RNS Number:3348M
Davenham Group PLC
23 January 2008
For Immediate Release 23 January 2008
Davenham Group plc
Half Year Trading Update
Financial Calendar Update
Davenham Group plc ("Davenham" or "the Group"), a leading independent asset
based lender to the UK SME sector, today issues a trading update for the half
year ended 31 December 2007 ahead of announcing its interim results on 4 March
2008.
Trading Update
The Group has traded in line with expectations for the half year ended 31
December 2007, with solid progress across the business as a whole. At the half
year end, the loan portfolio stood at a seasonal high of £289m.
The Group's expansion continues to be spearheaded by its national growth
strategy, in particular its recently enlarged London office and the successful
integration of Manor Credit.
Funding
At the half year end, £231m had been drawn down from the Group's £300m borrowing
facilities. Davenham's principal facilities are committed until December 2009
and the Board believes that these facilities provide the Group with headroom to
fund its organic growth plans well into 2009.
Bad debt charge
The Group's bad debt charge, accounted for under UK GAAP, as a percentage of its
rolling average portfolio, is currently marginally below the Board's target
range of 1.5% to 1.75%. This outperformance of our long term targets reflects
the Group's continued focus on credit quality and its adoption of a more
conservative approach to risk management approximately eighteen months ago. This
should also be seen in the context of Davenham's loan portfolio which is of
shorter duration and has asset security. Modifications to underwriting criteria
therefore have a more immediate effect on Davenham in contrast with many other
lenders whose products have a longer-term tenor.
ACP Capital ("ACP")
ACP announced on 14 January 2008 that it had withdrawn its offer for Davenham.
Since then, Davenham has received a communication from ACP which refers to
"joint ventures" but which provides no further detail. Davenham has requested a
detailed proposal from ACP so that the Board can evaluate it within the context
of delivering value to all shareholders.
IFRS
The Group's interim results for the six months to 31 December 2007 will be
published on 4 March 2008 and, as stated in our announcement on 26 April 2007,
will be the first to be reported under IFRS. We intend to issue a full
restatement of the financial information for the year ended 30 June 2007 prior
to publishing interim results for the six months to 31 December 2007.
The adoption of IFRS is expected to reduce the pre-tax profitability of the
business for the period ended 31 December 2007 by in the region of 4%, in line
with the guidance provided in our announcement on 26 April 2007. That
announcement stated that the areas of Davenham's financial information that are
most affected by the adoption of IFRS include loan portfolio impairment,
derivatives, income recognition and goodwill.
It should be reiterated that Davenham remains an asset backed lender and these
changes in accounting policy do not imply a change to the Group's underlying
credit quality.
The announcement referred to above (dated 26 April 2007) and a presentation
outlining the impact of IFRS for Davenham are both available on the Group's
website at www.davenham.co.uk.
David Coates, Chief Executive of Davenham Group plc, said:
"With our principal facilities in place until December 2009, an expanded
national sales footprint, and the Group's credit and risk functions performing
well, Davenham continues to trade in line with the Board's expectations.
"The momentum behind the growth strategy has been reinforced through
considerable investment in development and leadership programmes for our senior
managers.
"The recent tightening of credit available to SMEs is enabling Davenham to
increase margins and to potentially benefit from increased new business
opportunities, particularly from its introducer base. This should be balanced
against the less certain economic environment being experienced by many of
Davenham's clients.
"Overall, the Board's expectations for the year remain unchanged."
- Ends -
Davenham Group plc 0161 832 8484
David Coates, Chief Executive www.davenham.co.uk
Paul Burke, Finance Director
Hawkpoint Partners Limited (Nominated Adviser) 020 7665 4500
Lawrence Guthrie / Joseph Ayala
Smithfield 020 7360 4900
Katie Hunt / Libby Young / Reg Hoare
About Davenham:
Davenham is a leading, independent asset based lender to the UK SME sector. The
Company provides lending solutions designed to meet the financing needs of UK
SMEs - typically involving loans of between £10,000 and £5 million. Davenham has
a diverse loan portfolio, with its lending activities organised into the
following divisions: property finance, asset finance and trade finance.
Davenham provides asset based lending to such organisations that are not
adequately serviced by mainstream lenders, who tend to adopt a formulaic
approach to lending decisions. This funding is used to finance short term
property transactions, the acquisition of plant, machinery and equipment and the
funding of stock, debtors and letters of credit.
The business was founded in 1991 in Manchester from where its core operations
are run. In recent years, Davenham has begun to expand and it now also operates
from offices in Leeds, Birmingham, Bristol, Glasgow, Liverpool, London, and
Newcastle.
This information is provided by RNS
The company news service from the London Stock Exchange
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