PCF Group: Interim Results

3rd June 2020 | PCF Group plc

PCF Group plc, the AIM-listed specialist bank, today announces its interim results for the six-months ended 31 March 2020. The Board is pleased to report a strong trading performance in the first half of the year as a whole. However, this is overshadowed in the final weeks by the Covid-19 crisis and its potential financial implications. Our focus and priority at this challenging time is to support and protect our employees, customers and the long-term value of the business for all stakeholders.

Business Highlights:

  • Total new business originations up 26% to £153 million (2019: £121 million) comprising new business origination for both own portfolio and that placed for broker commission income
  • Portfolio growth of 18% to £401 million (Sept 2019: £339 million)
  • Focus remains on the prime end of the credit spectrum, with 80% (2019: 76%) of originations in our top four credit grades
  • Retail deposits total £340 million (Sept 2019: £267 million) with over 7,800 customers (Sept 2019: 6,250)
  • Business continuity plans have proved resilient and PCF remains open for business to support consumers and SMEs
  • As with all banks, the crisis caused an immediate decrease in demand for our products and our lending volumes reduced by 52% against target, in April and May 2020 with the business finance division being most affected
  • Customer forbearance has been granted totalling £138 million as at 29 May 2020, representing 34% of our lending book by value
  • Market guidance will be withheld until there is greater economic certainty

Financial Highlights:

  • Operating income up 26% to £12.7 million (2019: £10.1 million)
  • Cost of risk of 1.7% (2019: 0.9%) including an incremental charge of £1.6 million in relation to the potential impact of the Covid-19 crisis
  • Statutory profit before tax down 21% to £2.6 million (2019: £3.3 million) due solely to the impairment charge
  • Earnings per share of 0.8p (2019: 1.2p)
  • Net Interest Margin (‘NIM’) reduced to 6.8% (2019: 8.0%) with continued active management of lending quality
  • Lower cost to income ratio of 52.4% (2019: 54.3%), reflecting benefits of operational gearing
  • After-tax return on equity decreased to 6.8% (2019: 11.4%)
  • Total Capital Ratio of 17.0% (Sept 2019: 18.0%)
  • Liquidity Coverage Ratio of 1,181% (Sept 2019: 553%)
  • £69 million (Sept 2019: £63 million) of unearned finance charges to contribute to earnings in future years

Scott Maybury, CEO, commented:

“As one might expect for a financial period affected by Covid-19, there is a nuanced picture in this set of results. What I can say with certainty, however, is that the strengths of our business model are clear to see in both normal market conditions and a more challenging environment.

“The rationale for PCF gaining a banking licence was that the Group would be able to write greater volumes of business to borrowers with better credit quality and have a more secure source of funding through retail savings deposits. This allows for both stronger growth during normal trading and a business less exposed to external shocks when they arrive.

“Notwithstanding the seriousness of the current situation, I would like to emphasise that PCF is well equipped for the challenges ahead. We were able to implement our Business Continuity Plan both quickly and effectively. In addition, our leadership team and many of our employees have experience of three previous recessions and are determined to bring PCF through in a strong position.

“Albeit at lower levels, we are continuing to write new loans to support consumers and businesses across the UK and will continue to be ‘open for business’. In addition, we are working productively with borrowers who are facing financial difficulties to help find solutions for them, and we are confident that this ongoing, committed customer service will help PCF prosper as the economic picture improves.

“Finally, I would like to thank the PCF team who have adapted impressively well to the challenging circumstances.”