Distribution Finance Cap. Hldgs PLC Trading Update April 2020 (0490L)
April 28 2020 - 1:00AM
UK Regulatory
TIDMDFCH
RNS Number : 0490L
Distribution Finance Cap. Hldgs PLC
28 April 2020
28 April 2020
Distribution Finance Capital Holdings plc
("DFC" or the "Company" or together with its subsidiaries the
"DFC Group")
Trading Update in light of COVID-19 pandemic
On 2 April 2020, the Company announced that it had received an
extension to a temporary waiver from its senior and senior
mezzanine facility lenders (the "Lenders") of an early amortisation
provision in its funding facilities.
Since its last update, the Company has been working
collaboratively with the Lenders with the objective to agree the
shape of its funding facility and covenants appropriate for the
current climate, particularly as the loan book stock turn has
slowed in light of most dealers being closed during the COVID-19
public health crisis. Both the Company and the Lenders believe that
without further operating data relating to the emerging trading
pattern of dealers and the impact of the lockdown, it is difficult
to agree appropriate terms for a longer-term waiver. The Company
remains in ongoing constructive discussion with the Lenders and
further weekly extensions to the temporary waiver have been granted
during this period of negotiation. This pattern of waiver extension
may continue until such time as there is greater clarity and
analysis of the current situation. The Company recognises the
current constraints on the facility in light of the Lenders' own
credit risk appetite given the current economic environment and the
impact of COVID-19.
Notwithstanding the economic landscape, the Company's loan book
continues to perform well and remains stable. Despite some of its
industrial sector clients continuing to trade during the lockdown,
in the near-term demand is likely to be curtailed whilst the
majority of the Company's dealer networks and manufacturers remain
closed. However, the Company believes that its predominant lending
sectors of caravans, recreational vehicles, small motorboats and
motorbikes will perform strongly after Government restrictions are
lifted, as UK consumers seek to "staycation" and continue to
mitigate COVID-19 risk.
In light of the current position with its Lenders, the Company
believes it is likely that its existing lending portfolio will
modestly reduce in the near-term. Normal levels of new lending
should be achievable once the existing facilities are renegotiated
with the Lenders, or can be re-financed in whole or part through
alternative wholesale funding and/or the Company receives a banking
licence, and as many dealers reopen for business in the
post-lockdown period.
In addition to its ongoing banking licence application and
negotiations with the Lenders, the Company has made an application
to the British Business Bank to participate in its Enable Funding
Scheme, which provides wholesale finance to non-bank SME lenders
such as DF Capital. This application is progressing.
The Company remains committed to its bank licence application,
which is subject to regulatory approval. In light of the current
pandemic, the Company has completed analysis of its business plan
and forecasts, subjecting them to severe assumptions, including a
very prolonged lockdown of client premises. This analysis shows
that the firm can continue to meet its desired capital and
liquidity position at all times through the pandemic. Consequently,
the Board remains confident that its internal assessment
demonstrates that as a bank the Company would not breach any of its
anticipated capital or liquidity limits. DF Capital would be well
capitalised, a strong and secure savings franchise and in an
enviable position to support its SME borrowers, many of whom are in
the domestic leisure-sector, in the post lockdown period.
Additionally, the Company has announced a number of cost
mitigation actions aligned to an expected lower loan book in light
of the restrictions on its facility, which include potential staff
redundancies and furloughing of certain employees, who will receive
100% of their salary and benefits during the furlough period.
For the avoidance of doubt, given the current uncertainty in
relation to the Company's ongoing funding strategy driven by
COVID-19 and the associated potential impact on our customers, our
previously communicated financial guidance for 2020 should no
longer be considered current. The Company will however provide an
update to investors on its outlook at the time of its forthcoming
results for the year ended 31 December 2019, the timing of which
will be notified in due course.
Chief Executive Officer, Carl D'Ammassa commented:
"The Company has an excellent lending franchise and strong
support from its dealers and manufacturers, but these are
challenging economic times on the back of the global public health
crisis. We have worked hard to agree a route forward with our
Lenders, and whilst conversations remain constructive, as yet we
cannot confirm that agreement on a medium term waiver has been
achieved. Sadly we have had to announce a programme of
restructuring that will see some employees furloughed or facing
redundancy. There is no doubt that this is a critical time when
dealers need us to be flexible and able to provide ongoing funding
to help them navigate the challenging months ahead."
Chairman, John Baines added:
"We strongly believe in the viability of the Company's lending
proposition and it will be frustrating to see our loan book reduce
in the near term. Should we receive a bank licence, the firm would
be able to increase its loan book in line with the strength of
client demand, whilst being well capitalised to navigate COVID-19
as a legacy free banking franchise. We will be working hard to
unlock the current situation and ensure the Company can continue to
play a positive role in the post-COVID-19 economic environment, and
we are hopeful that this will be as a bank."
The Company will provide further updates as appropriate.
Enquiries:
Distribution Finance Capital Holdings plc
Carl D'Ammassa - Chief Executive Officer +44 (0) 20 3937
6390
http://www.dfcapital-investors.com
Macquarie Capital (Europe) Limited (NOMAD and broker)
Alex Reynolds +44 (0) 20 3037 2000
Jonny Allison
Blue Pool Communications (Financial PR)
Nick Lord +44 (0) 7501 271 083
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END
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