Non-Standard Finance (NSF) may be trying to accentuate the positives as it makes a hostile bid for Provident Financial (PFG), but adjusted pre-tax profits for 2018 came in a touch below consensus expectations. Still, the sub-prime lender was 12 per cent ahead on that metric thanks to net loan book growth of more than a quarter, a 2.8 percentage point improvement in revenue yields and flat impairments.
A full year’s contribution from guarantor lender George Banco boosted the net loan book for that lending specialism by 61 per cent to £83m, marking it as the group’s fastest growing business line. However, debt refinancing associated with that acquisition meant interest costs more than doubled to £21m.
The core branch-based lending business, Everyday Loans, reported that lending grew by a quarter to £186m, with 12 new branches opened, taking the total to 65 by the end of the year. Increased capacity meant the active customer base grew by almost a third to 61,200. However, the rate of expansion dragged on profit growth, which dipped 10 per cent on a normalised basis. With plans for just seven branch openings this year, management expects growth to pick back up.
Lending for home credit slowed during the second half, resulting in just 2 per cent growth in the net loan book over the year. Meanwhile, the revenue yield also dipped as the business shifted towards larger and longer-term loans. However, management expects that shift to be temporary and for yields to lift in 2019, with single-digit loan book growth over the medium term.
Analysts at Peel Hunt expect to downgrade their 2019 forecasts for adjusted pre-tax profits and EPS by between 5 and 10 per cent. They currently stand at £27.7m and 7.1p, respectively,
NON-STANDARD FINANCE (NSF) | ||||
ORD PRICE: | 60p | MARKET VALUE: | £187m | |
TOUCH: | 59-60p | 12-MONTH HIGH: | 71p | LOW: 49p |
DIVIDEND YIELD: | 4.3% | PE RATIO: | NA | |
NET ASSET VALUE: | 67p* | NET DEBT: | 120% |
Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2015 | 9.2 | -16.1 | -21.3 | nil |
2016 | 72.8 | -9.3 | -2.6 | 1.2 |
2017 | 108 | -13.0 | -3.3 | 2.2 |
2018 | 159 | -1.6 | -0.5 | 2.6 |
% change | +47 | - | - | +18 |
Ex-div: | 02 May | |||
Payment: | 07 Jun | |||
*Includes intangible assets of £154m, or 49p a share |