NSF reports FY19 results and Outlines strategic opportunity for 2020 and Beyond
Vox Markets
RNS Newswires
10:39, 25th June 2020

Non Standard Finance (LON:NSF) FOLLOW has announced Full Year Results to the 31 December 2019 with normalised revenue for the period up 10% to £183.7m from £166.5m in 2018, while normalised operating profit was up 20% to £42.2m (2018 restated: £35.1m) with normalised PBT increasing 5% to £14.7m.  
In 2019, the group said both branch-based lending and guarantor loans delivered ‘solid loan book growth’ which had translated into good growth in normalised operating profit.  
The home credit business also delivered strong growth in operating profit as a result of ‘the shift to a shorter-term loan book and careful management of impairment and operating costs.’ 
Exceptional costs for the period totalled £80.6m, with £65.9m relating to non-cash goodwill impairment s directly related to the rapid decrease in equity capital market multiples since 1 January 2020. 

A further £12.8m of costs are associated with the offer for Provident Financial and £1.9m in restructuring costs.  
The group said no final dividend will be declared making a total dividend per share for the year of 0.7p, which the group had previously announced in August 2019 (2018: 0.6p). 
"Yet despite this challenging backdrop, both branch-based lending and guarantor loans delivered good loan book growth in 2019 and home credit delivered a sharp increase in profit, resulting in a 5% increase in normalised group pre-tax profit,” he added. 
As at 31 May 2020, the Group had cash at bank of £60.3m up from £14.2m as at 31 December 2019 and £13.9m in 2018 while gross borrowings stood at £345.0m. 
Operating Highlights 
Operating highlights include 8 new braches opened as plan with 125 new cusomteer staff-facing staff recruited with a total 35% increase in total loan applications to 540,479.  
Productivity was affected during the year with a lower conversion rate for new borrowers at 7.56% (FY18: 9.0%) offset against total loans written increasing 16% to 52,130. Impairment was largely flat during the period due to stringent delinquency management.  
While the group expects to see its 2020 results severely impacted as a result of COVID-19, it reported that its post lock-down collections “have remained robust” at around 86% of its previous levels and has generated net cash of £24.6m over the last two months.  
“As the recession begins to bite, it is expected that more of the UK population will be unable to borrow from either their clearing bank or other mainstream lenders,” said Vvan Kuffeler.  
NSF has withdrawn all previous market guidance and medium-term targets until further notice due to the difficulty in predicting the balance of ongoing market uncertainties. 
Strategic Opportunity 
Despite the disruption caused by the COVID-19 pandemic, Van Kuffler was keen to stress the opportunity recessions can present the Company, if managed carefully.  
In particular, with the right capital structure, the business could leverage its leading positions it has across its three business segments with its diverse customer base and proven business model to achieve similar growth rates to that experienced during both the 1991-1995 and 2008-2012 recessions as illustrated below: 

“Previous recessions have taught us that prime lenders are likely to become increasingly risk averse and tighten their lending criteria, leaving a large and expanding pool of higher quality applicants who require access to regulated and responsible credit markets,” he said. 
Van Kuffeler added that this could represent “an exceptional market opportunity” for NSF. 
“Accordingly, the Board is considering the most appropriate funding structure, which may include the issue of equity, to strengthen the Group's balance sheet and to enable the Company to capitalise on this opportunity and meet a growing need in the economy." 
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