TIDMPCF TIDMTTM
RNS Number : 2574R
Private & Commercial Fin Group Plc
08 December 2016
8 December 2016
Private & Commercial Finance Group plc
("PCFG", "Private & Commercial Finance", the "Company" or
the "Group")
Preliminary Results for the 18 months ended 30 September
2016
Strong gains in profitability underpin platform for future
growth through banking licence
Private & Commercial Finance (AIM: PCF), the AIM-quoted
finance house, today announces its preliminary results for the 18
months ended 30 September 2016.
These final results constitute an 18 months period following an
accounting reference date change (as announced on 21 March 2016).
The highlights, narrative and statement also refer to an unaudited
pro forma 12 months period to 30 September 2016 and an unaudited
pro forma 12 months to 30 September 2015 to provide a like-for-like
comparative.
Financial Highlights:
-- 18 months underlying profit before tax was GBP5.6 million,
before adjustment for GBP0.5 million of bank set-up costs
-- 18 months profit before tax was GBP5.1 million
-- 12 months underlying profit before tax was up 38% to GBP4.0 million (2015: GBP2.9 million)
-- 12 months profit before tax up 29% to GBP3.6 million (2015: GBP2.8 million)
-- Fully diluted earnings per share up 19% to 1.9p (2015: 1.6p)
-- Return on Average Assets increased by 15% to 3.1% (2015: 2.7%)
-- Fully diluted after-tax Return on Equity stable at 13.0%
(2015: 12.9%) on a larger capital base
-- GBP28.2 million (2015: GBP25.7 million) of unearned finance
charges to contribute to earnings in future years
Business Highlights:
-- Application for banking licence approved on 6 December 2016,
offers new source of funding and significant opportunities for
scale
-- Return to the dividend list with a recommended final dividend of 0.1p per share
-- Over GBP100 million of new business volume for the 18 months period
-- 14% increase in new business volumes to GBP68.4 million
(2015: GBP59.9 million) in the 12 months to 30 September 2016
-- Total portfolio growth of 13% to GBP122 million (2015: GBP108 million)
-- Record low impairment charge of 1.0% (2015: 1.2%)
-- Committed debt facilities of GBP174 million (2015: GBP119
million) with headroom at year end of GBP65 million (2015: GBP32
million) to fund portfolio growth ahead of taking retail deposits
in summer 2017
Commenting on the results Scott Maybury, Chief Executive of
PCFG, said:
"Reporting a record level of profit the day after announcing our
approval as a new bank underlines the potential for our business.
Unusually, for a new entrant into the banking sector, we have an
operating platform and portfolio that is already performing
extremely well and consistently delivering excellent returns. As
such, the Company is equipped to deploy retail deposits immediately
and profitably upon completing mobilisation of the bank, allowing
us to significantly scale the business."
"We will complete the build and mobilisation of the banking
infrastructure in the coming months and launch the bank offering in
summer 2017. I am also pleased that PCFG is returning to the
dividend list for the first time in 13 years, which illustrates the
stable financial foundations of the Company and is indicative of
our intended progressive dividend policy for the future. We
approach the year ahead with great excitement and look forward to
updating the market with progress regarding the launch of the
bank."
- end -
For further information, please contact:
Private & Commercial Finance Group Tel: +44 (0) 20 7222
Scott Maybury, Chief Executive Officer 2426
Robert Murray, Managing Director
David Bull, Finance Director
Tavistock Communications Tel: +44 (0) 20 7920
Jos Simson / Niall Walsh 3150
Panmure Gordon (UK) Limited Tel: +44 (0) 20 7886
Atholl Tweedie / Adam James / Peter Steel 2500
- Corporate Finance
Charles Leigh-Pemberton - Corporate Broking
Stockdale Securities Tel: +44 (0) 20 7601
Henry Willcocks 6100
About Private & Commercial Finance Group plc
(www.pcfg.co.uk)
Established in 1994, Private & Commercial Finance Group plc
is an AIM-quoted finance house which has two main operating
divisions:
-- Consumer Finance which provides finance for motor vehicles to consumers; and
-- Business Finance which provides finance for vehicles, plant and equipment to SMEs.
The Group has a highly efficient and scalable business model,
utilising its specially developed internet-based proposal system to
service national networks of brokers and suppliers.
Chairman's Statement
For the 18 months ended 30 September 2016
Profit before tax for the 18 months accounting period was GBP5.1
million, after expensing GBP0.5 million of costs relating to our
application for a banking licence. Profit before tax for the pro
forma 12 months period increased by 29% to GBP3.6 million (2015:
GBP2.8 million) while profit after tax was up 27% to GBP2.8 million
(2015: GBP2.2 million). Fully diluted earnings per share increased
by 19% to 1.9p (2015: 1.6p).
Profit has reached record levels and we have exceeded our key
targets for Return on Average Assets ("ROAA") and after tax Return
on Equity ("ROE"). We will remain focussed on these two key
performance indicators as we enter the next stage in our
development, and are now targeting an ROAA of 2.5% and an ROE of
12.5% over the medium-term as we build the infrastructure for the
bank.
The improved profitability was due to a strong portfolio
performance with gross profit increasing by 10% in the pro forma 12
months, while administration expenses before banking costs
increased by only 3%. This operational gearing demonstrates the
potential for a business model that delivers profitability through
prudent portfolio growth.
Finance receivables increased by 14% to GBP122 million (2015:
GBP108 million) in the 12 months period. The gross profit margin
reduced marginally to 28.1% (2015: 29.5%) due to competitive
pressures in the market place. This is the result of ensuring we
deliver portfolio growth without compromising on credit quality,
which will underpin the future prospects of the Group.
Dividend
Enhancing shareholder returns on a sustainable basis is a key
objective for the Group. The 19% growth in earnings per share has
supported a return to the dividend list for the first time in 13
years. This has been a long held ambition for the Group and
although establishing a new bank will be capital intensive, we are
recommending a dividend of 0.1p per share with an intention to
adopt a progressive dividend policy while maintaining a
conservative cover ratio in the early years of the bank. Subject to
approval by shareholders at the Annual General Meeting on 10 March
2017, this dividend will be paid on 13 April 2017 to shareholders
on the register on 24 March 2017 and a scrip alternative will be
made available.
Banking Licence
The Group received notification on 6 December 2016 that its
application for a banking licence had been successful. This has
been an exacting two year project and we are proud to have been
recognised by the Prudential Regulation Authority and the Financial
Conduct Authority as a business which has the culture, processes
and financial strength to be worthy of being licensed as a
bank.
The Group has chosen the 'mobilisation route' to authorisation.
This involves the granting of the banking licence with restriction,
which requires the delivery of a number of predetermined tasks and
actions in accordance with an agreed project plan to be completed
within 12 months. The Group chose this route as it ensures
certainty of outcome before incurring the substantial
infrastructure costs of operating as a bank. These costs cover
areas such as an enhanced governance framework, additional staff
resource and new technology platforms. The project plan is well
underway and the Group expects to mobilise the bank in summer
2017.
Initially, the bank will support the Group's existing chosen
markets of consumer motor finance and SME asset finance, and there
is plenty of scope to grow both these areas by utilising the
cheaper cost of funds and more flexible nature of a retail
depositor base. The growth in the portfolio will continue to be
based on prudent lending, with our credit risk appetite focussing
on increasing our volumes by operating in the prime sector of both
markets.
Access to the retail deposit market will provide the Group with
a funding resource far in excess of that available from wholesale
bank debt, allowing us to scale the portfolio to levels which would
otherwise be unachievable. We will still retain an element of
wholesale bank debt to maintain a diversified treasury model,
mitigating risk in times of economic uncertainty. Once the bank is
established, the Board will assess its options for extending the
Group's range of financial products. This diversification may arise
from corporate activity or from acquiring specialist resource in
chosen sectors.
New business and our business model
New business originations exceeded GBP100 million in the 18
months period to 30 September 2016 and were up by 14% in the pro
forma 12 months period to GBP68.4 million (2015: GBP59.9 million).
This growth is broadly based on consumer motor finance lending
growing by 8% to GBP37.0 million and SME asset finance lending
growing by 22% to GBP31.4 million. Consumer and business confidence
remains good in both markets and the result of the EU Referendum
vote in June 2016 had little effect on these results. The current
portfolio sizes are GBP70 million for consumer finance (2015: GBP63
million) and GBP52 million for SME asset finance (2015: GBP45
million).
New business margins remain strong across the Group despite an
increasingly competitive market and the credit quality is matching
our expectations, with 55% (2015: 57%) of originations being in our
top two credit tiers. Our efforts to develop direct channels and
win repeat business, have continued successfully with GBP5.4
million (2015: GBP5.0 million) of returning customers, representing
our largest single source of new business.
We have already started our preparations for growing the lending
side of our business once the mobilisation of the bank has been
completed and are currently working on a project to enhance the
quality and range of credit bureau data we receive, which will
include digital solutions for customer affordability and
identification. This will improve speed and quality of service,
ensuring positive outcomes for our customers.
Private & Commercial Finance has a proven business model for
lending to both individuals and SMEs. Our Consumer and Business
Finance Divisions complement each other in terms of the
infrastructure required and balancing the risk profile. Each market
also provides growth opportunities at different points in the
economic cycle. The use of information technology is at the heart
of our operational efficiencies and the relationships with our
customers. The model requires an understanding of their finance
needs, an ability to deliver excellent levels of customer service
to both our customers and our network of intermediaries, as well as
striking the right balance, when underwriting, between risk and
reward. We will continue to operate a model that minimises risk by
financing assets which have strong collateral characteristics and
average low transaction sizes, spread over a diverse customer
base.
This is a robust model that has been tested in the most
difficult of economic conditions and provides us with confidence
for the future. This straightforward, easily understood and
customer focussed approach to business will stand us in good stead
for our entry into the deposit-taking market.
Portfolio and balance sheet
The portfolio has grown strongly and is reported net of GBP28.2
million (2015: GBP25.7 million) of unearned finance charges which
are attributable to future years. These will be recognised over the
next four years and provide the Group with predictability and
quality of earnings going forward.
The quality of the portfolio continues to improve. The loan loss
provisioning charge fell from GBP1.3 million to GBP1.0 million in
the pro forma 12 months period, which is a 23% reduction and
represents a charge-off rate for the year of 1.0% of the average
portfolio (2015: 1.2%). The credit quality is also reflected in the
percentage of the portfolio that is reported as neither past due
nor impaired, which was steady at 96% this period (2015: 96%). With
a focus on the quality of new business originations and with the
Group operating in markets in which it has invaluable experience
through historic performance, the portfolio should continue to
perform well throughout its lifecycle.
Capital and funding
The net assets of the Group increased by 15% to GBP24.7 million
as at 30 September 2016 (2015: GBP21.5 million) following the
conversion of outstanding Loan Notes. As at 30 September 2016 all
remaining Loan Notes had either been redeemed or were the subject
of a notice to convert. The Loan Notes subject to conversion were
admitted to trading on 10 October 2016.
The Group has GBP174 million of committed debt facilities (2015:
GBP119 million). These are drawn to GBP109 million leaving headroom
of GBP65 million (2015: GBP32 million) at the year-end. During the
period, the Group entered into an GBP83 million facility with its
majority shareholder, Bermuda Commercial Bank. This facility, along
with existing headroom, provides adequate capacity for future
growth in new business origination and to the point when we start
to accept retail deposits.
The first retail deposits are planned for summer 2017, providing
the Group with a much enhanced treasury model that will offer
diversification while also providing a source of funding that is
more attractive in terms of cost and scale. This strategy will
transform the business, supporting our long-term strategy to grow
into a substantial financial services group.
The Group's capital base continues to grow and the gearing ratio
stands at 4.1 (2015: 4.0).
Board
I announced earlier today my intention to step down as Chairman
following the publication of these Results.
When I joined the Board in 2011 I worked with the management
team to identify key objectives and to plan how to implement them.
We were aiming to reduce bad debts, improve profitability, grow the
balance sheet, diversify and expand funding sources, and ultimately
to resume dividend payments. These objectives have been achieved,
so now is the appropriate juncture for a change in leadership of
the Board as the Group pursues the next major stage of its
development.
Tim Franklin, who was appointed a director on 6 December 2016,
will be assuming the role of Chairman. Tim has over 30 years'
experience in financial services businesses in both director and
non-executive roles. His career experience, working for both
building societies and banks, leaves him ideally placed for the
position. I wish Tim and the entire Board every success over the
coming years.
Current trading and outlook
We have delivered excellent profitability in the period as the
result of a growing portfolio, combined with further gains in
portfolio performance and a continued focus on margin and costs. By
establishing itself as a bank the Group will, for the first time,
be on an equal footing with its competitors with regard to funding
cost. We therefore see opportunity and do not expect the forecast
lower economic growth in the UK to undermine our current
strategy.
I have strong confidence in the management and staff, and am
certain they will continue to grow the business successfully using
our banking status as a foundation.
D G Anthony
Chairman
GROUP INCOME STATEMENT
(GBP'000) Note 18 Months Unaudited Unaudited
30 September 12 Months 12 Months
2016 30 September 30 September
2016 2015
Group turnover 4 77,816 55,768 48,408
Cost of sales (54,719) (40,105) (34,130)
-------------- -------------- --------------
Gross profit 23,097 15,663 14,278
Administration expenses (10,429) (7,087) (6,568)
-------------- -------------- --------------
Operating profit 12,668 8,576 7,710
Interest receivable 4 1 -
Interest payable (7,544) (4,975) (4,903)
-------------- -------------- --------------
Profit on ordinary activities
before taxation 5 5,128 3,602 2,807
Income tax expense 6 (1,107) (801) (619)
-------------- -------------- --------------
Profit on ordinary activities
after taxation 4,021 2,801 2,188
-------------- -------------- --------------
Profit for the year attributable
to equity holders 4,021 2,801 2,188
============== ============== ==============
Earnings per 5p ordinary share
- basic 7 2.5p 1.8p 3.9p
Earnings per 5p ordinary share
- diluted 7 1.9p 1.8p 1.6p
GROUP STATEMENT OF COMPREHENSIVE INCOME
(GBP'000) 18 Months Unaudited Unaudited
30 September 12 Months 12 Months
2016 30 September 30 September
2016 2015
Profit for the year 4,021 2,801 2,188
-------------- -------------- --------------
Other comprehensive income that
may be reclassified to the income
statement in subsequent years
Cash flow hedges - fair value (losses)/gains (283) (187) (379)
Income tax effect 63 59 76
-------------- -------------- --------------
(220) (128) (303)
-------------- -------------- --------------
Total comprehensive income for
the year 3,801 2,673 1,885
============== ============== ==============
GROUP BALANCE SHEET
As at 30 September (GBP'000) 30 September Unaudited
2016 30 September
2015
Non-current assets
Goodwill 397 397
Other intangible assets 367 472
Property, plant and equipment 147 100
Loans and receivables 80,997 69,079
Deferred tax 1,424 1,718
------------- --------------
83,332 71,766
------------- --------------
Current assets
Loans and receivables 40,962 38,427
Trade and other receivables 504 1,043
Cash and cash equivalents 5,904 510
------------- --------------
47,370 39,980
------------- --------------
Total assets 130,702 111,746
------------- --------------
Current liabilities
Interest-bearing loans and borrowings 13,934 17,033
Trade and other payables 1,907 1,348
Derivative financial instruments 52 40
Corporation Tax 291 305
Bank overdrafts - 459
------------- --------------
16,184 19,185
------------- --------------
Non-current liabilities
Derivative financial instruments 439 261
Interest-bearing loans and borrowings 89,372 70,809
------------- --------------
89,811 71,070
------------- --------------
Total liabilities 105,995 90,255
------------- --------------
Net assets 24,707 21,491
============= ==============
Capital and reserves
Issued share capital 7,956 7,656
Share premium 174 7,898
Capital reserve - 3,873
Other reserves (373) (219)
Own shares (305) (305)
Profit and loss account 17,255 2,588
------------- --------------
Shareholders' funds 24,707 21,491
============= ==============
GROUP STATEMENT OF CHANGES IN EQUITY
(GBP'000) 18 Months Unaudited Unaudited
30 September 12 Months 12 Months
2016 30 September 30 September
2016 2015
Total comprehensive income for
the year 3,801 2,673 1,885
New share capital subscribed 9,011 510 8,508
Share-based payments 37 33 6
Net addition to shareholders' funds 12,849 3,216 10,399
Opening shareholders' funds 11,858 21,491 11,092
-------------- -------------- --------------
Closing shareholders' funds 24,707 24,707 21,491
============== ============== ==============
GROUP STATEMENT OF CASH FLOWS
(GBP'000) 18 Months Unaudited Unaudited
30 September 12 Months 12 Months
2016 30 September 30 September
2016 2015
Cash flows from operating activities
Profit before taxation 5,127 3,602 2,807
Adjustments for:
Amortisation of other intangible
assets 284 193 180
Amortisation of issue costs 204 136 136
Depreciation 57 39 28
Share-based payments 37 33 6
Loss on disposal of property, plant
and equipment - - 33
Fair value movement on derivative
financial instruments (1) 1 (5)
Increase in loans and receivables (22,130) (14,454) (13,622)
Decrease/(Increase) in trade and
other receivables 630 540 (333)
Increase in trade and other payables 279 561 371
-------------- -------------- --------------
Cash flows used in operating activities (15,513) (9,349) (10,399)
Tax paid (640) (463) (302)
-------------- -------------- --------------
Net cash flows used in operating
activities (16,153) (9,812) (10,701)
-------------- -------------- --------------
Cash flows from investing activities
Purchase of property, plant and
equipment (99) (86) (84)
Purchase of other intangible assets (138) (88) (71)
-------------- -------------- --------------
Net cash flows used in investing
activities (237) (174) (155)
-------------- -------------- --------------
Cash flows from financing activities
Proceeds from borrowings 51,608 44,589 10,926
Repayments of borrowings (28,750) (28,750) -
-------------- -------------- --------------
Net cash flows from financing activities 22,858 15,839 10,926
-------------- -------------- --------------
Net increase in cash and cash equivalents 6,468 5,853 70
Cash and cash equivalents at beginning
of the year (564) 51 (19)
-------------- -------------- --------------
Cash and cash equivalents at end
of the year 5,904 5,904 51
============== ============== ==============
Cash at bank 5,904 5,904 510
Bank overdraft - - (459)
-------------- -------------- --------------
5,904 5,904 51
============== ============== ==============
The amount of interest paid during
the year 7,515 4,955 4,902
============== ============== ==============
Notes to the Financial Statements
1. The preliminary results are unaudited and do not constitute
statutory accounts as defined by section 434 of the Companies Act
2006. The comparative figures for the year ended 30 September 2015
are based on the statutory accounts of the Group for the relevant
periods which have been reported on by the Group's auditor and
delivered to the Registrar of Companies. The report of the auditors
was unqualified and did not contain a statement under section 498
of the Companies Act 2006.
2. The preliminary results have been prepared on the basis of
the accounting policies set out in the Annual Report &
Financial Statements for the year ended 31 March 2015 as updated
where necessary for new accounting standards adopted in the
year.
3. These consolidated financial statements have been prepared in
accordance with IFRS and its interpretations issued by the
International Accounting Standards Board, as adopted by the
European Union. This announcement has been approved and authorised
for issue by the Board of Directors.
4. The Group's turnover represents gross rentals and instalments
from the hire, financing and sale of equipment, and the provision
of related fee-based services, stated net of Value Added Tax.
5. The Group operates in the principal areas of consumer finance
for motor vehicles and business finance for vehicles, plant and
equipment. All revenue is generated in the United Kingdom.
Turnover, profit on ordinary activities before taxation, and
loan loss provisioning charge are detailed below:
(GBP'000) 18 Months 12 Months 12 Months
30 September 30 September 30 September
2016 2016 2015
Consumer finance 40,891 27,787 25,772
Business finance 36,925 27,981 22,636
----------------- -------------- --------------
Group Turnover 77,816 55,768 48,408
================= ============== ==============
Consumer finance 2,695 1,795 1,785
Business finance 2,433 1,807 1,004
Profit on ordinary activities
before taxation 5,128 3,602 2,789
================= ============== ==============
Consumer finance (1,036) (609) (975)
Business finance (550) (381) (306)
----------------- -------------- --------------
Loan loss provisioning charge (1,586) (990) (1,281)
================= ============== ==============
6. The income tax assessed for the period is higher than the
standard rate of Corporation Tax in the UK of 20% (2015 - 21%). The
differences are explained below. As part of the Finance Act 2014,
the UK government legislated to reduce the main rate of Corporation
Tax from 21% to 20% with effect from 1 April 2015 and to 19% with
effect from 1 April 2017 which has been reflected in the amount of
the recognised deferred tax asset. A further reduction in the
Corporation Tax rate to 17% from 1 April 2020 was substantially
enacted on 15 September 2016. This has not impacted the amount of
the recognised deferred tax asset.
(GBP'000) 18 Months
30 September
2016
Profit on ordinary activities before tax 5,127
==============
Profit on ordinary activities multiplied by the standard
rate of Corporation Tax in the UK of 20% (2015 - 21%) (1,025)
Effects of:
Expenses not deductible for taxation purposes (13)
Adjustments in respect of prior years 1
Change in tax rate (71)
Utilisation of previously unrecognised losses 1
Total tax charge for the year (1,107)
==============
7. The calculation of basic earnings per ordinary share is based
on profit after taxation of GBP2,188,599 for the 12 months ending
September 2015, GBP2,800,975 for the 12 months ending September
2016 and GBP4,020,756 for the 18 months ending September 2016
(March 2015 - GBP1,613,789) and on 56,085,571 ordinary shares for
the 12 months ending September 2015, 156,654,703 ordinary shares
for the 12 months ending September 2016 and 160,168,597 ordinary
shares for the 18 months ending September 2016 (March 2015 -
53,066,335), being the weighted average number of ordinary shares
in issue during the period.
The calculation of diluted earnings per ordinary share is based
on profit after taxation of GBP2,664,466 for the 12 months ending
September 2015, GBP3,020,658 for the 12 months ending September
2016 and GBP4,466,903 for the 18 months ending September 2016
(March 2015 - GBP2,193,948), before deducting interest on the
convertible loan notes of GBP475,866 for 12 months ending September
2015, GBP219,683 for 12 months ending September 2016 and GBP446,147
for the 18 months ending September 2016 (2015 - GBP580,159), on
170,378,206 (2015 - 170,378,206) ordinary shares, being the
dilutive weighted average number of ordinary shares in issue during
the year.
8. The calculation of return on average assets is based on a
profit before tax of GBP2,807,227 for the 12 months ending
September 2015, GBP3,601,755 for the 12 months ending September
2016 and GBP5,126,536 for the 18 months ending September 2016
(2015: GBP2,099,451) and on average portfolio assets of
GBP102,523,184 for 12 months ending September 2015, GBP114,732,586
for 12 months ending September 2016 and GBP110,894,032 for the 18
months ending September 2016 (2015: GBP94,241,815).
9. The 2016 Annual Report & Financial Statements will be
posted to all shareholders on 25 January 2017. Further copies can
be obtained from the Company Secretary at Pinners Hall, 105-108 Old
Broad Street, London EC2N 1ER or can be downloaded from our
website, www.pcfg.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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