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Non-Standard Finance expanding branches and loan book

The sub-prime lender is reducing its losses as its acquisitions bed in
March 6, 2017

An increased contribution from acquisitions meant Non-Standard Finance (NSF) significantly reduced its losses last year. However, the group did incur higher start-up costs following its acquisition of Everyday Loans (including Trusttwo) - effectively its largest and highest-margin business unit - in April. This meant the sub-prime lender could get on with growing its loan book, which increased to £165m from £28m in 2015. Guarantor-backed lender Trusttwo built out its systems and staff numbers, which, while doubling administrative costs, delivered a pre-tax profit of £0.3m.

IC TIP: Hold at 60p

Branch-based lender Everyday Loans had a loan book of £122m by the end of the year, with 39,600 customers. It added five branches to its network, with plans for another 12 this year. The business also plans to launch a loan product for self-employed customers, which chief executive John Van Kuffeler believes are "appallingly underserved" by mainstream banks.

Strong growth in the number of self-employed agents serving home credit business Loans at Home meant a faster than expected increase in customer numbers, accompanied by a spike in impairment charges, though these narrowed as a proportion of revenues. Management increased scrutiny of newly-joined agents, revised its credit scorecard and consolidated sub-scale agencies. Nevertheless Loans at Home grew its net loan book by a fifth to £33.4m.

Analysts at Shore Capital expect adjusted pre-tax profits of £22.2m for the 12 months to December 2017, giving EPS of 5.7p (2016: £13.1m, 3.3p).

NON-STANDARD FINANCE (NSF)

ORD PRICE:60pMARKET VALUE:£190m
TOUCH:59.75-61p12-MONTH HIGH:77pLOW: 53p
DIVIDEND YIELD:2.0%PE RATIO:na
NET ASSET VALUE:78p*NET DEBT:33%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earning per share (p)Dividend per share (p)
20159.2-16.1-21.30.0
201672.8-9.34-2.61.2
% change----

Ex-div: 15 May

Payment: 20 Jun

*Includes intangible assets of £149m, or 47p a share