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RNS
Orchard Funding Group PLC  -  ORCH   

Half-year Report

Released 07:00 30-Mar-2017

RNS Number : 9459A
Orchard Funding Group PLC
30 March 2017
 

Orchard Funding Group PLC

("Orchard Funding Group" or the "Company" or the "Group")

 

Half Yearly Results

For the 6 months ended 31 January 2017

 

 

Orchard Funding Group, the finance group which specialises in insurance premium finance and the professions funding market, is pleased to announce its unaudited results for the six months ended 31 January 2017.

 

 

Highlights

 

·   The Group lent £31.1 million for the six months to 31 January 2017; on a like for like basis, an extra £7.5 million of lending and a 31.7% improvement on the six months to 31 January 2016;

·   Group turnover has increased by 29.2% from £1.6 million in the six months to January 2016 to £2.1 million in the six months to 31 January 2017;

·   Group profit before tax was £0.8 million, up by 15.5% on the six months to 31 January 2016;

·   Barclays Bank plc has increased the amount of funding available to the Group from £10 million to £15 million during the period since 31 January 2016.

·   The Board is recommending an interim dividend of 1 pence per share. This reflects its decision to adopt a policy of giving greater weight to the final dividend.

 

Ravi Takhar, Chief Executive Officer of the Company, stated:

 

"The benefits of raising capital from our flotation are just starting to show in our numbers. We are lending more and making more profits for the benefit of all our stakeholders. Our improved capital base has also enabled us to increase our leverage, which is still at very conservative levels. We are confident that we will continue to increase our lending going forward and will be able to fund that growth with our existing capital base and existing leverage. Our capital base and historic track record has also significantly improved our ability to raise further leverage in the future. It's a great time to be in our business and we are all very excited about the future."

 

 

For further information, please contact:

 

Orchard Funding Group PLC                                                      +44 (0)1582 635 507

Ravi Takhar, Chief Executive Officer

 

finnCap Limited (Nomad and Broker)                                           +44 (0)20 7220 0579

Jonny Franklin-Adams (Corporate Finance)

Emily Watts (Corporate Finance)

 

For Investor Relations please go to: www.orchardfundinggroupplc.com

Chairman's statement

This has proved a very satisfactory period for Orchard Funding Group, posting an increase in revenue of 29.2% and an increase in profit before tax of 15.5%, all the while keeping operational costs well under control. Overall lending continues to be strong and our new business pipeline remains robust and healthy.

 

The insurance premium finance market is expected to grow from around £8.5bn annually currently to circa £11.6bn by 2019. Orchard has but a very small proportion of this market and therefore has considerable scope to grow, as evidenced by the growth in lending in the period under review of 31.7% compared to the same period last year. Currently, we have over 100 partnerships with insurance brokers and it is our intention to increase this further over the coming years, but always in a measured and controlled fashion.

 

Lending to the professions continues to grow, and more and more professional businesses are seeking our help with their working capital requirements. We have relationships with about 450 professional firms and lending in this area has grown over 7.7% compared to the same period last year.

 

During the second half of 2016, I am happy to say we successfully launched Orchard Lending Club, the first peer-to-peer lender in the insurance premium finance market.

 

There remains stiff competition, especially in the professions finance market, but we continue to grow and develop whilst maintaining healthy margins on the business we write.

 

Investment in staff and software continues and we have recently moved to larger premises in Luton more suited to our needs and providing ample scope for the foreseeable future.

 

Our debt line from Barclays has been increased to £15m and the Board continues to examine other potentially suitable sources of finance for the Group.

 

The Board is pleased with the progress made by the group in the period under review, and feels confident that the business will continue to expand the number and quality of loans written while delivering results satisfying all stakeholders in the business.

 

 

 

 

 

 

 

David A Clark

Chairman

 

29 March 2017

 

 

 

 

 

 

Chief Financial Officer's summary

The figures for the six month period ended 31 January 2017 indicate that we have continued to grow from the baseline laid down in our first full year as a plc group. This should lead to sustainable growth in revenues and profitability and therefore shareholder value.

Gross revenue is 29.2% up compared with the equivalent six month period in 2016 and this is reflected in a 15.5% increase in profit before tax. The investment made in additional staff, software and associated marketing and other costs, have begun to bear fruit.

The launch of Orchard Lending Club has given the Group supplementary liquidity, albeit still small at this stage. Together with the additional finance which has been made available by Barclays Bank, this has meant that we have been able to grow our lending.

Key Performance Indicators (KPIs)

KPIs for the Group revolve around good quality lending, evidenced by a sound underwriting process and multiple layers of credit protection. Income and profits flow from this. There are two core areas - insurance premium funding and funding for professionals. Insurance premium funding is subdivided between broker finance companies and direct lending. At present the level of direct lending (although growing) does not warrant it being treated as a core area. The Board does, however, continue to monitor activity in direct lending.

 

 

31 January 2017

 

31 January 2016

 

 

£000s

 

%

 

£000s

 

%

Lending

 

 

 

 

 

 

 

 

Broker finance companies

 

20,598

 

66.2%

 

16,455

 

69.6%

Direct insurance

 

3,693

 

11.9%

 

845

 

3.6%

Professions funding

 

6,822

 

21.9%

 

6,329

 

26.8%

 

 

 

 

 

 

 

 

 

Total lending

 

31,113

 

100.0%

 

23,629

 

100.0%

 

 

 

 

 

 

 

Loan book

 

 

 

 

 

 

 

 

Broker finance companies

 

16,049

 

61.8%

 

13,458

 

66.8%

Direct insurance

 

3,167

 

12.2%

 

756

 

3.8%

Professions funding

 

6,773

 

26.0%

 

5,921

 

29.4%

 

 

 

 

 

 

 

 

 

Total loan book

 

25,989

 

100.0%

 

20,135

 

100.0%

 

 

 

 

 

 

 

Group income

 

 

 

 

 

 

 

 

Broker finance companies

 

1,429

 

67.4%

 

1,062

 

64.8%

Direct insurance

 

197

 

9.3%

 

87

 

5.3%

Professions funding

 

493

 

23.3%

 

491

 

29.9%

 

 

 

 

 

 

 

 

 

Total income

 

2,119

 

100.0%

 

1,640

 

100.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs have also risen over the period, again in line with expectations and our increased income.

 

 

31 January 2017

 

31 January 2016

 

 

£000s

 

%

 

£000s

 

%

Group costs

 

 

 

 

 

 

 

 

Broker finance companies

 

725

 

55.5%

 

492

 

52.6%

Professions funding

 

319

 

24.4%

 

200

 

21.4%

Central costs

 

263

 

20.1%

 

244

 

26.0%

 

 

 

 

 

 

 

 

 

Total costs

 

1,307

 

100.0%

 

936

 

100.0%

 

 

 

 

 

 

 

 

 

Group contribution to parent overheads*

 

 

 

 

 

 

Broker finance companies

 

705

 

65.6%

 

569

 

60.1%

Direct insurance

 

196

 

18.2%

 

87

 

9.2%

Professions funding

 

174

 

16.2%

 

291

 

30.7%

 

 

 

 

 

 

 

 

 

Total contribution to parent overheads

1,075

 

100.0%

 

947

 

100.0%

 

 

 

 

 

 

 

 

* This consists of subsidiaries' profits and excludes the parent company costs.       

 

66.2% of the Group's lending is to broker finance companies. It is still the largest part of the business so, as might be expected, broker finance companies account for the largest proportion of income and profits.

Direct insurance lending has risen substantially. We see this as becoming a larger part of the business in future.

We currently have a facility with Barclays Bank plc of £15 million of which approximately 79% was in use at 31 January 2017 (£10 million and 87% respectively at 31 January 2016). With this additional availability of bank funding, together with our own net current assets of £12.63 million at 31 January 2017 (£12.18 million - 31 January 2016), the Group is well set for continued growth.                                    

The Board is pleased to declare an interim dividend of 1 pence per share to be paid on 30 June 2017 to shareholders on the register on 23 June 2017.                                                                                     

 

 

 

 

Liam McShane

Chief Financial Officer

 

29 March 2017



 

Consolidated income statement

 

 

 

 

 

 

 

6 months ended 31 January 2017

6 months ended 31 January 2016

Year ended 31 July 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes

 

£

£

£

Continuing operations

 

 

 

 

 

 

Revenue

 

 

 

2

 

2,119,449

1,639,910

3,468,864

Finance costs

 

 

2

 

(146,990)

(110,183)

(238,079)

Other operational costs

 

 

2

 

(38,775)

(38,350)

(76,025)

Gross profit

 

 

 

 

1,933,684

1,491,377

3,154,760

Administrative expenses

 

2

 

(1,121,100)

(788,068)

(1,884,030)

Operating profit before income tax

 

812,584

703,309

1,270,730

Income tax expense

 

 

3

 

(172,450)

(137,150)

(266,653)

Profit for the period

 

 

 

640,134

566,159

1,004,077

 

 

 

 

 

 

 

 

 

Other comprehensive income 

 

 

 

-

-

-

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

 

 

 

attributable to the owners of the parent 

 

 

 

 

 

640,134

566,159

1,004,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to the owners of the parent during the period (pence)

 

 

 

 

 

 

Basic and diluted

 

4

 

3.00

2.65

4.70

 

 

 

 

 

 

 

 

 

 



 

Consolidated statement of financial position

 

 

 

 

At 31 January 2017

At 31 January 2016

At 31 July 2016

 

 

£

£

£

Assets

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

Property, plant and equipment

 

85,055

23,731

95,058

Intangible assets

 

 

39,226

-

43,873

 

 

 

124,281

23,731

138,931

 

 

 

 

 

 

Current assets

 

 

 

 

 

Trade and other receivables

 

26,192,653

20,237,991

22,003,868

Tax receivable

 

 

-

-

-

Cash and cash equivalents:

 

 

 

 

 

     Bank balances and cash in hand

 

1,439,981

2,282,929

1,390,098

     Bank overdrafts

 

 

-

(18,162)

-

 

 

 

27,632,634

22,502,758

23,393,966

 

 

 

 

 

 

Total assets

 

 

27,756,915

22,526,489

23,532,897

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

 

 

 

 

 

Equity attributable to the owners of the parent

 

 

 

 

Called up share capital

 

 

213,542

213,542

213,542

Share premium

 

 

8,691,910

8,691,910

8,691,910

Merger reserve

 

 

890,725

890,725

890,725

Retained earnings

 

 

2,885,557

2,407,557

2,545,449

Total equity

 

 

12,681,734

12,203,734

12,341,626

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Borrowings

 

 

60,951

-

27,318

Deferred tax

 

 

8,925

590

10,078

 

 

 

69,876

590

37,396

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

 

 

2,503,625

1,202,763

1,657,030

Borrowings

 

 

12,103,712

8,695,845

9,207,927

Tax payable

 

 

397,968

423,557

288,918

 

 

 

15,005,305

10,322,165

11,153,875

Total liabilities

 

 

15,075,181

10,322,755

11,191,271

 

 

 

 

 

 

Total equity and liabilities

 

 

27,756,915

22,526,489

23,532,897

 

 

 

 

 

 

Consolidated statement of changes in equity

 

 

 

 

Called up

 

 

 

 

 

 

Share

Retained

Share

Merger

Total

 

 

capital

earnings

premium

reserve

Equity

 

 

£

£

£

£

£

Balance at 1 August 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

 

 

 

 

 

 

 

Changes in equity

 

 

 

 

 

Total comprehensive income

-

437,918

-

-

437,918

Transactions with owners:

 

 

 

 

 

Dividends paid

-

(300,026)

-

-

(300,026)

 

 

 

 

 

 

Balance at 31 July 2016

213,542

2,545,449

8,691,910

890,725

12,341,626

 

 

 

 

 

 

Changes in equity

 

 

 

 

 

Total comprehensive income

-

640,134

-

-

640,134

Transactions with owners:

 

 

 

 

 

Dividends paid

-

(300,026)

-

-

(300,026)

 

 

 

 

 

 

 

Balance at 31 January 2017

213,542

2,885,557

8,691,910

890,725

12,681,734

 

 

 

 

 

 

 

 

 

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 95p per share. Costs directly attributable to the issue of shares have been deducted from the account.

 

Consolidated statement of cash flows

 

  

 

 

 

 

6 months ended 31 January 2017

 

6 months ended 31 January 2016

 

Year ended 31 July 2016

 

 

 

 

£

 

£

 

£

Cash flows from operating activities:

 

 

 

 

 

 

Profit before income tax

 

812,584

 

703,309

 

1,270,730

Adjustment for depreciation and amortisation

 

19,236

 

4,709

 

20,520

Hire purchase interest

 

1,342

 

-

 

-

 

 

 

 

833,162

 

708,018

 

1,291,250

Increase in trade and other receivables

(4,188,785)

 

(2,322,994)

 

(4,088,870)

Increase/(decrease) in trade and other payables

 

846,595

 

(633,145)

 

(178,878)

 

 

 

 

(2,509,028)

 

(2,248,121)

 

(2,976,498)

Income tax (paid)/received

 

 

(64,552)

 

1,411

 

(253,245)

 

 

 

 

 

 

 

 

 

Net cash absorbed by operating activities

 

(2,573,580)

 

(2,246,710)

 

(3,229,743)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchases of property, plant and equipment

(510)

 

(24,014)

 

(61,924)

Expenditure on software development

(4,077)

 

-

 

(50,949)

 

 

 

 

 

 

 

 

 

Net cash absorbed by investing activities

 

(4,587)

 

(24,014)

 

(112,873)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Dividends paid

 

 

(300,026)

 

-

 

(300,026)

Net proceeds from borrowings

 

2,934,134

 

1,680,690

 

2,185,099

Borrowings repaid

 

(6,058)

 

-

 

(7,160)

 

 

 

 

 

 

 

 

 

Net cash generated by financing activities

 

2,628,050

 

1,680,690

 

1,877,913

 

 

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

49,883

 

(590,034)

 

(1,464,703)

Cash and cash equivalents at the beginning of the period

 

1,390,098

 

2,854,801

 

2,854,801

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the end of period

 

1,439,981

 

2,264,767

 

1,390,098

 

 

 

 

 

 

 

 

 

 



 

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. 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 721 Capability Green, Luton, Bedfordshire LU1 3LU.

The condensed consolidated interim financial information for the six months ended 31 January 2017 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 2016 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 six months ended 31 January 2017 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 2017.

A number of IFRSs and Interpretations have been endorsed by the EU that will apply for the first time in the period to 31 July 2017 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 2016 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 2016 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.



 

6 months ended 31 January 2017

 

 

Total

Central

Insurance premium funding

Professional fee funding

 

 

£

£

£

£

Sales

 

2,119,449

-

1,625,958

493,491

 

 

 

 

 

 

Interest payable

 

(146,990)

-

(143,091)

(3,899)

Other operational costs

 

(38,775)

 

(38,775)

-

Administrative expenses

 

(1,121,100)

(262,712)

(542,940)

(315,448)

 

 

 

 

 

 

Operating profit/(loss) before tax

812,584

(262,712)

901,152

174,144

 

 

 

 

 

 

6 months ended 31 January 2016

 

 

Total

Central

Insurance premium funding

Professional fee funding

 

 

£

£

£

£

Sales

 

1,639,910

-

1,148,890

491,020

 

 

 

 

 

 

Interest payable

 

(110,183)

-

(110,183)

-

Other operational costs

 

(38,350)

-

(38,350)

-

Administrative expenses

 

(788,068)

(244,245)

(343,853)

(199,970)

 

 

 

 

 

 

Operating profit/(loss) before tax

703,309

(244,245)

656,504

291,050

 

 

 

 

 

 

 

Year ended 31 July 2016

 

 

Total

Central

Insurance premium funding

Professional fee funding

 

 

£

£

£

£

Sales

 

3,468,864

-

2,259,577

1,209,287

 

 

 

 

 

 

Interest payable

 

(238,079)

-

(238,079)

-

Operational costs and administrative expenses

 

(1,960,055)

(514,161)

(961,771)

(484,123)

 

 

 

 

 

 

Operating profit/(loss) before tax

1,270,730

(514,161)

1,059,727

725,164

 

 

 

 

 

 

 

3.   Taxation 

The tax assessed for the period differs from the main corporation tax rates in the UK (20% for both half years and the full year) because of the effect of items disallowed for tax and accelerated capital allowances.

 

 

4.   Earnings per share 

Earnings per share are 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 all three periods, this was 21,354,167. There are no options or other factors which would dilute these, therefore the fully diluted earnings per share is identical.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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