central Bank of Russia supervising its activities with informa-
tion on the mandatory liquidity ratio in accordance with the
established format on a quarterly basis as of the first day of
each month.
If the liquidity ratio values approach the limit set by the CBR,
this information is communicated to a company’s member.
The Company complies with the liquidity adequacy ratio as of
December 31, 2019 (unaudited), and December 31, 2018.
Please see Note 20 to Financial Statements for further
information on the liquidity risk.
Operational risk
TThe Group is exposed to operational risk which is the
risk of losses resulting from inadequate manage-
ment and control procedures, fraud, poor business
decisions, system errors relating to employee mistakes and
abuse by employees of their positions, technical failures,
settlement errors, natural disasters and misuse of the
Group’s property.
30
The Group has established internal control systems intend-
ed to comply with the CBR’s requirements regarding op-
erational risk. The Board adopts general risk management
policy, assesses efficiency of risk management, approves
the Group’s management structure, adopts measures
designed to ensure continuous business activities of the
Group, including the measures designed for extraordinary
and emergency situations and supervises other executive
bodies in respect of operational risk management. Manage-
ment generally oversees the implementation of risk man-
agement processes at the Group, including relevant internal
policies, adopts internal regulations on the Group’s risk
management, determines limits for monitoring operational
risks and allocates duties to various bodies responsible for
operational risk management.
Legal risk
ZZaim operates in a highly regulated financial services
industry and existing laws and regulations could be
amended, the manner in which laws and regulations
are enforced or interpreted could change and new laws
or regulations could be adopted. Any breach of applicable
regulations could expose the Group to potential liability and
other sanctions, including the exclusion of Zaim from the
Registry and revocation of its MCC status, thus depriving
it of the opportunity to carry on its business. Further, any
changes in regulation and laws could reduce the potential
returns the Group earns from its lending operations.
Zaim was included into the registry of microfinance institu-
tions when its status of an MCC was obtained; this inclusion
means that the Group is subject to ongoing monitoring and
compliance reporting requirements. If Zaim’s MCC status is
withdrawn or suspended, this is likely to have a materially
adverse effect on the Group’s business, financial condition,
results of operations and/or prospects.
The Group mitigates legal risk by constantly monitoring the
applicable legislation and ensuring that all legal require-
ments are met.
Force Majeure and epidemic risk
IIn 2020, a new coronavirus infection (COVID-19) outbreak
emerged in China and then spread across all other
countries. Governments across the world are taking
various measures to contain the spread of infection.
The Russian authorities are taking steps aimed at contain-
ing the spread of COVID-19, including international travel
restrictions, social distancing initiatives and announcing
holidays in Russia from 30 March to 11 May, that could be
extended further based on the epidemiological situation.
The Russian authorities have also enacted the closure
of non-essential businesses in Moscow and the Moscow
Region, where a part of Zaim’s main operations is focused
and announced a set of economic measures and subsidies
aimed to help affected businesses and the population.
Zaim-Express offices were allowed to continue operating
during the holidays.
АNNUAL REPORT 2019 Zaim team is well prepared to continue their work while at
the same time ensuring the safety of our employees and
clients as a top priority. Zaim had proactively implement-
ed strict health and safety policies specifically tailored to
COVID-19, including working from home for our entire head
office staff, taking all necessary disinfection measures in
the stores, such as using hand sanitizers, medical masks
and more frequent cleaning of the customer zone. The
clients can enter the shop in compliance with the social
distancing prescriptions or one at a time. Zaim is following
all the recommendations of local health authorities and the
World Health Organisation to the best of its ability.
As part of its recent strategy, Zaim has developed a
convenient online platform, allowing customers to receive
and repay loans via the internet or by phone in less than 10
minutes without leaving their homes, which is an impor-
tant option in the era of social distancing that is critical
for containing the pandemic. We can also deliver our Zaim
MasterCard debit cards to our clients and provide loans to
these cards.
It is difficult to foresee how long the current Government
measures in response to COVID-19 will be in place or how
customers will behave once the restrictions are lifted. Zaim
has decided not to grow its loan book beyond its current
level until the demand resumes and the ability of the
Company to accurately forecast future cashflows reliably
returns. This should protect the Company from potential
unexpected cash outflow and deterioration in liquidity due
to delays or defaults in collection.
In addition, Zaim has enacted a series of measures to re-
duce the cost base of operating its physical stores; this has
been achieved by way of negotiating rent reductions with
landlords as well as salary reductions for staff.
Together, these measures are expected to enable Zaim to
navigate the current uncertainty and be well positioned to
capitalize on the expected rebound in business opportuni-
ties once restrictions start to be eased. Our strong capital
and liquidity positions make us confident in the sustain-
ability of the Company’s operations and it is the intention
to re-start our growth plans as soon as we have a clearer
view of the situation.
SUSTAINABILITY
TThe Russian economy, like many other economies in
the world, is rapidly moving towards “demateriali-
zation“ and digitalization. Nowadays, societies are
based on the average level of services which go beyond
the basic necessities and include the consumption of
online services and products. Increasing complexity and
standards requirements are creating an increasingly larger
segment of population who cannot attain the “minimum
lifestyle level” to get these services. The key to enter this
online world is the availability of credit card or electronic
reconnaissance tools (which are anyway linked to payment
systems and cards).
The ongoing COVID-19 pandemic and “stay at home” policies
of many countries make this inequality even more obvi-
ous. Locked home, people work, communicate, study, and
entertain themselves online and via remote / e-commerce
platforms. Significant segments of population lost access
to the basic services.
A combination of financial burdens with technology has
become the real “Digital Divide”.
Non-availability of bankcards is the main barrier for
lower-income segments of the population the global world
and participate in its coming evolution. This could become
the new segregation wall.
From the possibility to rent a movie on stream to buying
food online, non-availability of a card will severely impact
the lifestyle of people and their participation in the society.
Zaim platform is conceived to ease the access and resolve
the divide. This makes the Zaim Express MasterCard a key
tool of inclusivity. The card was conceived in coherence with
the microfinance clients’ needs: simple, transparent, no
hidden costs or fees on transactions. The card is a “vec-
tor“ for Zaim services, but in the future, it could become a
vector for any third-party services, too. Zaim management
is working on getting the majority of its clients to get their
own cards.
Lending to heavily neglected people gives them awareness
that “they can have a further chance”.
Providing people with bankcards and easy access to fi-
nancing allows them to use the services that were normally
impossible or extremely complicated to get, which dramat-
ically improves their lifestyle, especially in the current “stay
at home” environment.
This Strategic Report statement was approved by the Board
of Directors June 16, 2020, and was signed on their behalf by:
Simon Retter
Finance Director & Company Secretary
June 16, 2020
FAST AND FLAWLESS
31
orporate
CCorporate
GOVERNANCE
GOVERNANCE
3
BOARD OF DIRECTORS
KEY MANAGEMENT
DIRECTORS’ REPORT
REMUNERATION REPORT
CORPORATE GOVERNANCE REPORT
DIRECTORS’ RESPONSIBILITY STATEMENT
34
36
37
41
43
47
CCorporate
orporate
GOVERNANCE
GOVERNANCE
Board of
DIRECTORS
The Board of Directors of Zaim Credit
Systems Plc consists of five members,
including two independent directors.
The Directors are responsible for
carrying out the Company’s objectives,
implementing its business strategy and
conducting its overall supervision.
TThe Board provides leadership within a framework of
prudent and effective controls. The Board estab-
lishes the corporate governance values of the
Company and will have overall responsibility for setting
the Company’s strategic aims, defining the business plan
and strategy and managing the financial and operational
resources of the Company.
Malcolm Groat –
Non-Executive Chairman
MM Mr. Groat is a Chartered Accountant and MBA graduate. Following an
early career with PwC in London, he held CFO, COO and CEO roles in in-
ternational businesses, including with the construction engineering firm
that is now Arcadis. Since 2005, Mr Groat has held non-executive board positions,
mainly with growth ventures listed on the AIM and the main market, but also with
larger bodies, such as the UK’s former Milk marketing Board, Corps Security, and
Baronsmead Second Venture Trust PLC. Mr Groat chaired a Singapore-based con-
sulting firm (2010-2012) and a UK-based technology group (2013-2015) that enables
secure and fast IT connectivity for financial institutions and military applications
around the world.
Paul James Auger –
Non-Executive Director
With a career of over 30 years in finance and lending, Mr Auger has been a direc-
tor of an Essex-based and FCA-regulated mircolender TFS Loans Limited (“TFS”)
for over 10 years. Established by Paul in 2009, TFS is focused on the guarantor
loans market and currently offers guaranteed loans under £15,000 to retail
consumers. Established in 2009, TFS was initially authorised by the Office of Fair
Trading until responsibility was transferred to the FCA in April 2014 when it was
given interim authorisation until full authorisation was granted by the FCA at the
end of 2016.
34
АNNUAL REPORT 2019 Vladimir Golovko -
Chief Operating Officer
Vladimir was previously the COO of Zaim Express LLC from inception in 2011 prior to
becoming CEO of this company. Prior to joining Zaim, he was General Manager of
the Pyaterochka retail chain (a franchisee network) (2004 – 2011) and had previ-
ously been Communication Director (1999-2011). Vladimir also previously worked for
Uniland (the largest wholesale company in Russia at the time) as Sales & Marketing
Manager; Uniland now operates as a supermarket chain, DIXY. Vladimir graduated
from the Volgograd branch of the Moscow State University of Commerce in 1997 with
a degree in management.
Siro Donato Cicconi –
Chief Executive Officer
Siro is an experienced Italian executive director that has worked for and advised
numerous businesses in Italy, many of which were in turnaround or distressed situ-
ations. In late 1990s, Siro advised on fundraisings for strategic R&D projects of many
organisations (including Alfa Gomma Group and Benelli Motors SpA), which involved
managing relations with European, Italian and local financial administrations. He also
assisted several other industrial groups to raise finance for their acquisition plans.
From 2005 until 2010, he provided corporate finance advice to several businesses.
Between 2011 and 2013, he was appointed Managing Director of IMT SpA, a large Italian
manufacturer of drilling equipment, to turnaround that business. After finishing this
role, he became managing director of EER to fund Zaim and managed the rationalisa-
tion of Zaim’s operations and returned it to profitability.
Simon James Retter–
Finance Director
Simon started his career at Deloitte & Touche LLP (now known as Deloitte LLP), where he
qualified as a Chartered Accountant specialising in corporate finance transactions. He has
been instrumental in setting up several private and listed companies. Simon has undertaken
numerous IPOs and Reverse Takeovers and has a wealth of public market experience. He
currently holds the position of Finance Director of SulNOx Group plc, which has developed
an innovative fuel conditioner to reduce harmful emissions from diesel and HFO combustion
engines, as well as various other board positions of listed companies across a broad range
of industries.
The Company Secretary
Simon James Retter is the Company Secretary of the Company.
FAST AND FLAWLESS
35
Key
MANAGEMENT
Vladimir Golovko –
Chief Operating Officer
Vladimir was previously the COO of Zaim from inception in 2011
prior to becoming CEO. Prior to joining Zaim, he was General
Manager of the Pyaterochka retail chain (a franchisee network)
(2004 – 2011) and had previously been Communication Director
(1999-2011). Vladimir also previously worked for Uniland (the
largest wholesale company in Russia at the time) as Sales &
Marketing Manager; Uniland now operates as a supermarket
chain, DIXY. Vladimir graduated from the Volgograd branch of the
Moscow State University of Commerce in 1997 with a degree in
management.
Andrey Katyshkov –
Chief Financial Officer
Mr Katyshkov joined Zaim at the beginning of 2018 as CFO and
had previously worked for Basic Element – one of the biggest
investment funds in Russia working in corporate finance. Mr
Katyshkov worked with GIP Group in 2011-2012, acting as an invest-
ment specialist within its investment department. Prior to this, Mr.
Katyshkov worked as an investment analyst with investment fund,
Ost West Group, from 2002 until 2006. Mr Katyshkov graduated
from the Moscow State University of Economics, Statistics and
Information Systems in 2003 with a degree in Finance, followed by
postgraduate studies at the Moscow Financial Industrial Academy
which he completed in 2006.
Alexander Akhmetov –
Head of Legal Department
Mr. Akhmetov joined Zaim Express LLC in 2011 first as legal
counsel and starting from 2014 as Head of Legal Department.
Prior to joining Zaim Express LLC, Mr Akhmetov worked for a law
firm called Yurconri before practising at the Arbitration Court for
the Moscow Region. He then joined Zaim in 2011. Mr. Akhmetov
graduated from the Moscow Engineering Physics Institute in 2007
with a degree in Accounting and subsequently graduated from
the Moscow State Law Academy in 2011 with a degree in Law.
36
Vildan Vegerio –
Head of Network Management
Prior to his appointment as Head of Network Management of
Zaim Express LLC in 2016, Mr Vegerio worked with the company
as a senior customer relationship specialist from 2011. Mr Vegerio
graduated from the International Slavic Institute with a degree in
Economics in 2011.
АNNUAL REPORT 2019 Key
MANAGEMENT
Directors’
REPORT
The Directors present their
Аnnual Report on the affairs
of Zaim Credit Systems Plc
together with the audited
Financial Statements for the
year ended December 31,
2019
Principal activities
The principal activity of the Group and Company is pro-
viding customers in Russia with small short-term loans.
Financial review
Financial review of the Group is presented in the “Finan-
cial Overview” section of the current Аnnual Report.
Going Concern
The Directors have prepared cash flow forecasts for the
12 months from the date of signing of these Financial
Statements. The uncertainty as to the future impact of
the COVID-19 pandemic has been considered as part
of the Group’s adoption of the going concern basis.
The Board considers the pandemic has not materially
adversely affected the prospects of the business as
of the date of this report, although any future impact
should further waves of the pandemic occur and further
measures be implemented remains hard to quantify.
The Directors have formed a judgement at the time of
approving the Financial Statements that there is a rea-
sonable expectation that the Company and Group have
adequate resources to continue operations for the fore-
seeable future. For this reason, the Directors continue to
adopt the going concern basis in preparing the Financial
Statements. Further details of the Directors’ conclusions
regarding going concern are detailed in note 3 to the
Financial Statements.
Dividends
The Directors do not recommend payment of dividends
(2018: £Nil).
The Directors recognise the importance of dividends
to Investors and as soon as the Zaim’s business is at a
mature state of development, the Directors will review
the desirability of paying dividends. Income generated by
the Company in the near term is likely to be re-invested
by the Company to implement its strategy. As a holding
company, the Company will be dependent upon dividends
being declared and paid by its subsidiary. The Board does
not anticipate declaring dividends in the short term,
but it may recommend dividends at some future date,
depending upon inter alia the Zaim Business demon-
strating sustainable profits and the financial position of
the Company. The Board can give no assurances that it
will pay dividends in the future, nor, if dividends are paid,
what the amount of such dividends will be.
Health and safety
Health and safety of our employees are of the para-
mount importance for our Company. During the COVID-19
outbreak, Zaim has been proactively implementing
strict health and safety policies specifically tailored to
COVID-19, including working from home for the entire
head office staff, taking all necessary disinfection meas-
ures in our stores, such as using hand sanitizers, medical
masks and more frequent cleaning of the customer
zone. The clients can enter the shop in compliance with
the social distancing instructions or one at a time. We
continue following all the recommendations of local
health authorities and the World Health Organisation.
Social, Community and Human
Right Issues and Policies
The Company does not have formal social, community
and human rights policies.
Environmental matters
The Company’s activities do not have a negative impact
on the environment, as it is a financial services company
and it does not own or operate heavy machinery or air or
water polluting equipment. The Company does not have
formal policies on this matter.
FAST AND FLAWLESS
37
Employees
As of December 31, 2019 the Group had 317 employees.
Our employees are the most valuable resource and we
focus on creating a comfortable working environment.
Zaim sets high standards for customer service and
conducts trainings for the employees. We see innova-
tion as a tool to ensure customer loyalty and increase
the motivation of our employees. We invest in human
capital through continuous staff training, development
of a personnel reserve system and career growth of our
employees. Responsibility, honesty and openness are
core values of our company.
The Company has the following internal policies:
• • On recruitment, evaluation and management of employees
• • On hiring and collocation of employees
• • On education, adaptation and evaluation of employees
• • On motivation and remuneration of employees
Gender diversity
Although the Board and top management consists only
of male members, the company supports diversity in the
Boardroom and the Financial Reporting Council aims to
encourage such diversity.
The following table sets out a breakdown by gender as of December
31, 2019:
Directors
Senior Management
Other employees
Male
5
4
81
Female
0
0
232
Directors and their interests
The names of the Directors of the Company at the date
of this report are shown in the “Board of Directors” sec-
tion of this report.
Substantial shareholdings
The Directors are aware of the following substantial
interests or holdings in 3% or more of the Company’s
ordinary called-up share capital as of June 16, 2020.
Shareholder
Zaim SA14
MPM & Partners
(Monaco) 15
Number of
shares
Percentage
320,000,000
73.23%
20,000,000
4.58%
There was no change in the interests set out above
between December 31, 2019, and June 16, 2020.
Share capital
Changes in the share capital of the Company, including
the disclosure of earnings per share, are set out in note
11 to the Financial Statements.
Voting rights
All the shares issued have equal voting rights.
The Directors who served during the year together with
their directly beneficial interests in the shares of the
Company as of December 31, 2019, are as follows:
Director
Malcolm Groat
Paul James Auger
Siro Donato Cicconi
Simon James Retter
Vladimir Golovko
Date of
appointment
4.11.2019
4.11.2019
22.07.2019
15.06.2018
25.10.2019
Shares
0
0
320,000,000
3,600,000
0
2019
Options
2,150,000
0
10,750,000
6,450,000
8,600,000
Shares
0
0
320,000,000
2,000,000
0
2018
Options
0
0
0
0
0
Nicholas Nelson was appointed Director on June 15, 2018, resigned on July 30, 2019.
None of the Directors exercised any share options during the year.
There was no change in the interests set out above between December 31, 2019, and June 16, 2020.
14
15
Siro Cicconi’s interest in shares is through Zaim SA, which he wholly owns through his life interest in Excelsior Foundation which wholly owns Zaim SA.
MPM & Partners (Monaco) holds its shares on behalf of a number of EEA-based clients none of whom hold more than 3% of the issued share capital.
38
АNNUAL REPORT 2019 Restrictions on the transfer of
securities
Pursuant to a lock-in deed entered into between the
Directors, Optiva Securities Limited, Beaumont Cornish
Limited and the Company have agreed to the following
lock-up arrangements:
(a) for a 12 month lock-up period from the date of the
Placing Agreement, the Directors have agreed that,
subject to certain customary exceptions, they will not
directly or indirectly transfer the legal and/or beneficial
ownership (or any interest therein or in respect thereof)
of any Ordinary Shares held by it immediately after Ad-
mission (or any Ordinary Shares which may accrue to it
as a result of such holding) or enter into any transaction
with the same economic effect as any of the foregoing;
(b) for a further 12 months after the initial lock-up period
ends, the Directors have undertaken that, subject to
certain customary exceptions, they will not directly or
indirectly transfer the legal and/or beneficial ownership
(or any interest therein or in respect thereof) of any
Ordinary Shares held by them immediately after Admis-
sion (or any Ordinary Shares which may accrue to it as a
result of such holding) or enter into any transaction with
the same economic effect as any of the foregoing other-
wise than through Optiva (subject to certain customary
exceptions); and
(c) Siro Cicconi has provided an undertaking that subject
to certain customary exceptions he will not directly or
indirectly transfer his legal or beneficial interest in the
share capital of Zaim SA for a period of twelve months
from Admission.
Relationship Agreement
The Board confirms that on October 29, 2019, Siro Cicconi,
Zaim SA and the Company entered into a relationship
agreement to ensure that the Company is able to carry
on its business independently of Siro Cicconi and Zaim SA
and that all transactions and relationships with Siro Cic-
coni and Zaim SA shall be on an arms’ length and normal
commercial basis. Where either of the Founder Share-
holder Parties holds or in aggregate hold 20% or more of
the total voting rights in the Company, Zaim SA has the
right to appoint a representative director. In addition,
where either of the Founder Shareholder Parties holds or
in aggregate hold 15% or more of the total voting rights
in the Company, they have the right to appoint a board
observer.
The Company complied with the Relationship Agreement
during the period under review. So far as the Company
is aware, the agreement was complied with during the
period under review by the controlling shareholder or
any of its associates; and the procurement obligation
was complied with during the period under review by the
controlling shareholder.
Directors’ statement as to the
disclosure of information to
auditor
The Directors who held office at the date of approval of
this Directors’ Report confirm that, so far as they are
individually aware, there is no relevant audit information
of which the Company’s auditor is unaware and the Di-
rectors have taken all the steps that they ought to have
taken to make themselves aware of any relevant audit
information and to establish that the auditor is aware of
the information.
The business review and review of KPIs are included
in the “Operational Overview” section of the Strategic
Report.
Events after the reporting date
The events after the reporting date are set out in note 26
to the Financial Statements.
Future developments
In 2020, the Group will be working towards further
implementation of its growth strategy; with the avail-
able equity financing following the IPO and necessary
investments already made into the online platform, Zaim
is now well positioned to grow its business and capture
the demand from a less well-off part of the Russian
population. However, in 2020, due to the uncertainty
caused by the COVID-19 pandemic, Zaim has further
decreased the cost base and decided to reduce the loan
amounts issued in order to keep business at a financial
and economic break-even level on the cash basis for the
period of “lockdown”. This will protect the Company from
potential unexpected cash outflow and provide financial
and operating stability during the turbulent times.
Information on exposure to risks
Principal risks and uncertainties are discussed in the
Risk Management section of this report as well as in
Note 20 to the Financial Statements.
Financial instruments
The financial risk management policies and objectives
are set out in detail in Note 20 to the Financial State-
ments.
Greenhouse gas emissions
The Group has as yet minimal greenhouse gas emissions
to report from the operations of the Group and does not
have responsibility for any other emission-producing
sources under the Companies Act 2006 (Strategic Report
and Directors report) Regulations 2014.
FAST AND FLAWLESS
39
Corporate Governance
Please refer to the Corporate Governance Report section
of this document.
Amendment of the Company’s
Articles of Association
The Directors do not have any specific procedures in
place regarding any potential changes to the company’s
Articles of Association, but should this need arise, this
would be presented to shareholders at a general meet-
ing in line with the company law.
Appointment and Replacement of
Directors
Subject to the Articles of Association and the Companies
Act, the Company may by ordinary resolution appoint a
person who is willing to act as a Director and the Board
shall have power at any time to appoint any person who
is willing to act as a Director, in both cases either to fill a
vacancy or as an addition to the existing Board.
At the first Аnnual general meeting, all Directors shall
retire from office and may offer themselves for re-ap-
pointment by the Shareholders by ordinary resolution.
At every subsequent Аnnual general meeting, any direc-
tor who:
i. has been appointed by the Directors since the last
Аnnual general meeting; or
ii. was not appointed or re-appointed at one of the
preceding two Аnnual general meetings;
must retire from office and may offer themselves for re-
appointment by the Shareholders by ordinary resolution.
Powers of the Company’s
Directors
The Directors do not have any specific procedures in
place regarding any potential changes to the availability
for the Company to buy back its own shares, but should
this need arise, this would be presented to the share-
holders at a general meeting in line with the company
law.
Directors and Officers Insurance
The Group has not provided Directors and Officers insur-
ance for both the current and prior periods.
Аnnual General Meeting
The Notice of the Аnnual General Meeting of the Compa-
ny will be distributed to shareholders together with the
Аnnual Report. Full details of the business to be consid-
ered at that meeting can be found in the Notice.
Due to the COVID-19 outbreak in the UK and globally, Stay
at Home Measures were passed into law in England and
Wales on March 26, 2020, prohibiting public gatherings
of more than two people who do not live in the same
household unless essential for work purposes.
In the light of this and following published legal guid-
ance, we are not permitting shareholders to attend the
AGM this year. We therefore request that shareholders
vote by proxy to ensure that votes are cast.
Independent auditor
The auditor, Shipley’s LLP, will be proposed for reappoint-
ment in accordance with section 485 of the Companies
Act 2006.
Shipley’s LLP has signified its willingness to continue in
office as auditor.
By Order of the Board
Simon Retter
Company Secretary
June 16, 2020
40
АNNUAL REPORT 2019 Remuneration
REPORT The Board of Directors of Zaim
Credit Systems Plc formed
the Remuneration Committee
that was constituted at a full
meeting of the Board held on
29.10.2019 in accordance with
the Articles of Association
of the Company.
Chief Operating
Officer – Vladimir Golovko
Vladimir Golovko is paid an Аnnual salary of £10,000 by
the Company. Under the terms of an agreement dated
December 21, 2017, Vladimir Golovko is also employed
by Zaim for a monthly salary of 700,000 Russian rubles
(approximately £8,500) and a yearly bonus determined
by the shareholders with reference to key performance
indicators.
A discretionary quarterly bonus is typically paid in the
amount of one monthly salary (depending on the perfor-
mance).
Finance Director – Simon Retter
Simon Retter is paid an Аnnual salary of £60,000 which
shall escalate to £120,000 per annum if Zaim reaches
EBITDA of £200,000 per calendar month and shall further
escalate to £150,000 per annum if Zaim reaches EBITDA
of £350,000 per calendar month.
Non-executive Director – Paul
Auger
Paul Auger is paid an Аnnual salary of £20,000 which
shall escalate to £27,000 per annum if Zaim reaches
EBITDA of £200,000 per calendar month.
The Committee determines and, together with the Board,
approves the framework or broad policy for the remu-
neration of the Company’s chairperson and the executive
directors, including pension rights and compensation
payments. The remuneration of non-executive directors
shall be a matter for the board or the shareholders
(within the limits set in the Articles of Association).
No director or senior manager shall be involved in any
decisions as to their own remuneration. The Committee
recommends and monitors the level and structure of
remuneration for senior management.
The Group’s policy is to maintain levels of remuneration
so as to attract, motivate, and retain Directors and Sen-
ior Managers of the highest calibre who can contribute
their experience to deliver industry-leading performance
with the Group’s operations.
Below are the summary service contracts and appoint-
ment letters of the Directors:
Non-Executive Chairman –
Malcolm Groat
Malcolm Groat is paid an Аnnual salary of £25,000 which
shall escalate to £35,000 if Zaim reaches EBITDA of
£200,000 per calendar month.
Chief Executive Officer – Siro
Cicconi
Siro Cicconi is paid an Аnnual salary of £100,000 which
shall escalate to £200,000 per annum if Zaim reaches
EBITDA of £200,000 per calendar month and shall further
escalate to £350,000 per annum if Zaim reaches EBITDA
of £350,000 per calendar month.
FAST AND FLAWLESS
41
Below is the summary of remuneration for each Director for 2019:
Salary
Other Fees
Benefits
Pension
Contributions
Share-based
payment charge
Malcolm Groat
Siro Donato Cicconi
Vladimir Golovko
Simon James Retter*
Paul James Auger
Total
£
4,167
16,667
149,423
10,000
3,333
183,590
£
-
-
-
40,000
-
40,000
£
-
-
-
-
-
-
£
-
-
-
-
-
-
Total
£
5,185
77,760
152,430
86,656
3,333
£
1,018
61,093
3,007
36,656
-
101,774
325,364
* Includes £40,000 fees charged to Zaim and the share-based payment charge of £36,656 in respect of the services provided by a company controlled by Simon
Retter before the acquisition of Zaim by ZCS
Below is the summary of remuneration for each Director for 2018, which is for Zaim only, as it is from before ZCS acquired Zaim. There was
no director remuneration prior to the acquisition of Zaim by ZCS:
Malcolm Groat
Siro Donato Cicconi
Vladimir Golovko
Simon James Retter
Paul James Auger
Total
Salary
Other Fees
Benefits
Pension
Contributions
Share-based
payment charge
£
-
-
130,879
-
-
130,879
£
-
-
-
-
-
-
£
-
-
-
-
-
-
£
-
-
-
-
-
-
£
-
-
-
-
-
-
Total
£
-
-
130,879
-
-
130,879
Shares and options held by the Directors are as follows:
Malcolm Groat
Siro Donato Cicconi
Vladimir Golovko
Simon James Retter
Paul James Auger
Shares held
Share options
Shares held
Share options
2019
-
320,000,000
-
3,600,000
-
2019
2,150,000
10,750,000
8,600,000
6,450,000
-
2018
-
-
-
1,000,000
-
2018
-
-
-
-
-
There was no discretionary pay for any of the directors,
all terms of the director’s remunerations are fixed as per
the contracts set out in the prospectus and are directly
linked to the EBIT generated by Zaim on a monthly basis.
As of the end of 2019, neither of these milestones had
been reached.
There is no LTIP in place and none of the directors re-
ceived any benefits in kind or pension contributions.
The company issued certain directors with options exer-
cisable at the issue price of 2.5p at the date of the IPO.
The share-based payment charge was calculated using
the Black Scholes method and included in the tables
above.
Approved on behalf of the Board
Malcolm Groat
Non-Executive Chairman
June 16, 2020
42
АNNUAL REPORT 2019 Corporate governance
REPORT
Corporate governance practices
The Board recognises the importance of sound corpo-
rate governance commensurate with the size of the
Company and the interests of Shareholders. As the
Company is listed in the Standard segment of the Official
List of the LSE, it is not required to comply with the UK
Corporate Governance Code, which is applicable to all
companies whose securities are admitted to trading to
the premium segment of the Official list. The UK Cor-
porate Governance Code can be found at https://www.
frc.org.uk/directors/corporate-governance-and-stew-
ardship. Nevertheless, the Directors are committed to
maintaining high standards of corporate governance and
propose, so far as is practicable given the Company’s
size and nature, to voluntarily adopt and comply with the
QCA Code. However, at present, due to the size of the
Company, the Directors acknowledge that adherence to
certain provisions of the QCA Code may be delayed until
such time as the Directors are able to fully adopt them.
Audit committee
The Audit Committee assists the Board in discharging
its responsibilities with regard to financial reporting,
external and internal controls, including reviewing and
monitoring the integrity of the Group’s Аnnual and inter-
im financial statements, reviewing and monitoring the
extent of the non-audit work undertaken by the Group’s
external auditors, advising on the appointment of such
external auditors, overseeing the Group’s relationship
with its external auditors, reviewing the effectiveness of
the external audit process, and reviewing the effective-
ness of the Group’s internal control and review function.
The ultimate responsibility for reviewing and approving
the Аnnual report and accounts and the half-yearly
reports remains with the Board. The audit committee will
meet not less than twice a year. The Audit Committee is
chaired by Malcolm Groat, and its other member is Paul
Auger. The Directors consider that Simon Retter has
recent and relevant financial experience.
The role of the Board
The Company holds timely board meetings as issues
arise which require the attention of the Board. The Board
is responsible for the management of the business
of the Company, setting the strategic direction of the
Company and establishing the policies of the Company.
It is the Directors’ responsibility to oversee the financial
position of the Company and monitor the business and
affairs of the Company on behalf of the Shareholders,
to whom they are accountable. The primary duty of the
Directors is to act in the best interests of the Company
at all times. The Board also addresses issues relating
to internal control and the Company’s approach to risk
management.
The Directors have established an audit and remunera-
tion committee. The Board does not consider it appro-
priate to establish a nomination committee at this stage
of the Company’s development, and the decisions usually
undertaken by those committees will be taken by the
Board as a whole.
Remuneration committee
The Group has established a Remuneration Committee,
which will comprise Malcolm Groat as Chairman and Paul
Auger, to review the performance of the Executive Direc-
tors and set the scale and structure of their remunera-
tion and the basis of their service agreements with due
regard to the interests of Shareholders. In determining
the remuneration of Executive Directors, the Remunera-
tion Committee will seek to enable the Group to attract
and retain executives of the highest calibre. The Remu-
neration Committee also makes recommendations to
the Board concerning the allocation of any share awards.
No Director is permitted to participate in discussions or
decisions concerning their own remuneration.
Market Abuse Regulation
The Board has adopted a share dealing code that com-
plies with the requirements of the Market Abuse Regu-
lation. The Board is responsible for taking all proper and
reasonable steps to ensure compliance with the MAR
by the Directors and persons discharging managerial
responsibilities. The FCA is the competent authority for
MAR and has powers to intervene as competent au-
thority and will be responsible for the investigation and
enforcement of breaches of MAR.
FAST AND FLAWLESS
43
Board Meetings
The core activities of the Board are carried out in sched-
uled meetings of the Board. These meetings are timed to
link to the key events in the Group’s corporate calendar
and regular reviews of the business are conducted.
Additional meetings and conference calls are arranged
to consider matters which require decisions outside the
scheduled meetings.
Zaim Credit Systems Plc completed its IPO on November
04, 2019, so it only existed for two months as a public
company in 2019. Independent non-executive directors
Malcolm Groat and Paul James Augier were only elected
after the Admission.
The Board met on two occasions: one meeting before
the IPO on October 29, 2019, and another after the IPO on
November 13, 2019.
Attendance at meetings:
Member
Malcolm Groat
Siro Donato Cicconi
Paul James Auger
Simon James Retter
Vladimir Golovko
Non-Executive Chairman
Director and CEO
Non-Executive Director
Finance Director
Chief Operating Officer
October 29, 2019
No
Yes
No
Yes
Yes
November 13, 2019
Yes
Yes
Yes
Yes
Yes
Outside the scheduled meetings of the Board, the
Directors maintain frequent contact with each other to
discuss any issues of concern they may have relating
to the Group or their areas of responsibility and to keep
them fully briefed on the Company’s operations.
The Directors are of the view that the Board and its
committees consist of Directors with an appropriate
balance of skills, experience, independence and diverse
backgrounds to enable them to discharge their duties
and responsibilities effectively.
Independence
The Board considers each of the non-executive Directors
to be independent in character and judgement.
Appointments
The Board is responsible for reviewing the structure, size
and composition of the Board and making recommenda-
tions to the Board with regards to any required changes.
Commitments
All Directors have disclosed their significant commit-
ments to the Board and confirmed that they have suffi-
cient time to discharge their duties.
Induction
All new Directors received an induction as soon as prac-
tical on joining the Board.
Matters reserved specifically for
Board
The Board has a formal schedule of matters reserved
that can only be decided by the Board. The key matters
reserved are the consideration and approval of:
• • The Group’s overall strategy;
• • Financial Statements and dividend policy;
• • Management structure including succession planning,
appointments and remuneration; material acquisitions
and disposal, material contracts, major capital
expenditure projects and budgets;
• • Capital structure, debt and equity financing and other
matters;
• • Risk management and internal controls;
• • The Group’s corporate governance and compliance
arrangements;
• • Corporate policies.
Effectiveness
For the period under review, the Board comprised the
Chief Executive Officer, a non-executive Chairman and
three other Director, including one independent non-ex-
ecutive Director. See the biographical details in the
“Board of Directors” section of the “Corporate Govern-
ance” section of this report.
44
АNNUAL REPORT 2019 Conflicts of interest
A Director has a duty to avoid a situation in which he or
she has, or can have, a direct or indirect interest that
conflicts, or possibly may conflict with the interests of
the Group and Company. The Board has satisfied itself
that there is no compromise to the independence of
those Directors who have appointments on the Boards
of, or relationships with, the companies outside the
Company. The Board requires Directors to declare all
appointments and other situations which could result in
a possible conflict of interest.
Board performance and
evaluation
The Company has a policy of appraising Board perfor-
mance Аnnually. Having reviewed various approaches to
Board appraisal, the Company has concluded that for a
Company of its current scale, an internal process of reg-
ular face to face meetings is most appropriate, in which
all Board members discuss any issues as and when they
arise in relation to the Board or any individual member’s
performance.
Remuneration policy
In determining the remuneration policy, the Committee
takes into account all the factors which it deems nec-
essary, including relevant legal and regulatory require-
ments and the provisions and recommendations of rel-
evant guidance. The objective of such policy shall be to
attract, retain and motivate the executive management
of the company without paying more than necessary. The
remuneration policy bears in mind the Company’s appe-
tite for risk and is aligned with the Company’s long-term
strategic goals. A significant proportion of remuneration
is structured so as to link rewards to corporate and
individual performance and is designed to promote the
long-term success of the Company.
When setting the remuneration policy for directors of
the Company, the Committee reviews and has regard to
the pay and employment conditions across the company
or group, especially when determining salary increases.
All Remuneration Committee members demonstrate in-
dependent judgement and discretion when determining
and approving remuneration outcomes.
Investing in the Company’s
workforce
Remuneration system of the Company includes:
1. Guaranteed salary, which is the fixed monetary
remuneration of an employee
This amount does not depend on the financial situation
of the organisation, personal characteristics of the em-
ployee and/or other factors. It includes:
• • basic salary for the time actually worked
• • compensations for overnight and overtime work
• • allowances
2. Variable part of the salary linked to professional
achievements of an employee
• • bonus for overachievement of the plan;
• • payment for the participation in the training of young
professionals
Diversity
Although the Board consists only of male Directors,
the Board supports diversity in the Boardroom and the
Financial Reporting Council aims to encourage such
diversity.
Accountability
The Board is committed to providing shareholders with a
clear assessment of the Group’s position and prospects.
This is achieved through this report and, as required,
other periodic financial and trading statements.
External Audit
No significant issues were identified during the external
audit process undertaken by the external auditors. The
Audit Committee reviews the audit process each year
and, in addition, analyzes the performance and feed-
back from the external auditors as part of the reporting
process. The audit committee assesses the external au-
ditor’s independence, length of service and provision of
non-audit services as part of the review of the suitability
of the external auditors to continue to hold office for
the following year and therefore seek reappointment at
the next AGM. A tender was not undertaken for reap-
pointment of the audit this year, as the current external
auditors had only held office for less than the statutory
number of years prior to a retender process.
External auditors of the Group are independent and
objective as they do not provide non-audit services.
FAST AND FLAWLESS
45
Internal controls
The Board of Directors reviews the effectiveness of
the Group’s and Company’s system of internal controls
in line with the requirement of the Code. The internal
control system is designed to manage the risk of failure
to achieve its business objectives. This covers internal
financial and operational controls, compliance and risk
management. The Company had necessary procedures
in place for the year under review and up to the date of
approval of the Аnnual Report and Financial Statements.
The Directors acknowledge their responsibility for the
Group’s and Company’s system of internal controls and
for reviewing its effectiveness. The Board confirms the
need for an ongoing process for identification, evalua-
tion and management of significant risks faced by the
Group. The Directors carry out a risk assessment before
signing up to any commitments.
The Audit Committee regularly reviews and reports to
the Board on the effectiveness of the system of internal
control. Given the size of the Group and Company and
the relative simplicity of the systems, the Board consid-
ers that there is no current requirement for an internal
audit function. The procedures that have been estab-
lished to provide internal financial control are consid-
ered appropriate for a Group and Company of its size
and include controls over expenditures, regular reconcil-
iations and management accounts.
The Directors are responsible for taking such steps as
are reasonably available to them to safeguard the assets
of the Group and to prevent and detect fraud and other
irregularities.
Nomination
Currently, due to the size of the Group, there is no Nomi-
nation Committee.
Shareholder relations
Open and transparent communication with shareholders
is given high priority and there is regular dialogue with
institutional investors, as well as general presentations
made at the time of the release of the Аnnual and
interim results. All Directors are kept aware of changes
in major shareholders in the Company and are available
to meet with shareholders who have specific interests
or concerns. The Group issues its results promptly to
individual shareholders and also publishes them on the
Company’s website: www.zaimcreditsystemsplc.com.
Regular updates to record news in relation to the Group
are included on the Company’s website.
The Directors are available to meet with institutional
shareholders to discuss any issues and gain an under-
standing of the Company’s business, its strategies and
governance. Meetings are also held with the corporate
governance representatives of institutional investors
when requested.
Our AGMs give the Board the opportunity to engage
with investors on the running of their company, and to
receive feedback. ZCS plans to conduct its first AGM
following the publication of this Аnnual report, but due
to the exceptional circumstances surrounding COVID-19
and the Stay at Home measures in force in the United
Kingdom, shareholders will not be permitted to attend.
The Board also considers the views and interests of
other key stakeholders, including clients, employees,
regulators and the society as a whole in its discussions.
Аnnual General Meeting
At every Аnnual general meeting, individual sharehold-
ers are given the opportunity to put questions to the
Chairman and to other members of the Board that may
be present. Notice of the Аnnual general meeting is sent
to shareholders at least 21 clear days before the Аnnual
general meeting. Details of proxy votes for and against
each resolution together with the votes withheld are
announced by way of regulatory information service
and are published on the Company’s website as soon as
practical after the Аnnual general meeting.
Approved on behalf of the Board
Malcolm Groat
Non-Executive Chairman
June 16, 2020
46
АNNUAL REPORT 2019 Directors’ responsibilities
STATEMENT
For the year ended December 31, 2019
The directors are responsible for
preparing the strategic report, Аnnual
report and the financial statements in
accordance with the applicable law and
regulations.
The Company law requires the directors to prepare
financial statements for each financial year. Under that
law, the directors have elected to prepare the Group’s
and Company’s financial statements in accordance with
the International Financial Reporting Standards (IFRSs)
as adopted by the European Union. Under the compa-
ny law, the directors must not approve the financial
statements unless satisfied that the statements give
a true and fair view of the state of affairs of the Group
and Company and of the profit or loss of the Group and
Company for that period. The directors are also required
to prepare financial statements in accordance with the
rules of the London Stock Exchange.
In preparing these financial statements, the directors
are required to:
• • Select suitable accounting policies and then apply
them consistently;
• • Make judgments and accounting estimates that are
reasonable and prudent;
Directors’ Responsibility statement
We confirm that to the best of our knowledge:
• • The financial statements prepared in accordance
with the relevant financial reporting framework give
a true and fair view of the assets, liabilities, financial
position and profit or loss of the company and the
undertakings included in the consolidation taken as a
whole;
• • The Strategic Report includes a fair review of the
development and performance of the business and
the position of the company and the undertakings
included in the consolidation taken as a whole
together with a description of the principal risks and
uncertainties that they face; and
• • State whether applicable UK Accounting Standards
have been followed, subject to any material
departures disclosed and explained in the financial
statements; and
• • Prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the company will continue in business.
The directors are responsible for keeping adequate ac-
counting records that are sufficient to show and explain
the company’s transactions and disclose with reason-
able accuracy at any time the financial position of the
company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregulari-
ties.
The directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the company’s website. Legislation in the
United Kingdom governing the preparation and dissem-
ination of financial statements may differ from legisla-
tion in other jurisdictions.
• • The Аnnual Report and financial statements, taken as
a whole, are fair, balanced and understandable and
provide the information necessary for shareholders
to assess the company’s position and performance,
business model and strategy.
This responsibility statement was approved by the Board
of Directors on June 16, 2020 and was signed on its
behalf by:
Simon Retter
Company Secretary
June 16, 2020
FAST AND FLAWLESS
47
4
Financial
STATEMENTS
Financial
STATEMENTS
CONTENTS
Independent Auditor’s Report to the Shareholders of Zaim Credit Systems plc
51
Consolidated Financial Statements and Company Financial Statememts
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Notes to the Consolidated Financial Statements
1. Principal Activities of the Group
2. Operating Environment of the Group
3. Basis of Presentation
4. Summary of Significant Accounting Policies
5. Cash and Cash Equivalents
6. Loans to Customers
7. Lease
8. Other Assets
9. Loans Received
10. Other Liabilities
11. Charter and Additional Capital, Other reserves. Earnings per share
12. Share-based payment
13. Interest Income and Expense
14. Gains less Losses from Dealing in Foreign Currency
15. Allowance for Expected Credit Losses / Impairment of Other Assets
16. Other Operating Income
17. Staff Costs
18. Operating Expenses
19. Income Tax
20. Risk Management
21. Capital management
22. Contingencies
23. Fair Value of Financial Instruments
24. Reconciliation of Classes of Financial Instruments with Measurement Categories
25. Related Party Transactions
26. Business combination
27. Events after the Reporting Period
50
55
55
56
56
57
57
58
58
59
59
59
60
62
64
65
66
67
67
68
68
69
69
69
70
70
70
70
70
71
75
75
75
75
76
76
77
АNNUAL REPORT 2019 Independent Auditor’s
Report to the hareholders
of Zaim Credit Systems plc
Opinion
We have audited the financial statements of Zaim Credit Systems plc
(the ‘parent company)’ and its subsidiaries (the ‘Group’) for the year
ended December 31, 2019, which comprise the Consolidated Statement
of Profit or Loss and Other Comprehensive Income, Consolidated and
Company Statement of Financial Position, Consolidated and Company
Statement of Changes in Equity, Consolidated and Company Statement
of Cash Flows and notes to the financial statements, including signif-
icant accounting policies. The financial reporting framework that has
been applied in the preparation of the group financial statements is the
applicable law and International Financial Reporting Standards (IFRSs)
as adopted by the European Union. The financial reporting framework
that has been applied in the preparation of the parent company
financial statements is the applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with the International Standards
on Auditing (UK) (ISAs (UK)) and the applicable law. Our responsibilities
under those standards are further described in the Auditor’s Responsi-
bilities for the Audit of the Financial Statements section of our report.
We are independent of the group and the parent company in accor-
dance with the ethical requirements that are relevant to our audit of
In our opinion:
• • the financial statements give a true and fair view of the state of
the group’s and of the parent company’s affairs as at December
31, 2019 and of the group’s loss for the year then ended;
• • the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
• • the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European
Union; and
• • the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006; and, as regards the
group financial statements, Article 4 of the IAS Regulation.
the financial statements in the UK, including the FRC’s Ethical Standard
as applied to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide the basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the direc-
tors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. Our evaluation of the directors’
assessment of the entity’s ability to continue to adopt the going
concern basis of accounting included carrying out a risk assessment
which covered the nature of the group, its business model and related
risks including where relevant the impact of Coronavirus, the require-
ments of the applicable financial reporting framework and the system
of internal control. We evaluated the directors’ assessment of the
group’s ability to continue as a going concern, including challenging the
underlying data and key assumptions used to make the assessment,
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance for our audit of the financial
statements of the current period and include the most significant as-
sessed risks of material misstatement (whether or not due to fraud)
we identified, including those, which had the greatest effect on: the
and evaluated the directors’ plans for future actions in relation to their
going concern assessment.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the company’s or group’s
ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of this
report.
overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Risk
Impact of COVID-19
There is a risk that the Group may not be
considered a going concern as a result
of the impact of COVID-19 (Coronavirus).
Our response to the risk
We read the Directors’ assessment of the risks and impacts
of COVID-19 on the business. We compared this assessment
to our own understanding of the risks, and the nature of the
Group’s operations, products and customer base. We then
conducted a review of going concern in respect of COVID-19,
which included reviewing forecasts and current trading
performance, and carrying out stress testing. The work
undertaken considered a period of at least twelve months
from the date of approving these financial statements.
Our response and observation
The disclosures in the financial
statements adequately reflect
the Directors’ conclusions around
the uncertainties and impact
of COVID-19 and, that the going
concern assumption remains
appropriate.
FAST AND FLAWLESS
51
Recoverability of loans to customers
Given the extended credit terms that
were provided to customers, judgement
is required to establish how much of the
loan receivables balance is recoverable.
There is a risk that management’s
judgements and estimates over
recoverability are inappropriate, when
considering the specific balances and
the requirements of IFRS 9.
Risk that acquisitions have been
incorrectly accounted for
The Company acquired Zaim Express
LLC during the year by way of a reverse
acquisition. There is a risk that the
transaction was not correctly accounted
for in line with IFRS.
Risk of fraud in revenue recognition
There is a risk that revenue is materially
understated due to fraud.
Risk that management is able to
override controls
Journals can be posted that significantly
alter the financial statements.
We understood the Group’s process for estimating the
expected credit loss provision under IFRS 9. Loans to
customers were tested on a sample basis, which included
considering the recoverability of the balances post year end.
Overdue balances were discussed with the management and
we assessed whether the accounting provision appropriately
reflects the facts and circumstances.
We did not identify any evidence of
material misstatement related to
carrying value of receivables. The
management continue to apply an
appropriate expected credit loss
provision.
We conducted a detailed review of the journals posted with
regards to the reverse acquisition and the mechanism for
preparing the consolidated financial statements. Work was
also undertaken to determine if the transaction met the
requirements to be considered a reverse acquisition.
The acquisition of Zaim Express
LLC was correctly accounted for in
accordance with IFRS.
We reviewed the Group’s revenue recognition policies and
how they are applied. Revenue was then tested on a sample
basis to confirm that transactions have been appropriately
recorded in line with IFRS 15.
We examined journals posted around the year end,
specifically focusing on areas, which are more easily
manipulated.
Revenue was recognised in
accordance with the Group’s
accounting policy and we concluded
that no evidence of fraud or other
understatement was identified.
We identified no evidence of
management override in respect
of inappropriate manual journals
recorded in any section of the
financial statements.
Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be charged
or influenced. We use materiality both in planning and in the scope of
our audit work and in evaluating the results of our work.
We determine materiality for the Group to be £155,180 and this
financial benchmark, which has been used throughout the audit,
was determined by way of a standard formula being applied to key
financial results and balances presented in the financial statements.
Where considered relevant the materiality is adjusted to suit the
specific risk profile of the Group.
Performance materiality is the application of materiality at the
individual account or balance level set at an amount to reduce to
an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality.
Performance materiality was set at 75% of the above materiality
levels. We agreed with the audit committee that we would report
to the committee all individual audit differences identified during
the course of our audit in excess of £7,759. We also agreed to report
differences below these thresholds that, in our view, warranted
reporting on qualitative grounds.
Our group audit scope focused on the group’s principal operating
subsidiary, being Zaim Express LLC, which was subject to a full scope
audit together with the parent company. Shipleys LLP performed the
audit of the parent company and BDO Unicon JSC performed the audit
of the Russian component.
The group audit team was actively involved in the direction of the
audit and specific audit procedures performed by the component
auditor along with the consideration of findings and determination
of conclusions drawn. As part of our audit strategy, we issued group
audit engagement instructions and discussed the instructions with
the component auditor. A senior member of the group audit team
met with the component auditor and local management, performed
a review of the component audit files and we discussed the audit
findings with the component auditor.
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding of the
group and its environment, including the group’s system of internal
control, and assessing the risks of material misstatement in the
financial statements at the group level.
Whilst Zaim Credit Systems plc is a company registered in England &
Wales and its head office is located in the UK, the group’s principal
operations are located in Russia. In approaching the audit, we
considered how the group is organised and managed. We assessed
the activities of the group as being the issuance of microfinance
loans to Russian individuals.
52
АNNUAL REPORT 2019 Other Information
The other information comprises the information included in
the Аnnual report other than the financial statements and our
auditor’s report thereon. The directors are responsible for the
other information contained within the Аnnual report. Our opinion
on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves.
If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact.
In this context, matters that we are specifically required to report to
you as uncorrected material misstatements of the other information
include where we conclude that:
• • Fair, balanced and understandable – the statement given by
the directors that they consider the Аnnual report and financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to
assess the groups’ position and performance, business model and
strategy, is materially inconsistent with our knowledge obtained in
the audit; or
• • Audit committee reporting - the section describing the work
of the audit committee does not appropriately address matters
communicated by us to the audit committee; or
We have nothing to report in respect of these matters.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the
audit:
• • the information given in the strategic report and the directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• • the strategic report and the directors’ report have been prepared
in accordance with applicable legal requirements
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the
parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic
report or the directors’ report.
• • the parent company financial statements and the part of the
directors’ remuneration report to be audited are not in agreement
with the accounting records and returns; or
• • certain disclosures of directors’ remuneration specified by law are
We have nothing to report in respect of the following matters, in
relation to which the Companies Act 2006 requires us to report to you
if, in our opinion:
• • adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set
out on page 40, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
not made; or
• • we have not received all the information and explanations we
require for our audit.
In preparing the financial statements, the directors are responsible
for assessing the company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either
intend to liquidate the company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s Responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level
of assurance but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
FAST AND FLAWLESS
53
Explanation as to what extent the audit was considered capable of
detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. Our approach was as
follows:
• • We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Group and determined the
most significant are those that relate to the reporting framework
(IFRS, the Companies Act 2006) and the relevant tax compliance
regulations in the jurisdictions in which the Group operates.
• • We understood how Zaim Credit Systems plc is complying with
those frameworks by making enquiries on the management,
the Company Secretary, and those responsible for legal and
compliance procedures. We corroborated our enquiries
through our review of board minutes, papers provided to the
Audit Committee, discussion with the Audit Committee and any
correspondence received from regulatory bodies.
• • We assessed the susceptibility of the Group’s financial statements
to material misstatement, including how fraud might occur by
enquiring with management and the Audit Committee during the
planning and execution phase of our audit. We considered the
programs and controls that the Group has established to address
risks identified, or that otherwise prevent, deter and detect
fraud and how senior management monitors those programs
and controls. Where the risk was considered to be higher, we
performed audit procedures to address each identified fraud
risk including revenue recognition as discussed above. These
procedures included testing manual journals and were designed
to provide reasonable assurance that the financial statements
were free from fraud or error.
• • Based on this understanding we designed our audit procedures
to identify non-compliance with such laws and regulations.
Our procedures involved journal entry testing, with a focus on
manual consolidation journals and journals indicating large or
unusual transactions based on our understanding of the business;
enquiries of the Company Secretary and management; and
focused testing, as referred to in the key audit matters section
above.
Other matters, which we are required to address
We were appointed by the board on February 21, 2020 to audit the
financial statements for the period ending December 31, 2019. Our
total uninterrupted period of engagement is 2 years, covering the
periods ending December 31, 2018 to December 31, 2019.
The non-audit services prohibited by the FRC’s Ethical Standard were
not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting our
audit.
Our audit opinion is consistent with the additional report to the audit
committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Benjamin Bidnell
For and on behalf of SHIPLEYS LLP,
Chartered Accountants and Statutory Auditor
10 Orange Street, Haymarket, London, WC2H 7DQ
June 16, 2020
54
АNNUAL REPORT 2019 Consolidated Financial
Statements for the Year
Ended December 31, 2019
Zaim Credit Systems Group
Consolidated Statement of Financial Position as at 31 December 2019 (in British pounds sterling)
Company Registered number 11418575
Assets
Cash and cash equivalents
Loans to customers
Property and equipment
Right-of- use assets under lease agreements
Other assets
Total assets
Liabilities
Loans received
Lease liabilities
Other liabilities
Total liabilities
Equity
Charter capital
Additional capital
Foreign currency translation reserve
Merger reserve
Accumulated deficit
Total equity
Total liabilities and equity
Note
2019
2018
5
6
7
8
9
7
10
11
11,25
11
11,26
11
1,582,751
786,346
11,967
2,549,233
222,117
5,152,414
742,603
2,555,648
664,905
3,963,156
4,369,750
6,078,128
4,457,788
23,764,800
(37,481,208)
1,189,258
5,152,414
454,549
640,371
13,559
-
229,126
1,337,605
908,293
-
1,006,171
1,914,464
2,492,363
29,122,880
4,497,731
-
(36,689,833)
(576,859)
1,337,605
Siro Donato Cicconi,
Chief Executive Officer
Simon James Retter,
Finance Director
June 16, 2020
FAST AND FLAWLESS
55
Zaim Credit Systems plc
Company Statement of Financial Position as at 31 December 2019 (in British pounds sterling)
Company Registered number 11418575
Assets
Cash and cash equivalents
Other assets
Investment in Subsidiary
Total assets
Liabilities
Other liabilities
Total liabilities
Equity
Charter capital
Additional capital
Accumulated deficit
Total equity
Total liabilities and equity
Note
2019
2018
5
8
1
10
11
11
1,310,655
68,122
8,705,663
10,084,440
162,666
162,666
4,369,750
6,078,128
(526,104)
9,921,774
10,084,440
-
60,000
-
60,600
66,670
66,670
60,000
-
(66,670)
(6,670)
60,000
The above Company Statement of Financial Position should be read in conjunction with the accompanying notes, loss for the period was
£ 626,317 (2018: £ 66,670). As permitted by section 408 of the Companies Act 2006, the statement of comprehensive income of the Parent
Company is not presented as part of these Financial Statements.
The Financial Statements were authorised for issue by the Board of Directors on June 16, 2020 and were signed on its behalf.
Siro Donato Cicconi,
Chief Executive Officer
Simon James Retter,
Finance Director
June 16, 2020
Zaim Credit Systems Group
Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Year Ended December 31, 2019 (in British pounds
sterling)
Interest income
Interest expenses
Interest expense – lease liabilities
Net interest income
Allowance for ECL/impairment of loans to customers
Net interest income after allowance for ECL/impairment of loans to customers
Gains less losses from dealing in foreign currency
Other operating income
Operating income
Staff costs
Charge for share based options
Operating expenses
Costs of IPO
Deemed cost of listing
Loss before income tax
Income tax expense
Net loss
Net other comprehensive income that may be reclassified to profit or loss
Foreign exchange differences arising on translation into presentation currency
Total comprehensive expense
56
Note
13
13
6,8,15
14
16
17
12
18
18
26
19
2019
3,940,747
(28,018)
(243,281)
3,669,448
(231,681)
3,437,767
95,497
790,554
4,323,818
(2,006,265)
(166,883)
(2,523,112)
(369,146)
(150,000)
(891,589)
-
(891,589)
(39,942)
(931,531)
2018
10,226,071
(2,460,874)
-
7,765,197
(4,213,239)
3,551,958
(822,620)
827,322
3,556,660
(2,339,965)
-
(2,762,326)
-
(1,545,631)
-
(1,545,631)
3,820,203
2,274,572
АNNUAL REPORT 2019 Zaim Credit Systems Group
Consolidated Statement of Changes in Equity for the Year Ended December 31, 2019 (in British pounds sterling)
Charter
capital
Additional
capital
Foreign currency
translation reserve
(FCTR)
Merger
reserve
Accumulated
deficit
Total
equity
Balance at December 31, 2017
Impact of IFRS 9 adoption
Balance at January 1, 2018 restated in
accordance with IFRS 9
Financial assistance from the participant
(Note 11, 25)
Comprehensive loss for 2018
Balance at December 31, 2018
Reverse acquisition in 2019
Comprehensive loss for 2019
Share-based payments
2,492,363
-
2,492,363
-
-
-
-
-
677,528
-
-
(35,050,047)
(94,155)
(31,880,156)
(94,155)
677,528
-
(35,144,202)
(31,974,311)
29,122,880
-
-
-
29,122,880
-
3,820,203
-
(1,545,631)
2,274,572
2,492,363
1,877,387
29,122,880
(23,044,752)
4,497,731
-
-
23,764,800
(36,689,833)
(66,670)
-
-
(39,942)
-
(891,589)
166,883
(576,859)
2,530,765
(931,531)
166,883
Balance at December 31, 2019
4,369,750
6,078,128
4,457,788 23,764,800
(37,481,208)
1,189,258
Zaim Credit Systems plc
Company Statement of Changes in Equity for the Year Ended December 31, 2019 (in British pounds sterling)
Balance at December 31, 2017
Company incorporation
Comprehensive loss for 2018
Balance at December 31, 2018
Issue during the year
Expenses on issue of shares
Comprehensive loss for 2019
Share-based payments
Balance at December 31, 2019
Charter capital
Additional capital
Accumulated
deficit
-
60,000
-
60,000
4,309,750
-
-
-
-
-
-
-
6,406,699
(328,570)
-
-
4,369,750
6,078,128
-
-
(66,670)
(66,670)
-
-
(626,317)
166,883
(526,104)
Total
equity
-
60,000
66,670
(6,670)
10,716,449
(328,570)
(626,317)
166,883
9,921,774
FAST AND FLAWLESS
57
Zaim Credit Systems Group
Consolidated Statement of Cash Flows for the year ended December 31, 2019 (in British pounds sterling)
2019
2018
Cash flows from operating activities
Interest received
Interest paid
Gains less losses from dealing in foreign currency
Other operating income
Staff costs
Operating expenses
Cash flows from/(used in) operating activities before changes in operating assets and
liabilities
Net (increase)/decrease in operating assets
Loans to customers
Other assets
Net decrease in operating liabilities
Other liabilities
Net cash flows from operating activities
Cash flows from investing activities
Proceeds from placements under fiduciary management agreement
Purchases of property and equipment
Net cash flows from investing activities
Cash flows from financing activities
Repayment of lease liabilities
Loans received
Repayment of loans received
Issue of ordinary shares (includng share premium)
Share issue costs
Net cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year (Note 5)
Zaim Credit Systems plc
Company Statement of Cash Flows for the year ended December 31, 2019 (in British pounds sterling)
Cash flows from operating activities
Loss for the period
Correction for non-cash transaction (charge for share options granted)
Cash flows from/(used in) operating activities before changes in operating assets and liabilities
Adjustments for
Increase in trade and other receivables, VAT
Increase in trade and other payables
Cash generated from operations
Net cash flows used in operating activities
Cash flows from investing activities
Investment in Subsidiary
Net cash flows from investing activities
Cash flows from financing activities
Issue of ordinary shares (includng share premium)
Share issue costs
Net cash flows from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year (Note 5)
58
2,332,339
(400,142)
(9,448)
198,600
(2,005,236)
(1,440,487)
(1,324,373)
1,259,013
4,126
162,957
101,723
-
(2,130)
(2,130)
(1,389,284)
653,530
(653,530)
2,716,449
(328,570)
998,594
30,015
1,128,202
454,549
1,582,751
8,172,050
(2,174,103)
3,314
12,109
(2,402,998)
(2,650,846)
959,526
(1,833,502)
23,930
(9,906)
(859,952)
5,193
(3,733)
1,460
-
944,725
-
-
-
944,725
(89,264)
(3,031)
457,580
454,549
2019
2018
(626,317)
166,883
(459,433)
(8,122)
95,995
(371,560)
(371,560)
(705,663)
(705,663)
2,716,449
(328,570)
2,387,878
1,310,655
-
1,310,655
(66,670)
-
(66,670)
(60,000)
66,670
(60,000)
(60,000)
-
-
60,000
-
60,000
-
-
-
АNNUAL REPORT 2019 Notes to the Consolidated
Financial Statements
1. Principal Activities of the Group
The principal activity of Zaim Credit Systems plc (“the Company”) and
its subsidiary Zaim-Express, LLC (together “the Group”) is issuance
of microloans to individuals (retail customers). The Company was
incorporated as Agana Holdings Plc and registered in England and
Wales on June 15, 2018 as a public limited company with company
registration number 11418575 and LEI, 213800Z4MI9KSZA2VW72 and on
July 22, 2019 the Company changed its name to Zaim Credit Systems Plc.
The Subsidiary’s principle activity is issuance of microloans through
the network of it’s branches in Russian cities (including Moscow and
the Moscow region, St. Petersburg, Volgograd, Samara, Orel, Tula).
The Subsidiary was entered in the state register of microfinance
organisations on August 29, 2011, registration number 2110177000440. The
Subsidiary’s assets and liabilities are located in the Russian Federation.
The average number of Subsidiary’s employees is as follows:
On September 18, 2019 the Company acquired the entire issued
share capital of Zaim-Express LLC. The Company is now the holding
company of a Russian-based financial services company Zaim-
Express LLC (Subsidiary), so the main function of the Company is to
provide holding company services and undertake the management
management of the listed activities on the stock exchange. These
business combination in 2019 was stated in consolidated financial
statements as reverse acquisitions under IFRS 3 and the prior year
comparative figures presented are those of the legal acquiree Zaim
Express LLC.
The organizational structure of Group:
The name of Subsidiary
The share votes of the Company
Country of
registration
31.12.2019 31.12.2018
Zaim-Express LLC
Russia
100%
-
The average number of Subsidiary’s employees,
by groups
Central office
Call center
Other spesialists
Total average number of employees
2019
2018
42
23
208
273
50
35
268
353
The average number of parent Company’s employees (directors) is
as follows:
The average number of parent Company’s
employees
Directors
2019
2018
3
2
As at 31 December 2019, the main participant of the Company is Zaim
Holdings SA (with a 73.23% equity holding). The ultimate controlling
party of the Group is an individual - Mr. Siro Donato Cicconi.
2. Operating Environment of the Group
General
The economy of the Russian Federation continues to display certain
characteristics of an emerging market. These characteristics include,
in particular, the inconvertibility of the national currency in most
countries outside Russia and relatively high inflation rates. The
current Russian tax, currency and customs legislation is subject to
varying interpretations and frequent changes. The country’s economy
depends on the fluctuations of oil and gas prices.
As at December 31, 2019, the CBR’s key rate was 6.25% (December 31,
2018: 7.75%).
The future economic development of the Russian Federation is largely
dependent upon the effectiveness of economic measures, financial
mechanisms and monetary policies adopted by the Government,
together with tax, regulatory, and political developments.
Inflation
The Russian economy experiences relatively high levels of
inflation. The inflation indices for the last five years are given in
the table below:
The year ended
December 31, 2018
December 31, 2018
December 31, 2018
December 31, 2018
December 31, 2018
Inflation for the period
3.0%
4.3%
2.1%
5.4%
12.9%
Foreign exchange transactions
Foreign currencies, especially the US Dollar and Euro, play a
significant role in determining the economic parameters of many
economic transactions carried out in Russia. The table below shows
the CBR exchange rates of RUB relative to USD and EUR:
Date
December 31, 2018
December 31, 2018
December 31, 2018
December 31, 2018
December 31, 2018
USD
61.9057
69.4706
57.6002
60.6569
72.8827
EUR
69.3406
79.4605
68.8668
63.8111
79.6927
GBP
81.1460
88.2832
77.6739
74.5595
107.9830
The management takes all the necessary measures to ensure the
sustainability of the Bank’s operations. However, the future impact
of the current economic situation is difficult to predict and the
management’s current expectations and estimates may differ from
actual results.
Functional and presentation
currency
The functional currency is the currency that mainly influences sales
prices for goods and services (this will often be the currency in which
sales prices for goods and services are denominated and settled)
and which mainly influences labour, material and other costs of
providing goods or services (this will often be the currency in which
such costs are denominated and settled). The Group’s functional
currency is the Russian rouble.
FAST AND FLAWLESS
59
The presentation currency is the currency in which financial
statements are presented.
The consolidated financial statements are presented in British
pounds sterling. The reasons why the functional currency differs
from the presentation currency are the consolidation of Subsidiary’s
financial statements with the parent Company accounts, which have
been presented in GBP and investors interests. Comparatives for 2018
of Subsidiary have also been restated to GBP.
3. Basis of Presentation
General principles
These consolidated financial statements of the Group are prepared in
accordance with International Financial Reporting Standards (IFRSs).
The Group maintains its records in compliance with the applicable
legislation of the United Kingdom. These financial statements
have been prepared on the basis of those accounting records and
adjusted as necessary in order to comply, in all material respects,
with IFRSs.
Going concern
These consolidated financial statements reflect the Group
management’s current assessment of the impact of the Russian
business environment on the operations and the financial position of
the Group. The future economic direction of the Russian Federation
is largely dependent upon the effectiveness of measures undertaken
by the RF Government and other factors, including regulatory and
political developments, which are beyond the Group’s control. The
Group’s management cannot predict what impact these factors can
have on the Group’s financial position in future. Adjustments related
to this risk have not been included in the accompanying financial
statements
As at December 31, 2019, the Group has an accumulated deficit of
GBP 37,481,208 (2018: GBP 36,689,833), and incurred a net loss of GBP
891,589 during the year ended December 31, 2019 (2018: GBP 1,545,631).
The Group’s business activities together with the factors likely to
affect its future development, performance and position are set
out in the Chairman’s Statement on pages [10] and Chief Executive
Review on page [12]; in addition note 3 to the Financial Statements
includes the Group’s objectives, policies and processes for managing
its capital; its financial risk management objectives; details of its
financial instruments and its exposure to credit and liquidity risk.
The Financial Statements have been prepared on a going concern
basis. The Directors consider that the Group has sufficient funds to
undertake its operating activities for a period of at least the next 12
months including any additional expenditure required in relation to
any adverse impacts from the COVID-19 Pandemic. The Group has
cash reserves, which are considered sufficient by the Directors to
fund the Group’s desired strategy of increasing the loan book both
online and in the store.
The uncertainty as to the future impact of the COVID-19 pandemic has
been considered as part of the Group’s adoption of the going concern
basis. In response to government instructions the Group’s offices in
London and Moscow have been closed with staff working from home,
international travel has stopped and health and safety initiatives have
been implemented throughout the physical store network, which
has remained open for business during this pandemic as a result of
financial services being classified as being critical services for the
population.
Whilst the board considers that the Group’s financial results for
2019 are unaffected by COVID-19, since the year end the amount of
funds advanced has been significantly lower than expected due to a
reduction in demand, coupled with prudent measures adopted by the
Directors to limit any cash advanced to the receipts generated in any
given month. The operations have therefore been run on a break-
even basis to protect the business against any unforeseen credit
losses due to the deteriorating economic environment in Russia. The
Board considers the pandemic has not materially adversely affected
60
the prospects of the business as of the date of this report, although
any future impact, should further waves of the pandemic occur and
further measures implemented, remains hard to quantify.
As a result of considerations noted above, the Directors have a
reasonable expectation that the Group and the Company have
adequate resources to continue in operational existence for the
foreseeable future. Thus, they continue to adopt the going concern
basis of accounting in preparing these Financial Statements.
The CBR sets the minimum mandatory liquidity ratio at over 70% for
Russian Federation. The Subsidiary meets the mandatory economic
liquidity ratio: as at December 31, 2019 - 132.89% and as at December
31, 2018 – 114.26%.
Basis of consolidation and
business acquisitions
On September 18, 2019 the Company acquired the entire issued share
capital of Zaim-Express (LLC) by way of a share for share exchange.
The transaction was treated as a reverse acquisition and was
accounted for using the merger accounting method as the entities
were under common control before and after the acquisition.
Subsidiary is entity controlled by the Group. Control is achieved
when the Group is exposed, or has rights, to variable returns from
its involvement with the investee and has the ability to affect those
returns through its power over the investee.
The Group considers all relevant facts and circumstances in
assessing whether it has power over an investee, including:
• • The contractual arrangement with the other vote holders of the
investee.
• • Rights arising from other contractual arrangements.
• • The Group’s voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group obtains control
over the subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the
consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the subsidiary.
Other than for the acquisition of Subsidiary as noted above, the Group
uses the acquisition method of accounting to account for business
combinations. The consideration transferred for the acquisition
of a subsidiary is the fair value of the assets transferred, the
liabilities incurred and the equity interests issued by the Group. The
consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the
acquisition date. Acquisition-related costs are expensed as incurred
unless they result from the issuance of shares, in which case they are
offset against the premium on those shares within equity.
If an acquisition is achieved in stages, the acquisition date carrying
value of the acquirer’s previously held equity interest in the acquiree
is remeasured to fair value at the acquisition date through profit or
loss.
АNNUAL REPORT 2019 Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration that is deemed to be
an asset or a liability is recognised in accordance with IFRS9 either
in profit or loss or as a change in other comprehensive income. The
unwinding of the discount on contingent consideration liabilities
is recognised as a finance charge within profit or loss. Contingent
consideration that is classified as equity is not remeasured, and its
subsequent settlement is accounted for within equity.
The excess of the consideration transferred and the acquisition date
fair value of any previous equity interest in the acquiree over the
fair value of the Group’s share of the identifiable net assets acquired
is recorded as goodwill. If this is less than the fair value of the net
assets of the subsidiary acquired in the case of a bargain purchase,
the difference is recognised directly in profit or loss.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Accounting
policies of subsidiaries have been changed where necessary to
ensure consistency with policies adopted by the Group.
Investments in subsidiaries are accounted for at cost less
impairment
Subsidiaries and Acquisitions. The consolidated financial statements
incorporate the financial statements of the Company and entities
controlled by the Company (its subsidiaries) made up to December
31 each year. Control is recognised where an investor is expected, or
has rights, to variable returns from its investment with the investee,
and has the ability to affect these returns through its power over
the investee. Based on the circumstances of the acquisition an
assessment will be made as to whether the acquisition represents
an acquisition of an asset or the acquisition of business. In the
event of a business acquisition, the assets, liabilities and contingent
liabilities of a subsidiary are measured at their fair value at the date
of acquisition. Any excess of the cost of the acquisition over the fair
values of the identifiable net assets acquired is recognised as a “fair
value” adjustment.
If the cost of the acquisition is less than the fair value of net assets
of the subsidiary acquired, the difference is recognised directly in
profit or loss. In the event of an asset acquisition assets and liabilities
are assigned a carrying amount based on relative fair value.
The results of subsidiaries acquired or disposed of during the year
are included in the statement of comprehensive income from the
effective date of acquisition or up to the effective date of disposal, as
appropriate.
Where necessary, adjustments are made to the financial statements
of subsidiaries to bring the accounting policies into line with those
used by the Group.
Contingent consideration as a result of business acquisitions is
included in cost at its acquisition date assessed value and, in the
case of contingent consideration classified as a financial liability,
remeasured subsequently through the profit and loss
Critical Accounting Estimates and Judgments in Applying
Accounting Policies
The Group makes estimates and assumptions that affect the amounts
recognised in the financial statements, and the carrying amounts
of assets and liabilities within the next financial year. Judgements
that have the most significant effect on the amounts recognised in
the financial statements and estimates that can cause a significant
adjustment to the carrying amount of assets and liabilities within the
next financial year include:
Fair value of financial instruments. Information on fair value of
financial instruments measured on the basis of assumptions that use
observable market prices is disclosed in Note 23.
ECL measurement. Calculation and measurement of ECLs is an area
of significant judgement, and implies
methodology, models and data inputs. The methodology used by
the Group for assessment of expected credit losses is disclosed in
Note 6. The following components of ECL calculation have the major
impact on allowance for ECLs: default definition, significant increase
in credit risk (SICR), probability of default (PD), exposure at default
(EAD), loss given default (LGD), macromodels and scenario analysis for
impaired loans. The Group regularly reviews and validates models and
inputs to the models to reduce any differences between expected
credit loss estimates and actual credit loss experience.
Significant increase in credit risk (SICR). In order to determine
whether there has been a significant increase in credit risk, the
Group compares the risk of a default occurring over the expected life
of a financial instrument at the reporting date with the risk of default
at the date of initial recognition. IFRS 9 requires an assessment of
relative increases in credit risk rather than the identification of a
specific level of credit risk at the reporting date. In this assessment,
the Group considers a range of indicators, including behavioural
indicators based on historical information as well as reasonable and
supportable forward-looking information available without undue
cost and effort. The most significant judgments include identifying
behavioural indicators of increases in credit risk prior to default
and incorporating appropriate forward-looking information into the
assessment, either at an individual instrument, or on a portfolio level.
Determining business model and applying SPPI test. In determining
the appropriate measurement category for debt financial
instruments, the Group applies two approaches: business model
assessment for managing the assets and the SPPI test based
on contractual cash flows characteristics on initial recognition
to determine whether they are solely payments of principal and
interest. The business model assessment is performed at a certain
level of aggregation, and the Group will need to apply judgement to
determine the level at which the business model condition is applied.
The assessment of the SPPI criterion performed on initial recognition
of financial assets involves the use of significant estimates in
quantitative testing and requires considerable judgement in
determining whether quantitative testing is required, what scenarios
are reasonably possible and should be considered and in interpreting
the outcomes of quantitative testing (i.e. determining what
represents a significant difference in cash flows).
Substantial modification of financial assets. When the contractual
terms of financial assets are modified (e.g. renegotiated), the Group
assesses whether the modification is substantial and should result in
derecognition of the original asset and recognition of a new asset at
fair value. This assessment is based primarily on qualitative factors
described in the relevant accounting policy and requires significant
judgment.
Recognition of a deferred tax asset. The recognised deferred tax
asset represents the amount of income tax that can be offset against
future income taxes and is recognised in the statement of financial
position. A deferred tax asset is recognized only to the extent that
realisation of the related tax benefit is probable. The future taxable
profits and the amount of tax benefits that are probable in the future
are based on medium-term forecasts prepared by management.
Changes in accounting policies
IFRS 16 Leases (issued on January 13, 2016 and effective for Аnnual
periods beginning on or after 1 January 2019).
IFRS 16 Leases supersedes IAS 17 Leases, IFRIC 4 Determining
whether an Arrangement contains a Lease, SIC 15 Operating Leases-
Incentives and SIC 27 Evaluating the Substance of Transactions
Involving the Legal Form of a Lease. The new standard sets out
the principles for the recognition, measurement, presentation and
disclosure of leases. All leases result in the lessee obtaining the right
FAST AND FLAWLESS
61
to use an asset at the start of the lease and, if lease payments are
made over time, also obtaining financing.
The Group applied IFRS 16 using a modified retrospective approach.
Right-of-use assets were recorded in an amount equal to the lease
liabilities adjusted for the amount of prepaid or accrued operating
lease payments under these lease agreements recorded in the prior
periods. Lease liabilities were measured at the present value of the
remaining lease payments discounted at the incremental borrowing
rates (IBR) as January 1, 2019. The date of initial application is
January 1, 2019. The Group applied a modified retrospective approach
without restatement of the comparative information.
In applying IFRS 16 for the first time, the Group has used the following
practical expedients:
• • A single discount rate was applied to a portfolio of leases with
reasonably similar characteristics;
• • Leases ending within 12 months from the date of initial application
of the standard were reflected as short-term, even if an initial
lease term was more than 12 months;
• • Initial direct costs were excluded from measurement of the right-
of-use asset at the date of first application.
Reconciliation of lease liabilities as at January 1, 2019 and
operating lease liabilities as at December 31, 2018 is as follows:
Group
Contractual obligations under operating lease as at
December 31, 2018
Discount rate as at January 1, 2019
3,806,790
7.95%
• • Below are revised standards that became mandatory for the
Group since January 1, 2019, but had no material impact on the
Group:
• • IFRIC 23 Uncertainty over Income Tax Treatments (issued on June
7, 2017 and effective for Аnnual periods beginning on or after
January 1, 2019).
• • Prepayment Features with Negative Compensation - Amendments
to IFRS 9 (issued on October 12, 2017 and effective for Аnnual
periods beginning on or after January 1, 2019).
• • Long-term Interests in Associates and Joint Ventures -
Amendments to IAS 28 (issued on October 12, 2017 and effective
for Аnnual periods beginning on or afterJanuary 1, 2019).
• • Аnnual Improvements to IFRSs 2015-2017 cycle – Amendments to
IFRS 3, IFRS 11, IAS 12 and IAS 23 (issued on December 12, 2017 and
effective for Аnnual periods beginning on or after January 1, 2019).
• • Amendments to IAS 19 Plan Amendment, Curtailment or
Settlement (issued on February 7, 2018 and effective for Аnnual
periods beginning on or after January 1, 2019).
Certain new standards and interpretations have been published,
which are mandatory for the Group’s Аnnual periods beginning on or
after January 1, 2020 and which the Group has not early adopted.
The Revised Conceptual Framework for Financial Reporting (issued on
March 29, 2018 and effective for Аnnual periods beginning on or after
January 1, 2020).
Definition of a business - Amendments to IFRS 3 (issued on October
22, 2018 and effective for acquisitions from the beginning of Аnnual
reporting period beginning on or after January 1, 2020).
Definition of material – Amendments to IAS 1 and IAS 8 (issued on
October 21, 2018 and effective for Аnnual periods beginning on or
after January 1, 2020).
Discounted operating lease liabilities as at January 1,
2019
Effect of discounting
Lease liabilities recognised as at January 1, 2019
(481,164)
3,325,625
Unless otherwise described above, the new standards and
interpretations are not expected to significantly impact the Group’s
consolidated financial statements.
Previously paid advances and non-returnable security
deposits
81,880
Right-of-use assets recognised as at January 1, 2019
3,407,065
4. Summary of Significant Accounting Policies
Fair value measurement
Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction in the principal (or
most advantageous) market at the measurement date under current
market conditions (i.e. an exit price) regardless of whether that price
is directly observable or estimated using another valuation technique.
All assets and liabilities for which fair value is recognised or disclosed
are categorised within the fair value hierarchy, described as below,
based on the lowest level input that is significant to the fair value
measurement as a whole:
Level 1 — quoted market prices in an active market (that are
unadjusted) for identical assets or liabilities;
Level 2 — valuation techniques for which the lowest level input that
is significant to the fair value measurement is directly or indirectly
observable;
Level 3 — valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
For assets and liabilities that are remeasured in the financial
statements at fair value on a recurring basis, the Group determines
whether transfers have occurred between the Levels in the hierarchy
by re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end of
each reporting period.
For the purpose of fair value disclosures, the Group has determined
classes of assets and liabilities on the basis of the nature,
characteristics and risks of the asset or liability and the level of the
fair value hierarchy as explained below (Note 23).
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, current accounts
and deposits with banks with original maturity of three months or
less. Cash and cash equivalents are carried at amortised cost in the
statement of financial position.
62
АNNUAL REPORT 2019 Financial instruments
Key measurement terms
Depending on their classification, financial instruments are carried
at fair value or amortised cost.
Loans to customers
Based on cash flow characteristics, the Group classifies loans and
advances to customers into the measurement category:
1. at amortised cost: loans held to collect contractual cash flows, if
these cash flows are SPPI and are not classified as at fair value
through profit or loss, are measured at amortised cost;
Loans to customers are recorded when cash is advanced to
borrowers. Impairment of loans at amortised cost or at FVOCI is
assessed using a forward-looking ECL model. The Group does not
acquire loans from third parties.
Impairment of financial assets:
ECL allowance
The Group assesses, on a forward-looking basis, the ECL for debt
instruments measured at amortised cost and FVOCI and for the
exposures arising from credit related commitments and financial
guarantee contracts. The Group measures ECL and recognises credit
loss allowance at each reporting date. The measurement of ECL
reflects:
1.
2.
3.
an unbiased and probability weighted amount that is
determined by evaluating a range of possible outcomes,
time value of money, and
all reasonable and supportable information that is available
without undue cost and effort at the reporting date about past
events, current conditions and forecasts of future economic
conditions.
Debt instruments measured at amortised cost are presented in the
statement of financial position net of the ECL allowance.
The Group applies a three-stage model for impairment, based on
changes in credit quality since initial recognition, in accordance with
IFRS 9.
1.
2.
3.
A financial instrument that is not credit-impaired on initial
recognition is classified into Stage 1. Financial assets in Stage 1
have their ECL measured at an amount equal to the portion of
lifetime ECL that results from default events possible within the
next 12 months (12m ECL).
If the Group identifies a significant increase in credit risk (SICR)
since initial recognition, the asset is transferred to Stage 2 and
its ECL is measured based on ECL on a lifetime basis (lifetime
ECL). Refer to Note 3 for a description of how the Group
determines when a SICR has occurred.
If the Group determines that a financial asset is credit-impaired,
the asset is transferred to Stage 3 and its ECL is measured as
a lifetime ECL. Assets that are more than 60 days past due are
considered to be defaulted.
For financial assets that are purchased or originated credit-impaired
(POCI assets), the ECL is always measured as a lifetime ECL.
Note 6 provides information about inputs, assumptions and
estimation techniques used in measuring ECL, including an
explanation of how the Group incorporates forward-looking
information in the ECL models.
Loans received
Loans received include loans received from the participant and are
carried at amortised cost.
Property and equipment
Property and equipment are stated at cost, less accumulated
depreciation and impairment allowance.
At the end of the reporting period the Group assesses whether there
is any indication of impairment of property and equipment. If such
indication exists, the Group estimates the recoverable amount, which
is determined as the higher of an asset’s fair value less costs to
sell or its value in use. Where the carrying amount of property and
equipment is greater than their estimated recoverable amount, it
is written down to their recoverable amount and the difference is
charged as impairment loss to the statement of profit or loss and
other comprehensive income.
Gains and losses on disposal of property and equipment are
determined by reference to their carrying amount and recorded
as operating expenses in the statement of profit or loss and other
comprehensive income.
Repairs and maintenance are charged to the statement of profit or
loss and other comprehensive income when the expense is incurred.
Depreciation
Depreciation of an asset begins when it is available for use.
Depreciation is charged on a straight-line basis over the following
useful lives of the assets:
• • Equipment – 2- 7 years.
Operating lease - the Group as
lessee
Leases of property under which the risks and rewards of ownership
are effectively retained with the lessor are classified as operating
leases. Lease payments under operating lease are recognised as
expenses on a straight-line basis over the lease term and included
into operating expenses in the statement of profit or loss and other
comprehensive income.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, and it is probable
that an outflow of resources embodying future economic benefits
will be required to settle the obligation, and a reliable estimate of the
amount of the obligation can be made.
Taxation
The income tax charge/recovery comprises current tax and deferred
tax and is recorded in the statement of profit or loss and other
comprehensive income. Income tax expense is recorded in the
financial statements in accordance with the applicable legislation
of the Russian Federation. Current tax is calculated on the basis of
the estimated taxable profit for the year, using the tax rates enacted
during the reporting period.
Current tax is the amount expected to be paid to or recovered from
the taxation authorities in respect of taxable profits or losses for
the current or prior periods. Tax amounts are based on estimates
if financial statements are authorised prior to filing relevant tax
returns.
Deferred income tax is provided using the balance sheet liability
method for tax loss carryforwards and temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts for financial statement purposes.
FAST AND FLAWLESS
63
Foreign currency
(a) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where such items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Gains and losses on purchase and sale of foreign currency are
determined as a difference between the selling price and the
carrying amount at the date of the transaction.
(b) Group companies
The results and financial position of all the Group’s entities that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
1. assets and liabilities for each statement of financial position
presented are translated at the closing rate at the date of that
statement of financial position;
2. each component of profit or loss is translated at average
exchange rates during the accounting period (unless this average
is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income
and expenses are translated at the dates of the transactions); and
3. 3. all resulting exchange differences are recognised in other
comprehensive income
The table below presents the credit quality analysis of cash and
cash equivalents based on credit risk levels as at December 31,
2018.
Group
Minimum credit risk
Total cash and cash equivalents, less
cash on hand
Company
Minimum credit risk
Total cash and cash equivalents, less
cash on hand
-
Accounts with
other RF banks
392,578
Total
392,578
392,578
392,578
-
-
-
For the purpose of assessing expected credit losses, cash and cash
equivalent balances are included in Stage 1. The expected credit
losses on these balances represent insignificant amounts, therefore,
the Group does not create an ECL allowance for cash and cash
equivalents.
Income and expense recognition
Interest income and expense are recorded in the statement of profit
or loss and other comprehensive income for all debt instruments on
an accrual basis using the effective interest method. The effective
interest method is a method of calculating the amortised cost of a
financial asset or a financial liability and of allocating the interest
income or interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash payments or receipts through the expected life of the financial
instrument to the net carrying amount of the financial asset or
financial liability. When calculating the effective interest rate, the
Group estimates cash flows considering all contractual terms of the
financial instrument, but does not consider future credit losses. The
calculation includes all commissions and fees paid or received by
the parties to the contract that are an integral part of the effective
interest rate, transaction costs, and all other premiums or discounts.
When loans become doubtful of collection, they are written down
to their recoverable amounts and interest income is thereafter
recognised based on the rate of interest that was used to discount
the future cash flows for the purpose of measuring the recoverable
amount.
Employee benefits and social insurance contributions
The Group pays social insurance contributions predominantly on the
territory of the Russian Federation. Social insurance contributions
are recorded on an accrual basis and comprise contributions to the
Russian Federation state pension, social insurance, and obligatory
medical insurance funds in respect of the Group’s employees. The
Group does not have pension arrangements separate from the
state pension system of the Russian Federation. Wages, salaries,
contributions to the Russian Federation state pension and social
insurance funds, paid Аnnual leaves and paid sick leaves, bonuses
and non-monetary benefits are accrued as the Group’s employees
render the related service.
5. Cash and Cash Equivalents
Group
Cash on hand
Accounts with other banks
Total cash and cash equivalents
Gompany
Cash on hand
Accounts with other banks
Total cash and cash equivalents
2019
84,098
1,498,653
2018
61,971
392,578
1,582,751
454,549
-
1,310,655
1,310,655
-
-
-
As at December 31, 2019, the Group has 2 counterparties (2018: 3
counterparties) with balances exceeding 10% of total cash and cash
equivalents in the amount of GBP 1,310,655 (2018: GBP 380,039).
The table below presents the credit quality analysis of cash and
cash equivalents based on credit risk levels as at December 31,
2019.
Group
Minimum credit risk
Total cash and cash equivalents, less
cash on hand
Company
Minimum credit risk
Total cash and cash equivalents, less
cash on hand
Accounts with
other banks
1,498,653
Total
1,498,653
1,498,653
1,498,653
1,310,655
1,310,655
1,310,655
1,310,655
64
АNNUAL REPORT 2019 Below is the credit quality analysis of cash and cash equivalents as at December 31, 2019 in accordance with ratings of international
agencies:
Group
Fitch A+
Fitch BB
528,551
528,551
528,551
528,551
782,104
782,104
782,104
782,104
Accounts with other banks
Total
Company
Accounts with other banks
Total
6. Loans to Customers
Group
Loans to customers
Less: ECL allowance
Total loans to customers at amortised cost
Company
Loans to customers
Less: ECL allowance
Total loans to customers at amortised cost
S&P from BB-
to BB+
93,047
93,047
-
-
No rating
assigned
94,951
94,951
-
-
Total
1,498,653
1,498,653
1,310,655
1,310,655
2019
32,078,150
2018
29,187,093
(31,291,804)
(28,546,722)
786,346
640,371
-
-
-
-
-
-
Below is analysis of movements in the ECL allowance during 2019 (by type of loans specified in the first table of the Note):
Group
ECL allowance as at January 1, 2019
Assets recognised for the period
Assets derecognised or collected
Transfers to Stage 2
Transfers to Stage 3
Net loss on ECL allowance charge/(reversal)
Effect of exchange rate differences
ECL allowance as at December 31, 2019
Analysis of movements in the ECL allowance during 2018 is as follows:
Group
ECL allowance as January 1, 2018
Assets recognised for the period
Assets derecognised or collected
Transfers to Stage 2
Transfers to Stage 3
Net loss on ECL allowance charge/(reversal)
Effect of exchange rate differences
ECL allowance as December 31, 2018
Stage 1
139,800
687,271
(95,125)
(206,503)
(409,279)
11,864
128,028
Stage 1
176,018
3,394,615
(13,066)
(443,898)
(2,953,565)
-
(20,304)
139,800
Stage 2
424,712
-
(102,217)
206,503
(326,329)
52,065
34,252
288,985
Stage 2
869,353
(30,451)
443,898
(775,143)
2,369
(85,312)
424,712
Stage 3
27,982,210
-
(842,085)
-
735,608
530,141
2,468,916
30,874,790
Stage 3
26,864,738
(126,006)
-
3,728,708
987,992
(3,473,222)
27,982,210
Total
28,546,722
687,271
(1,039,427)
-
-
582,206
2,515,032
31,291,804
Total
27,910,109
3,394,615
(169,523)
-
-
990,361
(3,578,840)
28,546,722
The ECL allowance for loans and advances to customers recognised
during the period is impacted by various factors. The table below
describes the main changes:
• • impact on ECL estimation due to changes in model assumptions,
including changes in probability of default, EAD and LGD during the
period resulting from regular updating of the model inputs.
• • transfers between Stages 1 and 2 and Stage 3 due to significant
increase (or decrease) in credit exposure or impairment during
the period and subsequent increase (or decrease) in the
estimated ECL level: for 12 months or over the entire period;
• • accrual of additional allowances for new financial instruments
recognised during the period, as well as reduction in allowance
as a result of derecognition of financial instruments during the
period;
FAST AND FLAWLESS
65
Following is the credit quality analysis of loans to customers as at December 31, 2019:
Group
Loans to customers
Minimum credit risk
Low credit risk
Moderate credit risk
High credit risk
Defaulted assets
Stage 1
Stage 2
Stage 3
Total
568,567
-
-
-
-
374,288
164,962
95,507
-
-
-
-
568,567
374,288
164,962
95,507
30,874,826
30,874,826
Total loans to customers before allowance
ECL allowance
Total loans to customers after ECL allowance
568,567
634,757
30,874,826
32,078,150
(128,028)
440,539
(288,986)
345,771
(30,874,790)
(31,291,804)
36
786,346
Following is the credit quality analysis of loans to customers as at December 31, 2018:
Group
Loans to customers
Minimum credit risk
Low credit risk
Moderate credit risk
High credit risk
Defaulted assets
Total loans to customers before allowance
ECL allowance
Total loans to customers after ECL allowance
The ECL allowance for loans to customers recognized during
the period is impacted by different factors. Information on the
assessment of expected credit losses is disclosed in Note 3.
The Group uses the following approach to measurement of expected
credit losses:
• • portfolio-based measurement: internal ratings are assigned
individually, but the same credit risk parameters (e.g. PD, LGD)
are applied to similar credit risk ratings and homogeneous credit
portfolio segments in the process of ELC estimation.
7. Lease
The Group has agreements for lease of premises, land, office space
and computer equipment. Prior to application of IFRS 16, the Group (as
a lessee) classified each lease as an operating lease at the inception
of the lease term. The Group had no finance lease agreements.
Leased assets under operating leases have not been capitalised and
payments under operating leases were recognised as an expense
in the statement of profit or loss and other comprehensive income
on a straight-line basis over the lease term. Lease prepayments
and accrued lease payments were recognised as prepayments and
accounts payable, respectively. Following the adoption of IFRS 16, the
Group applied a single approach to recognising and measuring all
leases except for short-term leases and leases where the underlying
asset is of low value. The standard contains transitional requirements
and provides for practical expedients that have been used by the
Group.
The carrying amount of right-of- use assets and its movements
during the period are presented below:
Discount rate
Lease term
66
7.95%
3 years
Stage 1
Stage 2
Stage 3
Total
516,270
-
-
-
-
516,270
(139,800)
376,470
-
218,898
250,138
219,577
-
688,613
(424,712)
263,901
-
-
-
27,982,210
27,982,210
(27,982,210)
-
516,270
218,898
250,138
219,577
27,982,210
29,187,093
(28,546,722)
640,371
This approach provides for aggregation of the portfolio into
homogeneous segments on the basis of specific information on
borrowers, such as delinquent loans, historic data on prior period
losses and forward-looking macroeconomic information.
The amounts of loans recognised as “past due” represent the entire
balance of such loans rather than the overdue amounts of individual
payments.
Group
Minimum operating lease сontractual
obligations at January 1, 2019
short-term leases not recognised under
IFRS 16
effect of renewal options that are
reasonably certain to be exercised
Real Estate
Total
738,538
738,538
(151,047)
(151,047)
3,219,299
3,219,299
Undiscounted lease payments
3,806,790
3,806,790
effect of discounting at the IBR rate at
the date of initial application
(481,165)
(481,165)
Lease liabilities at January 1, 2019
3,325,625
3,325,625
The carrying amount of right-of- use assets and its movements
during the period are presented below:
Group
As at January 1, 2019
Additions
Depreciation charge
Effect of translation into presentation
currency
Real Estate
3,407,065
112,021
Total
3,407,065
112,021
(1,248,758)
(1,248,758)
278,905
278,905
As at December 31, 2019
2,549,233
2,549,233
АNNUAL REPORT 2019 The carrying amounts of lease liabilities and their movements
during the period are set out below:
Group
Lease liabilities
As at January 1, 2019
Additions
Interest expense on lease liabilities
Lease payments
Effect of translation into presentation currency
As at December 31, 2019
8. Other Assets
Group
Other financial assets
Receivables under fiduciary management
agreement
Total other financial assets
Other non-financial assets
Lease prepayments
Settlements with suppliers
Taxes other income tax
Other
Less: impairment allowance
Total other non-financial assets
Total other assets
Company
Other financial assets
Total other financial assets
Other non-financial assets
Settlements with suppliers
Taxes other income tax
Other
Less: impairment allowance
Total other non-financial assets
Total other assets
9. Loans Received
Real Estate
Total
3,325,625
3,325,625
108,875
243,281
108,875
243,281
(1,395,580)
(1,395,580)
273,447
273,447
2,555,648
2,555,648
2019
2018
Analysis of movements in the impairment allowance for non-
financial assets during 2019 is presented below:
Group
Impairment allowance for other assets as
at January 1, 2019
Impairment allowance charge during 2019
Effect of translation into presentation
currency
Impairment allowance for other assets as
at December 31, 2019
Non-financial
assets
Total
13,117
13,117
1,631
1,184
1,631
1,184
15,932
15,932
-
-
510
510
16,603
29,440
139,069
52,937
145,124
21,873
36,881
37,856
(15,932)
(13,117)
222,117
228,617
222,117
229,126
Analysis of movements in the impairment allowance for non-
financial assets during 2018 is presented below:
2019
-
2018
-
Group
-
-
68,122
-
-
-
-
-
60,000
-
68,122
60,000
68,122
60,000
Impairment allowance for other assets as
at January 1, 2018
Reversal of impairment allowance during
2019
Effect of translation into presentation
currency
Impairment allowance for other assets as
at December 31, 2018
Non-financial
assets
Total
17,290
17,290
(2,214)
(2,214)
(1,959)
(1,959)
13,117
13,117
Group
Loan from related party
Total loans received
2019
2018
Company
742,603
908,293
Loan from related party
742,603 908,293
Total loans received
2019
2018
-
-
-
-
As at December 31, 2019 and December 31, 2018, loans received
represent outstanding interest on 1 loan at 8.7% per annum forgiven
by the ex-Subsidiary participant.
FAST AND FLAWLESS
67
10. Other Liabilities
Group
Other financial liabilities
Payables
Settlements with customers on penalties
Other
Other non-financial liabilities
Taxes other than income tax
Provision for unused vacations
Payables to employees and payroll related taxes
Total other liabilities
2019
2018
Company
200,618
97,322
16,732
62,515
90,040
17,523
Other financial liabilities
Payables
Other
Other non-financial liabilities
2019
2018
126,057
66,670
27
-
-
Payables to employees and payroll related taxes
36,582
16,982
562,814
Total other liabilities
162,666
66,670
144,024
189,227
165,104
108,175
664,905 1,006,171
11. Charter and Additional Capital, Other reserves. Earnings per share
As at December 31, 2018 the Charter capital states the amount of
Share capital of Subsidiary - the authorized capital represents the
contribution made by the sole participant of Subsidiary.
Amounts of Additional capital as at December, 31, 2018 were restated
as at the date of the agreement on in-kind contribution (debt on the
loan).
During 2019 the reverse acquisition was stated in consolidated
financial statements, as a result, the Charter capital as at December,
31, 2019 states the Share capital of legal parent Company, in amount
of 4,369,750 British pounds sterling. All the shares issued have equal
voting rights.
Below there is reconcilation of movement in legal parent Company
Share capital during 2019:
Group and Company
Issued and fully paid
Ordinary shares of £0,01 each
31 Dec., 2018
Number
Amount, £
6,000,000
6,000,000
60,000
60,000
For the year 2019 (Ordinary shares issue of £0,01 each):
Group
Date of exchange rate
for translation to
presentation currency
29.12.2018
Amount in
RUB
Exchange
rate
Amount
in GBP
2,561,820,344
87.9659
29,122,880
Total additional capital at December 31,
2018
29,122,880
As a result of reverse acquisition, which was stated in consolidated
financial statements in 2019, the Additional capital as at December, 31,
2019 states the share premium from the participant of legal parent
Company, in amount of 6,078,128 British pounds sterling.
Below there is reconciliation of movement in Additional capital
(share premium) of the legal parent Company during 2019:
Group and Company
Consideration shares (acquisition of
Subsidiary)
IPO
Fee shares
31 Dec., 2019
Number
Amount, £
320,000,000
3,200,000
104,000,000
1,040,000
6,975,000
69,750
430,975,000
4,309,750
Group and Company Issued and fully paid
Ordinary shares of £0,01 each
436,975,000
4,369,750
436,975,000
4,369,750
As at December 31, 2018 the Additional capital states the amount of
the agreement on in-kind contribution (debt on the loan) from the
balance of Subsidiary - 29,122,880 British pounds sterling
Group and Company
As at January 1, 2019
Premium arising on issue of ordinary shares
Issue costs
As at December 31, 2019
Other reserves
Group
At 1 January, 2018
Merger reserve
Translation differences
At December 31, 2018
Merger reserve
Translation differences
At December 31, 2019
For the year 2019:
Amount, £
-
6,406,699
(328,570)
6,078,128
Merger
reserve
-
Translation
reserve
677,528
-
-
-
23,764,800
-
23,764,800
-
3,820,203
4,497,731
-
(39,942)
4,457,788
The merger and foreign currency translation reserve as at December
31, 2019 arose on consolidation as a result of merger accounting for
the acquisition of the entire issued share capital of Subsidiary during
2019 and represents the difference between the value of the share
capital issued for the acquisition of Subsidiary and investments made
in Subsidiary and that of the acquired share capital of Subsidiary.
68
АNNUAL REPORT 2019
Currency translation differences relate to the translation of
Subsidiary that have a functional currency different from the
presentation currency (refer note 2). Movements in the translation
reserve are linked to the changes in the value of the Russian Ruble
against the Pound Sterling: the business of the Group are located in
the Russian Federation, and the Subsidiary functional currency is the
Russian Ruble, which has certain volatility against Sterling during the
year.
Accumulated deficit represents retained earnings.
Earnings per share. The basic loss per share of 0.77p (2018 loss per
share: 1.11p ) is calculated by dividing the loss attributable to owners
of the parent by the weighted average number of ordinary shares in
issue during the year.
Group
Loss attributable to owners of the parent
2019
(891,589)
2018
(66,670)
Weighted average number of ordinary
shares in issue
115,689,178
6,000,000
The diluted loss per share of 0.73p (2018 loss per share: 1.11p ) is
calculated by dividing the loss attributable to owners of the parent
by the weighted average number of ordinary shares in issue during
the year outstanding for the effects of all dilutive potential ordinary
shares. For the year 2018 there is no difference between the basic
and diluted earnings per share, as the parent Company has no
potential ordinary shares.
Group
Loss attributable to owners of the parent
2019
(891,589)
2018
(66,670)
Weighted average number of ordinary
shares in issue outstanding for the effects
of all dilutive potential ordinary shares
122,148,630
6,000,000
12. Share-based payment
IIn October 2019 and related to the IPO of the Company, a total of
32,250,000 options were issued to certain directors, senior man-
agement and other advisers in recognition of the work undertak-
en for Zaim prior to the IPO. In addition, the Company issued a total of
13,600,000 warrants to advisers in relation to the funds raised at the
time of the IPO. All of the options were issued with an exercise price
of 2.5 pence per share and expire after 5 years from the date of issue.
17,200,000 of the options vest immediately and have no employment
related conditions, the remaining 15,050,000 vest over 1-2 years from
the date of issue and should the individual cease employment the
options either expire immediately or are valid for a further 6 months
(depending on the circumstances of the departure of the individu-
al). All of the warrants have a contractual term of 3 years from the
date of issue and have no performance related terms attached and a
strike price of 2.5 pence per share.
In addition to the options noted above as set out in the prospectus
at the time of the IPO the Directors have the discretion to issue a
further 10,750,000 options to key employees and consultants to the
Group as a tool to incentives and retain key individuals. As at the date
of this report these have not been issued and have therefore not
been included in the calculations. Neither the Company nor the Group
has any legal or constructive obligation to settle or repurchase the
options in cash.
Movements on number of share options and their related exercise
price are as follows:
0,9
Number of options
& warrants 2019
Outstanding at January 1
Granted
Forfeited
Outstanding at December 31
Exercisable at December 31
-
40,650,000
-
40,650,000
25,600,000
Weighted
exercise price
2019, £
-
2,50
-
2,50
2,50
The options & warrants outstanding at December 31, 2019 had a
weighted average remaining contractual life of 4,6 years.
The fair value of the share options and warrants was determined
using the Black-Scholes valuation model.
The parameters used are detailed below.
Group and Company
Date of Grant
Weighted average share price
Weighted average exercise price
Weighted average fair value at the measurement
date
Expiry date
Options granted
Volatility
Dividend yield
Option life
Аnnual risk free interest rate
2019 options
Oct. 29, 2019
2.50 pence
2.50 pence
0.57 pence
29 Oct., 2024
40,650,000
20%
Nil
5 year
2.83%
2019
2018
13. Interest Income and Expense
Group
Interest income
Loans to customers
Total interest income
Interest expense
Loans received
Lease liabilities
Total interest expense
Net interest income
(28,018)
(243,281)
(271,299)
3,669,448
3,940,747
3,940,747
(2,460,874)
-
(2,460,874)
7,765,197
10,226,071
10,226,071
14. Gains less Losses from Dealing
in Foreign Currency
Group
2018
2019
Gain/loss on revaluation of financial
assets and liabilities
Realised gain/ (loss) from foreign ex-
change transactions
Total gains less losses from dealing in
foreign currency
102,327
(825,934)
(6,830)
3,314
95,497
(822,620)
FAST AND FLAWLESS
69
15. Allowance for Expected Credit
Losses / Impairment of Other
Assets
Group
Loans to customers
Other assets
Total allowance for
expected credit losses /
impairment of other assets
Note
6
8
2019
230,050
1,631
2018
4,215,453
(2,214)
231,681
4,213,239
16. Other Operating Income
Group
Taxes other than income tax
Agent's fee
Fines received under loan agreements
Other income
2019
591,965
150,036
34,846
13,707
2018
815,201
-
-
12,121
Total other operating income
790,554
827,322
17. Staff Costs
Group
Salary
Payroll related taxes
Total staff costs
2019
1,722,792
283,473
2018
2,096,784
243,181
2,006,265
2,339,965
Group
Tax effect of deductible temporary differences
Loans to customers
Other assets
Lease liabilities
Other liabilities
Tax loss carryforwards
Net deferred tax assets
Tax effect of taxable temporary differences
Property and equipment
Right-of-use assets under lease agreements
Gross deferred tax liabilities
Total net deferred tax asset
Unrecognised tax assets
Recognised tax liabilities
70
18. Operating Expenses
Group
Depreciation of right-of-use assets
Consulting services
Rental expenses
Communication
Representative and travel expenses
Banking services
Security
Postal services
Advertising and marketing
State duty
Office equipment
Material expenses
Repairs
Management expenses
Other expenses
Total operating expenses
2019
1,248,759
851,223
257,639
87,830
81,250
43,246
42,594
38,491
25,736
23,036
17,274
3,412
2,038
-
169,730
2,892,258
2018
-
115,165
2,019,680
113,251
1,212
60,915
57,816
48,567
13,090
26,084
21,705
2,537
1,855
144
280,304
2,762,325
19. Income Tax
As at December 31, 2019 and December 31, 2018, the Group has no
current income tax expense. The current income tax rate applicable
to the majority of the Group’s profit is 20% (2018: 20%).
Reconciliation between the theoretical and the actual taxation charge
is provided below.
Group
IFRS loss before taxation
Theoretical tax charge at the applicable
statutory rate
Non-deductible expenses and other
differences
Unrecognised deferred tax asset
Income tax expense for the year
2019
(891,589)
2018
(1,545,631)
178,318
309,121
(19,132)
(280,081)
(159,186)
-
(29,040)
-
The Company has a potential deferred tax asset of £56,987 as a result
of trade losses to be offset against future profits, should they arise.
Differences between IFRS and statutory taxation regulations of
the Russian Federation give rise to certain temporary differences
between the carrying amount of certain assets and liabilities
for financial statement purposes and for the Group’s income tax
purposes.
2018
Change
recognised in
profit and loss
Effect of
exchange rate
differences
97,301
42,397
-
54,654
3,342,776
3,537,128
(1,688)
(1,688)
3,535,440
(3,535,440)
-
(13,827)
(20,854)
501,961
(48,853)
241,480
659,907
(20)
(500,701)
(500,721)
159,186
(159,186)
-
8,305
3,348
9,169
3,915
298,425
323,162
(149)
(9,145)
(9,294)
313,868
(313,868)
-
2019
91,779
24,891
511,130
9,716
3,882,681
4,520,197
(1,857)
(509,846)
(511,703)
4,008,494
(4,008,494)
-
АNNUAL REPORT 2019
Group
Tax effect of deductible temporary differences
Loans to customers
Other assets
Loans received
Other liabilities
Tax loss carryforwards
2017
49,785
47,957
606,626
73,306
3,191,870
Net deferred tax assets
Tax effect of taxable temporary differences
3,969,544
41,970
Property and equipment
Gross deferred tax liabilities
Total net deferred tax asset
Unrecognised tax assets
Recognised tax liabilities
(1,287)
(1,287)
3,968,257
(3,968,257)
-
-
-
41,970
(41,970)
-
20. Risk Management
Impact of
IFRS 9
Change
recognised in
profit and loss
Effect of
exchange rate
differences
41,970
39,007
215
(563,789)
(10,398)
564,591
29,626
(586)
(586)
29,040
(29,040)
-
(33,461)
(5,775)
(42,837)
(8,255)
(413,684)
(504,012)
186
186
(503,826)
503,826
2018
97,301
42,397
-
54,654
3,342,776
3,537,128
(1,688)
(1,688)
3,535,440
(3,535,440)
-
TThe risk management function within the Group is carried out
in respect of financial risks (credit, market, currency, liquidity
and interest rate), operational and legal risks. The primary ob-
jectives of the financial risk management function are to establish risk
limits, and then ensure that exposure to risks stays within these limits.
The assessment of exposure to risks also serves as a basis for optimal
Credit risk
The Group assumes a credit risk, namely the risk that a counterparty
will fail to meet its debt obligations within the specified period. The
Group has developed policies and procedures for the management
of credit exposures (both for recognised financial assets and
unrecognised contractual commitments), including requirements for
establishment and monitoring of the loan portfolio concentration limits.
The credit policy establishes:
• • procedures for review and approval of loan applications,
• • methodology for assessment of the borrowers’solvency,
• • credit documentation requirements,
• • procedures for the ongoing monitoring of loans and other credit
exposures.
The Group continuously monitors the status of individual loans and
regularly re-assesses the creditworthiness of its customers. The review
is based on the most recent loan delinquency statistics.
The Group applies the expected credit loss, i.e. the timely reflection
of deterioration or improvement in the credit quality of debt financial
instruments based on current and forward-looking information.
The amount of ECL recognised as a credit loss allowance depends on
the extent of credit quality deterioration since initial recognition of
a debt financial instrument.
distribution of risk-adjusted capital, transaction pricing and business
performance assessment. The operational and legal risk management
functions are intended to ensure proper functioning of internal policies
and procedures to minimise operational and legal risks.
Credit risk classification system. Each level of credit risk is assigned
a certain degree of solvency, using a single scoring system:
• • minimum credit risk – high credit quality with low expected credit
risk, debt is not past due;
• • low credit risk – sufficient credit quality with average credit risk,
debt is prolonged and not past due;
• • moderate credit risk – average credit quality with satisfactory credit
risk, the debt is from 1 to 30 days past due;
• • high credit risk – low credit quality with unsatisfactory credit risk,
high probability of default, the debt is from 31 to 60 days past due;
• • default – assets that meet the definition of default, the debt is more
than 60 days past due.
Expected credit losses on financial assets that are not impaired are
usually measured on the basis of default risk over one or two different
time periods, depending on whether there has been a significant
increase in the borrower’s credit risk since initial recognition.
The Group performs collective assessment of loans to individuals. This
approach provides for aggregation of the portfolio into homogeneous
segments based on specific information about borrowers, such as
delinquent loans, historic data on prior period losses and forward-
looking macroeconomic information.
Collective assessment principles: for assessing risk stages and
estimating ECL on a collective basis, the Group combines its loans into
segments based on shared credit risk characteristics, so that exposure
within a grouping had a homogeneous pattern.
FAST AND FLAWLESS
71
Market risk
The Group assumes a market risk. Market risk is the risk that the
fair value or future cash flows of a financial instrument will fluctuate
because of changes in market prices. Market risk comprises currency
risk, interest rate risk and other price risks. Market risk arises
from open positions in interest rates, currency and equity financial
instruments, which are exposed to general and specific market
Currency risk
Currency risk is the risk that the fair value or the future cash flows
of a financial instrument will fluctuate because of changes in foreign
currency exchange rates.
movements and changes in the volatility levels of market prices.
The objective of market risk management is to manage and
control market risk exposures within acceptable parameters, while
optimising the return on risk.
The Group accepts the risk of effect of foreign currency exchange
rate fluctuations on its financial position and cash flows. Currency
risk arises when the existing or prospective assets in foreign
currencies are greater or lower than the existing or prospective
liabilities in the same currencies. The Group’s management controls
the exposure to currency risk on a regular basis.
The table below provides the analysis of the Group’s currency risk as at December 31, 2019.
Group
Assets
Cash and cash equivalents
Loans to customers
Property and equipment
Right-of-use assets under lease agreements
Other assets
Total assets
Liabilities
Loans received
Lease liabilities
Other liabilities
Total liabilities
Net balance sheet position
RUB
271,229
786,346
11,967
2,549,233
150,525
3,769,300
-
2,555,648
499,077
3,054,725
714,575
USD
867
-
-
-
-
867
-
-
-
-
867
The table below provides the analysis of the Group’s currency risk as at December 31, 2019.
Group
Assets
Cash and cash equivalents
Loans to customers
Property and equipment
Other assets
Total assets
Liabilities
Loans received
Other liabilities
Total liabilities
Net balance sheet position
RUB
453,144
640,371
13,559
229,126
1,336,200
-
1,006,171
1,006,171
330,029
GBP
1,310,393
-
-
-
68,122
1,378,514
-
-
162,666
162,666
1,215,849
USD
884
-
-
-
884
-
-
-
884
EUR
263
-
-
-
3,470
3,733
742,603
-
3,162
745,765
(742,032)
EUR
521
-
-
-
Total
1,582,751
786,346
11,967
2,549,233
222,117
5,152,414
742,603
2,555,648
664,905
3,963,156
1,189,258
Total
454,549
640,371
13,559
229,126
521
1,337,605
908,293
-
908,293
(907,772)
908,293
1,006,171
1,914,464
(576,859)
The table below presents a change in the financial result and equity
due to possible fluctuations of exchange rates used at the end
of the reporting period, if all other conditions remain unchanged.
Reasonably expected exchange rate changes for each currency were
projected on the basis of historical information on maximum daily
exchange rate fluctuations in December 2019.
Group
EUR appreciation by 10%
EUR depreciation by 10%
December 31, 2019
Effect on
profit or loss
before taxation
(74,229)
74,229
Effect on
equity
(59,383)
59,383
72
АNNUAL REPORT 2019 The table below presents a change in the financial result and equity
due to possible fluctuations of exchange rates used at the end
of the reporting period, if all other conditions remain unchanged.
Reasonably expected exchange rate changes for each currency were
projected on the basis of historical information on maximum daily
exchange rate fluctuations in December 2018.
Group
December 31, 2018
Effect on
equity
Effect on
profit or loss
before taxation
EUR appreciation by 6%
EUR depreciation by 6%
(54,466)
54,466
(43,573)
43,573
Liquidity risk
Liquidity risk is defined as the risk when the maturity of assets and
liabilities does not match. The Group does not accumulate cash
resources to meet calls on all liabilities mentioned above, as based
on the existing practice it is possible to forecast with a sufficient
degree of certainty the required level of cash funds necessary to
meet the above obligations.
To manage its liquidity, the Group is required to analyse the level of
liquid assets needed to settle the liabilities on their maturity, provide
access to various sources of financing, draw up plans to solve the
problems with financing and exercise control over compliance of the
liquidity ratios with the statutory laws and regulations.
The risk was calculated only for cash balances in major currencies
other than the Group’s functional currency.
The impact of movements in other currencies on the Group’s profit
and equity is not significant.
The CBR sets and monitors liquidity requirements for microfinance
organisations. The Group calculates the liquidity ratio in accordance
Instruction No. 4384-U of the Central Bank of the Russian Federation
“On establishment of economic standards for a microloan
company attracting loan funds from individuals, including individual
entrepreneurs who are founders (participants, shareholders), and
(or) legal entities” dated May 24, 2017. As at December 31, 2019 and
December 31, 2018, the minimum liquidity ratio was 70%. The Group
provides the territorial CBR division that supervises its activities with
information on mandatory liquidity ratio in accordance with the set
format on a quarterly basis as at the first day of each month. Also,
if the liquidity ratio values approach the limit set by the CBR, this
information is communicated to the Group’s management. The Group
complies with the liquidity ratio as at December 31, 2019 (unaudited)
and as at December 31, 2019.
The table below shows the maturity profile of financial liabilities as at December 31, 2019:
Group
Liabilities
Loans received
Lease liabilities
Other liabilities
On demand
and less than
1 month
1 to
3 months
From
3 months to 6
months
From
6 months to 12
years
From
1 to 3 years
742,603
-
-
-
-
-
396,064
396,064
787,925
3,069,025
351,253
-
-
-
-
Total
742,603
4,649,078
351,253
Total potential future payments under
financial liabilities
1,093,856
396,064
396,064
787,925
3,069,025
5,742,934
The table below shows the maturity profile of financial liabilities as at December 31, 2018:
Group
Liabilities
Loans received
Other liabilities
Total potential future payments under financial
liabilities
On demand
and less than
1 month
1 to
3 months
From
3 months
to 6 months
From
6 months
to 12 years
908,293
129,187
1,037,479
8,813
8,813
29,813
29,813
2,265
2,265
Total
908,293
170,078
1,078,371
FAST AND FLAWLESS
73
The Group does not use the above undiscounted amounts in the maturity analysis to monitor the liquidity profile. Instead, the Group
monitors the expected maturity limits that are shown in the table below as at December 31, 2019:
From 1 to 3
months
From 3 to
6 months
From 6 to 12
months
More than 1
year
Overdue
No stated
maturity
Total
On demand
and less than
1 month
1,582,751
786,346
-
-
131,938
2,501,035
742,603
Group
Assets
Cash and cash equivalents
Loans to customers
Property and equipment
Right-of-use assets under
lease agreements
Other assets
Total assets
Liabilities
Loans received
Lease liabilities
Other liabilities
Total liabilities
Net liquidity gap at as at
December 31, 2019
Cumulative liquidity gap as at
December 31, 2019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,218
2,218
-
-
-
-
-
-
-
-
-
-
-
-
-
11,967
1,582,751
786,346
11,967
2,549,233
2,549,233
12,649
75,312
222,117
12,649
2,636,512
5,152,414
-
-
-
-
-
-
144,025
144,025
742,603
2,555,648
664,905
3,963,157
227,558
352,680
725,218
1,250,193
520,880
-
-
-
-
1,263,483
227,558
352,680
725,218
1,250,193
1,237,552
(227,557)
(352,680)
(723,000)
(1,250,193)
12,649
2,492,487
1,189,257
1,237,552
1,009,995
657,315
(65,685)
(1,315,878)
(1,303,229)
1,189,257
The table below presents the maturity profile of assets and liabilities as at December 31, 2018:
Group
Assets
Cash and cash
equivalents
Loans to customers
Property and
equipment
Other assets
Total assets
Liabilities
Loans received
Other liabilities
Total liabilities
Net liquidity gap as at
December 31, 2018
Cumulative liquidity
gap as at December
31, 2018
On demand and
less than
1 month
From 1 to
3 months
From 3 to
6 months
From 6 to 12
months
More than
1 year
Overdue
No stated
maturity
Total
454,549
537,917
-
183,546
1,176,012
908,293
237,361
1,145,654
-
-
-
11,780
11,780
-
8,813
8,813
-
-
-
0
0
-
194,918
194,918
30,358
2,967
(194,918)
-
-
-
3,149
3,149
-
2,265
2,265
884
-
-
-
30,651
30,651
-
-
-
-
102,454
-
0
102,454
-
-
-
-
-
13,559
0
13,559
-
562,814
562,814
454,549
640,371
13,559
229,126
1,337,605
908,293
1,006,171
1,914,464
30,651
102,454
(549,255)
(576,859)
30,358
33,325
(161,593)
(160,709)
(130,058)
(27,604)
(576,859)
Interest rate risk
The Group assumes the risk associated with the effects of
fluctuations in market interest rates on its financial position and cash
flows. Interest margins may increase as a result of such changes,
but may also reduce or create losses in the event of unexpected
movements in interest rates.
The Group is exposed to interest rate risk primarily as a result of its
lending activities at fixed interest rates, in amounts and for periods
which differ from those of fixed interest rate borrowings (Loans to
customers as at 31 December 2019: 786,346 and as at December 31,
2018: 640,371 British pounds sterling). In practice, interest rates are
usually set for short periods. In addition, interest rates recorded
in both asset and liability contracts are often revised by mutual
agreement in accordance with current market conditions.
Also, in 2019 the maximum daily interest rate was limited to 1.5% per
day in the first half of the year and 1% per day since the second half
of 2019.
Other assets and liabilities are not exposed to interest rate risk.
74
АNNUAL REPORT 2019
21. Capital management
The Group’s objectives when managing capital are to comply with the
capital requirements set by the Central Bank of Russia, as the main
place for business of Group is the Russian Federation, and to ensure
the Group’s ability to continue as a going concern and maintain a
capital base at the level necessary to achieve the capital adequacy
ratio of 5% in accordance with the CBR requirements.
The Group provides the territorial division of the CBR supervising its
operations with information on the mandatory capital adequacy ratio
in accordance with the established format quarterly as at the first
day of each month.
The Group is in compliance with the CBR’s charter capital ratio as at
December 31, 2019 (unaudited) and December 31, 2018 (unaudited).
22. Contingencies
Litigations. In the ordinary course of business, the Group is subject
to legal actions and complaints. The management believes that the
ultimate liability, if any, arising from such actions or complaints will
not have a material adverse effect on the Group’s financial condition
or the results of its future operations.
Tax legislation As the main business of Group is in Russia, Russian
tax legislation is subject to varying interpretations, and changes,
which can occur frequently. The management’s interpretation of
such legislation as applied to the transactions and activity of the
Group’s companies may be challenged by the relevant regional or
federal authorities. Current trends in the Russian Federation suggest
that the tax authorities are taking a more assertive position in their
interpretation of the legislation and assessments. As a result, tax
authorities may challenge transactions and accounting methods,
which they have not previously challenged. As a result, significant
additional taxes, penalties and fines may be assessed.
As at December 31, 2019, management believes that its interpretation
of the relevant legislation is appropriate and the Group’s tax, currency
and customs positions will be sustained by the regulatory authorities.
Management believes that the Group has accrued all relevant taxes.
Operating lease commitments. In the course of its business, the
Group enters into a number of lease agreements. These agreements
are not irrevocable. The minimum future lease payments under
operating leases where the Group is the lessee are presented below:
Group
Less than 1 year
Total operating lease commitments
2018
738,538
738,538
23. Fair Value of Financial Instruments
A quoted market price in an active market is the best evidence of
fair value. As no readily available market exists for the major part
of the Group’s financial instruments, their fair value is based on
current economic conditions and the specific risks attributable to
the instrument. The estimates presented below are not necessarily
indicative of the amounts the Group could realise in a market
exchange from the sale of its full holdings of a particular instrument.
Below is the estimated fair value of the Group’s financial instruments
as at December 31, 2019 and December 31, 2018:
Group
Financial assets
Cash
2019
2018
Carrying
value
Fair
value
Carrying
value
Fair
value
1,582,751
1,582,751
454,549
454,549
Loans to customers
786,346
786,346
640,371
640,371
Financial liabilities
Loans received
Other liabilities
742,603
351,253
742,603
351,253
908,293
908,293
170,078
170,078
The Group uses the following methods and assumptions to
estimate the fair value of these financial instruments:
Cash and cash equivalents. The estimated fair value of cash and cash
equivalents does not differ from their carrying amounts due to the
nature of these financial instruments.
Loans to customers. Loans to customers are reported net of
impairment allowance. The estimated fair value of loans to customers
represents the discounted amount of estimated future cash flows
expected to be received. To determine fair value, expected cash flows
are discounted at current market rates.
Loans received. The fair value of other fixed interest-bearing
borrowed funds is based on discounted cash flows using interest
rates for debt instruments with similar maturity. The estimated
fair value of the Group’s other borrowed funds approximates their
carrying value as these instruments do not have market quotations
and are attracted on special terms.
To present information on the fair value hierarchy of financial
instruments as required by IFRS 13 Fair Value Measurement, the
management of the Group assigns the above financial assets and
liabilities as at December 31, 2019 and December 31, 2018, excluding
cash and cash equivalents (Level 1 = GBP 1,582,751 at December 31,
2019 and GBP 454,549 at December 31, 2018 to Level 3 of the fair value
hierarchy.
24. Reconciliation of Classes of Financial Instruments with
Measurement Categories
In accordance with IFRS 9 Financial Instruments, the Group classifies/
alloys its financial assets into the following categories: (a) financial
assets at fair value through profit or loss; (b) financial assets at fair
value through other comprehensive income; and (c) financial assets
at amortised cost.
At the same time, in accordance with the requirements of IFRS
7 Financial Instruments: Disclosures, the Group discloses various
classes of financial instruments.
As at December 31, 2019 and December 31, 2018, all financial assets of
the Group are classified as financial assets measured at amortised
cost.
FAST AND FLAWLESS
75
25. Related Party Transactions
For the purposes of these consolidated financial statements, parties
are considered to be related if one party has the ability to control
or exercise significant influence over the other party in making
financial or operational decisions as defined by IAS 24 Related Party
Disclosures. In considering each possible related party relationship,
attention is directed to the economic substance of the relationship,
not merely the legal form.
26. Business combination
On September 19, 2019 Zaim Credit Systems plc (Parent Company)
became the legal parent of Zaim Express LLC (Subsidiary) by way of
reverse acquisition. The cost of the acquisition is deemed to have
been incurred by Zaim Express LLC, the legal subsidiary in the form
of equity instruments issued to the owners of the legal parent.
This acquisition has been accounted for as a reverse acquisition as
described in Note 3, Basis of Preparation.
In the normal course of business the Group enters into transactions
with its sole participant and directors. These transactions include
settlements, payment of remuneration to employees and loan draw
downs. According to the Group’s policy, the terms of related party
transactions are equivalent to those prevailing in arm’s length trans-
actions.
Until September 18, 2019 and as at December 31, 2018, the sole partic-
ipant of the Subsidiary, owning the 100% interest, was Eastern Europe
Resources S. A., which, at December 31, 2019, remained a related party
to the Group (the party under common control). The ultimate benefi-
ciary is Mr. Siro Donato Cicconi.
The outstanding balances at the year end and liability transactions
with related parties for 2019 are as follows:
Transactions with party under common
ultimate control
2019
2018
Loans received (balance)
742,603
908,293
The fair value of the shares in Zaim Express LLC has been determined
from the admission price of the Zaim Credit Systems plc shares on
re-admission to trading on the LSE for 2.5 pence per share. The value
of the consideration shares was £8,000,000. The fair value of the
notional number of equity instruments that the legal subsidiary would
have had to have issued to the legal parent to give the owners of the
legal parent the same percentage ownership in the combined entity
is 1.84 per cent of the market value of the shares after issues, being
£150,000. The difference between the notional consideration paid by
Zaim Credit Systems plc for Zaim Express LLC and the Zaim Credit
Systems plc net assets acquired of £nil has been charged to the
Consolidated Statement of Comprehensive Income as a deemed cost
of listing amounting to £150,000 with a corresponding entry to the
reverse acquisition reserve.
Details of net assets acquired and the deemed cost of listing are
as follows:
Transactions with party under common
ultimate control
2019
2018
Less net asset required:
Consideration effectively received
Consideration effectively received
Cash and cash equivalents
Current liabilities
Total net asset required:
Deemed cost of listing
£
150,000
11,982
(64,037)
-
150,000
Under the terms of the share purchase agreement between the Com-
pany and Zaim Express LLC there are certain circumstances under
which deferred contingent consideration might become payable.
Should the Company record a monthly EBITDA figure in accordance
with IFRS of £200k per month for a continuous period of four months
and there be no reasonable expectation that this should fall below
this level for a further period of six months then a further 16,000,000
new ordinary shares in the Company shall become payable. Addition-
al consideration of 16,000,000 over and above that already mentioned
shall become payable should the Company record a monthly EBITDA
figure of £350k per calendar month with the same continuous period
clause as noted above. At the IPO price per share these deferred
contingent considerations would have a value of £400k each for a
combined £800k in value. It has been considered by the Directors at
this time that, in light of the COVID-19 pandemic it remains difficult to
predict if and when this might occur. This combined with the current
low probability of these milestones being met in the current environ-
ment, means that no fair value has been calculated for such deferred
considerations.
Interest expense
-
2,460,874
No interest was accrued in 2019, in 2018 the interest rate on the loan
in Euros converted into additional capital is 8.6% per annum.
As at December 31, 2019, the balance on loans received represents
the obligation to pay interest on the loan, which was forgiven. In
2018 the Group received a non-repayable contribution from the
related party in the form of the loan forgiveness in the amount of
GBP 29,018,205, which was stated as additional capital in Subsidiary
balance as at 31 December 2018.
Transactions with ultimate beneficiary
Services rendered
2019
206,718
2018
42,214
For the year ended December 31, 2019, the total remuneration of
key management personnel of Subsidiary was GBP 267,128, includ-
ing social insurance contributions of GBP 39,765 (2018: GBP 223,977,
including social insurance contributions of GBP 33,597). The Group
does not provide key management personnel with post-employment
and employment termination benefits. The remuneration of the Board
of Directors of the Group for the year 2019 was 36,582 GBP, including
social insurance contributions of GBP 2,415.
Below is the summary of remuneration for each Director for 2019:
Salary, £, for
the year 2019
Shares held
Stock
options
Malcolm Groat
4,167
0
2,150,000
Siro Donato Cicconi
16,667
320,000,000
10,750,000
Vladimir Golovko
Simon James Retter
Paul James Auger
149,423
10,000
3,333
0
8,600,000
3,600,000
6,450,000
0
0
Out of pocket expenses totaling £78,055 (2018: £nil) were incurred by
Siro Donato Cicconi and remained payable as at December 31, 2019.
76
АNNUAL REPORT 2019 27. Events after the Reporting Period
The Russian authorities are taking steps aimed at containing the
spread of COVID-19, including an international travel ban, social
distancing initiatives and a days off in Russia from March 30 to May
11, Various quarantine measures in Moscow were extended to June 14,
2020. The authorities have also enacted the closure of non-essential
businesses in Moscow and the Moscow Region, where Zaim’s main
operations are focused and announced a set of economic measures
and subsidies aimed to help affected business and the population.
In line with the current official guidance and the rest of the micro-
finance sector in Russia, Zaim continues operating via its physical
stores during the days off, as it provides a critical service supporting
the primary needs of the Russian population as well as through its
online presence.
Prior to Government regulations in respect of COVID-19, Zaim had
proactively implemented strict health and safety policies specifically
tailored to COVID-19, including working from home for the entire head
office staff, taking all necessary disinfection measures in our stores,
such as using hand sanitizers, medical masks and more frequent
cleaning of the customer zone. The clients can enter the shop in
compliance with the social distancing prescriptions or one at a
time. We continue following all the recommendations of local health
authorities and the World Health Organisation.
In April and May 2020 Zaim saw a significant decrease in demand,
leading to a significant decrease in the amount funded in April and
May 2020 compared to March 2020. This is a direct result of the
reduction in footfall throughout Moscow resulting from the measures
enacted regarding COVID-19.
It is difficult to foresee how long the current Government measures
in response to COVID-19 will be in place for or how customers will
behave once the restrictions are lifted. As such Zaim is taking a
prudent course of action by not seeking to grow the loan book, in line
with its previous strategy, beyond its current level until the demand
resumes and the ability of the Company to accurately forecast future
cashflows reliably returns. As such it is the current strategy of Zaim
to run its loan book on a breakeven cash flow basis, that is to only
lend out the funds that are received from loans until more certainty
of the wider economic impact has been established. This has the aim
of protecting the Company from potential unexpected losses and
deterioration in liquidity due to delays or defaults in collection.
In addition to restricting any new loans granted to the cash inflows
from existing customers, Zaim has enacted a series of measures to
reduce the cost base of operating its physical stores, this has been
achieved by way of negotiating rent reductions with landlords as well
as salary reductions for staff.
Together these measures are expected to enable Zaim to navigate
the current uncertainty and be well positioned to capitalize on the
expected rebound in business opportunities once restrictions start to
be eased.
Our strong capital and liquidity positions makes us confident in the
sustainability of the Company’s operations and it is the intention to
re-start our growth plans as soon as we will have clearer view of the
situation.
FAST AND FLAWLESS
77
Corporate
INFORMATION
5
& glossary
Corporate
INFORMATION
Corporate
INFORMATION
Registrar:
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
Legal advisers to the Company
as to English law:
Hill Dickinson LLP
The Broadgate Tower
20 Primrose Street
London
EC2A 2EW
Legal advisers to the Company
as to Russian law:
Ingvarr Advisory and Trust LLC
Rochdelskaya Street, 20
Moscow
Russia
123022
Legal advisers to the Company
as to Luxembourg Law:
Bonn & Schmitt Avocats
148, Avenue de la Faïencerie
L-1511 Luxembourg
ISIN
GB00BK5T9G03
SEDOL BK5T9G0
TIDM
ZAIM
Registered Office:
10 Orange Street
London
United Kingdom
WC2H 7DQ
Principal Place of Business/
Operating address:
Room No.1 -12, Structure 7
Trekhgorny Lane
Moscow
Russia
123022
Financial Adviser:
Beaumont Cornish Limited
10th Floor
30 Crown Place
London
EC2A 4EB
Company’s Auditors:
Shipleys LLP
10 Orange Street
Haymarket
London
WC2H 7DQ
80
АNNUAL REPORT 2019 Corporate
INFORMATION
GLOSSARY
ATM
CBR
“Default”
an automated teller machine is an electronic telecommunications device that enables customers of financial
institutions to perform financial transactions, such as cash withdrawals, deposits, funds transfers, or account
information inquiries, at any time and without the need for direct interaction with bank staff.
Central Bank of The Russian Federation
means within the guidelines of the Company any loan with no payments to cover either principal or interest amount
for over 120 days after the maturity date. “Default Rate” means the share of loans with no payments for over 120 days
after the maturity day in the amount funded for the same period. “Delinquencies” means within the guidelines of the
Company any borrower who is late in the repayment of their loan
ECL
expected credit loss
“EER Loan Facility
Agreement”
means the facility agreement dated February 14, 2014, pursuant to which EER granted Zaim an unsecured credit
facility of up to 10 million Euro which on September 23, 2015 was increased up to 50 million Euros
“EER Master
Debenture
Agreement”
means the master debenture agreement dated February 1, 2016
(as amended) between Zaim and Zaim SA of up to fifty million Euro
IFRS
International Financial Reporting Standards as adopted by the European Union
“Independent Non-
Executive Director”
means the non-executive directors of the Board from time to time considered by the Board to be independent for the
purposes of the UK Corporate Governance Code
MAR
MCC
MCO
the Market Abuse Regulation (EU) No. 596 (2014) of the European Parliament and of the Council;
microcredit company
microcredit organization
“Microfinance Law”
Federal Law No. 151-FZ of July 2, 2010 on Microfinance Activity and Microfinance Organizations, effective January 2011;
MFC
MFI
microfinance company
a microfinance institution
“NA Loan”
means the loan agreement dated May 17, 2019 between Zaim and LLC NOAH ARK 500 pursuant to which a short term
loan of 30,000,000.00 Russian rubles was advanced to Zaim
POS Terminal
a point of sale terminal (POS terminal) is an electronic device used to process card payments at retail locations
QIWI
UIAS
QIWI plc including its banking subsidiary, Qiwi Bank JSC
the Russian Unified Identification and Authentication System
FAST AND FLAWLESS
81
FAST AND FLAWLESS
83
Аnnual rep o r t
9
2 0 1