PCF Group Plc (LON:PCF), the AIM-listed challenger bank, grew income and earnings per share by more than 50% in the first half of its financial year and said it was “on track” to meet market expectations.
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 October acquisition of media and broadcast lending specialist 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 but PCF's net interest margin slipped to 8.0% from 8.4% a year ago as the group moves to a lower yielding but better-quality portfolio.
Profit before tax jumped 57% to £3.3mln and earnings per share was up by 50% to 1.2p.
Chief executive Scott Maybury said the bank had set ambitious targets and was “on track to deliver these ahead of schedule”, with the acquisition and new property lending initiative accompanied by “strong” organic growth in established markets.
Strengthening capital base
“Prudent capital management led us to increase the capital base and diversify the capital structure," he added, in reference to the £10.75mln of new equity issued in March and plan for a £15mln Tier 2 capital facility this month. "This mitigates the potential risk of market volatility that may arise in these uncertain times and provides a strong base to support ongoing growth.”
Noting that core equity tier-1 capital ratio ended the period at 19.7% following the March fundraising, broker Shore Capital said: "This strengthening capital base underpins our expectation that PCF can continue to deliver amongst the highest EPS and TNAV growth rates of UK lenders, with the previous £350mln loan book target for FY 2020 likely to be achieved ahead of schedule."
Analysts said the results were in line with expectations and made no changes to forecasts in light of the "cautiously confident" outlook.
PCF shares were up 6% in early trade on Wednesday to 35p.
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