Final Results

Private & Commercial Finance Group plc

("PCFG", "Private & Commercial Finance" or the "Group")

Preliminary Results for the year ended 31 March 2013

Private & Commercial Finance (AIM: PCF), the AIM-quoted finance house, today announces its preliminary results for the year ended 31 March 2013.

Financial Highlights:

·; Reported profit before tax up 9% to £0.83 million (2012: £0.76 million)

o Excluding one-off profit in 2012, like-for-like profit before tax was up 30%

·; Reported profit after tax up 20% to £0.57 million (2012: £0.48 million)

·; Earnings per share up 20% to 1.1p (2012: 0.9p)

·; Net assets up 6% to £9.3 million (2012: £8.8 million)

o Net assets per share increased to 17.7p (2012: 16.6p)

·; Loan loss provisioning charge fell by 32% to £2.3 million (2012: £3.4 million)

·; Return on average assets increased by 26% to 1.0% (2012: 0.8%)

o Excluding one-off profit in 2012, like-for-like return on average assets was up 53%

·; £17 million of unearned finance charges to contribute to income in future years

Business Highlights:

·; Successful £5.9 million fund raising in November 2012

·; Committed debt facilities extended and increased to £95.3 million

o Headroom of £20.5 million to fund growth

·; 48% increase in returning consumer finance customers

·; 27% increase in new business volumes in Q4 over the equivalent period in 2012

·; Over 70% of all new business originations falling within top two credit grades

·; Portfolio growth resumed in the last quarter of the year and has continued to grow strongly since

·; Continually improving quality of portfolio

Commenting on the results David Anthony, Chairman of PCFG, said:

"Our improved financial performance has come about as a result of our operational initiatives and illustrates that we are pursuing the right strategy. Our improved return on average assets is especially encouraging, as we continue to progress towards our medium-term goal of 2%.

"The management team has done an excellent job in leading PCFG through a challenging environment and I strongly believe the Group is well placed to build on the portfolio growth seen in the last quarter and to deliver increasing value for shareholders."

Scott Maybury, CEO of PCFG, added:

"The last year has seen a number of significant successes for Private & Commercial Finance. The Group is pleased to announce positive results following a period of readjustment amidst the difficult trading conditions of the last few years, and I feel confident that we can look forward to continued improvement in the future. The increases in reported profit before tax and earnings per share are encouraging and reflect the improving quality and size of our portfolio."

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For further information, please visit www.pcfg.co.ukor contact:

About Private & Commercial Finance Group plc 

Private & Commercial Finance Group plc is an AIM-quoted finance house with a 20 year track record which has two main operating divisions:

·; Consumer Finance provides a range of specially tailored finance products for consumers

·; Business Finance finances vehicles, plant and equipment for SMEs

The Group has a highly efficient and scalable business model, utilising its specially developed internet-based proposal system to service national networks of brokers and suppliers.

Chairman's statement

The year to 31 March 2013 was transformational for Private & Commercial Finance, securing term funding for the business and providing a platform from which we can grow. Since the successful conclusion of our £5.9 million fundraising in November 2012, the Group has introduced a number of new business initiatives and has seen a strong increase in volumes. As a result, we achieved portfolio growth in the last quarter of the year, the first growth in the portfolio since 2008.

Profit before tax for the year ended 31 March 2013 was £829,558 (2012: £761,148), a 9% increase, and the return on average assets was 1.0% (2012: 0.8%).

Excluding a 'one-off' profit of £131,486 in 2012, relating to the sale of part of our leasing portfolio, the Group's like-for-like profit before tax this year was a 30% increase over 2012 and the return on average assets increased by 53%, despite the fact that the portfolio growth only arrived in the last quarter of the year.

Earnings per share increased by 20% to 1.1p (2012: 0.9p) and our net asset value per share increased to 17.7p (2012: 16.6p). The Group's portfolio of receivables currently stands at £80 million and throughout the year we have seen an improvement in quality, a continued reduction in the level of default accounts and a significant decrease in the loan loss provisioning charge.

The Group has debt facilities of £95.3 million, with committed headroom of £20.5 million which is available to grow the portfolio in our two chosen markets of consumer motor finance and business asset finance.

Encouragingly, we have seen positive results from our recent new business initiatives and the Group's originations from direct sales efforts in the year resulted in a 48% increase in returning consumer finance customers. In the coming year we intend to underpin this with further successes in developing direct relationships in specialist markets and for niche assets. 

The progress made by the Group reflects the dedication of the staff and the skill of the management team in guiding it through the economic downturn and banking crisis. I thank them for their efforts in the year. PCFG is now well placed for expansion and, to align the future financial performance of the Group with the interests of shareholders, we have introduced a long-term incentive plan for executive directors and key staff.

Despite a challenging competitive and economic environment, we have started the current financial year with better than budgeted new business volumes and profit, and are targeting £100 million of finance receivables by the financial year end, a 25% increase.

As the portfolio grows and we benefit from operational gearing, we are confident of further improvements in profitability and anticipate accelerating progress towards our medium-term objectives of a 2% return on average assets and returning Private & Commercial Finance to the position where we can recommence the payment of a dividend.

I look forward to reporting further progress in the Interim Report for the six months ending 30 September 2013, which we expect to announce in early December.

Chief Executive's statement

2013 marks the Group's 20th year of trading and significant steps have been taken to ensure it will be a year of growth after several years of contraction and consolidation as a result of the global financial crisis.

Robust profits growth

The Group's profit before tax for the year to 31 March 2013 was £829,558 (2012: £761,148), which is a strong performance when allowing for the fact that the results for 2012 benefited from a 'one-off' profit from the sale of part of our leasing portfolio. A like-for-like comparison with 2012, excluding this one-off profit, shows a 30% growth in underlying profit before tax.

Return on average assets, which is our key performance measure, continues to improve, from 0.4% in 2011 to 1.0% this year (2012: 0.8%). Excluding the one-off profit in 2012, our return on average assets increased by 53% and it is pleasing to report meaningful progress towards our medium-term target of 2%.

The tax charge for the year fell to 31% (2012: 37%), reflecting the crystallisation of a deferred tax asset last year, and we expect this to further normalise towards the standard rate of Corporation Tax of 20%, which comes into effect from 1 April 2015. The reduced tax charge helped deliver a 20% improvement in earnings per share to 1.1p (2012: 0.9p).

Costs continue to be rigorously controlled and staff numbers have reduced in the year as we have benefited from operational efficiencies and improved use of information technology. Administrative expenses, excluding loan loss provision charge, reduced by £0.8 million and now represent 40% of gross profit. We expect to see this percentage fall further as the portfolio grows and produces economies of scale.

Capital and funding

As stated in the Interim Report, we successfully completed a £5.9 million convertible loan note fundraising in November 2012 and we thank our largest shareholder, Bermuda National Limited, for its support. The balance sheet strength provided by the fundraising enabled us to negotiate the extension of our senior debt facilities onto a longer term basis and deliver £20.5 million of committed headroom for future growth.

Our available debt facilities stood at £95.3 million at the year end. A further tranche of £3 million of convertible loan notes is committed and available for drawdown to repay the 2003 and 2009 loan notes which fall due in September 2013.

The net assets of the Group increased to £9.3 million (2012: £8.8 million) and net assets per share increased to 17.7p (2012: 16.6p).

Portfolio performance

Throughout the year, we saw an improved performance in our portfolio with the levels of overdue accounts, repossessions and impairments all falling. As a result, the loan loss provisioning charge fell in the year by 32% to £2.3 million (2012: £3.4 million), representing a charge of 2.8% of the average portfolio in the year (2012: 3.6%).

We finished the year with a portfolio of £80 million, comprising £46 million of consumer motor finance receivables and £34 million of business asset finance receivables. After several years of contraction, the last quarter of the year saw portfolio growth, as we started to utilise the committed senior debt headroom secured in November 2012.

Our portfolio of £80 million is reported net of £17 million of unearned finance charges which will be recognised as income in future years. These future finance charges provide the Group with a quality and predictability of earnings going forward.

New business

New business originations for the full year increased by 3.4% to £39.2 million (2012: £37.9 million), with the largest part of the increase coming in the second half of the year, once we had gained certainty on our fundraising and extended banking facilities. The last quarter of the year saw a 27% increase in new business volumes over the equivalent period in 2012. This has been followed by a strong start to the new financial year with sustained, better than budgeted new business volumes.

The quality of new business throughout the year exceeded our expectations with over 70% of all originations falling within our top two credit grades. Repeat business originations in the year increased by 48% in the consumer motor finance division and now provide 16% of monthly new business for that division.

Over 25 new brokers have been appointed during the year and, while direct sales channels have been slow to build, we are looking forward to reporting some successes through 2013.

A Group rebranding was launched on 1 May 2013 to reinforce an 'open for business' message in the market place and support the revised products and new initiatives. We are running an increased number of marketing and advertising campaigns which aim to connect with new markets and our returning customers. We have also implemented website developments to improve the functionality and attract new business to the site.

Competitive environment

Significant opportunities exist for an independent finance house that has a proven business model and a capacity to originate new business. Our success in growing new business volumes in recent months is the result of a scalable model that delivers excellent customer service and provides both flexibility and a thorough understanding of the funding needs of consumers, sole traders and SMEs.

Consumer Motor Finance

This division of the business was started in 1995 and represents the largest part of the Group. The market is dominated by the large consumer divisions within the high street banks but there is a clear niche for a smaller operator like Private & Commercial Finance, which is well funded, is not constrained by a credit score model, can correctly price for risk and will provide flexibility on terms.

We use information technology to our advantage to deliver outstanding levels of service and focus on the customer's requirements, to ensure we match their aspirations with affordability. Our high level of returning customers is testament to this.

Business Asset Finance

We have seen increased competition in this sector as new entrants and the 'challenger' banks compete for market share. Notwithstanding ING Lease's exit from the market, lending to SMEs remains rate sensitive and our success in this market requires an ability to understand the customer's finance requirements, structure the financial product accordingly and concentrate on assets with strong collateral characteristics. We expect to see strong growth in this division as the economy improves and small businesses start to invest again in business critical assets.

Staff

I thank all the staff at Private & Commercial Finance. They continue to deliver the excellent customer service that sets us apart and gives the Group its well regarded position in the sector. The average length of service is 7 years which provides the foundation for a professional and highly skilled operation.

Outlook and current developments

A sound treasury platform is essential if we are to grow our portfolio and expand our business model with confidence, and we are well placed in that regard. However, we also require a more diversified funding structure to support our ambitious growth plans. We are, therefore, looking at additional and new sources of funding, including an ability to take retail deposits and also to originate new business for third parties through joint ventures. The first of these, namely obtaining a deposit taking licence, is a substantial strategic project and we have engaged consultants to report on the feasibility, costs and likely timeframe. We will report further as the year progresses.

In the interim, we will utilise the substantial headroom available to us to grow the portfolio and drive greater profitability through operational gearing, information technology and further efficiencies.

We also continue to look for opportunities to purchase portfolios of receivables in our markets or a market with complementary finance products. Our most recent acquisition in 2011, in the consumer motor finance sector, has performed ahead of expectations and is an example of the benefits to be gained from the acquisition of a complementary and correctly priced portfolio of good quality receivables.

We are confident that our strategy will deliver further growth in our portfolio, continued improvements in portfolio quality and another significant step in the current year towards our medium-term goals. 

GROUP INCOME STATEMENT

GROUP STATEMENT OF COMPREHENSIVE INCOME

GROUP BALANCE SHEET

GROUP STATEMENT OF CHANGES IN EQUITY

GROUP STATEMENT OF CASH FLOWS

Notes to the Financial Statements

1. Financial Information - The unaudited financial information set out above does not constitute the Group's statutory accounts as defined in Section 434 of the Companies Act 2006. The comparative financial information is based on the statutory accounts for the year ended 31 March 2012.

The Financial Statements for the year ended 31 March 2012, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. The statutory Financial Statements and audit opinion for the year ended 31 March 2013 are expected to be finalised in mid-August and will be delivered to the Registrar following the Company's Annual General Meeting.

2. Basis of Preparation - These consolidated statements have been prepared in accordance with IFRS and its interpretations issued by the International Accounting Standards Board, as adopted by the EU, and on the basis of the accounting policies set out in the 31 March 2012 Financial Statements as updated where necessary for new accounting standards adopted in the year.

The financial information contained within this preliminary statement has been approved and authorised for issue by the Board.

3. Turnover and segmental analysis - Turnover represents gross rental and instalment credit income from the hire, financing and sale of equipment, and the provision of related fee based services, stated net of Value Added Tax. The Group operates in the principal areas of consumer finance for motor vehicles and business finance for vehicles, plant and equipment. All revenue is generated in the United Kingdom.

Turnover, profit on ordinary activities before taxation and loan loss provisioning charge are analysed below:

4. Income tax expense - The tax assessed for the year is higher than the standard rate for current Corporation Tax in the UK of 24% (2012 - 26%). The differences are explained below. Deferred tax has been recognised at 23% (2012 - 24%). On 21 March 2013 as part of the 2013 Budget, the UK government announced its intention to legislate to reduce the main rate of corporation tax to 23% with effect from 1 April 2013, 21% from 1 April 2014 and falling to 20% with effect from 1 April 2015.

5. Dividends - The directors are not recommending the payment of a final dividend.

6. Earnings per Ordinary Share - The calculation of basic earnings per ordinary share is based on a profit of £574,252 (2012 - £478,883) and on 52,731,151 (2012 - 52,731,151) ordinary shares, being the weighted average number of shares in issue during the year. The number of shares used in the diluted calculation is 80,637,033 (2012 - 52,731,151).

7. Return on average assets - The calculation of return on average assets is based on a profit before tax of £829,558 (2012: £761,148) and on average portfolio assets of £81,542,080 (2012: £94,511,456).

8. Hedge Accounting - Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly to equity and the ineffective portion is recognised immediately to the income statement. The cumulative gain or loss on the hedging instrument recognised directly to equity is reported net of tax in 'Other reserves' in the balance sheet.

9. New Accounting Standards - There has been no significant financial impact on the Group's financial statements as a result of any new or amended accounting standards in the year.

10. The 2013 Annual Report & Financial Statements will be posted to all shareholders on 20 August 2013. Further copies can be obtained from the Secretary of the Company at Brandon House, 180 Borough High Street, London SE1 1LB or can be downloaded from our website, www.pcfg.co.uk.