Banking Licence & Business Trading Update

 

7 August 2020

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO.596/2014.

 

Distribution Finance Capital Holdings plc
("DFC", "DF Capital" or the "Company" or together with its subsidiaries the "DFC Group")

 

Banking Licence and Business Trading Update

 

Banking Licence Application

 

Pursuant to the Company's resubmitted banking licence application, the Company has received confirmation from the Prudential Regulation Authority ("PRA") of its Total Capital Requirement ("TCR") and Liquidity Coverage Ratio ("LCR") in relation to that application. Receiving TCR and LCR notifications, setting out the Company's capital and liquidity regulatory requirements, are key steps in the Company's banking licence application. 

 

However, following feedback from the PRA in relation to the firm's application for its share capital to be classified as CET1, the Company will take certain reorganisation steps in respect of parts of the existing share capital within the Group, which will be carried out before any final authorisation decision will be considered by the PRA.

 

The Company has developed a plan to achieve these steps in discussion with the PRA.  Details of the proposals will be set out in a shareholder circular, to be sent by the end of August, requesting shareholder approval for the buyback and cancellation of certain existing shares and issuance of new shares held by managers and former managers totalling less than 5% of the Company's issued share capital.  No additional new equity capital will be raised in connection with the proposals. 

 

The Company expects to receive the requisite support from shareholders for these reorganisation proposals at a General Meeting to be held in early September, and expects that the reorganisation steps will be completed in full by mid-September 2020.  Following this, the Group expects to receive notification of the PRA's decision in respect of its application by the end of September.

 

 

British Business Bank

 

Having agreed this announcement with the British Business Bank, the Company is also pleased to confirm that its application to participate in British Business Bank's ENABLE Funding scheme has progressed and that headline terms have been issued. The Company and the British Business Bank are continuing due diligence relating to the potential facility, which remains subject to further Bank and ministerial approval.

 

 

Trading Update

 

The Company's business has continued to successfully navigate the post lockdown period. Dealers have now re-opened, with sales of stock materially increasing, now at pre-lockdown levels and comparable to July 2019.  Sales in those of the Company's market segments that opened first have been strong whilst other sectors, such as holiday parks, are now building momentum. Sales related to "staycation" and leisure activities have been strongest, specifically motorbikes, motorhomes and caravans.

 

Although during lockdown, requests for new lending were limited, the Company is now seeing greater forward requests from both its dealers and from the Company's manufacturer partners to support the flow of new stock.

 

The loan book has continued to perform positively and robustly through the post lockdown period, with lower arrears and forbearance than had previously been reported at 31 December 2019 and 12 June 2020. The Company reported in its Annual Report and Financial Statements that dealer insolvencies had only reached 3 at 12 June with no associated write-offs, and since that time it has not seen any increase in those numbers.

 

Arrears comparisons through lockdown (unaudited)

	31 December 2019	12 June 2020	31 July 2020
Arrears (£'000) - principal repayment, fees and interest
0-30 days past due	643	156	98
31-60 days past due	225	163	86
61-90 days past due	87	24	41
91 days + past due	762	969	913
	1,717	1,312	1,138
Associated gross receivable or principal balance (£'000)
0-30 days past due	5,505	1,077	258
31-60 days past due	482	164	125
61-90 days past due	226	108	417
91 days + past due	857	1,358	1,038
	7,070	2,707	1,838

 

As might be expected given increasing sales of stock, the loan book has continued to reduce overall with loan repayments, as stock is sold, continuing to run at a seasonal norm of c£1.5m per day over recent weeks.  Accordingly, the loan book stood at £128m at 31 July 2020, down from £186m at 31 May 2020, driven in part by constraints on new lending.  Whilst this trend is expected to continue into the Autumn, the Company remains focused on ensuring the continued positive portfolio performance given the uncertain environment, but has seen demand for new lending recover over recent weeks, and expects significant near and medium-term demand for its lending products.

 

The Company will provide more detail on its trading performance as it announces its interim results, no later than 30 September 2020.

 

 

Carl D'Ammassa, Chief Executive Officer commented: "We are delighted that the PRA has shared our TCR with us and we believe we have a clear plan to fully complete our licence application. This, alongside the progress we have made in relation to the BBB Enable programme is the result of significant hard work across the firm. We are pleased with how we have managed the portfolio through the pandemic but recognise we have some clear deliverables to achieve over the coming weeks, before we conclude our licence application with the regulators. I would like to thank our shareholders for continuing to believe in the firm, particularly as we close out these final stages of our application.  What's clear to us, is that our lending products remain highly relevant to dealers and manufacturers more so than ever as the economy starts to recover in the post lockdown environment".

 

The person responsible for arranging for the release of this announcement on behalf of DFC is Carl D'Ammassa.

 

 

Enquiries:

 

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
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

 

Forward looking statements

This announcement contains forward looking statements with respect to the business, strategy and plans of the company and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about DFC or management's beliefs and expectations, are forward looking statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. DFC's actual future results may differ materially from the results expressed or implied in these forward-looking statements as a result of a variety of factors. These include UK domestic and global economy and business conditions, risks concerning borrower credit quality, market related risks including interest rate risk, inherent risks regarding market conditions and similar contingencies outside DFC's control, any adverse experience in inherent operational risks, any unexpected developments in regulation or regulatory and other factors.