TIDMPCF
RNS Number : 6792A
PCF Group PLC
01 October 2020
1 October 2020
PCF Group plc
("PCF", the "Company" or the "Group")
Trading Update
In advance of our Preliminary Results which will be announced in
early December 2020, the Group today provides a trading update for
the second half of our financial year ending 30 September 2020. Our
priority throughout this period has been to maintain customer
service levels, ensure the well-being of our employees and manage
all aspects of risk for our stakeholders.
Highlights
-- PCF Bank has proved itself operationally and financially
resilient and remains open for business across all lending
divisions
-- Increased focus on prime quality lending with new business
volumes in line with management's adjusted targets
-- Short- and medium-term operating income is expected to be
maintained through continued portfolio growth
-- The number of customers currently in forbearance is significantly reduced from peak levels
-- Strong balance sheet, diversified and secured lending
portfolio and experienced management is ameliorating the impact of
the Covid-19 pandemic on the Group
Trading update
We remain open for business and continue to finance consumers
and SME customers across all our lending divisions. The lending
portfolio has continued to grow against a backdrop of lower demand,
cautious underwriting and a challenging operational environment. We
have a small but increasing market share within the markets we
operate in and we expect the portfolio to show growth of 30% this
year (2019: 55%) and approximately 9% in H2, a period affected in
its entirety by the Covid-19 pandemic. We have progressively
tightened our credit risk appetite during the period, resulting in
the percentage of prime lending for the year, increasing to 83%
(2019: 74%).
Our considerable investment in infrastructure and technology has
provided us with the resilience to operate in a controlled manner
while maintaining our levels of customer service. In a difficult
year, new business volumes are expected to be GBP260 million across
the Group (2019: GBP276 million). The decision to focus on
originating entirely prime quality lending will result in some NIM
compression. However future operating income and our cost to income
ratio will remain well positioned by maintaining portfolio
growth.
The portfolio is likely to exceed GBP435 million (2019: GBP335
million) at year end and the level of forbearance within the
portfolio has reduced considerably since the release of our Interim
Results. Forborne loans, by value, currently represent 12% of our
portfolio down from 32% in early June. This is as a result of our
expeditious and appropriate response to the issue and our use of
automation to efficiently deal with customer requests. We are
extremely pleased with this progress, however, we remain ready to
assist customers further should the pandemic be prolonged and the
economy continue to deteriorate. Our portfolio is
collateral-backed, diversified and has a low average transaction
size, all of which are characteristics that help minimise
impairment losses.
At the present time we feel it unwise to issue forward guidance
while the events surrounding Covid-19 and economic forecasts remain
highly uncertain. Although the crisis will inevitably have an
impact on this year's results, we remain both profitable and
cashflow positive in this period. Over the coming weeks we will
undertake further IFRS9 impairment modelling against the latest
data and for various economic stress scenarios, to ensure we have
prudent levels of loss provisioning to match the uncertain
outlook.
Consumer motor finance
The used motor vehicle finance market has proved resilient
through the period. After an initial fall in demand, new business
origination picked back up in May and further increased when
dealerships opened on 1 June. This is consistent with data on used
car sales and used car asset values. As reported previously, a
change in travel preferences by consumers away from public
transport has supported this market. The leisure market has had a
good summer with the demand for motorhome finance, in particular,
producing strong volumes.
Levels of forbearance in this portfolio are relatively low but
we are alert to the risks of higher unemployment levels and have
maintained cautious underwriting terms in respect of loan to value
and quality of customer.
Business asset finance
New business origination in this division has been more
noticeably affected by lower demand. Understandably, in the current
climate sole traders and small companies are deferring investment
decisions and where working capital can be accessed from one of the
government's support schemes, at preferential terms, our asset
finance products prove less competitive. We remain focused on
prudent underwriting as difficult trading conditions for SMEs
raises affordability and sustainability concerns.
Our broadcast and media finance subsidiary, Azule, has been
particularly affected by the lockdown with TV, film, sports and
live events all severely impacted. In the period the company has
focussed its broking activity on assisting customers with
successful applications under the government CBILS scheme. The
business has seen some improvement in September as large studio
productions are now back underway, however, we do not expect a
recovery to 2019 levels of activity until next spring.
Forbearance levels have gradually improved in the asset finance
portfolio. In many cases companies asked for assistance as a
precaution rather than a necessity and the SME sector has benefited
from considerable government support.
Bridging property finance
This division has seen good demand and has a healthy pipeline of
transactions. We have been able to take advantage of a number of
competitors in this market withdrawing due to liquidity issues.
This has allowed us to build relationships with new introducers.
The quality and terms of business are attractive and we are pleased
with the performance of this new business line in its first full
year of operation.
Appointment of Interim CFO
We are pleased to announce the appointment of Nick Price as
Interim Chief Financial Officer, with immediate effect. Nick is an
experienced bank and financial services professional and overseen a
wide range of corporate activities. In recent years, Nick has
performed several bank Interim CFO roles and during his executive
career worked at Close Brothers and Goldman Sachs. Nick will be a
member of the executive committee but will not become a Board
director of the Group.
A search for a permanent CFO is ongoing and the Company will
update the market in due course.
Balance sheet and treasury
PCF entered this crisis in a strong financial position. The
Group has access to the retail deposit market, wholesale debt
markets and Bank of England funding mechanisms. We are currently
utilising the cheaper cost of funds provided by the Term Funding
Scheme as our primary source of new funding. Group borrowings
remain predominantly retail deposits with little other wholesale
borrowings other than the Term Funding Scheme. The retail deposit
market, to date, has not shown any signs of stress and continues to
be accessible for new and maturing savings products.
The Group reported a strong capital ratio of 17% as at 31 March
2020 and continues to actively manage both capital and liquidity
through these challenging times to maintain a surplus position
ahead of our normal risk appetite.
Commenting on current trading, CEO Scott Maybury said:
"I would like to thank the whole PCF team for their dedication,
flexibility and motivation to maintain our standards of customer
service in a challenging environment.
"Our trading performance in the period exhibits an encouraging
combination of operational resilience, cautious lending and
continuing profitability. The near-term outlook for the economy may
remain uncertain, however we have shown we have the resources and
experience to steer a balanced course through the current downturn.
I have confidence that this downturn will only slow our progress
and we can emerge strongly to expedite growth and returns."
S
For further information, please visit https://pcf.bank/ or
contact:
PCF Group Tel: +44 (0) 20 7222
Scott Maybury, Chief Executive Officer 2426
Robert Murray, Managing Director
Tavistock Communications Tel: +44 (0) 20 7920
Simon Hudson / Edward Lee / Tim Pearson 3150
Peel Hunt (Nominated Advisor and Broker) Tel: +44 (0) 20 7886
Andrew Buchanan / James Britton / Rishi 2500
Shah /
Duncan Littlejohns
Shore Capital (Joint Broker) Tel: +44 (0) 20 7408
Henry Willcocks - Corporate Broking 4080
About PCF Group plc ( www.pcf.bank )
Established in 1994, PCF Group plc is the AIM-quoted parent of
the specialist bank, PCF Bank Limited. Since commencing operations
as a bank in 2017, the Group has increased its lending portfolio
from GBP140 million to over GBP425 million. The Group will retain
its focus on portfolio quality and lending to the prime segments of
its existing financial services markets. The Group will continue to
identify opportunities to diversify its lending products and asset
classes through acquisition and by setting up new organic
operations.
PCF Bank currently offers retail savings products for
individuals and then deploys those funds through its four lending
divisions:
-- Business Finance which provides finance for vehicles, plant and equipment to SMEs;
-- Consumer Finance which provides finance for motor vehicles to consumers;
-- Azule Limited which provides finance to the broadcast and media industry; and
-- Bridging Property Finance which provides loans to companies
and sole traders investing in residential and commercial
property.
The Group has a track record of profitability and sustainability
through an efficient and scalable business model. Utilising its
technologically advanced platform, PCF Bank provides both
depositors and borrowers with a high level of service and a
straightforward, simple range of products tailored to suit their
needs.
Recently recorded video profiles of PCF's Bridging Finance,
Azule Broadcast Equipment Finance, and Savings divisions are
available at the Company's profile page on the London Stock
Exchange website:
https://profile.lsegissuerservices.com/PCFGroup/overview .
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END
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