Distribution Finance Capital Holdings Plc · LSE:DFCH
Distribution Finance Capital — H1 2020 Earnings Presentation
34 slides from Distribution Finance Capital's earnings presentation, Sep 30, 2020
Slide 1: Distribution Finance Capital Holdings plc Interim Results 2020
Cover Distribution Finance Capital Holdings plc Interim Results 2020 Building a specialist SME focused bank 30 September 2020
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Distribution Finance Capital Holdings PLC does not know what impact any such differences may have on its business, if there are (“the Company”) and includes the results of Distribution Finance Capital Ltd (“DFC Ltd”) such differences, the Company’s f
Slide 3: What we intend to cover
What we intend to cover • Share our interim results and how we have responded to Covid-19 • Now that we are a Bank, lay out our strategic roadmap: 1. Achieve a sustainable, profitable run-rate 2. Building on the foundations of profitability 3. Our aims as we reach maturity Distribution Finance Capit
Slide 4: Key takeaways
What we intend to cover Key takeaways • We are one of a new breed of specialist Bank specifically focused on SMEs • We have built a highly successful and proven secured lending franchise that has a clear runway for growth • Now as a bank we have sustainable low cost funding to support our growth pla
Slide 5: Strategic Priorities: Our phased objectives to deliver growth
What we intend to cover Strategic Priorities: Our phased objectives to deliver growth 1. Achieve a sustainable 2. Building on the foundations 3. Reaching maturity profitable run-rate of profitability • Unlock pent up demand for Inventory • Extend reach of Inventory Finance product • Well diversified
Slide 6: Who we are
Who we are DF Capital is a niche lender, providing working capital solutions to dealers and manufacturers across the UK. We are a team of experts, with specialist knowledge, who have ambitions to support the growth of poorly served SME businesses through a wider range of lending products and service
Slide 7: How we lend today
Who we are How we lend today Inventory finance for dealers How we help Who we support With DF Capital Manufacturer We buy finished Agricultural Industrial goods from equipment equipment manufacturer Without DF Capital Inefficient use of working Marine Motor capital vehicles We enable product to be s
Slide 8: Why our customers value our products
Who we are Why our customers value our products The benefits Grow sales Increase profit Protects cash flow Allows dealers to have a greater range of Dealers can sell products at full price without Stock can be financed from order to sale by products for customers to see and purchase needing to disco
Slide 9: The foundations that characterise us
Who we are The foundations that characterise us How we do things What our customers think Net Promoter Score • Straightforward +45 Quality service and products that are easy to understand +39 • Expert +6 point We apply our product and industry expertise to deliver practical solutions that work incre
Slide 10: Trading update: working through Covid-19 and our interim results to 30 June 2020
Trading update: working through Covid-19 and our interim results to 30 June 2020 Distribution Finance Capital Holdings plc | Interim Investorresults Presentation 2020 and Interim Results 2020 10
Slide 11: Delivered actions since 2019 FY results
Trading update Delivered actions since 2019 FY results Obtained bank licence Progressed wholesale funding alternatives, i.e. British Business Bank Carefully managed portfolio through Covid-19 and supported our customers Re-scheduled TruFin loan repayment Protected and enhanced our lending franchise
Slide 12: Our loan book through Covid-19: Potential for significant bounce back
Trading update Our loan book through Covid-19: Potential for significant bounce back 250 Managed demand from customers due to new UK lockdown begins stock availability 212.9 (dealers close) 208.0 UK lockdown ends (dealers open) 200 201.8 175.4 163.7 150 Loan book (£m) 128.0 107.4 100 90.0 50 Modest
Slide 13: Interim results: financial highlights
Trading update Interim results: financial highlights Covid-19 has impacted ...however we have ...to keep losses our loan book growth... managed our costs under control.. and taken actions... Loan book (£m) Headcount (no.) Loss before tax (£m) 208 -7.2 -13.5 -7.2 90 86 168 164 73 73 June Dec June Jun
Slide 14: Revenue generation
Trading update Revenue generation YoY revenue is up ...but yields have been ...which has impacted driven by larger average adversely impacted by lower fees margins along with higher loan book... and slower stock turn... wholesale funding cost. Gross revenue (£m) Gross yield (%) Net interest margin (
Slide 15: Portfolio stewardship
Trading update Portfolio stewardship Arrears have been ...and we have provided ...but have seen minimal carefully managed... forbearance where needed... insolvency and losses, with cost Arrears (£’000) of risk impacted by IFRS9 assumptions. 1,400 1,243 Forbearance granted (%) Cost of risk (%) 1,200
Slide 16: Exposure to end markets
Trading update Exposure to end markets We have continued to target the same end markets with a diverse portfolio with no significant sector concentration. Portfolio by sector (£’000) June 2019 December 2019 June 2020 5% (7,971) 9% (18,106) 6% (9,869) 19% (32,143) 21% (43,205) 26% (43,087) 16% (27,19
Slide 17: Security position
Trading update Security position We have remained disciplined ...thus protecting and improving ...whilst also seeing a reduction in about audits and invested in our security position... wholesale funding %. digital solutions... Asset audit duration (days) Loan to wholesale value (%) Wholesale advanc
Slide 18: Our sectors have performed well post lockdown
Trading update Our sectors have performed well post lockdown Sector Trend1 Of loan book at 30 June 2020 Lodges and • Parks in particular have noted 100% occupancy with holiday homes2 manufacturers struggling to meet demand Motorhomes • High demand due to staycations. Minimal new stock is and Caravan
Slide 19: Strategic outlook: growing the bank
Strategic outlook: growing the bank Distribution Finance Capital Holdings plc | Interim Investorresults Presentation 2020 and Interim Results 2020 19
Slide 20: The runway for loan book growth: A product in high demand
Trading update The runway for loan book growth: A product in high demand 1000 Inventory Finance • Address immediate pent-up demand Credit lines requested by dealers Credit lines approved 1005 Market size: £20bn enabled sales • Grow share of existing wallet Credit lines utilised • Onboard more manufa
Slide 21: DF Capital Bank: Successful ingredients that deliver sustainable and strong earnings
Strategic outlook DF Capital Bank: Successful ingredients that deliver sustainable and strong earnings Always differentiated by digitally Legacy free modern Service focused DNA led product distribution scalable platform Sustainable and Lending to SMEs in diversified low cost funding Highly secured a
Slide 22: Banking licence is a game changer
Strategic outlook Banking licence is a game changer Reducing funding cost Ready to deliver profitable growth Full authorisation No mobilisation period c6% Future diversified funding base combines at <2% Deposit raising launch ready Focus on 1 yr and Notice Accounts Majority of funding base <3.5% Sig
Slide 23: Digitally enabled efficiency unlocks a low cost operating model
Strategic outlook Digitally enabled efficiency unlocks a low cost operating model Today: Our proof points How we implement Our digital roadmap • Paperless delivery of lending • Leverage standard back office • Common lending platform across platforms with unique DF multiple products for a single • Po
Slide 24: £22bn funding gap: opportunity roadmap
Strategic outlook £22bn funding gap1: opportunity roadmap SME Finance – Current Landscape Product Sectors (Not Yet Prioritised) • 5.9 million SMEs in the UK representing 60% Inventory Asset finance and leasing (excluding consumer) Short term Finance working capital of private sector workforce Market
Slide 25: SME market opportunity: Our products and digital solutions will address pain points
Strategic outlook SME market opportunity: Our products and digital solutions will address pain points SME pain points DF Capital score card Easy application and onboarding processes • Poor quality of service Timely credit decisions • Products never easy to understand Transparent pricing and facility
Slide 26: Continuous improvement: existing product proof points of digital innovation
Strategic outlook Continuous improvement: existing product proof points of digital innovation DF Onboard DF Connect DF Check* DF Choice ✓ Customer onboarding Customer lending Customer asset auditing Customer lending An online application and Supports financing customers’ A digital auditing solution
Slide 27: Key takeaways
Strategic Outlook Key takeaways • We are one of a new breed of specialist Bank specifically focused on SMEs • We have built a highly successful and proven secured lending franchise that has a clear runway for growth • Now as a bank we have sustainable low cost funding to support our growth plan • We
Slide 28: Appendices
Appendices Distribution Finance Capital Holdings plc | Interim Investorresults Presentation 2020 and Interim Results 2020 28
Slide 29: Summary financial highlights
Appendices Summary financial highlights 30 June 2020 30 June 2019 31 December 2019 6 month 6 month 12 month Financial Highlights: Gross revenues (£'000s) 7,405 5,406 12,655 Loans and advances to customers (£'000s) 163,704 168,027 207,636 Net assets (£'000s)1 56,967 70,780 64,556 Gross yield2 7.6% 7.
Slide 30: Summarised statement of profit or loss and other comprehensive income
Appendices Summarised statement of profit or loss and other comprehensive income 30 June 2020 30 June 2019 31 December 2019 6 month 6 month 12 month £’000 £’000 £’000 Gross revenues 7,405 5,406 12,655 Interest expense (5,420) (2,814) (8,207) Net income 1,985 2,592 4,448 Operating expenses (8,474) (7
Slide 31: Summarised statement of financial position
Summarised statement of financial position 30 June 2020 30 June 2019 31 December 2019 £’000 £’000 £’000 Cash held at bank 26,533 34,544 14,122 Loans and advances to customers 163,704 168,027 207,636 Other assets 10,131 24,723 13,242 Total Assets 200,368 227,294 235,000 Financial liabilities 136,650
Slide 32: Portfolio by sector; Security position
Appendices Portfolio by sector 30 June 30 June 30 June 30 June 31 December 31 December 2020 2020 2019 2019 2019 2019 £’000 % £’000 % £’000 % Motorhomes and caravans 47,541 29% 53,881 32% 60,266 29% Lodges and holiday homes 43,087 26% 32,143 19% 43,205 21% Marine 29,648 18% 28,827 17% 37,851 18% Indu
Slide 33: Shareholders as at September 2020
Shareholders as at 14 September 2020 Name Holding Arrowgrass Capital Partners 49.2% Watrium AS 15.4% Liontrust Asset Management 7.1% Premier Miton Investors 4.6% Directors and Employees 3.1% Intertrust Employee Benefit Trustee 2.8% Invesco 2.3% Schroder Investment Management 2.3% UBS Securities 2.0%
Slide 34: Distribution Finance Capital Holdings plc | Investor Presentation and Interim Results 2020
DF Capital is a trading name of Distribution Finance Capital Holdings plc. Registered Office: 196 Deansgate, Manchester M3 3WF. VAT GB 337 4014 21. Company No. 11911574 (Registered in England and Wales). Distribution Finance Capital Holdings plc | Investor Presentation and Interim Results 2020 34
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