TIDMORCH
RNS Number : 1386V
Orchard Funding Group PLC
14 April 2016
Orchard Funding Group PLC
("Orchard Funding Group" or the "Company" or the "Group")
Half Yearly Results
For the 6 months ended 31 January 2016
Orchard Funding Group, the finance company which specialises in
insurance premium finance and the professions funding market, is
pleased to announce its 6 months results for the period ended 31
January 2016.
Highlights
-- The Group lent GBP23.63 million for the 6 months to 31
January 2016. On a like-for-like basis an extra GBP1.4m of lending
and a 6% improvement on the 6 month period to 31 January 2015;
-- The Group profit before tax was GBP0.7 million for the 6
months to 31 January 2016. A 5.4% improvement on the 6 month period
to 31 January 2015;
-- Since flotation, the Group has signed up 15 new insurance
brokers, 2 new insurance broker finance companies and 22 new
accountancy practices. The Group has a full and active prospect
list, which it is actively pursuing and converting.
-- The Group received preliminary credit approval from Barclays
Bank plc to increase its existing loan facility, when required,
from GBP10 million to GBP15 million;
-- Key senior additions to sales and marketing teams, and
strengthening of the technology team and software platform; and
-- Underlining the Board's confidence in the future, the Board
is recommending an interim dividend of 1.405 pence per share.
Ravi Takhar, Chief Executive Officer of Orchard, said: "We are
pleased with how the business has grown since flotation. We have
retired expensive debt, which has immediately improved our
profitability, we have increased our lending and we have improved
our technology. Due to our improved capital position we have also
been able to attract market leading sales professionals, who will
over time substantially increase the business written in our core
insurance premium finance market. Our improved capital provision
has also enabled us to improve our liquidity options and we will be
launching some exciting initiatives in the Fin Tech space in the
near future. With our new capital position we are excited and
confident about the future of our business and delivering
attractive and sustainable returns to our shareholders."
For further information, please contact:
Orchard Funding Group PLC
+44 (0)1582 635 507
Ravi Takhar, Chief Executive Officer
Panmure Gordon (UK) Limited (Nomad and Broker) +44 (0)20 7886
2500
Dominic Morley / Alina Vaskina (Corporate Finance)
Charles Leigh-Pemberton (Corporate Broking)
Novella +44 (0)20 3151 7008
Tim Robertson
Ben Heath
For Investor Relations please go to:
www.orchardfundinggroupplc.com
Chairman's Statement
I am delighted to be reporting to you on the 6 month figures for
the period ending 31 January 2016, a period in which the Company
has made progress in line with our corporate objectives.
Following the successful fund raising in July 2015 and the
subsequent listing of your Company's shares on AIM, the Company has
been extremely busy in three core areas: the origination of loans;
the development of financial software; and the sourcing of new
liquidity for the business.
With regard to origination, we have invested in our sales team
with the hire of two senior level sales staff and have initiated a
concentrated marketing campaign focusing on our core customer
segments - insurance brokers and the professions market. Our
prospect list has grown strongly both in terms of numbers and the
size, and quality of the clients now seeking to do business with
us. Although business origination has been challenging in the 6
months to 31 January 2016 due in part to a new regulatory
environment, we have identified a number of significant high
quality new customers and have signed letters of intent with
several of them. Once we commence writing business, these could all
make a significant contribution to our lending volumes.
We will continue to focus on our key market segments of
insurance premium finance and professions finance and we will also
explore lending in adjacent markets that have a similarly low risk
profile. The Company has already identified a large adjacent market
into which we can start writing business almost immediately.
We continue to invest in and develop our software in order to
provide market leading financial technology solutions to our
clients. Our focus on technology has led to the appointment of a
new commercial director who will be driving forward some exciting
opportunities in the fin tech space, which we will launch later in
2016.
Liquidity is central to our business and we have received
preliminary credit approval from Barclays Bank plc, the Group's
existing liquidity provider, to increase the current facility from
GBP10 million to GBP15 million, when required. The Company is also
exploring alternative financing options to further grow its lending
book.
Finally on liquidity, and with an eye to the future success of
the company, we are finalising a Regulatory Business Plan, Capital
Plan & Liquidity Plan to submit to the PRA and FCA for a new
Bank application. It is anticipated that Orchard Funding Group will
submit a full Bank Application on receiving the Regulator's
preliminary approval to do this.
The regulatory background in our areas of focus continues to
evolve. Recently, there have been important developments I would
like to bring to the attention of all stakeholders in our
business.
The FCA has had an overwhelming number of applications under the
new consumer credit licensing regime. Our subsidiary, Bexhill UK,
is the first insurance premium finance lender in the UK to have
received full FCA permission, and our team has been instrumental in
helping a number of our insurance broker clients to obtain full FCA
licences for their in-house insurance premium finance
companies.
The new consumer credit application regime has led to delays in
application timelines. As a core part of our business involves
insurance brokers setting up new finance companies, we are subject
to FCA timelines for some of our potential clients going live. In
order to prevent these delays affecting our business, we have
created an innovative business model, which enables brokers to rely
on our regulatory permissions whilst still obtaining the benefits
of lending. Such an approach has generated considerable
interest.
However, the competition has increased in our market. We are
seeing aggressive competition in the professions finance market
from bank and private equity backed finance brokers that are being
converted to lending operations. We continue to operate effectively
in our market and continue to closely monitor product offerings
from our competitors.
The largest players in the insurance premium finance market
continue to protect their market positions. We are seeing more and
more examples of brokers entering into two to three year
exclusivity agreements and receiving substantial advance commission
payments in return for introducing their business to insurance
premium finance providers. In line with our prudent approach our
Company does not pay any advance commissions to brokers.
The Board continues to assess markets adjacent to our current
areas of business where we are able to bring our own expertise,
products and solutions to bear for the benefit of the Company.
The Board has been very pleased with the progress made by the
group since flotation and, although it is early days, feel
confident that the business will continue to expand the number,
size and quality of loans written whilst at the same time deliver
results that will benefit all stakeholders in the business.
We continue to look to the future with confidence.
David A Clark
Chairman
Chief Financial Officer's Summary
The figures for the 6 month period ended 31 January 2016
indicate that we have laid the foundations for future business
development with a view to sustainable growth in revenues and
profitability and, therefore, shareholder value.
The Group's gross revenue for the 6 month period ended 31
January 2016 has remained relatively flat year-on-year due to the
Company concentrating on building the foundations for future
growth, in particular investment in additional sales staff, and
associated marketing efforts. We have taken on senior sales staff
to help boost the business and have supported them with focused
marketing campaigns in our two core areas - premium funding and
professional fee funding.
Additional costs in this area amounted to approximately
GBP38,000 for the 6 month period. By its nature, this type of
expenditure has a lead time before results are fully seen. However,
we are already seeing contributions from the enhanced sales team
with the introductions to new business increasing. Also, the
increased quality of our clients and the ability to write new
business into adjacent markets could potentially result in
substantial revenue growth within a relatively short period of
time.
Our cost of funding has reduced due to expensive debt being
repaid with the IPO proceeds meaning that the Group's average gross
margin has increased from approximately 67% to 85%. In the past,
liquidity was a constraint to growing the business. This is no
longer the case. Our existing bank, Barclays, has indicated that
they can increase our facility from GBP10 million to GBP15 million,
when required.
Administrative expenses have also increased. In part this was as
a result of the IPO - certain costs arose from the AIM listing, in
particular additional corporate governance costs. These amounted to
almost GBP93,000 in the period.
The Board is pleased to declare an interim dividend of 1.405
pence per share to be paid on 27 April 2016 to shareholders on the
register on 22 April 2016.
Liam McShane
Chief Financial Officer
(MORE TO FOLLOW) Dow Jones Newswires
April 14, 2016 02:00 ET (06:00 GMT)
Consolidated Income Statement
6 months 6 months Year
ended ended ended
31 January 31 January 31 July
2016 2015 2015
Notes GBP GBP GBP
------------------------- ------ ------------ ------------ ------------
Continuing operations
Revenue 2 1,639,910 1,683,936 3,409,859
Finance costs 2 (210,606) (504,290) (854,929)
Other operational
costs 2 (38,350) (35,413) (92,650)
-------------------------- ------ ------------ ------------ ------------
Gross profit 1,390,954 1,144,233 2,462,280
Administrative expenses 2 (687,645) (482,495) (1,169,028)
--------------------------- ------ ------------ ------------ ------------
Operating profit before
income tax 703,309 661,738 1,293,252
Income tax
expense 3 (137,150) (121,445) (258,839)
-------------------------- ------ ------------ ------------ ------------
Profit for the period 566,159 540,293 1,034,413
Other comprehensive -
income - -
--------------------------- ------ ------------ ------------ ------------
Total comprehensive
income for the period
attributable to the
owners of the parent 566,159 540,293 1,034,413
--------------------------- ------
Earnings per share
attributable to the
owners of the parent
during the period
(pence)
Basic and diluted 4 2.65 4.94 8.77
--------------------------- ------
Consolidated Statement of Financial Position
31 January 31 January 31 July
2016 2015 2015
GBP GBP GBP
---- ------------------------- ----------- ----------- -----------
Assets
Non-current
assets
Property, plant
and equipment 23,731 11,900 4,427
--------------------------------
Current
assets
Trade and other
receivables 20,237,991 20,217,062 17,914,997
Tax receivable - 1,410 1,410
Cash and cash
equivalents:
Bank balances
and cash in hand 2,282,929 11,636 2,901,960
Bank overdrafts (18,162) (27,064) (47,159)
-------------------------------
22,502,758 20,203,044 20,771,208
Total assets 22,526,489 20,214,944 20,775,635
-------------------------------
Equity and liabilities
Equity attributable
to the owners of the
parent
Called up share
capital 213,542 109,375 213,542
Share premium 8,691,910 - 8,691,910
Merger reserve 890,725 890,725 890,725
Retained
earnings 2,407,557 1,359,778 1,841,398
-------------------------------
Total equity 12,203,734 2,359,878 11,637,575
------------------------------- ----------- ----------- -----------
Liabilities
Non-current liabilities
Deferred
tax 590 1,626 590
-------------------------------
Current
liabilities
Trade and other
payables 1,202,763 3,128,465 1,835,908
Borrowings 8,695,845 14,382,338 7,015,155
Tax payable 423,557 342,637 286,407
-------------------------------
10,322,165 17,853,440 9,137,470
------------------------------- ----------- ----------- -----------
Total liabilities 10,322,755 17,855,066 9,138,060
------------------------------- ----------- ----------- -----------
Total equity and
liabilities 22,526,489 20,214,944 20,775,635
--------------------------------
Consolidated Statement of Changes in Equity
Called
up
Share Retained Share Merger Total
capital earnings premium reserve Equity
GBP GBP GBP GBP GBP
--------------------- ------------- ------------- ------------- ------------- ------------
Balance at 1
August 2014 109,375 944,485 - 890,725 1,944,585
Changes in equity
Total comprehensive
income - 540,293 - - 540,293
Transactions
with owners:
Dividends paid - (125,000) - - (125,000)
----------------------
Balance at 31
January 2015 109,375 1,359,778 - 890,725 2,359,878
----------------------
Changes in equity
Total comprehensive
income - 494,120 - - 494,120
Transactions
with owners:
Dividends paid (12,500) (12,500)
Issue of share
capital 104,167 - 9,895,834 - 10,000,001
Items expensed
through share
premium - - (1,203,924) - (1,203,924)
---------------------- ------------- ------------- ------------- ------------- ------------
Balance at 31
July 2015 213,542 1,841,398 8,691,910 890,725 11,637,575
---------------------- ------------- ------------- ------------- ------------- ------------
Changes in equity
Total comprehensive
income - 566,159 - - 566,159
Transactions
with owners:
Dividends paid - - - - -
----------------------
Balance at 31
January 2016 213,542 2,407,557 8,691,910 890,725 12,203,734
----------------------
The merger reserve arose through the formation of the group on
23 June 2015 using the consolidation method which treats the merged
companies as if they had been combined throughout the current and
comparative accounting periods. The accounting principles for these
combinations gave rise to a merger reserve in the consolidated
statement of financial position, being the difference between the
nominal value of new shares issued by the company for the
acquisition of the shares of the subsidiaries and each subsidiary's
own share capital.
The share premium account arose on the issue of shares on the
IPO on 1 July 2015 at a premium of 95 pence per share. Costs
directly attributable to the issue of shares have been deducted
from the account.
Consolidated Statement of Cash Flows
6 months 6 months Year
ended ended ended
31 January 31 January 31 July
2016 2015 2015
GBP GBP GBP
-------------------------------------- ------------ ------------
Cash flows from operating
activities:
Profit before income tax 703,309 661,738 1,293,252
Adjustment for depreciation 4,709 11,000 8,301
----------------------------------------
708,018 672,738 1,301,553
(Increase)/decrease in trade
and other receivables (2,321,584) (1,186,618) 1,527,966
Decrease in trade and other
payables (633,144) (168,959) (400,666)
----------------------------------------
(2,246,710) (682,839) 2,428,853
Income tax
paid - - (251,229)
---------------------------------------
Net cash (absorbed)/generated
by operating activities (2,246,710) (682,839) 2,177,624
----------------------------------------
Cash flows from investing activities
Purchases of property, plant
and equipment (24,014) - (828)
Net cash absorbed by investing
activities (24,014) - (828)
----------------------------------------
Cash flows from financing activities
Proceeds of issuance of ordinary
shares 10,000,001
Items expensed through the
share premium account (1,203,924)
Dividends
paid - (125,000) (137,500)
Net proceeds from borrowings 1,680,690 865,206 (7,907,777)
(MORE TO FOLLOW) Dow Jones Newswires
April 14, 2016 02:00 ET (06:00 GMT)
---------------------------------------- ------------ ------------ ------------
Net cash generated by financing
activities 1,680,690 740,206 750,800
----------------------------------------
Net (decrease)/increase in cash
and cash equivalents (590,034) 57,367 2,927,596
Cash at the beginning of
the period 2,854,801 (72,795) (72,795)
----------------------------------------
Cash and cash equivalents
at the end of period 2,264,767 (15,428) 2,854,801
----------------------------------------
Notes to the Financial Statements
1. General information
Orchard Funding Group plc ("the company") and its subsidiaries
(together "the group") provide funding and funding support systems
to insurance brokers and professional firms through the trading
subsidiaries. On 23 June 2015 the company acquired its
subsidiaries, Bexhill UK Limited and Orchard Funding Limited. The
group operates in the United Kingdom.
The company is a public company listed on the Alternative
Investment Market of the London Stock Exchange, incorporated and
domiciled in the United Kingdom. The address of its registered
office is 960 Capability Green, Luton, Bedfordshire LU1 3PE.
The condensed consolidated interim financial information for the
6 months ended 31 January 2016 has been prepared in accordance with
the presentation, recognition and measurement requirements of
applicable International Financial Reporting Standards adopted by
the European Union ('IFRS') except that the Group has not applied
IAS 34, Interim Financial Reporting, which is not mandatory for UK
Groups listed on AIM, in the preparation of the condensed
consolidated interim financial information.
The financial information does not include all of the
information required for full annual financial statements and
should be read in conjunction with the financial statements of the
Group for the year ended 31 July 2015 which are prepared in
accordance with International Financial Reporting Standards and
International Reporting Interpretations Committee pronouncements as
adopted by the European Union.
The accounting policies used in the preparation of condensed
consolidated interim financial information for the 6 months ended
31 January 2016 are in accordance with the presentation,
recognition and measurement criteria of IFRS and are consistent
with those which are expected to be adopted in the annual statutory
financial statements for the year ending 31 July 2016.
A number of IFRSs and Interpretations have been endorsed by the
EU that will apply for the first time in the period to 31 January
2016 and, although they have been adopted by the Group, none of
them has had a material impact on the Group's financial
statements.
The Group's 2015 annual report provides full details of
significant judgements and estimates used in the application of the
Group's accounting policies. There have been no significant changes
to these judgements and estimates during the period.
The financial information included in this document is unaudited
and does not comprise statutory accounts within the meaning of
section 434 of the Companies Act 2006. The comparative figures for
the financial year ended 31 July 2015 are the Group's statutory
accounts for that financial year. Those accounts have been reported
on by the company's auditor and delivered to the registrar of
companies. The report of the auditor was (i) unqualified, (ii) did
not include a reference to matters to which the auditor drew
attention by way of emphasis without qualifying their report, and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
2. Segmental reporting
The group operates wholly within the United Kingdom therefore
there is no meaningful information that could be given on a
geographical basis. It does have, however, two discrete operating
segments - insurance premium funding and professional fee
funding.
The board assesses the performance of each sector based on
operating profit (before tax and exceptional items, but after
interest which is a cost of sale). The relative sales, operating
costs and operating profit are shown below.
Insurance
6 months ended premium Professional
31 January 2016 Total Central funding fee funding
GBP GBP GBP GBP
------------------------- ---------- ------------ ---------- -------------
Sales 1,639,910 - 1,061,876 578,034
------------------------- ---------- ------------ ---------- -------------
Interest payable (210,606) - (210,606) -
Operational costs
and administrative
expenses (725,995) (244,245) (281,780) (199,970)
------------------------- ---------- ------------ ---------- -------------
Operating profit/(loss)
before tax 703,309 (244,245) 569,490 378,064
------------------------- ---------- ------------ ---------- -------------
Insurance
6 months ended premium Professional
31 January 2015 Total Central funding fee funding
GBP GBP GBP GBP
------------------------- ---------- ---------- ---------- -------------
Sales 1,683,936 - 1,041,128 642,808
------------------------- ---------- ---------- ---------- -------------
Interest payable (504,290) - (197,390) (306,900)
Operational costs
and administrative
expenses (517,908) - (319,570) (198,338)
------------------------- ---------- ---------- ---------- -------------
Operating profit/(loss)
before tax 661,738 - 524,168 137,570
------------------------- ---------- ---------- ---------- -------------
Insurance
Year ended 31 premium Professional
July 2015 Total Central funding fee funding
GBP GBP GBP GBP
------------------------- ------------ ----------- ---------- -------------
Sales 3,409,859 - 2,132,387 1,277,472
------------------------- ------------ ----------- ---------- -------------
Interest payable (854,929) - (330,459) (524,470)
Operational costs
and administrative
expenses (1,261,678) (60,655) (808,349) (392,674)
------------------------- ------------ ----------- ---------- -------------
Operating profit/(loss)
before tax 1,293,252 (60,655) 993,579 360,328
------------------------- ------------ ----------- ---------- -------------
3. Taxation
The tax assessed for the period differs from the main
corporation tax rates in the UK (21%, and 20%) because of the
effect of items disallowed for tax and accelerated capital
allowances.
4. Earnings per share
Earnings per share is based on the total comprehensive income
shown above, for each relevant period, and the weighted average
number of ordinary shares in issue during each period. For the 6
months to 31 January 2016, this was 21,354,167; for the 6 months to
31 January 2015 it was 10,937,500; and for the year to 31 July 2015
it was 11,793,664. There are no options or other dilutive factors,
therefore, the fully diluted earnings per share are identical.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR VXLFFQZFEBBK
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April 14, 2016 02:00 ET (06:00 GMT)
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