Private and Commercial Finance looks ahead with confidence

Private and Commercial Finance Group (PCFG), an AIM-listed independent finance company, has expressed its confidence for the future having developed a strong platform from which to grow its portfolio.

After a four year "period of survival", the firm saw pre-tax profits rocket 40% in the half year ended September 30th, as a decline in turnover was offset by a reduction to both the cost of sales and administrative expenses.

Revenues dropped from from £26.89m to £20.82m year-on-year, while the cost of sales fell to £14.65m (2011: £19.23m) and admin expenses decreased to £3.75m (2011: £4.69m). Profit was also boosted by a fall in the interest paid, from £2.7m to £2.1m year-on-year.

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Speaking during an interview with Sharecast and Digital Look, Scott Maybury, PCFG's Chief Executive, explained that the past four years has seen a shortage of funding as banks exited the sector or became reluctant to loan in the long-term, creating a situation for the company where lending was long and borrowing was short.

This difficulty has, however, been largely solved by the subscription, placing and open offer of unsecured convertible loan notes raising £8.9m. The majority of this amount was subscribed for by a single shareholder who has told board members that he is focused on building the business and remaining a long-term investor.

Maybury said that the raising has "put the uncertainty behind us and we are now in a comfortable position".

Looking forward, he said the focus of the company is now on growing the portfolio, making acquisitions, promoting organic growth, and increasing the return on assets to 2% by March 2014. The return on assets is currently at 0.8%, compared to 0.5% a year ago.

Maybury revealed his confidence in the business is going forward, saying: "All the ingredients are there - the staff, the premises, the IT equipment - for us to operate a bigger business. We do not expect the cost of sales to see much change going forward.

"We are opening a new channel of sales within the broker-introduced market. We are creating a direct sales presence in niche markets, which will benefit from the recent withdrawal from SME asset-based lending by ING Lease (UK), who accounted for about 40% of the broker market, a move we believe will create a significant opportunity for us."

The portfolio decreased by 5.0% over the period to £79m from £83m last year, but this is expected to grow in the second half. The group was keen to stress that the strong performance of the portfolio and good cost control enabled it to deliver a better level of profitability and improve earnings per share to 0.4p (2011: 0.2p).

Maybury added that he hopes to introduce a progressive dividend policy in the future, and believes that, depending on the company's leverage, it will be able to re-introduce a dividend payment in March 2015.

The share price was unchanged by the afternoon.