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PCF.L / Index: AIM / Sector: Speciality & other finance

16 December 2008

 

Private & Commercial Finance Group plc ('PCFG' or 'the Group')

Interim Statement

Private & Commercial Finance Group plc, the AIM quoted finance house, announces its results for the six months ended 30 September 2008.

Overview

• 15% increase in pre tax profits to £496,390 (six months ended 30 September 2007: £430,040)

• 36.15% increase in turnover to £31.86 million (2007: £23.4 million)

• Consumer Finance and Business Finance divisions performing well

• Competition in the financial lending arena declining resulting in increased demand for PCFG's services

• Funding banks continue to be supportive and committed to the Group

• Commissioning new technically advanced portfolio management and accounting system

• Strong management team - continue to manage portfolio and influx of proposals for new business successfully 

PCFG's CEO Scott Maybury said, 'As the newly appointed CEO, I am delighted to announce these encouraging results during what has been an interesting time in the financial markets. There is currently a significant market opportunity for PCFG due to many of the main lenders reducing their loan activities and we are seeing increasing demand for our services. However our strategy remains one of prudence, building our business portfolio organically and maintaining high standards of procedures and training to ensure consistency throughout our operations and continued growth for the future.' 

Chairman's statement 

In the light of the prevailing economic climate, it is pleasing to report a 15% increase in profits for the period of six months ended 30 September 2008. The profit before tax for the six month period was £496,390 (2007: £430,040) on increased turnover of £31.86 million (2007: £23.40 million).  

This respectable performance, during a period which has seen more competitors withdraw from our market, is due to a number of factors including our broker-introduced business model, our diversified portfolio of receivables and our policy of avoiding concentrations of risk.  

Our business

PCFG is a long-established finance group with a highly efficient and scaleable infrastructure and business model. The original Private and Commercial Finance Company Limited, which we acquired in 1995, was formed in 1972 and has demonstrated the robustness of a well-diversified finance house, having come through several previous recessions. 

We have two operating divisions:

• The Business Finance Division which provides finance for equipment, plant and vehicles for SMEs; and 

• The Consumer Finance Division which provides finance for cars for consumers.

Both divisions underwrite proposals received from long-established networks of finance brokers using advanced technology, namely our proposal management and underwriting system, e-Quote, in tandem with old fashioned lending principles, thorough and consistent underwriting, and careful checking of proposals.  

Risks and economic background

The performance of our portfolio during the period was in line with our expectations. Since the end of the period, the economic outlook has deteriorated markedly. The measures taken by the Bank of England and the Chancellor, including the recent deep interest rate cuts and efforts to encourage liquidity, appear unlikely to avert a significant increase in UK unemployment. In addition, a relentless campaign of adverse publicity has been waged against payment protection insurance. Certainly, as far as we are concerned, the effect has been that customers have declined this valuable cover in increasing numbers at a time when they need it most and the income we have earned from arranging such insurance has therefore declined. The level of business failures is increasing and likely to rise further as the recession bites and we expect the collateral values of vehicles and equipment to continue to fall as demand weakens.

Our carefully underwritten portfolio of receivables has already demonstrated its robustness over the last twelve months, but we do not expect to be immune from what is happening in the wider economy. As the recession appears likely to be deeper than most forecasters, including HM Treasury, anticipated, it is now prudent for us to expect a correspondingly higher increase in customer defaults in the coming months. On the other hand, the increases in margins which we have progressively introduced since 2007, together with a number of recent cost-saving initiatives, will provide a growing measure of offset. 

It is important, however, to maintain a sense of perspective. Many forecasters are speculating as to the extent of the downturn but our management team, with considerable experience in past recessions, knows that a finance house which has a well diversified portfolio with low risk concentrations, managed by a well-resourced and experienced credit control team, is best placed to weather the anticipated downturn. 

Competitive environment

Competition since the start of the period has reduced considerably and although overall demand for finance from both SMEs and consumers has fallen as a result of declining confidence, so far as we are concerned the fall-off in competition is causing a net increase in demand for our services. However, our resources are not unlimited and we have taken steps, including tightening terms and increasing margins, to bring the number of applications within manageable levels. We continue to operate within an industry-wide scarcity of funding and, although it is often frustrating that we are having to turn away excellent opportunities, the business which we are writing is in line with our plans and of high quality, with attractive margins. 

Funding 

Our funding banks continue to be supportive and committed to maintaining our facilities, albeit at increased margins. I am pleased to report that we have successfully concluded agreement with Barclays Bank, which funds our Consumer Finance Division, to extend the term of our existing facility. We are currently in negotiation with The Royal Bank of Scotland and Lloyds TSB Bank with a view to agreeing the terms of a similar extension for funding of our Business Finance Division. The facility we have with Kaupthing Singer & Friedlander is not affected by the position of its parent company and remains committed until 2011. In addition, the Group obtained £7.5 million of new facilities in the six months to 30 September 2008 which are committed for periods of up to four years. Based on these facilities and the progress made to date, we have adequate facilities for our current growth plans.

Technology

In order to complement our leading-edge proposal management system, e-Quote, we are demonstrating our confidence in the future by commissioning a new portfolio management and accounting system which we expect to have fully implemented by 1 May 2009 and which will be as advanced as e-Quote. Although this involves a financial commitment and a detailed commissioning process involving a high level of commitment from the team, we expect the new system to pay for itself within its first two years of operation through increased efficiencies and more in-depth management information. 

Board of directors and staff

On 31 October Tony Nelson stepped down as Chief Executive and was appointed Non-Executive Deputy Chairman. Having recently celebrated his 65th birthday, Tony felt that the time was right to hand over the reins to his long-standing colleagues. As a result, Scott Maybury, previously the Finance Director, was appointed Chief Executive and Zane Kerse, who had been Group Financial Controller since 2001, was appointed Finance Director to replace Scott. In addition, Robert Murray, Managing Director of our Business Finance Division, was given the additional responsibility of being Managing Director of our Consumer Finance Division. 

On behalf of the board, I would like to thank Tony for all his hard work and commitment to the development of the Group over the last fifteen years and to congratulate Scott, Zane and Robert on their new appointments.

Our professional and experienced team performed well in the period and continue to demonstrate their qualities in managing both our portfolio and the influx of proposals for new business. 

Outlook 

Although we are realists and expect the economic environment in the coming months to be challenging, we have products which are very much in demand, a robust portfolio, supportive banks, a strong board and a very capable and experienced team. In short, all the resources and qualities needed to manage the business through the recession and to prosper in the long-term. The improved competitive environment, coupled with the more prudent lending terms now being offered by our remaining competitors, mean that our opportunities for new business on favourable terms are highly promising.  

Michael R Cumming

Chairman 

16 December 2008

Group Income Statement

for the six months ended 30 September 2008

	Six months  ended  30 September 2008 £000's unaudited		Six months  ended  30 September 2007 £000's unaudited		Year  ended 31March 2008 £000's audited
Group turnover Cost of sales	31,856  (20,269)		23,402  (15,242)		51,749  (33,745)
Gross profit Administration expenses	11,587  (6,581)		8,160  (4,305)		18,004  (9,524)
Operating profit Interest Receivable Interest Payable	5,006  2  (4,512)		3,855  - (3,425)		8,480  11  (7,557)
Profit on ordinary activities before taxation Income tax expense	496  (139)		430  (129)		934  (32)
Profit on ordinary activities after taxation	357		301		902
Profit for the period attributable to equity holders	357		301		902
Earnings per 5p ordinary share  - basic and diluted	1.3p		1.2p		3.6p

Group Statement of Recognised Income and Expense

for the six months ended 30 September 2008

 

 

	Six months  ended  30 September 2008 £000's unaudited		Six months  ended  30 September 2007 £000's unaudited		Year  ended 31March 2008 £000's audited
Profit for the period	357		301		902
Cash flow hedges - fair value gains/(losses) net of tax	141		-		(620)
Income/(expense) recognised directly in  Equity	141		-		(620)
Total recognised income for the period attributable to equity holders	498		301		282

Group Balance Sheet

as at 30 September 2008

	30 September 2008 £000's unaudited	30 September 2007 £000's unaudited	31March 2008 £000's audited
ASSETS Non-current assets Goodwill Other intangible assets Property, plant and equipment Loans and receivables Deferred tax	397  194 137  97,393  2,166	397 226  249  71,641  2,441	397 223 159  89,456  2,221
	100,287	74,954	92,456
Current assets Loans and receivables Trade and other receivables Corporation Tax Cash and cash equivalents	42,502  1,096  102  22	40,299  806 -  -	42,520  1,357 241 -
	43,722	41,105	44,118
Total assets	144,009	116,059	136,574
LIABILITIES Current liabilities Interest-bearing loans and borrowings Trade and other payables Derivative financial instruments Corporation tax Bank overdrafts	2,754  3,489 623 - -	274  4,841 10 130  1,106	155  3,881  876 - 1,121
	6,866	6,361	6,033
Non-current liabilities Interest-bearing loans and borrowings	130,685	104,219	124,584
Total liabilities	137,551	110,580	130,617
Net assets	6,458	5,479	5,957
Capital and reserves Called-up share capital Share premium Capital reserve Other reserves Own shares Profit and loss account	1,426  4,154  3,873              (480)              (243)  (2,272)	1,298  3,781  3,873  -             (243)          (3,230)	1,426 4,150 3,873                 (620)                (243)             (2,629)
Equity shareholders' funds	6,458	5,479	5,957

Group Cash Flow Statement

for the six months ended 30 September 2008

	Six months	Six months	Year
	ended	ended	ended
	30 September	30 September	31 March
	2008	2007	2008
	£000's	£000's	£000's
	unaudited	unaudited	audited
Cash flows from operating activities
Profit before taxation	496	430	934
Adjustments for:
Amortisation of other intangible assets	71	85	166
Amortisation of issue costs	24	-	48
Depreciation	28	28	95
(Profit)/loss on sale of property, plant and equipment	7	-	(4)
Fair value movement on derivative financial instruments	(18)	213	137
Increase in loans and receivables	(7,919)	(21,442)	(41,478)
Decrease in trade and other receivables	221	1,014	543
Increase/(decrease) in trade and other payables	(392)	1,727	1,054
Cash outflow from operating activities	(7,482)	(17,945)	(38,505)
Tax paid	-	(145)	(244)
Net cash outflow from operating activities	(7,482)	(18,090)	(38,749)
Cash flows from investing activities
Purchase of property, plant and equipment	(36)	(18)	(96)
Proceeds from sale of property, plant and equipment	23	-	105
Purchase of other intangible assets	(42)	(40)	(118)
Net cash outflow from investing activities	(55)	(58)	(109)
Cash flows from financing activities
Proceeds from issue of share capital	-	560	1,057
Proceeds from borrowings	8,680	17,816	38,134
Repayments of borrowings	-	(157)	(277)
Net cash inflow from financing activities	8,680	18,219	38,914
Net increase in cash and cash equivalents	1,143	71	56
Cash and cash equivalents at beginning of the period	(1,121)	(1,177)	(1,177)
Cash and cash equivalents at end of the period	22	(1,106)	(1, 121)
Cash at banks	22	-	-
Bank overdrafts	-	(1,106)	(1,121)
	22	(1,106)	(1,121)
The amount of interest paid and received during the period is as follows:
Interest paid	4,447	3,484	7,184
Interest received	2	-	11

Notes:

• The interim results are unaudited and do not constitute statutory accounts as defined by section 240 of the Companies Act 1985. The comparative figures for the year ended 31 March 2008 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 237(2) or (3) of the Companies Act 1985.  

• The interim 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 2008.

• These interim consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. 

• Private & Commercial Finance Group plc allotted 5,747 fully paid 5p ordinary shares on 11 April 2008 as a result of the conversion of loan notes to the value of £4,369.

• The calculation of basic earnings per ordinary share is based on a profit of £357,483 for the period and on 28,515,748 ordinary shares, being the weighted average number of ordinary shares in issue during the period. 

• The Group's turnover represents gross rental and instalment credit income receivable, the hire, the financing and the sale of equipment, and the provision of related fee based services, stated net of Value Added Tax.

• The Group's loans and receivables portfolio of £139,895,546 is reported net of unearned future finance income of £31,082,292.  

• A copy of the Interim Report is being sent to all shareholders and convertible loan note holders. Further copies can be obtained from the Secretary of the Company at 39 Victoria Street, London SW1H 0EU or can be downloaded from our website, www.pcfg.co.uk

**ENDS**

For further information please visit www.pcfg.co.uk 

Scott Maybury	Private and Commercial Finance Group plc	Tel: 020 7222 2426
Felicity Edwards	St Brides Media and Finance Ltd	Tel: 020 7236 1177
Tim Feather	Hanson Westhouse Limited	Tel: 0113 246 2610

 

Notes to Editors

Private & Commercial Finance Group plc, which is authorised and regulated by the FSA, is a growing AIM-quoted finance house.  

PCFG has two main operating divisions:  Consumer Finance - which provides a growing range of specially tailored finance products for consumers and Business Finance - which finances vehicles, plant and equipment for SMEs. The Group has a highly efficient and scaleable business model, utilising its specially developed internet-based proposal system to service national networks of brokers. This allows it to handle a large volume of proposals extremely quickly with proportionately low costs.  

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