TIDMPCF TIDMTTM
RNS Number : 1954H
Private & Commercial Fin Group Plc
06 June 2017
6 June 2017
Private & Commercial Finance Group plc
("PCF", "Private & Commercial Finance", the "Company" or the
"Group")
Interim Results for the six months ended 31 March 2017
"Launch of PCF Bank on track, strong organic growth"
Private & Commercial Finance (AIM: PCF), an AIM-quoted
specialist bank, today announces its interim results for the six
months ended 31 March 2017.
Business Highlights:
-- Submitted request for permission for PCF Bank to commence retail deposit operations
-- Raising retail deposits on track for summer
-- New business volumes up 13% to GBP35 million for the six
months period (2016: GBP31 million)
-- Portfolio growth of 14% to GBP128 million (2016: GBP112 million)
-- Record low impairment charge of 0.5% (2016: 1.0%)
-- Committed debt headroom of GBP36 million (2015: GBP25
million) to fund portfolio growth alongside retail deposits
Financial Highlights:
-- Six months underlying profit before tax up 16% to GBP2.3
million (2016: GBP2.0 million), before adjustment for GBP0.6
million of bank set-up costs
-- Six months adjusted profit before tax of GBP1.7 million
(2016: GBP1.8 million) due to the costs of establishing the
bank
-- Fully diluted earnings per share of 0.8p (2016: 1.0p)
following conversion of remaining convertible loan notes and the
investment in the bank
-- Return on Average Assets of 2.8% (2016: 3.2%), ahead of medium-term target of 2.5%
-- Fully diluted after-tax Return on Equity of 10.5% (2016: 12.7%) on a larger capital base
Commenting on the results Scott Maybury, Chief Executive of PCF,
said:
"The first six months of this year have gone very well, with
continued momentum in profitability and the achievement of key
objectives. We saw strong organic growth with new business volumes
up by 13% and an increased portfolio size of 14%. This level of
growth is consistent with previous periods. We recently concluded a
successful Placing and Open Offer and now have the platform in
place to commence retail banking operations, reduce our cost of
funds and significantly grow the business.
"It is pleasing to see that the team have been able to deliver
further underlying progress whilst completing the IT and
operational infrastructure for PCF Bank. Taking the first retail
deposits remains on track for summer and we have already delivered
a successful 'Friends and Family' trial. I look forward to updating
shareholders with a new website, brand and launch of the bank in
the not too distant future."
- end -
For further information, please contact:
Private & Commercial Finance Tel: +44 (0)
Group 20 7222 2426
Scott Maybury, Chief Executive
Officer
Robert Murray, Managing Director
David Bull, Finance Director
Tavistock Communications Tel: +44 (0)
Jos Simson / Niall Walsh 20 7920 3150
Panmure Gordon (UK) Limited Tel: +44 (0)
Atholl Tweedie / Adam James 20 7886 2500
- Corporate Finance
Charles Leigh-Pemberton - Corporate
Broking
Stockdale Securities Tel: +44 (0)
Robert Finlay / Richard Johnson 20 7601 6100
- Corporate Finance
Henry Willcocks - Corporate
Broking
This announcement contains inside information, disclosed in
accordance with the Market Abuse Regulation which came into effect
on 3 July 2016.
About Private & Commercial Finance Group plc
(www.pcfg.co.uk)
Established in 1994, Private & Commercial Finance Group plc
is an AIM-quoted specialist bank 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 six months ended 31(st) March 2017
I am delighted to present my first Interim Report in what has
been a truly exciting period since my appointment on 6 December
2016. The following day we were granted our banking licence and
since then our team has been working diligently to ensure that we
execute mobilisation successfully within the twelve months period
set by the Prudential Regulatory Authority ("PRA") and the
Financial Conduct Authority ("FCA"). It gives me great pleasure to
report that we submitted our Variation of Permissions to the
regulators on 31st May 2017, enabling us to remain on target to
launch PCF Bank this summer, in line with our initial
estimations.
The investment in establishing PCF Bank will allow the Group to
access a lower cost of funds, increasing profitability through
scale and giving access to new markets. During the last six months
we have continued to recruit high calibre risk and savings staff to
build our banking team, fully tested our computer systems with a
successful "Friends and Family" trial and put in place the
governance and operational framework required by the regulators. In
addition, we completed a successful Placing and Open Offer in early
April, raising GBP10.5 million (before expenses) of additional
equity to meet the PRA's liquidity requirements and provide us with
the requisite capital to support our medium-term growth plans. We
were also pleased that our GBP500,000 Open Offer was
over-subscribed, confirming support amongst our retail
shareholders. All the foundations are now in place for the
successful launch of the bank and we will utilise the coming weeks
to refine processes, complete our training programmes, put in place
new business initiatives to support those growth plans and announce
the branding and website for PCF Bank.
As anticipated, one-off costs relating to the banking project
increased in the period to GBP553,000 (2016: GBP197,000) but remain
within budget. The statutory profit before tax for the period,
after expensing these banking costs, was GBP1.7 million (2016 -
GBP1.8 million). Underlying profit before tax, adjusted for banking
costs, however, increased by 16% to GBP2.3 million (2016 - GBP2.0
million) due to the increased size of our portfolio and a further
reduction in the loan loss provisioning charge. The continuing
upward trend in profitability which we have seen over the last six
years together with an unchanged timetable for the launch of the
bank provides us with confidence in achieving market expectations
for the full year.
Profitability and balance sheet
Profitability exceeded target with a Return on Average Asset
('ROAA') of 2.8% adjusted for banking costs (2016: 3.2%), ahead of
the medium-term target of 2.5%. Fully diluted earnings per share
for the period was 0.8p (2016: 1.0p) and after tax Return on Equity
('ROE') was 10.5% (2016: 12.7%) both reflecting the conversion or
redemption of the remaining convertible loan notes at the beginning
of this period. The ongoing additional cost of running the bank are
estimated at GBP1.9 million per annum, however, these are far
outweighed by the positive benefits of reduced funding cost and the
ability to scale the business. We reconfirm our three-year targets
of an ROAA of 2.5% and an ROE of 12.5% as we transition and
leverage the full potential of the banking infrastructure and
additional equity.
Net Interest Margin ('NIM') in the period was 8.2% (2016: 8.8%)
and is ahead of our medium-term target of 8%. The compression in
NIM must be considered alongside the 46% reduction of loan loss
provisioning charge to 0.5% (2016: 1.0%). Over a number of years,
we have improved the credit quality of our portfolio but it is now
slightly lower yielding and this is being reflected in our NIM and
loan loss charge. This focus towards prime lending is key to our
future growth plans but also supports our current risk appetite
with regards to the credit cycle and economic environment.
Administrative expenses increased by 20% to GBP3.0 million
(2016: GBP2.5 million) reflecting the increased investment in the
banking project. Intangible assets increased to GBP2.1 million
(2016: GBP0.8 million) reflecting the capital expenditure on new IT
software licences required to establish the bank.
The portfolio of receivables increased by 14% to GBP128 million
(2016: GBP112 million). The portfolio continues to perform well and
its quality is excellent with 96% of the portfolio reported as
neither past due nor impaired (2016: 96%). Our objective is to grow
the portfolio to GBP350 million within three years and GBP750
million within five years.
The net assets of the Group as at 31 March 2017 increased by 20%
to GBP27.4 million (2016: GBP22.9 million) and net assets have
further increased following the recent Placing and Open Offer.
A final dividend will be recommended on the announcement of our
results for the full year on 5 December 2017. We do not intend to
pay an interim as well as a final dividend for the foreseeable
future.
Bank mobilisation and funding
Once the Variation of Permissions is approved, the current
restrictions on savings operations will be lifted and we will be
able to commence trading as PCF Bank. This process can take up to
12 weeks but we hope the decision will arrive earlier. Until then
we will continue to fund our business through wholesale bank
facilities and we have adequate headroom of GBP36 million (2016:
GBP25 million) to meet our portfolio growth targets. With retail
deposits on the horizon, we have already taken steps to rationalise
our senior debt facilities. We have replaced facilities and
interest rate swaps with fixed rate funding which protects our
margin and we expect to report interest expense and facility cost
savings in the remainder of the year.
New business origination and our business model
The targeted portfolio growth to GBP750 million in five years
will be achieved initially through further expansion into the prime
and super-prime segments of the lending markets in which we already
operate. This strategy is made possible through the significantly
reduced cost of funding provided by retail deposits and these
interest expense savings will enable us to offer the finance terms
that are typical in those segments. This is a low risk execution of
our growth strategy as we will be operating in business areas in
which we already have invaluable experience and existing
origination channels. With a small existing market share and the
banking licence providing a more equal footing with our major
competitors, we see great opportunity in both consumer motor
finance and SME asset finance. Over time, this organic growth
strategy will be supplemented with diversification into new asset
classes through corporate activity or potentially the acquisition
of specialist resource in new sectors. Our current focus is on
refining our credit model, automating processes and defining the
terms of business for our expansion into the prime market.
In this six months period, new business originations increased
by 13% to GBP35 million (2016: GBP31 million). The strongest growth
was in SME asset finance where we were best able to match credit
quality criteria with our yield expectations based on the existing,
more expensive funding model. The current portfolio sizes are
consumer motor finance at GBP69 million (2016: GBP64 million) and
SME asset finance at GBP59 million (2016: GBP48 million). There has
been no change in risk appetite or compromise on credit
quality.
The Group does not offer Personal Contract Purchase ('PCP') and
hence is unaffected by the recent negative press comment regarding
the car finance market and specifically that product. We are not,
therefore, exposed to the inherent residual risk in that type of
contract or vulnerable to the criticisms being made about
mis-selling and poor underwriting practices for this product. We
have operated in the car finance market for 20 years and have an
in-depth knowledge of the risk factors, in addition to the
experience of successfully administering a portfolio in difficult
economic circumstances historically. We finance predominantly used
vehicles on fully amortising hire purchase contracts and apply
appropriate underwriting standards by taking into consideration
loan-to-value, credit status, age of vehicle and affordability to
assess and price risk. We are regulated by the FCA for consumer
credit lending and we maintain a well-diversified portfolio of
quality receivables which has in the past performed well at all
points of the credit cycle.
Staff
I would like to thank the whole PCF team who continue to deliver
excellent results while undertaking the considerable task of
building a bank. Their commitment, skill and relentless dedication
continue to be the foundation to our success.
Current trading and outlook
New business levels remain buoyant and we achieved a record
month for new business originations in May 2017. There are
competitive pressures in both our chosen markets and while economic
uncertainty exists over the General Election, falling real incomes
and the Brexit negotiations, we feel that these risks are being
mitigated by our prudent and disciplined approach to lending. With
a small market share, a focus on delivering excellent customer
service and the upcoming ability to fund through retail deposits,
the outlook for growth in both our markets is favourable.
We have delivered strong profits for the first six months, while
putting in place the bank infrastructure to implement our strategy
to deliver significant portfolio scale, further profitability
growth and enhanced shareholder value. The long-term growth
prospects of the Group are excellent and we look to the future with
great confidence.
T A Franklin
Chairman
6 June 2017
GROUP STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE
INCOME
(GBP'000s) Six months Six months 18-month
ended ended period
31 March 31 March 30 September
2017 2016 2016
unaudited unaudited audited
Interest income and similar
income 9,697 9,070 22,419
Interest expense and
similar charges (4,545) (4,215) (7,542)
----------- ----------- --------------
Net interest income 5,152 4,855 14,877
Fees and commission income 258 208 677
Fees and commission expense (336) (262) (847)
----------- ----------- --------------
Net fee and commission
expense (78) (54) (170)
Fair Value loss on financial
instruments (4) 3 2
----------- ----------- --------------
Net operating income 5,070 4,804 14,709
Administration expenses (3,049) (2,472) (7,996)
Impairment losses on
financial assets (305) (565) (1,586)
----------- ----------- --------------
Profit before taxation 1,716 1,767 5,127
Income tax charge (347) (353) (1,106)
----------- ----------- --------------
Profit after taxation,
being total comprehensive
income, attributable
to owners 1,369 1,414 4,021
Earnings per 5p ordinary
share - basic 0.8p 0.9p 3.2p
Earnings per 5p ordinary
share - diluted 0.8p 0.9p 2.6p
Underlying adjustments
Profit before taxation 1,716 1,767 5,127
Banking Costs 553 197 506
------ ------ --------
Underlying profit before
taxation 2,269 1,964 5,633
Income tax charge (458) (394) (1,212)
------ ------ --------
Underlying profit after
taxation, being total
comprehensive income,
attributable to owners 1,811 1,570 4,421
GROUP BALANCE SHEET
(GBP'000s) Six months Six months 18-month
ended ended period
31 March 31 March 30 September
2017 2016 2016
unaudited unaudited audited
Assets
Cash and balances at
central banks 1,993 84 5,904
Loan and advances to
customers 127,590 112,270 121,960
Derivative financial
assets - - -
Property Plant and Equipment 304 108 147
Intangible assets 2,058 811 764
Deferred tax assets 1,338 1,326 1,424
Trade and other assets 362 171 503
----------- ----------- --------------
Total Assets 133,645 114,770 130,702
Liabilities
Bank overdraft - 675 -
Due to banks 104,042 89,293 103,305
Derivative financial
liabilities - 404 491
Trade and other liabilities 2,251 1,475 2,199
----------- ----------- --------------
Total Liabilities 106,293 91,847 105,995
Equity
Share Capital 8,506 7,708 7,956
Share premium account 558 - 174
Other reserves - (303) (373)
Own shares (355) (305) (305)
Retained earnings 18,643 15,823 17,255
----------- ----------- --------------
Total Equity 27,352 22,923 24,707
Total equity and liabilities 133,645 114,770 130,702
GROUP STATEMENT OF CHANGES IN EQUITY
(GBP'000s) Six months Six months 18-month
ended ended period
31 March 31 March 30 September
2017 2016 2016
unaudited unaudited audited
Total comprehensive income
for the period 1,369 1,414 4,021
New share capital subscribed 934 89 9,011
Share-based payments 19 16 37
Issue of own convertible
debt (50) - -
Transfer to distributable
reserves from derivative
instruments 373 - -
Fair value gain/(loss)
on cash flow hedges - (85) (220)
----------- ----------------- --------------
Net addition to shareholders'
funds 2,645 1,432 12,849
Opening shareholders'
funds 24,707 21,491 11,858
----------- ----------------- --------------
Closing shareholders'
funds 27,352 22,923 24,707
=========== ================= ==============
NOTES TO THE INTERIM REPORT
1. The interim results are unaudited and do not constitute
statutory accounts as defined by section 434 of the Companies Act
2006. The comparative figures for the 18 months ended 30 September
2016 are based on the statutory accounts of the Group for that
period and 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 interim results have been prepared on the basis of the
accounting policies set out in the Annual Report & Financial
Statements for the 18 months ended 30 September 2016.
3. These accounts are reported for the first time in banking
format with the main differences in the presentation being:
-- gross profit is reported as 'interest income and similar
income' with a small element reported in the 'fees and commission
income'
-- banking facilities fees and broker commission fees moved from
administration expenses to 'fees and commission expenses'
-- impairment losses separately disclosed from administration expenses
4. These interim consolidated financial statements have been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the European Union.
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.
Profit on ordinary activities before taxation, and loan loss
provisioning charge are detailed below:
(GBP'000s) Six months Six months 18-month
ended ended period
31 March 31 March 30 September
2017 2016 2016
unaudited unaudited audited
Consumer finance 927 1,024 2,695
Business finance 789 743 2,433
Profit on ordinary activities
before taxation 1,716 1,767 5,127
----------- ------------ --------------
Consumer finance (146) (327) (1,036)
Business finance (159) (238) (550)
----------- ------------ --------------
Loan loss provisioning
charge (305) (565) (1,586)
----------- ------------ --------------
6. Administration expenses includes GBP553k of one-off costs
relating to the set-up of a new bank (2016: GBP197k). The costs of
software and infrastructure have been included in property, plant
and equipment and other intangible assets.
7. The income tax rate is 20%, representing the best estimate of
the annual effective tax rate applied to operating profit before
tax for the six month period.
8. The calculation of basic earnings per ordinary share for the
6 months ending 31 March 2017 is based on a profit of GBP1,369,156
for the period on 170,124,102 ordinary shares, being the weighted
average number of ordinary shares in issue during the period. There
were no convertible loan notes in issue in the period.
The calculation of basic earnings per ordinary share for the 6
months ending 31 March 2016 is based on a profit of GBP1,413,753
for the period on 154,162,846 ordinary shares, 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 of GBP1,501,267 for the period, before deducting interest on
the convertible loan notes of GBP87,514, on 170,378,200 ordinary
shares, being the dilutive weighted average number of ordinary
shares in issue during the period.
The calculation of basic earnings per ordinary share for the 18
months ending 30 September 2016 is based on a profit of
GBP4,020,756 for the period on 124,288,560 ordinary shares, 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 of GBP4,466,130 for the period, before deducting
interest on the convertible loan notes of GBP445,374, on
170,378,200 ordinary shares, being the dilutive weighted average
number of ordinary shares in issue during the period.
9. In other reserves the Group adopted hedge accounting for
derivative financial instruments. The hedging reserve includes the
effective portion of the change in fair value of cash flow hedging
instruments. These derivative financial instruments matured on 31
March 2017 and during the six months period the cash flow hedge
reserve balance transferred to distributable reserves.
10. The 2017 Interim Report and Financial Statements will be
posted to all shareholders and convertible loan note holders on 6
June 2017 or shortly thereafter. 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
IR BLGDLLDGBGRU
(END) Dow Jones Newswires
June 06, 2017 02:00 ET (06:00 GMT)
Pcf (LSE:PCF)
Historical Stock Chart
From Apr 2024 to May 2024
Pcf (LSE:PCF)
Historical Stock Chart
From May 2023 to May 2024