DFCH Distribution Finance Capital Holdings Plc

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).

4 July 2024

Distribution Finance Capital Holdings plc

("DF Capital" or the "Company" together with its subsidiaries the "Group")

Trading update for six months ended 30 June 2024

Continued momentum with full year results now expected to be significantly ahead of market expectations

Distribution Finance Capital Holdings plc, a specialist bank providing working capital solutions to dealers and manufacturers across the UK, is pleased to provide a trading update for the six months ended 30 June 2024.

·    The Group has continued to see strong momentum during the period with new loan origination exceeding a record £709m, up c17% on the prior year (H1 2023: £607m).

·    The Group's loan book at 30 June 2024 reached £600m, up c16% on the prior year (H1 2023: £519m) and which is in line with seasonal expectations. Whilst new loan origination remains strong, the Group has seen a normalisation of the seasonality in loan repayments during the year (i.e. an acceleration of dealer sales during the period March to September), a first since the onset of the global pandemic. 

·    The Group now supports 90 manufacturer partners and its dealer customers total 1,250 on a net basis (H1 2023: 1,152) having added 165 new dealers in the period. Credit lines reached a record c£1.1bn, up c21% on prior year (30 June 2023: £926m).

·    Average stock days, which measures the average age of loans outstanding, remains well within sector tolerances, extending marginally on a portfolio basis to 149 days (31 December 2023: 148 days) at the period end.

·    In spite of the challenges of the macro-economic and higher interest rate environment, the Group's overdue accounts have continued to perform well and ahead of expectations through the period. 20 dealers (H1 2023: 29), including 10 cases in legal recovery, had arrears one day past due, representing c1.6% (H1 2023: c 2.5%) of the Group's dealer base. The Group's total arrears balance represented c0.5% (H1 2023: 2.5%) of its entire loan book.

In light of the strong performance during the six month period, the Group's underlying trading performance is expected to be ahead of market expectations for the full year, driven by stronger net interest income, lower impairments and loss provisions and stronger cost control.

Additionally, having prudently written off approximately £10m in respect of the RoyaleLife balance, the Group has continued in its pursuit of the fullest possible level of financial recovery. The Group is pleased to announce, having now exhausted all opportunities, that it has now recovered assets and cash and agreed legal settlement with related parties to the aggregate sum of c£4.7m, of which c£1.7m is expected to be recognised in H1 2024. The remaining £3m of this settlement amount is subject to the sale of assets (including property) by a third party and it is therefore anticipated that this will be recovered in the financial year ending 31 December 2025.   

Given the Company's strong underlying operational and financial momentum and the financial recovery in relation to RoyaleLife, the Group expects to report a pre-tax profit for the six month ended 30 June 2024 of no less than £9.0m, which is significantly ahead of its expectations and more than the entire FY23 outturn of £4.6m. Accordingly, the Group expects its full year outturn for 2024 to significantly exceed market expectations.

The Group has also continued with the organic build of a hire purchase lending capability, which unlocks entry into significantly larger addressable markets than the Company's current offering, supporting the sales of its existing dealers and manufacturers to end-user consumers. The Group does not expect to start lending in this market adjacency until 2025, which is subject to regulatory approval.

The Company expects to provide a fuller update when it announces its interim results for the six months ended 30 June 2024 in September 2024.

Carl D'Ammassa, Chief Executive, commented: "2024 has started exceptionally well, with strong operational and commercial execution as well as portfolio management and control. Our products and services clearly resonate with our customers and seeing continued record new loan origination is a testament to the entire team's focus on providing high quality service and the deep relationships we have with our dealer and manufacturer partners. I am pleased with the Group's trading performance so far this year and this gives us confidence for the rest of the year. It is pleasing to see our efforts in working through the RoyaleLife situation deliver significant recoveries and upside potential to our financial expectations."

The person responsible for arranging the release of this announcement on behalf of the Company is Karen D'Souza (Company Secretary).

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