Distribution Finance Capital Holdings plc ($DFCH)

Good afternoon, and welcome to the Distribution Finance Capital Holdings plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to the management team. Carl, good afternoon, sir.

Thanks very much. Good afternoon, everybody. I'm delighted to be here with Sameera sharing with you our exceptional 2025 results. We'll go through a bit of background because I think there are some people on the call that perhaps haven't met the company before, but we'll move them from the background into the actual financial results. So Distribution Finance Capital, we're a specialist lender, and we provide financing solutions to manufacturers, dealers and distributors. And that's a purpose that we've had since the company was founded in 2016. We were authorized as a bank with a full banking license in 2020. And I'm really pleased to say that having now been a bank for 5 years, this is our fourth consecutive year of profitable year-on-year growth. I don't know how many of you follow early-stage banks, but to have gotten to a point of profitability within 2 years of authorization is pretty much unheard of. But that has set the foundations for us to be moving through our growth journey with extreme confidence. As far as where we are at the moment, 2025, it's been a transformational year for us, not only from a financial performance perspective, but also in us building the building blocks for future growth. When we were going through a banking license application, we set our store out to become a multiproduct lender whilst always supporting manufacturers, dealers and distributors, but that ambition has really come to life at the back end of 2025 as we enter 2026. So our business model has been very disciplined and our lending products really do unlock the ambitions and the sales growth of manufacturers, dealers and distributors. That's our sole reason for being. We're now at a point where we've got an array of lending products that actually are quite virtuous in how they work together. So the dominant product that we've had since the firm was incepted is inventory finance, which is effectively providing working capital support to dealers and distributors stock ready to sell on the forecourt. We've now launched asset finance, which is a natural step for us in selling product as it leaves the [indiscernible], and the structured finance, which are bespoke lending solutions that help manufacturers, dealers, distributors and sector participants to develop their businesses and hopefully create a virtuous environment of further growth across the markets in which we operate. What we do is niche. We think it's an attractive niche because it is underserved by the mainstream lenders. And at the heart of everything we do is a customer-first, technology-first approach to our proposition. We draw on deep sector expertise, but also deep lending product expertise as well. So all the products and services that we provide to our customers, we've got expertise across the organization, which helps us manage the credit risk really well through the cycle. Our whole lending is underpinned by a retail deposit funding base. And again, tech-enabled, cost-efficient structure where we participate in Best Buy tables to gain access to the retail deposit markets. The expertise that we have across the sectors really helps us manage the various cycles that you will appreciate are in place across the varying sectors that we operate. So our structures are really tailored around that. All of our lending is secured, how we secured as well. We've got multiple layers of recourse in the event of needing to recover any of the lending that we've made. We're very well diversified against end user markets, as you'll see a little bit later on when Sameera talks about things. But really importantly, we're now at a point having been profitable now for 4 of the 5 years as a bank. We're generating really strong levels of profitability that means that we can support our growth through retained earnings, and we're self-generating tangible net asset value, which supports our organic capital generation, which means we don't need dilutive equity raise to support our growth moving forward. You can see here, this is the core lending product that might be new to people, but it is stock finance, inventory finance, distribution finance. This foundation has really given us access to over 1,500 manufacturer relation -- sorry, dealer relationships and over 100 manufacturer relationships across a whole array of different sectors, whether there was a leisure focus being powersports, which is motorcycles, automotive, specialty automotive, marine, lodges and motorhomes and caravans, and all the commercial assets, which are plant machinery and industrial and transportation and agriculture. So very, very well diversified across array of sectors. But the characteristics of our products and the access that we have to dealers is consistent across the board. We do support manufacturers in allowing them to ship finished goods to a dealer, which means that working capital, both the manufacturer and the dealer end is not tied up at all. We are secured on individual assets, each asset we hold, we hold title to. And we're typically advanced at about 85% of the wholesale price, which is price of an asset. And as you recognize that dealers do make a margin, a retail margin as they look to sell. So we're about 70% advanced against the retail value. And the beauty of the product is that we are repaid as the dealer sells one of those motor homes or one of those light commercial vehicles from the forecourt. And the loan duration is fairly short and it's about 150 days on average. And those 100 or so manufacturer relationships introduce a whole array of business to us. And that generally what we call program business equates to about 60% of our lending. And that gives us not only access to the dealer network, but also redistribution or repurchase arrangements if the dealer is struggling to sell a particular asset. This is a repeat facility-based financing type product. So we do pledge limits to dealers that they will put stock hopefully to that limit on the forecourt. And as they sell one of what we would call an asset, we hope that, that space is filled with a new asset for sale and that's drawn down from the facility that we have in place. It is a fee-based product. And whilst it is a fee-based product, Sameera and the team will convert those fees into a gross yield for accounting purposes and that is a double-digit yield that we achieved on our lending. Given the extent of security and the mitigations that we have in place, our losses, impairments are generally about 1% through the cycle or inside of 1%, which is very strong. And you'll hear later on about the exceptional levels of customer advocacy that we received through a Net Promoter Score as well. So that's a whistle stop tour of BF Capital. Now focused on the very exciting results for 2025, which frankly is I would describe as our best year so far. I mean our journey has been exceptional since becoming a bank. And for us to now be 5 years in and 4 years profitable, demonstrating year-on-year growth and material increases year-on-year in the profitability is great to be able to talk to you about that today. It's fair to say that 2025 has been another year characterized by us breaking records left, right and center again. This year, we originated new loans of GBP 1.8 billion, which is up 27% on the prior year. And that's rolled through to our closing loan book of almost GBP 850 million, again, up 27% on the prior year. And the components of that with great credit stewardship, managing our credit quality and keeping our cost of risk, cost of impairments below 60 bps, and holding our net interest margin at 8% has enabled us to deliver an adjusted pretax profit of GBP 18.1 million, which is up 26% on the prior year. Now on stand-alone, those results themselves are exceptional, but we've also done some pretty amazing things in 2025 as well that really builds for the future. And I think the most exciting element of that is the launch of our asset finance proposition. So you heard earlier about how our inventory finance product works, which is effectively putting product to the forecourt. But I'm sure you'll recognize that as product leaves the forecourt, that is generally financed. Well, asset finance is there to support sales. It is distributed through our existing dealer and manufacturer partners and actually unlocks ginormous addressable market. We've estimated that our entire dealer network has about GBP 10 billion of annualized sales, and we're looking to convert some of those into asset finance. Like the rest of our proposition, whether that's the savings products that we offer to our depositors or our existing inventory finance capability, asset finance is also digitally enabled. It's a modern scalable platform that we've deployed from the ground up. It is fully regulatory compliant. And I think importantly, difference, we're calling it [ DFRNT ] has no legacy issues as well, which is common amongst a number of lenders in the consumer lending space. It's important to say we have been through the FCA's approval process to receive consumer lending commissions as well. Over and above that, we believe that our overall platform and our culture is built for further scale. We have during 2025 moved our HQ office and expanded our space in Manchester. And that gives us the capacity to grow the business over the next few years. I think it's fair to say our customers think we're doing a pretty good job. Our lending customer Net Promoter Score increased by 21 points to plus 59, which is very much above the sector benchmark of plus 30 that we've set ourselves. And our depositors continue to think we do a great job as well. We've grown deposits, but we have a really strong fan base. Our FIFO score, which is recognized in star ratings up to 5 is 4.8. And we've received for the third year running a Platinum service award from FIFO as well. I still read on a Sunday morning with great pride our customer reviews on the deposit side of things, and we offer a slick service and great rates, which resonates with them. I think over and above that as well, I mean, culture from an employee culture, we're in a great place. For those of you who have followed us for quite a while, you'll remember that we were rated as a world-class place to work with best companies last year. We decided to try and go for a different level of insight this year by switching to the Best Places to Work survey that has a league table in the Sunday Times, which I think is due in May time this year. But we have had our own internal results, not the benchmark against other firms. And we are rated excellent across all categories of workplace engagement, which is the highest possible rating that you can have. So I think that page alone says what a fantastic year 2025 has been. But I think without understating what a great performance we've had over the last 5 years since becoming authorized and building the proof points, I think I'm most excited about what's ahead of us as we head towards 2030 and look to deliver sizable value creation for shareholders. I think it's important to say that the medium-term targets that we put out to the market full year 2028, those are still in force. However, we do see those stepping targets. It's 2030 that we're most excited about, which is really a further acceleration on what we're expecting to achieve over the next couple of years. So by 2030, we're expecting to have our loan book north of GBP 1.5 billion, with a cost-to-income ratio that will land in the 45% to 48%. And those ingredients with continued scale and continued price discipline should get us to a point where we have a 20% overall return. And our plan is that with each year, we'll look to grow tangible net assets by about 10% to 15%. Now what's really exciting about it, and this, I guess, is the endowment from us getting to profitability so early in our journey as a bank that we're now at a point where we are self-funding growth. We're expecting to be generating excess capital over and above our growth requirements. So we do not need to raise capital from shareholders to support anything that we're trying to achieve by 2030. In fact, we believe that our capital position is such that it will give us optionality around our growth to either perhaps accelerate our growth plan as opportunities present themselves maybe consider some smaller portfolio acquisitions if they are an adjacent space or complementary to what we're looking to do, or I guess, importantly, to consider additional returns to shareholders similar to perhaps the share buyback that we did in 2025. But I guess what we're really focused on as well is our first dividend, which we hope to be able to announce alongside our full year 2028 results, subject to regulatory approval at that time. So a fabulous first 5 years of the bank, exceptional 2025, our best year so far, but amazing opportunities to create further value for shareholders as we look to 2030. So I'll let Sameera now take you through a bit more detail on the 2025 results.

Thanks, Carl. And I'm delighted to present what is my first set of annual statements to you today after joining the business in May 2025. And it gives me great pleasure to share an exceptional year of performance across all our key indicators, which you can see here on this slide. And I will talk in more detail about each of these areas as we go through the presentation. But the summary message here is our core financial metrics have all trended positively and have culminated in us improving the underlying value in our business. So our growth trajectory has continued to climb year-on-year and 2025 was no exception with another 27% increase in our loan book, and that was delivered across a diversified portfolio and materially ahead of where we set market expectations. But it's not just been about the pound value growth. We've been very deliberate in how we have grown and where we have placed our lending. And that's meant we've been able to maintain our net interest margin at that 8% mark, which is quite exceptional. And equally, on the cost side, we've had a really close watch on costs all year and carefully balancing that need to invest for our future and make sure we're sustainable for the long term whilst also maintaining a culture of strong underlying cost discipline. So despite some of that significant investment this year in areas such as our asset finance proposition, we have seen improvement in our overall cost-income ratio, which you see there to the right. In the bottom left, you can see there our performance in terms of cost of risk. And of course, it's quite topical at the moment in terms of the ever-evolving and challenging macroeconomic environment. But despite that, again, our lending portfolios have continued to perform well. Our provisions have remained stable as our book has grown, and that's helped improve our cost of risk this year actually to 0.59% from the previous period and again, comfortably within our appetite at the 1% mark. And so collectively, these business drivers have enabled us to improve our overall return on tangible equity by 2%, so up to just under 12%. And importantly, our TNAV per share is up to 75.9p, and that's really demonstrating, as I said, the value that we're generating in our business. And also worth noting the increase in TNAV is after we account for just under GBP 5 million being allocated to our share repurchase program this year. So a very good result even with that repurchase program. So if I just move on to a more detailed breakdown of our P&L, and we'll talk you through financial performance covering both the profit and loss and balance sheet positions. So starting with the P&L. Net interest income is the lifeblood of our profit performance, and I'm really pleased to see this material increase of around 23% in overall income compared to 2024. And there's 2 main drivers of this. The loan book growth has inevitably contributed. As the value of our book increases, we generate more income, but we've also done a great job in maintaining our net interest margin between our assets and liabilities around that 8% mark, which again has been exceptional in the year given the backdrop of where rates have been moving. So just quickly on the growth side, we've already talked about how much our loan book has grown over the period, but that's been underpinned by a diversification of our suite of products and having many more options to place our lending. So we've closed our book ahead of market expectations, and that's certainly supported the overall income position. From a pricing perspective, asset yields have held up really well at 12% and that's despite base rate coming down by 1% in the period. And that's really been driven through careful management of the portfolio and growing the book in profitable segments. So we've been really selective about where we placed our lending and have optimized our returns across the whole portfolio. I touched on base rate. I think it's worth noting that our savings book repriced downwards quicker than our asset book, and that's simply because of the nature of our savings book as a proportion of it is variable, and therefore, almost immediately reprices. And on the asset side, our yields reprice when the book naturally turns. And so we expect that to fully materialize in 2026. Elsewhere on the retail side, I think it's fair to say it's been a competitive market for retail funding throughout the year despite base rate coming down. We've seen competitors hold their pricing for new business, particularly in the fixed market. But we've successfully balanced that requirement to grow our funding with effective pricing discipline to manage the overall cost of that funding to us. So we've been able to rebalance our savings proposition and achieve a more attractive mix. And we've also been careful and selective about when we're in the market for funding, which has also contributed. But we stayed true to those values that Carl mentioned around our commitment to offer great value rates to our customers and have demonstrated that by attracting really good levels of new business across the full suite of products, but also retaining very well in terms of existing customers. So that's the performance on net interest income. From a cost perspective, we've seen an overall increase in costs over the period. And I think outside of general inflationary increases, which you can always expect, the main driver of this has been some very deliberate investment in our strategic growth priorities, particularly the asset finance proposition, but also driving more operational efficiencies and strengthening our core capabilities as we grow. Now we've long talked about efficiency, automation, scalability being so core to our values, and we've continued to progress those targeted technology initiatives to enhance operational efficiency. Of course, the big one being the organic build of our asset finance platform, which we will now be able to leverage for rapid scale into 2026. And from a capabilities perspective, it's been really important to be able to strengthen in the areas that we think are important as we execute our strategy, whether that's our change capabilities or risk areas. And again, that is ensuring that our risk and control frameworks are aligned with regulatory expectations as the business accelerates. Outside of these investments, underlying cost discipline has been maintained throughout the period, and our focus on leveraging these investments over time to make sure that we can scale without that material increase in costs. That remains paramount to our strategy, and we should see this widening of jaws between cost and income to support the lowering of our cost-income ratio over time, which, at the end of this last financial year, was at 57.4%, so some reduction there. I won't say too much about impairment just yet. We've got another slide coming up on that. But just to note that this -- our proven track record of working hard to resolve every arrears case is evident in how our overall cost of risk has come down to 0.59% and that's despite our book growing. So we haven't seen that same growth in our provisions charge. And I will cover this in more detail in a slide that's coming up. So overall, these things combined have driven our excellent P&L performance in the year. Pretax profit reached GBP 19.6 million for the period. And again, that was ahead of expectations. And on a comparable basis to 2024, when we strip out one-off items, that's a solid 26% increase. So very, very positive and pleasing performance. And I think what's most pleasing about it, as I said, is that all the performance drivers have trended in the right direction and demonstrating that strength that we're building in our business, not just for today, but for the future. And the overall result of that is strong underlying financial KPIs, return on tangible equity up as we've already talked about and our adjusted EPS also improved to 8.3p, sorry. So just moving on to the balance sheet quickly. We've already spoken about the growth ending ahead of expectations, GBP 846 million. I think the real success story here is we've been able to achieve that through a diverse portfolio of lending. The expansion of our product set has absolutely been a material driver of this. And whether that has been about bringing on new manufacturers, winning share where we're already strong, providing those tailored solutions to our existing customers or indeed launching our new asset finance product, we certainly have many more opportunities for growth in 2025. And that's mitigated against some of those markets that have been a bit more challenging. So again, demonstrating the resilience that we're building in our business and the levers we have to pull to meet our strategic growth ambitions. We continue to fund all of our lending through our retail savings franchise, which has been a real success for us and remains fundamental to our overall strategy and absolutely enables the growth of our balance sheet. And despite it being a competitive environment across the savings market, we delivered 29% growth in our savings book overall, again, demonstrating that we can access liquidity to fund our ambitions with relative ease. Provision coverage, again, we'll come on to this in just a moment, but remains comfortable and steady at 1% and is reflective of our -- the consistency in our borrower profile and the security that we have against our lending. Just touching on capital for a moment, really strong and stable position at the year-end, even with the material growth in our balance sheet, our CET1 ratio remains well above our regulatory minimum at 18%. And we also took the opportunity to draw down a further GBP 5 million of Tier 2 capital with our British business investment facility to take our overall capital ratio to 20.5% for the period. We continue to leverage the Enable Guarantee scheme. And again, that assumes that we drive maximum efficiency and utilization of that scheme to optimize our capital. And when you combine all these factors, we have the expectation of future retained earnings. We've got ongoing negotiations with the British Business Bank for a renewed agreement on the Enable Guarantee scheme, and we have capacity for more Tier 2 capital. All of that gives us confidence in our overall capital headroom, and as a result, we expect to deliver our medium-term growth ambitions without the need for a dilutive capital raise, and as Carl said, also gives us opportunities to consider other strategic opportunities as they arise. So we've already touched on TNAV per share. So I'll just move on to a bit about the market and where we've driven our growth from. Overall, the portfolio is very well balanced and diversified, both in terms of the market segments and specific products. The bulk of our portfolio remains within the inventory finance sector with a diverse set of markets and products within that. But in 2025, we also meaningfully grew our structured finance portfolio, and that was, again, being selective and serving more of those needs of our existing dealers and supporting the vitality of their business. And of course, we are delighted to have launched our different asset finance product initially in the motorhomes and caravans sector, and we've seen that steadily increase to GBP 16 million in the year and expect that, that will accelerate further this year, particularly as we expand into new sectors. In the inventory finance space, we've seen good growth and resilience in those markets. Motorhomes and caravans is, of course, where we've long punched above our weight, and that trend continued in 2025. We've retained our position as being the leading provider of inventory finance to U.K.-based dealers. But outside of that, we've seen good levels of growth across other sectors such as marine and industrial, where we've done really well to win new manufacturing relationships, but we've also seen some green shoots of recovery in the log sector and expect that market to reestablish itself as parks start to change ownership. So I think collectively, stepping back, what this demonstrates is the real positive story is the diversified opportunities we've had across 2025 to grow our loan book. Even when there's been sectors that have been more challenging, such as agriculture, what we've demonstrated is the maturity that our business has reached in terms of our proposition and opportunities for growth. So finally, I'll just add a little bit of color to our credit position. And again, just to reiterate that this remains central to our strategy and is a key driver of our business. We're not just focused on growth, but also the quality of the lending that we're placing. And I think the metrics on this page really bring that to life. So we've talked about that macroeconomic environment, but our lending portfolios and asset quality remains within appetite that's been set by the Board. Our credit discipline is very well embedded both in terms of our credit origination journey, where all new lending is in line with credit policy and appetite, but also our in-life portfolio management. Any overdue accounts are tightly controlled and managed by our credit management team. We have a team of specialists whose sole responsibility is to identify warnings, early warnings of distress and deal with kind of subsequent collections and recoveries, and we take a very prudent view. Customers are contacted from 1 day past due and a regular dialogue is established to remediate any arrears. So the chart on the left just shows the number of dealers within our base that were in arrears at the period end, and that's remained fairly stable at 39 overall, which is just under 3% of our dealer base. And of those dealers, we have about 33 that we class as being more aged recoveries. So we work diligently to recover these assets over the necessary period of time. But again, we have really good security of them and appropriate loan provisions are individually assessed and put in place for those cases. The chart in the middle shows that the value of those arrears, although slightly increased from last year has remained relatively low at 0.85% of the total book and again, well within risk appetite. But I think the key thing here is our provisions have remained really stable even with the 20% -- 27% increase in our loan book, and that's demonstrated by that overall cost of risk position being sub-60 basis points and well within our target of 1%. So I think that's what these metrics really show and stand out in terms of the strength and proactive approach to credit management and any problem cases that we have. We have the ability to remediate dealer defaults through redistribution of our products within the existing customer network or if necessary, by sale of the secured assets to third parties. So I think that concludes the financial overview, which hopefully demonstrates that growing underlying strength and resilience in our business model and that underpins our future outlook, which I will hand back to Carl to take us through.

Great. Thanks very much, Sameera. So some of you may have seen this and remember this from the last presentation, those of you that were perhaps tuned in. And I'm not going to spend much time on this. But I want to put this up for reassurance, hopefully, you've seen this is reassuringly boring that this is the environment that we said we were going to be playing in, in the multiproduct lending areas and nothing has changed. This is the box that we'll be operating in as we move forward through to 2030. And frankly, we have all the tools in the armory, all the products in the armory, all the tech in the armory and all the people in the armory to be able to bring this to life. So there's no change. And what we're hoping is that -- or what you'll see is that our capital base is entirely fungible across all of the different lending products so that we can really be massively selective and focus on maximizing overall returns. Where we're heading to 2030, we talked about this earlier. The opportunities are immense, whether it's in our core inventory finance market, we can grow share, we can enter new sectors, we can bring on new dealers. Those are still opportunities that are there for us. We've got the deeper relationship on asset finance, that GBP 10 billion market opportunity that we're looking to tap into. And obviously, that lending is much longer in tenor. So we don't need to be doing anywhere near as much lending as we do in the core finance space. And then we've got that virtuous product set in structured finance that will help stabilize, grow and support ambitions of sector participants so that we see the growth in the markets that we're transacting and exceptionally well. So the ambition for 2030 is the loan book north of GBP 1.5 billion, cost-income ratio of 45% to 48% to widen the jaws and unlock that operational leverage that's in the organization. And that, with the pricing, will underpin the 20% return that we're looking at, and that 10% to 15% TNAV growth over the time horizon on an annualized basis. What's really important is the point around capital. We do not need to raise capital. We don't need anything that's dilutive at all. This is all going to be achieved through the redeployment of retained earnings. And at the tipping point in 2028, we believe that we'll be at a point where, with all the acceptable buffers in place, we'll be able to distribute to shareholders on a regular basis, subject to regulatory approval and hopefully be announcing our first dividend alongside the full year '28 results. So just looking at this year, I mean there's no doubt when we started to frame these results, we weren't in a world that is looking as difficult it is right now. The macroeconomic backdrop and the geopolitical landscape is pretty challenging. And I don't -- in anything that I'm going to say here want anybody to feel that we're being complacent. I mean we've demonstrated over the last 5 years of being a bank. Every year has had some challenge, some macroeconomic issue of sorts, whether that was supply chain issues that came out of the pandemic, whether that was the cost of living crisis, whether it was the significant step-up in interest rates as we hit inflation, we've demonstrated, our dealers have demonstrated that we can navigate our way through that really well and our credit stewardship has really come into its own. So we're not expecting to loosen any of the credit control disciplines that we have in place across the firm. In fact, we're going to lean into those as we look forward. Our portfolio, as it stands at the end of the year, and we'll be announcing Q1 over the next couple of weeks, we're expecting that to be in line with where we've been at. So -- but as I say, cautious, vigilant and not complacent is the key for us. We have seen a strong start to the year. We're expecting that to continue through the balance of the year, whilst obviously being quite cautious about our lending, whether it's in any of the new segments that we're going into such as asset finance or in the core inventory market. We're expecting asset finance to build momentum through the second half. And I really hope that, all things being equal, we should be at a point where we've got about GBP 100 million of really good quality asset finance business on the books by the end of the year. You're going to see that operational leverage open up as the gap between income generation and cost growth widens. And we are absolutely well capitalized to not only support our lending ambition for this year, but also right through to 2030. And you'll see that our closing loan book ambition for this year is GBP 900 million, which I think reflects some of the conservatism that we're expecting to have to unfold through this year given some of the macroeconomic uncertainties, but also some of the shorter tenor lending that we've had in the structured finance business that's due to unwind during the next few months. So that's the story for this year. I'm hoping you are all feeling as uplifted by these results as we are, also excited about the ambition for 2030.

I think what we'll look to do now is just counter through some of the questions that we've got here. So if we can -- let's just see what we've got going here. And we're just bringing the questions up. So one of the questions we have here are what are the key drivers for the target of a 20% return on equity? And do you have everything in place to achieve this? So I'd say, yes, we do. We've got all the product services, technology in armory. We've got the space in our new HQ to grow. We've assumed that our net interest margin will remix with the product mix as well, but returns will still be very, very strong. So we're feeling very confident about the 20% return. I think a great question here from Hamish. As you look through the various end markets to which you and your dealers are exposed, which ones are most likely to be vulnerable to sharp increases in energy and fuel costs and/or interest rates, and which ones are most vulnerable to an economic downturn? Could it be that your losses are very small, but growth falls because dealers don't restock inventory at the same scale due to caution? How should we think about the likely scale of such a growth setback? Well, I'd probably point to the fact that the combinations of all the things that you've laid out, Hamish, whether it's the energy, fuel, cost of living, interest rates, we've been through all of those over the last few years and navigated those exceptionally well. I think there are a number of -- as we've seen, there are a number of leisure assets that frankly, just do not seem susceptible to the -- certainly the fuel cost increases and interest rate movements. We've seen motors and caravans and marine being very buoyant because folks that are transacting in those markets and looking to commit to buy generally are those that are impacted by those sorts of macroeconomic challenges. The one that I would say that I feel most concerned about is probably motorcycles. That's fairly wide access to people from an affordability perspective. It's got similar characteristics of the motor space, which we don't play and we don't play in the motor car space at that level. So -- but that is a very, very small part of our loan book. I think we've got so many opportunities perhaps more than we perhaps could shake a stick at that I think there's a whole array of different combinations that we can look to unfold here if an economic downturn does lock in. But it's too soon to say at this particular point whether dealers have been impacted. Sales across a number of sectors are looking pretty good. So we're not overly concerned about it. But short-term extension of stock days if stock doesn't sell, that's beneficial to us because we generate more fee income. We've seen that in the past. The key is our portfolio folks continuing to manage that very, very tightly and helping us navigate through things because obviously, extended stock days well beyond where we are today is a sign that there is dealer distress there as well. But I say we've got a proven track record of navigating that. We've got a question here on more about rising impairment charges. I think that might be, Peter, you were looking at the face of the P&L that showed we had a credit last year, and then we've had a quite sizable step change, but there is a GBP 4.5 million one-off in 2024. So actually, impairments are actually improved during the year on a larger loan book.

Yes. I think the way to look at that, Peter, is the cost of risk coming down from the 0.75% to the 0.59%. So our provisions on an underlying basis, like-for-like have remained fairly steady in comparison to the 27% growth that we've had in the balance sheet, which is what's brought the overall cost of risk down. So they're not rising. And we would expect impairments to go up somewhat as our balance sheet grows. But as I said, we've certainly not seen them go up to the same extent as growth.

We've got a similar question here on competitive benchmarks for impairments. Sadly, I mean, operating in a niche that we're in, we don't have lots of people that report in the same way as that we can draw external benchmarks. But we do believe our loan book is performing exceptionally well against our own standards that are built into our models. Ms. Sameera, do you want to talk about the projections on impairments on the question...

Yes. So yes, so I think overall, as Carl said, we don't have the comparisons. However, where we've set our risk appetite is the sort of 1% through the cycle mark. And I think where we're really confident is we have really good underlying security of the asset. We have the redistribution programs. And so collectively, that means our loss given default is often lower than perhaps the typical competitor might be. And that's factored into our forecasting. So whilst we expect provisions overall to go up as our book grows, as you would naturally expect with a bigger book, we're still targeting that 1% throughout our forecast period. So not changing our appetite to risk.

So just I think we go up to -- well, actually, can we just go down because there's another question there on impairments and asset finance. So Sameera can take that.

Yes. So in terms of the comparison, so from an asset finance perspective, again, the risk appetite is consistent. So benchmarking around that 1% mark. I think the composition of that is a little bit different. So we expect a lower probability of default on asset finance, the customer type that we see there less likely to default. But the LGD, which I just talked about, probably a little bit higher on asset finance, again, because it's at the retail, not the wholesale price. But overall, those things balance, and we expect a similar profile in terms of provisions for asset finance. And from a NIM perspective, which is the second part of that question, again, a little bit lower in terms of absolute NIM, so about 6% compared to where we expect the long run average on inventory finance to move, which is around 7%. But we're looking at this more from a return on capital perspective and asset finance with the lower operational cost associated with it, we expect it to deliver comparative returns on capital.

I think that's an important point for us has been instrument to demonstrate returns, but overall, now as a mix product set, we do want to look at overall returns on capital. So if we can just -- I think one of the questions again in relation to perhaps the deployment of AI and how can we grow the number of loans without any human touch? Well, we've consistently built across our business a digitized capability that allows us to scale our operation without human beings doing processing behind the scenes. We like our operational folks to be enriching the client experience through human connection. We do that on the savings side of things, and we get really great feedback that phones are answered in an old-fashioned 5 rings and people are off the phone before they've even thought about, which I think is pretty uncommon. We are not keen on eradicating that human touch point using AI chatbots and the like. But we are really keen and we have been using AI tools and robotic processing to deal with more administrative paper-based test behind the scenes. So that's what really unlocks the operational leverage in the firm. And we've put some AI tools really to work to enhance proposition rather than take out human beings that would say, provide a quality service to our customers. The key is getting it right first time. You get it right first time and you don't need human to answer queries and all those sorts of things, they can be focused on relationship management. And we've got proof points in relation to that because we originate GBP 1.8 billion without lots of human interaction there. I think there's a couple of questions on capital. So I think we've got question 7, Sameera. I don't know if you want to deal with that one. And there's another one a bit further down. So what is the base core Tier 1 you would like to operate with through the cycle? Well, I mean it's not set by us by capital requirements set by the regulator, but would you expect sustainable organic growth in the CET1 preshareholder distributions?

I think just taking those in the round, as Carl said, the capital requirements are set by the regulator. We go through a rigorous exercise to do that. We're also in the process of transitioning in terms of the capital regime. But the key thing here is, we would always keep our excess capital above the regulatory minimum. We never want to run it to the minimum. There's always the unknowns. As I said, we are changing regime as well. But we're running it with a sensible buffer against our kind of baseline capital requirements, which allow for us to meet the growth ambitions that we have in plan, but leave that sensible buffer for any kind of unknowns. But we're not allowed to disclose our actual total capital requirement.

So I think there's a question here, which you mentioned the capital required to support growth 2030. I mean I think it's pretty clear to you and that we're going to be holding excess capital, and that's not efficient to do that. So that's where the optionality comes in between 2028 and 2030. So we always want to be holding more capital so that our future growth is funded. But when we start to stabilize our growth plan, it is inefficient for us to be holding such capital. So regardless of whatever the regulatory capital requirements and we've obviously modeled that we want to be making sure we haven't got opportunity to put that to work by accelerating our growth plan over and above what we've said here, then we'll look to distribute that in some mode to the shareholders. I think there was another question, are we planning a share buyback. No immediate plans in that regard. Where we are right now, we want our capital to work to support growth. That being said, it is something that we do talk to the Board about on a regular basis. And it may well be the circumstances present themselves as they did at the beginning of 2025 for us to do a buyback. But as it stands, just under regular review. So what have you got here.

[indiscernible]

We've already covered that one. I think question [indiscernible]. What is the average maturity profile of your new asset finance book versus existing lending book? Well, the tenor on the existing lending is quite short. Typically 150 days is a little bit shorter at the moment. Obviously, a little bit longer, generates more income for us. Asset finance book is much longer in tenure. We're expecting it to be between 3 and 5 years of behavioral life, which means it's quite sticky relative to our existing book. So we don't need to originate as many loans. So that GBP 10 billion is ginormous relative to our annualized origination requirements in asset finance. In fact, I think our strongest year between now and 2030 requires us to be between GBP 300 million and GBP 400 million of annualized loan origination. So it's a drop in the ocean compared to the size of the opportunity. I hope that we have GBP 100 million or thereabouts of asset finance lending at the back end of this year. There's a question here just in relation to base rate expectations and how do you manage asset yield, which one moves first deposit cost or loan repricing to customers? In an upward environment, we're obviously benefiting from new loans being written at a higher yield because we're anchored to base rate movement. So we should see, I guess, a positive mismatch in that regard. That's dealt with it. And then there's a question here about bolt-on additions. I wonder that's in relation to perhaps some of the optionality around the capital position. We talked about potentially portfolio acquisitions. There may be small acquisitions, people looking to sell loan books. We have actually over the years when we were looking at developing products, we have looked at M&A. We kissed an awful lot of frogs. We've never found anybody that's quite fitting to build, and we've been very, very choosy. So we actually went down the route of building from scratch, so we have no legacy issues to face into. So that same discipline that we've had in looking at M&A acquisitions to build capabilities we have on the portfolio side of things. But I think it just illustrates that those opportunities could be presented to us. We will consider them if they fit the quality of what we're I think how are you expecting these arrears and defaults currently low. How do you expect these metrics to behave in a downturn or under stress scenarios?

I think with this -- so we run an ICA scenario every year, which looks at a severe stress, and we do assess arrears and defaults in that situation. It actually forms part of our downside scenario in our base case projections of provisions. And I think what that shows is they do go up almost double to about GBP 5 million, which obviously would be an impact on our P&L, but I think the key thing here is we would still be profitable. We wouldn't see a major reduction in our capital headroom or capital metrics that would cause concern. We could still lend through that situation. And actually, from a net interest margin perspective, there's often an opportunity as yields increase. So as long as we were careful and selective about that, I think we would have that ability to withstand those shocks.

So I think that's all the questions dealt with. Well, look, I just wanted to wrap up before we close. For those of you that have been on this journey with us, for those of you that are on the share register, I hope you're pleased with the 2025 results. I hope you'd agree that what we said we were going to do, we've at least done that, if not more. 2025 has really set the foundations for where we're looking to head through to 2030. And I hope you're excited about it as we are where we can take this without the need for a capital raise, which is an important point. And if you're not on the register, hopefully, you're going to go and buy some shares this afternoon. But thanks very much for all your time.

Thank you.

That's great. Thanks for updating investors today. Can I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.