Half Yearly Report

PCFL / Index: AIM / Sector: Speciality & other finance

27 November 2012

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

Interim Results Statement

Private & Commercial Finance Group plc, the AIM quoted finance house, announces its results for the six month period ended 30 September 2012.

Overview

·; Profit before tax for the first half up 40 % to £340k (2011: £242k)

·; Successfully raised £8.9m through a subscription, placing and open offer of unsecured convertible loan notes

·; All revolving bank facilities extended and committed for more than 3 years

·; Obtained new funding facilities of £4m during the period, increasing headroom to £19m

·; Return on average portfolio assets increased to 0.8 % (2011: 0.5%)

·; Total net assets increased by 11% to £9.1m (2011: £8.2m)

·; New business advances totalled £18.0m for the period (2011: £19.7m) - the decision of a major bank-owned competitor to withdraw from the business finance market is expected to generate significant new business opportunities

·; Committed to new business growth and complementary portfolio acquisitions

·; E.P.S. doubled to 0.4p (2011: 0.2p)

·; N.A.V. per share 17.6p (2011: 16.5p)

Commenting on the interim results, Scott Maybury, PCFG's Chief Executive said:

"In accordance with our previously declared strategies, we have increased the senior debt facilities of the Group, strengthened the balance sheet and provided a platform from which to grow the business. I am pleased that with the successful conclusion of a £8.9m fundraising of unsecured convertible loan notes on 2 November 2012 and the renewal for three years of our £55m facility with Barclays, we have achieved those key objectives. The issue of new convertible loan notes also allows us to replace the existing convertible loan notes maturing in September 2013, at a significantly improved interest rate.

"Many of the growth initiatives highlighted in the Annual Report are now underway and we look forward to reporting on their progress, as well as new business and portfolio growth in the second half of our year."

Chairman's Statement

Profit before tax for the period ended 30 September 2012 was £339,466 (2011: £241,901), a 40% improvement on the same period last year, and we made further progress towards our medium-term objective of a 2% return on average assets, achieving 0.8% in the period compared with 0.5% a year ago.

Profit after tax was up 68% to £216,575 and earnings per share doubled following the partial deferred tax asset crystallisation resulting from the sale of receivables in March 2012. The tax rate for the period and for the full year will still be higher than the standard rate, but we expect it to normalise when the main rate of Corporation Tax reduces to 22% with effect from 1 April 2014, which will provide a further boost to earnings per share.

In my annual statement for 2012, I mentioned our plan to raise not less than £8 million through the issue of convertible loan notes. The fundraising was successfully concluded earlier this month and in fact raised £8.9 million before expenses. The loan notes have been listed on the London Stock Exchange's main market, a first for an AIM-listed company. Along with the renewal of the £55 million facility from Barclays for three years, we now have a solid platform from which to grow the business.

We appointed a Sales and Marketing Director in October 2012 who will be responsible for creating a direct sales presence in niche markets. Along with our established presence in the broker-introduced market and our success at retaining customers and originating repeat business, we expect the portfolio to grow in the second half of the year. The recent withdrawal from SME asset-based lending by ING Lease (UK), who accounted for about 40% of the broker market, has significantly changed the market dynamic and we believe that it will create opportunities for us.

Throughout the period there has been a sustained improvement in the quality of the portfolio, with continued reductions in the level of overdue accounts.

Financial Review

Turnover was down in the period mainly due to the sale of receivables at the end of the last financial year and the portfolio decreased by 5% in the period to £79 million (2011: £83 million). However, the excellent performance of the portfolio and good cost control enabled us to deliver a better level of profitability and improve earnings per share.

We reduced administration expenses by 20% in the period and as a consequence, they remained stable at 61% as a proportion of gross profit, despite the fall in portfolio size.

Net asset value per share increased to 17.6p (2011: 16.5p).

Current Trading

Economic activity remains subdued and sentiment is still one of contraction. Both the UK SME and consumer sectors continue to defer investment decisions and shy away from taking on new debt. In the period we wrote £18.0 million of new business compared to £19.7 million in the corresponding period last year. This reflects our focus on maintaining quality and margins, along with weaker demand and greater competition.

We announced several new business initiatives in the Annual Report and these have been launched in the confidence that debt funding has now been secured for the medium-term. Central to this is the establishment of a direct sales force focussing on niche assets and supplier relationships to supplement our broker-sourced model. The appointment of a Sales and Marketing Director is key to this strategy and progress will be reported in the full year results.

We continue to develop repeat business through our website, utilising our extensive database of customers. Volume of repeat business in the period represented £1.5 million compared with £0.9 million in the same period last year, representing an increase of 66%. We have also launched a joint venture with DSG Financial Services, a well-established motor finance broker, whom we have been dealing with for more than ten years. This is an arrangement that should ensure loyalty and increase volumes of business.

In addition, we continue to search for portfolio acquisition opportunities, but only if both the price and quality are right.

Funding and Equity

With the support of our largest shareholder, Bermuda National Limited, the balance sheet has been strengthened through the fundraising of £8.9 million unsecured convertible loan notes. £5.9 million of the loan notes were issued and commenced trading on completion and the remainder are available, at our option, to redeem the existing loan notes which mature on 30 September 2013.

The fundraising enabled us to renew our revolving senior debt facilities for a three year term and provided us with committed facility headroom of £19 million as at 30 September 2012. New facilities of £4 million were obtained in the period and with the added strength of the recent fundraising, we expect further successes in this area.

Staff

The quality, skill and hard work of our staff has been a major factor in our performance and we have the resources and technology to build the business without significant additional fixed cost.

Outlook

Economic and market conditions remain challenging and the outlook for the wider economy in 2013 is far from certain. However, pricing pressure should now reduce following the withdrawal of a major competitor. With new senior debt facilities, committed funding and a strengthened balance sheet we are in good shape to seize the market's opportunities, and we are determined to grow the portfolio, improve profitability and develop our new business model.

David G Anthony

Chairman

27 November 2012

Private & Commercial Finance Group plc

Group Income Statement

for the six months ended 30 September 2012

Group Statement of Comprehensive Income

for the six months ended 30 September 2012

Private & Commercial Finance Group plc

Group Balance Sheet

as at 30 September 2012

Private & Commercial Finance Group plc

Group Statement of Changes in Equity

for the six months ended 30 September 2012

Private & Commercial Finance Group plc

Group Statement of Cash Flows

for the six months ended 30 September 2012

Private & Commercial Finance Group plc

Notes to the Interim Report:

1. The interim results are unaudited and do not constitute statutory accounts as defined by section 434 of the Companies Act 2006. The comparative figures for the year ended 31 March 2012 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 498 of the Companies Act 2006. 

2. 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 2012.

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

4. The Group's 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.

5. 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 and profit on ordinary activities before taxation are stated below:

6. The income tax rate is 36%, representing the best estimate of the annual effective tax rate applied to operating profit before tax for the six month period. The effective tax rate for the period is higher than the standard rate for current Corporation Tax in the UK of 24% due to the effect of the reduction in the Corporation Tax rate on the deferred tax asset.

7. The calculation of basic earnings per ordinary share is based on a profit of £216,575 for the period and on 52,731,151 ordinary shares, being the weighted average number of ordinary shares in issue during the period.

8. The Group's loans and receivables portfolio of £78,936,518 is reported net of unearned future finance income of £16,350,786.

9. 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 Brandon House, 180 Borough High Street, London SE1 1LB or can be downloaded from our website, www.pcfg.co.uk.

**ENDS**

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

Notes to Editors:

Private & Commercial Finance Group plc is an AIM-quoted finance house.

PCFG has two main operating divisions: Consumer Finance - which provides a 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 scalable business model, utilising its specially developed internet-based proposal system to service national networks of brokers and suppliers.