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Orchard Funding up as company contemplates cancelling AIM listing

9th Apr 2024 11:18

(Alliance News) - Shares in Orchard Funding Group PLC jumped on Tuesday, after the company reported its interim results and said it was mulling over the benefits of its continued admission on AIM.

Orchard is a Luton, England-based finance company, which provides funding support to insurance brokers and professional firms. Shares in Orchard were up 32% at 21.16 pence each in London on Tuesday morning.

In the six months to January 31, Orchard's pretax profit was GBP1.1 million, down 14% from GBP1.3 million a year prior.

Total revenue was up 23% to GBP4.7 million from GBP3.8 million, while net interest income rose 10% to GBP2.7 million from GBP2.5 million.

Lending volume was up 26% to GBP58.4 million from GBP46.4 million.

Earnings per share dropped 20% to 3.78 pence from 4.71p.

Orchard said that it was pleased with its first-half performance in the face of "a great deal of turbulence in the markets" caused by the conflicts in Ukraine and the Middle East.

The company also provided an update on a recent instance of external fraud, which it said had taken a toll on profitability in the period.

In early March, Orchard said it funded credit agreements arising from dealings with a "fraudulent introducer". The company made a provision of around GBP500,000 in respect of these agreements, and warned that its year-end results would be hit by the provision.

Orchard said it has completed the investigation into the matter, and concluded that the incident was an isolated one which will not impact any of its remaining assets.

Orchard noted that its current share price is at a material discount to its most recent net asset value of GBP17.8 million, equating to 83p per share, and has decided to review its capital allocation policy and its continued listing on the AIM market of the London Stock Exchange.

The review will consider returning capital to shareholders by way of a buyback or tender offer, and whether the benefits of its continued admission on AIM are outweighed by the legal and regulatory requirements.

If a capital return or cancellation on AIM is considered prudent by the board, Orchard said it will seek to ensure a partial exit for shareholders.

As Orchard conducts its capital allocation policy, the company has decided to postpone payment of an interim dividend.

Chief Executive Officer Ravi Takhar said: "The company successfully increased its lending and revenues over the first half of the year. Due to a number of matters which have been reported to shareholders we will face significant headwinds in the second half of the year and we will work to recover the impact on our earnings from these factors.

"As a result of the continued and escalating costs of listing having a significant impact on our earnings, the poor trading of our stock, the lack of liquidity of the stock and the inability of the company to raise new capital, we believe a full review of the benefits of continuing to maintain our admission on AIM should be undertaken. We will continue to focus on the insurance premium finance and are fully aware of the FCA focus on our key market."

By Hugh Cameron, Alliance News reporter

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