This announcement contains inside
information as stipulated under the UK version of the Market Abuse
Regulation (EU no. 596/2014) as it forms part of UK law by virtue
of the European Union (Withdrawal) Act 2018 (as amended from time
to time).
16 January 2025
Distribution Finance Capital Holdings plc
("DF
Capital" or the "Company" together with its subsidiaries the
"Group")
Trading Update, Medium-Term Financial
Guidance and Share Buyback
Sufficient organic capital generation
and market opportunity to support medium term financial
ambitions
Distribution Finance Capital Holdings plc, a
specialist bank providing working capital solutions to dealers and
manufacturers across the UK, is pleased to provide a trading update
for the 12 months ended 31 December 2024, announce the launch of a
new lending partnership, new medium term financial guidance and the
launch a share buyback programme.
Highlights
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As previously announced, FY24 underlying
pre-tax profit expected to be not less than £14m, more than a
threefold increase on FY23
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FY24 total pre-tax profit (including recoveries
and write-backs relating to RoyaleLife) expected to be not less
than £18.7m (FY23: £4.6m)
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FY25 pre-tax profit now expected to be ahead of
current market expectations, driven by continued elevated NIM and
strong core lending growth
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At 31 December 2024 tangible net asset value
per share expected to be not less than 63p per share
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New partnership with Satago to expand the
Group's lending products, making invoice discounting available to
existing and prospective customers for their working capital
needs
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Share buyback programme of up to £5m to further
enhance shareholder returns
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New medium term financial guidance announced in
light of the Group's strong execution:
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Target loan book of c.£1.3bn by the end of
FY28
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Strong NIM over the medium term, well in excess
of its historical expectation of at least 6%
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Continued cost efficiency with scale, achieving
<50% cost-to-income ratio by FY28
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Progression of return on equity with a
mid-teens target for FY28
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No further Tier 1 equity capital required to
deliver these medium-term financial targets
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Trading
Update
The Group's loan book at 31 December reached a
record £666m (2023: £581m), up almost 15% over the course of the
year, with new loan origination for the year reaching a record
£1.44bn (2023: £1.20bn). Whilst the Group has seen continued growth
and momentum during the year, some dealers were more cautious
holding stock over the festive period whilst considering the impact
of the measures announced in the recent budget. Notwithstanding
that, the Group has grown market share in some sectors whilst also
achieving growth in its wholesale and bespoke lending product
adjacencies.
The Group continued to take a vigilant and
cautious view on credit risk through the period being highly
selective in its onboarding of new customers. Despite that the
Group has grown its aggregate lending customers to in excess of
1,300 and 88 manufacturer partners.
Average stock days, which measures the average
age of loans outstanding, was 145 days for the year being
consistent with the prior year (2023: 145 days), with a small
reduction in Q4 2024 to 140 days (Q4 2023: 148 days).
The Group's overdue accounts have continued to
perform extraordinarily well, demonstrating the quality of the
Group's customer base but also the strength of credit risk and
portfolio management. The number of customers with arrears one day
past due at 31 December was 33 representing less than 3% of the
Group's entire customer base, which includes 19 cases in legal
recovery. The Group's total arrears closed the year at £4.3m, equal
to 0.64% of total lending.
The Group is pleased to re-confirm its
previously announced expectation that for the 12 months ended 31
December 2024:
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Underlying pre-tax profit (excluding recoveries
and write-backs relating to RoyaleLife) of not less than £14m, more
than a threefold increase on its FY23 outturn of £4.6m;
and
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Total pre-tax profit (including recoveries and
write-backs relating to RoyaleLife) of not less than
£18.7m.
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Announcement
of partnership with Satago Financial Solutions Limited
("Satago")
The Group is pleased to announce that it has
entered into a contractual partnership with Satago, a leading
provider of Lending as a Service software solutions and invoice
financing to provide the Group's customers additional access to
invoice discounting as an alternative and/or supplement to their
existing inventory finance borrowing requirements.
Under the partnership agreement, the Group will
be given the opportunity to provide working capital to Satago's own
and its existing platform partners' customers, where the borrower
meets DF Capital's credit appetite and risk-adjusted return
requirements. Satago will provide the Group and its customers
access to its proprietary lending technology and proven operational
capability to administer this additional lending on behalf of the
Group.
This partnership with Satago widens the Group's
suite of lending products, making invoice discounting accessible to
both its existing and prospective customer base as a supplementary
product to support their working capital needs.
Announcement
of medium-term financial guidance
In light of the Group's strong execution since
becoming a fully authorised bank in 2020, the momentum in recent
years and through 2024 and the Group's launch of new products,
services and partnerships, DF Capital is pleased to set out new
medium term financial targets:
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Target loan book of c.£1.3bn by the end of
FY28
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Strong NIM over the medium term, well in excess
of its historical expectation of at least 6%
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Continued cost efficiency with scale, achieving
<50% cost-to-income ratio by FY28
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Progression of return on equity with a
mid-teens target for FY28
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No further Tier 1 equity capital required to
deliver these medium-term financial targets
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The Group remains on track to launch its asset
finance/hire purchase capability during H1 2025, subject to
regulatory approval, giving it access to adjacent markets several
times larger than the Group's existing core lending product. In
order to take advantage of this exciting opportunity and position
the Group firmly as a multi-product lender, the Group expects a
cost of investment and financial drag of this early-stage product
of approximately £2m during 2025, with breakeven occurring in 2026.
Notwithstanding this and given the expectation of continued
elevated NIM over the medium term, FY25 pre-tax profit is expected
to be ahead of current market expectations.
Share
Buyback
Given the previously announced and significant
upgrade to FY24 expected financial outturn, the Group's latest
capital projection and the Board's belief that the current share
price materially undervalues the Group's future prospects and its
intrinsic earnings potential, the Group is separately announcing
today that it is launching a share buyback programme to further
enhance shareholder returns of up to the lower of £5 million or
17.5 million ordinary shares.
Carl
D'Ammassa, Chief Executive, commented: "2024
marked our third full year of profitability since authorisation as
a bank just over four years ago. I'm extremely proud of the
franchise we continue to build and the products and services we are
bringing to life for our customers. Whilst the runway for further
growth in our core markets is clear, the opportunities open to us
in new sectors and recently launched products and services are
immense.
DF Capital is not short of opportunity and as
we are now generating sizeable retained earnings that allows us to
organically bring our ambitions for the business to life, without
the need for additional Tier 1 capital. The launch of the share
buyback programme today, utilising excess capital, demonstrates our
shared belief in the firm's future potential, which is not
recognised in our current share price.
We are confident in our ability to deliver on
the new medium-term financial targets announced today, which
provide the potential to create further and significant shareholder
value despite the macro-economic uncertainties."
The person
responsible for arranging the release of this announcement on
behalf of the Company is Karen D'Souza (Company
Secretary).
For
further information contact:
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Distribution Finance Capital Holdings plc
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Carl D'Ammassa - Chief Executive
Officer
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+44 (0) 161 413 3391
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Kam Bansil - Head of Investor
Relations
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+44 (0) 7779 229508
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http://www.dfcapital-investors.com
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Panmure Liberum Limited (Nomad and Broker)
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+44 (0) 203 100 2000
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Chris Clarke
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William King
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Alma Strategic Communications
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+44 (0) 203 405 0235
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Josh Royston
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Hilary Buchanan
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Kieran Breheny
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