TIDMDFCH
RNS Number : 9709U
Distribution Finance Cap. Hldgs PLC
29 November 2023
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).
29 November 2023
Distribution Finance Capital Holdings plc
("DF Capital" or the "Company" together with its subsidiaries
the "Group")
Trading and Capital Strategy Update
Distribution Finance Capital Holdings plc, a specialist bank
providing working capital solutions to dealers and manufacturers
across the UK, provides an update in relation to its single large
obligor arrears balance, a trading update and a change to its
medium-term capital strategy.
Update relating to large single obligor's arrears balance
The Group previously reported that as at 30 June 2023 the
Group's arrears included GBP10.4m of balance outstanding in respect
of a large single obligor; RoyaleLife and associated companies
("RoyaleLife"), a customer of the Company since June 2018,
representing c.2 per cent of the Group's loan book as at 30
September 2023. Whilst the refinancing and restructuring of
RoyaleLife was in progress, it had been delayed, and at that time
the Group's assessment, following engagement with key stakeholders,
was that the Group would be repaid should the proposed refinance
complete as planned.
The Group is aware of a significant number of assets which have
been sold out of trust or are missing from confirmed locations and
following continued work with various stakeholders, it is now clear
that RoyaleLife's financial situation and operation is much opaquer
and more complex than originally determined, adversely impacting,
to a greater degree than expected, a larger number of secured
lenders and other creditors.
Whilst the Group understands that action to refinance RoyaleLife
remains in progress, there is no certainty at this stage given the
elapsed time and new information that this will lead to a
satisfactory outcome and successful refinance, which will see the
Group being substantively repaid.
Whilst the Group will continue to work with stakeholders to
effect a good outcome, pursuing recovery of the outstanding debt to
the fullest extent possible, the Group intends to make an
appropriate credit loss provision in its full year accounts for the
year ending 31 December 2023. Due to the unique circumstances
associated with RoyaleLife and the one-off nature of any provision,
the Group does not anticipate any further impact to its results for
the next financial year ending 31 December 2024.
The Group maintains a highly cautious and vigilant approach to
credit risk management and the circumstances surrounding RoyaleLife
facility are unique in the context of the Group's loan book.
Trading update and capital strategy
As reported in the results for six months ended 30 June 2023 the
Group delivered pre-tax profit, including impairment provisions, of
GBP3.2m in the first half, more than the entire previous financial
year. Additionally, new loan origination remained strong, stock
turn extended further and the Group continued to generate elevated
net interest margin. However, in light of any expected credit loss
provision in relation to RoyaleLife, the Group now expects to
deliver a pre-tax profit of no less than GBP2.0m for the year
ending 31 December 2023.
Given the strong underlying momentum combined with the Group's
expectations of further loan book growth, the Company has
determined that, in the medium term, it will remain flexible and
pragmatic in the pursuit of its growth strategy, balancing this
against its ability to generate retained earnings as a route to
organic capital accretion.
As previously announced the Group believes it has capacity to
grow its current loan book to the envisaged level of approximately
GBP800m based on current capital, a full drawdown of the GBP20m
Tier 2 Capital Facility as announced on 8 September 2023 and
upsizing of the previously announced ENABLE Guarantee from GBP250m
to GBP350m. At a cGBP800m loan book the financial characteristics
of the Group would allow it to achieve further organic growth at a
slower, but healthy rate without the need to raise additional Tier
1 capital. The Group remains committed to becoming a multi-product
lender in the near-term, considering organic and inorganic product
development strategies which underpin the Group's longer-term
earnings potential.
Carl D'Ammassa, Chief Executive, commented: "Despite our best
efforts, it is very disappointing that we have not been able to
resolve the RoyaleLife situation. This is a complex, demanding and
unique exposure that we have been working through over many months
alongside other lenders and creditors. Despite the material changes
to the landscape most recently, we continue to seek recovery, but
feel prudency and transparency of approach is critical at this time
and central to our model".
"Notwithstanding this situation, the Group is seeing strong
underlying financial momentum and we remain well placed to build a
diverse multi-product lending proposition, without the pressing
need to raise Tier 1 capital through an equity raise."
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:
Distribution Finance Capital Holdings
plc
Carl D'Ammassa - Chief Executive Officer +44 (0) 161 413 3391
Kam Bansil - Head of Investor Relations +44 (0) 7779 229508
http://www.dfcapital-investors.com
Investec Bank plc (Nomad and Joint
Broker) +44 (0) 207 597 5970
David Anderson
Bruce Garrow
Harry Hargreaves
Maria Gomez de Olea
Liberum Capital Limited (Joint Broker) +44 (0) 203 100 2000
Chris Clarke
Lauren Kettle
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END
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