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21 October 2021 - PCF Group plc

("PCF", the "Bank" or the "Group")

Update on Restatement of 2020 Preliminary Results

Further to the announcement of 10 September 2021, in which PCF announced that the restatement of profit before impairment of goodwill and tax for the year ended 30 September 2020 would now result in a reduction of profit greater than £750,000, the Group has undertaken further detailed analysis to establish the extent of that reduction.

As part of the previously announced review into the Group's financial controls and reporting processes, the Group's impairment methodology was reviewed with a particular focus on receivables which were either seriously in arrears or where the asset which acted as security for the receivable had been sold and a balance of the receivable remained outstanding ("defaulted receivables").

Following this review and a subsequent review of impairment levels it has now been determined by the Group that the historical expectations in respect of the collectability of these defaulted receivables requires revision resulting in an additional impairment charge of £6 million which will be applied to the results for the year ended 30 September 2020.

Taking that FY19/20 impairment charge into account, along with other adjustments (principally from the financial controls review and the increased cost of the full year 2020 audit), the new revised reduction to the preliminary result for profit before impairment of goodwill and tax for the year ended 30 September 2020 will now be approximately £7 million. This will bring the statutory loss before tax for that period to approximately £5 million. The Group still has headroom above its regulatory capital requirements, including Pillar 2 buffers.

In light of the increased impairment charge, the Group also reviewed its strategy for managing these defaulted receivables. Following this review, the Group sold the majority of these defaulted receivables to a specialist debt purchaser. As part of that strategy, going forward it is envisaged that periodic smaller sales of defaulted receivables will now be undertaken by the Group on an ongoing basis to give certainty to the valuation of this category of assets, and to enable operating efficiencies for the Group by reducing the operational time and costs that managing such defaulted receivables involves.

More generally, the extensive work being undertaken as part of the review of the Group's financial statements, completion of the annual report and accounts for the year ended 30 September 2020 and the investigative review of the Group's financial controls and reporting processes has been exhaustive and is now well progressed. The PCF Group would like to thank all shareholders again for their patience and support during this time and will provide further updates in due course.

PCF's shares remain suspended from trading.