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PCF on track to deliver 'ambitious targets' ahead of schedule

PCF is confident it will meet market expectations for the full year after growing earnings by 50% in the first half

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PCF has strengthened its capital base

What it does:

PCF Group Plc (LON:PCF), which became a fully operational bank in July 2017, specialises in motor finance and loans for business assets.

It lends to consumers and small and medium-sized companies wanting to buy such items as cars, commercial vehicles, engineering equipment, motorhomes and horse boxes.

The bank recently extended its reach to the broadcast and media industry by agreeing to buy Azule Limited for up to £5.6mln.

How’s it doing:

In its latest results published in June, PCF said it grew adjusted earnings per share (EPS) by 50% to 1.2p in the first half and said it was on course to meet market expectations for the full year.

The six months to 31 March saw £121mln of new business origination, with the pace of growth remaining at 75% as in the previous year, with £25mln of new broker commission from the acquisition of Azule.

Azule also contributed £8mln to the group’s own portfolio and this mix is expected to increase in time as the business becomes further integrated.

The lending portfolio, where the focus on business finance for SMEs and consumer motor finance has been broadened by the addition of Azule and a new property bridging finance division in January, swelled by 54% to £276mln, along with net unearned finance income of £53mln that will be attributed to accounting periods over the next four years.

Management aims to grow the total portfolio to £350mln by September 2020.

Operating income generated from the portfolio was up 51% to £10.1mln.

What the boss says:

Chief executive Scott Maybury told investors in the interim results on 5 June that the bank had set ambitious targets and was “on track to deliver these ahead of schedule”.

“Prudent capital management led us to increase the capital base and diversify the capital structure," he said, in reference to the £10.75mln of new equity issued in March and plan for a £15mln Tier 2 capital facility in June.

"This mitigates the potential risk of market volatility that may arise in these uncertain times and provides a strong base to support ongoing growth.”

He added: "We remain on track to meet market expectations and with the enhanced capital structure in place, we are well set to implement our 2019 objectives and medium-term plans. We look forward to reporting continued success as the year progresses."

Blue Sky

Noting the March fundraising, house broker Shore Capital said in June after the interim results: "This strengthening capital base underpins our expectation that PCF can continue to deliver amongst the highest EPS and tangible net asset value (TNAV) growth rates of UK lenders, with the previous £350mln loan book target for FY 2020 likely to be achieved ahead of schedule.

“Trading at 1.3x end-2019E TNAV for a 17% return on tangible equity in 2021E, we think PCF offers good value, particularly given the relative share price weakness over the past year, which we find difficult to justify.”

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