REG - Orchard Funding Grp - Half-year Report
31/03/2025 07:15
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RNS Number : 7685C Orchard Funding Group PLC 31 March 2025
Orchard Funding Group PLC
("Orchard Funding Group" or the "company" or the "group")
Half Year Results for the Six Months ended 31 January 2025
Half Year Results
Orchard Funding Group, the finance group which specialises in insurance
premium finance and the professions funding market, announces its unaudited
results for the six months ended 31 January 2025.
Highlights in the six months to 31 January 2025, compared to the six months to
31 January 2024:
All amounts are £m unless otherwise stated 6 months to 31 January 2025 6 months to 31 January 2024 % increase/ (decrease)
Lending volume 60.06 58.41 2.83%
Average income earning assets 67.88 62.03 9.43%
Total revenue 5.32 4.65 14.42%
Net interest income 3.48 2.73 27.75%
Profit before tax 2.10 1.08 94.42%
Profit after tax 1.53 0.81 89.21%
EPS (pence) 7.15 3.78 89.15%
Operating costs (excluding impairment provisions) 2.07 1.83 12.75%
Impairment provisions 0.06 0.49 -86.87%
Net interest margin (%) 13.17% 11.20% 11.59%
Return on average equity 15.44% 8.83% 8.56%
Average external funding 12.25 11.79 3.90%
Own resources (net financial assets) 22.16 19.18 15.53%
A more detailed breakdown of the Highlights is contained within the Chief
Financial Officer's summary below.
Ravi Takhar, Chief Executive Officer of the company, stated:
" The company has successfully increased its lending and revenues over the
first half of the year. We have nearly doubled our profits from the same
period last year and intend to maintain our growth momentum. We are continuing
to lend, compete and succeed in an extremely competitive market. I thank our
staff for their hard work and our finance providers Toyota and NatWest for
their great support to our business.
"The board has not changed its view that the continued admission of Orchard's
shares to trading on AIM may not be in the best long-term interests of the
company or its shareholders. We do not have short-term plans to address this
issue and will therefore, for current purposes, continue with the AIM
admission. In light of our strong first half performance the board has agreed
to pay an interim dividend of 1p and an additional special dividend of 1p."
For further information, please contact:
Orchard Funding Group PLC
+44 (0)1582 346 248
Ravi Takhar, Chief Executive Officer
Allenby Capital Limited (Nomad and Broker)
+44 (0)20 3328 5656
Nick Naylor/James Reeve (Corporate Finance)
Amrit Nahal/Jos Pinnington (Sales and Corporate Broking)
For Investor Relations please go to: www.orchardfundinggroupplc.com
(http://www.orchardfundinggroupplc.com)
Chairman's statement
I am pleased to report that we have achieved strong half year financial
results. Lending volumes have increased in our core insurance premium funding
markets and together with the gradual reduction in Base lending rates, this
has resulted in improved margins and significant growth in revenues.
Underpinning this success in a highly competitive market is our highly
experienced and stable executive team and supporting colleagues. The board
continues to believe that in the long term it is not in our best interest to
continue the admission of the company's ordinary shares to trading on AIM.
However, we recognise the importance of the dividend to our shareholders. We
have therefore decided to reinstate the 1p interim dividend and to also make a
special dividend payment of an additional 1p, making a total of 2p per share
to reflect the exceptional first six months results.
Looking ahead, global geopolitical risks and uncertainties persist, but
subject to unforeseen events, the board is optimistic that we will continue
the current trajectory for the rest of this financial year.
Steven Hicks
Chairman
Chief Financial Officer's statement
There remains a great deal of turbulence in the markets, primarily due to the
two main conflicts at present - Ukraine and Gaza. To these we now have to add
the issue of tariffs being imposed by the USA and reciprocation by other
countries. The full impact of these will take some time to feed through into
the economy but it is unlikely that there will be any benefits from these
actions.
Inflation and interest rates have both fallen since the last half-year report.
Inflation was 2.98% for the year to 31 January 2025 compared to 3.98% for the
year to 31 January 2024. Bank of England base rate fell from 5.25% in January
2024 to 4.75% in January 2025.
Against this background the group again performed well in the half year to 31
January 2025 compared to the same period in the previous year.
The KPIs and other financial indicators have been adjusted for Toyota income
which does not form part of interest income but is part of other income. This
adjustment is reflected in lending and the loan book.
Lending is up by 9.94% for non-Toyota GAP products from £49.90m to £54.86m
and down 38.90% for Toyota from £8.51m to £5.20m.
A reduction in the Toyota market was expected and was reported last year. As a
result, we adjusted our internal forecasts substantially down in respect of
this lending. However, this market has performed better than our expectations.
PBT increased by 94.42% from £1.08m to £2.10m.
This came about because of a number of factors: turnover increased in line
with lending; the amount of impairment allowance fell (down from £485k in the
six months to 31 January 2024 to £60k in the six months to 31 January 2025);
we have improved the rates on our lending as evidenced by the gross interest
margin rising from 15.03% for the six months to 31 January 2024 to 16.76% for
this period.
Operating costs excluding impairment losses are 10.70% higher from £1.87m to
£2.07M.
Impairment charge has fallen by 87.86% from £0.49m to £0.06m.
The main increases in operating costs were employee costs (up £165k) and
commissions (up £105k). There have been small savings across other cost
headings. The large impairment charge in the previous year arose as a result
of the fraud which was reported last year.
Impairment reviews are carried out at each reporting period on all financial
assets. The method employed for assessing assets arising from lending is shown
in the audited accounts to 31 July 2024 and is based on expected credit losses
(ECLs). As part of this exercise we review debts to establish whether they
have moved from one ECL stage to another. There have been substantial material
movements from Stage 1 and Stage 2 since the 31 January 2024. These amounted
to £664k in debt and £591k in impairment allowance. These were accounted for
in the year end financial statements to 31 July 2024. At 31 January 2025 the
provision was £1,223k (31 January 2024 £789k). Other assets (fixed assets
and investments) are also subject to impairment reviews but none is needed
this period.
Net financial assets (all financial assets less all financial liabilities) are
up by 14.70% to £22.16m from £19.32m.
Unused borrowing availability was up 8.40% from £12.54m to £13.21m.
Liquidity (net current assets) was up by 1.20% from £18.27m to £21.90m.
On 15 August 2024, Open B Gateway Limited became a 90% subsidiary of the
parent.
On 19 March 2024, the group took a further 30% stake by way of transfer from
an existing shareholder in Open B Gateway Limited at a cost of £Nil. The
intention was to get better control of the company which provided open banking
software to the group. The group also took over the management of the company.
It therefore became a 60% subsidiary on that date. On 15 August 2024 a further
300 shares were transferred from a shareholder in Open B to the company,
giving it a 90% share in Open B. These were transferred at £Nil cost.
Principal risks:
Credit risk;
Liquidity risk;
Interest rate risk
Non-repayment risk
Systems risk;
Conduct risk.
Our principal risks are shown in the full year financial statements to 31 July
2024. A full explanation of each of them together with their impact and
mitigation are detailed in those financial statements.
Key Performance Indicators (KPIs)
Our KPIs are set so that fluctuations outside a certain tolerance would
trigger an examination of our operations to establish why these fluctuations
have occurred and, if necessary, take any remedial action deemed necessary.
The table below gives a breakdown of group KPIs as well as indicators not
considered KPIs but which give a better understanding of the figures.
Key performance indicators
All amounts are £m unless otherwise stated and are annualised in respect of 6 months to 31 January 2025 6 months to 31 January 2024 Year to 31 July 2024
ratios
Lending volume (non-Toyota products) 54.86 49.90 101.32
Lending volume (Toyota products) 5.20 8.51 13.38
Average interest earning assets (non-Toyota products)(1) 52.90 48.71 49.72
Average income earning assets (Toyota products)(1) 14.98 13.32 13.26
Total revenue 5.32 4.65 9.64
Average external funding(2) 14.26 11.79 23.92
Cost of external funds 0.95 0.93 1.91
Cost of funds/funds ratio(3) 6.64% 7.90% 7.99%
Own resources (net financial assets) 22.16 19.18 20.11
Operating costs (excluding impairment provisions)(2) 2.07 1.87 3.60
Impairment charges 0.06 0.49 1.17
Net interest margin (%)(4) 13.17% 11.20% 11.59%
Return on average equity(5) 15.44% 8.83% 8.56%
Financial summary - other performance indicators
All amounts are £m unless otherwise stated and are annualised 6 months to 31 January 2025 6 months to 31 January 2024 Year to 31 July 2024
Net interest income 3.48 2.73 5.76
Profit before tax 2.10 1.08 2.12
Profit after tax 1.52 0.81 1.57
Gross interest margin(6) 16.76% 11.80% 15.44%
EPS (pence) (7) 7.15 3.78 7.39
DPS (pence) (8) - 2 -
Return on capital employed annualised(9) 6.95% 3.85% 3.83%
1. Average interest and income earning assets consist of the average of
the opening and closing loan book after taking account of the impairment
provision.
2. Average external funding comprises amounts borrowed on a daily basis
net of repayments.
3. Cost of funds/funds ratio is the cost of external funds divided by
average external funding.
4. Net interest margin is net interest income divided by the average loan
book. This has been adjusted this year to remove Toyota GAP assets income from
which does not form part of interest income and the comparatives restated.
5. ROAE consists of profit after tax divided by average equity. Average
equity is the average of opening and closing equity.
6. Gross interest margin is gross interest income divided by the average
loan book, again adjusted for Toyota assets.
7. There are no factors which would dilute earnings therefore fully
diluted earnings per share are identical. EPS is based on the half-year
results divided by shares in issue.
8. Dividends per share are based on interim dividends paid in the year and
proposed final dividend for the year.
9. ROCE consists of earnings before interest, tax, depreciation and
amortisation divided by capital employed. Capital employed comprises capital
and reserves together with borrowings, less cash held. The annualised figures
contain estimates of profit for the next six months.
In summary, the next six months will remain a challenge because of ongoing
international issues and the loss of some GAP business. However, the results
for the half-year show that the business has moved in a healthy direction and,
notwithstanding the global situation, growth is expected to continue through
the next half-year. The board feels that no further provisions or estimates
(based on our forecasts) are needed at this time.
The board has an ongoing review into how and where we spend our capital as
well as reviewing the benefits of the company's shares being admitted to
trading on AIM. The board also recognises the importance of giving
shareholders a return on their investment.
With this in mind the board has therefore decided to reinstate the 1p interim
dividend, In addition, particularly as there has been an exceptional first six
months trading, it has decided to make a special dividend payment of an
additional 1p. Both dividends will be paid on 25 June 2025 to shareholders on
the register at 13 June 2025 with an ex-dividend date of 12 June 2025.
Liam McShane
Chief Financial Officer
Consolidated statement of comprehensive income
6 Months to
6 Months to 31 January 2024 Year to
31 January 2025 31 July 2024
Notes £000 £000 £000
Continuing operations
Interest receivable and similar income 2 4,432 3,659 7,674
Interest payable and similar charges (948) (932) (1,910)
Net interest income 3,484 2,727 5,764
Other trading income 2 884 987 1,965
Other direct costs (137) (276) (844)
Net other income 747 711 1,121
Net total income 4,231 3,438 6,885
Other operating costs (2,061) (1,875) (3,601)
Net impairment (losses)/gains on financial assets (64) (485) (1,235)
Reversal of impairment loss on investment at fair value through profit and - - 75
loss
Goodwill on consolidation written off - - (11)
Operating profit 2,106 1,078 2,113
Interest receivable 2 3 6
Profit before tax 2,108 1,081 2,119
Tax 3 (583) (275) (552)
Profit and total comprehensive income for the period from continuing
operations attributable to:
Owners of the parent 1,533 806 1,579
Non-controlling interests (8) - (12)
1,525 806 1,567
Earnings per share attributable to the owners of the parent during the period
(pence)
Basic and diluted 4 7.15 3.78 7.39
Consolidated statement of financial position
At 31 January 2025 At 31 January 2024 At 31 July 2024
£000 £000 £000
Assets
Non-current assets
Property, plant and equipment 445 450 448
Intangible assets 107 68 145
Investment at fair value through profit and loss 6 6 6
Loans to customers 8,616 9,481 9,038
9,174 10,005 9,637
Current assets
Loans to customers 60,168 55,586 57,944
Other receivables and prepayments 110 205 122
Cash and cash equivalents:
Bank balances and cash in hand 908 345 1,482
61,186 56,136 59,548
Total assets 70,360 66,141 69,185
Liabilities and equity
Current liabilities
Trade and other payables 8,224 9,064 9,488
Borrowings 29,937 28,077 29,693
Tax payable 1,121 724 542
39,282 37,865 39,723
Non-current liabilities
Borrowings 10,620 10,146 10,529
Deferred tax 1 2 1
10,621 10,148 10,530
Total liabilities 49,903 48,013 50,253
Equity attributable to the owners of the parent
Called up share capital 214 214 214
Share premium 8,692 8,692 8,692
Merger reserve 891 891 891
Retained earnings 10,637 8,331 9,104
Total equity attributable to:
Owners of the parent 20,434 18,128 18,901
Non-controlling interests 23 - 31
Total equity 20,457 18,128 18,932
Total equity and liabilities 70,360 66,141 69,185
Consolidated statement of changes in equity
Called up share capital Retained earnings Share premium Merger reserve Attributable to the owners of the parent Non-controlling interests Total equity
£000 £000 £000 £000 £000 £000
Balance at 1 August 2023 214 7,952 8,692 891 17,749 - 17,749
Profit and total comprehensive income - 806 - - 806 - 806
Transactions with owners:
Dividends paid - (427) - - (427) - (427)
Balance at 31 January 2024 214 8,331 8,692 891 18,128 - 18,128
Non-controlling interests at the date of acquisition 43 43
Profit and total comprehensive income 773 773 (12) 761
Transactions with owners:
Dividends paid - - -
Balance at 31 July 2024 214 9,104 8,692 891 18,901 31 18,932
Changes in equity
Profit and total 1comprehensive income 1,533 1,533 (8) 1,525
Transactions with owners:
Dividends paid - - -
Balance at 31 January 2025 214 10,637 8,692 891 20,434 23 20,457
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.
Non-controlling interests consist of equity belonging to non-group
shareholders in Open B Gateway Limited in which the group has a 90% interest.
Consolidated statement of cash flows
6 Months to
6 Months to 31 January 2024 Year to
31 January 2025 31 July 2024
£000 £000 £000
Cash flows from operating activities:
Operating profit 2,106 1,078 2,113
Adjustment for depreciation and amortisation 45 14 95
Reversal of impairment loss on investment at fair value through profit and - - (75)
loss
Goodwill on acquisition written off - - 11
Adjustment for assets and liabilities at date of acquisition - - 107
2,151 1,092 2,251
Increase in trade and other receivables (1,790) (5,987) (7,838)
Increase in trade and other payables (1,243) 109 575
(882) (4,786) (5,012)
Tax paid (6) - (459)
Net cash absorbed by operating activities (888) (4,786) (5,471)
Cash flows from investing activities
Interest received 2 3 6
Purchases of property, plant and equipment (2) (448) (453)
Purchase of intangibles assets - (30) (214)
Transfer of intangible assets purchased in the previous year - - 33
Net cash absorbed by investing activities - (475) (628)
Cash flows from financing activities
Dividends paid - (427) (427)
Proceeds from borrowings 314 3,498 5,473
Lease repayments - (15) (15)
Net cash generated by financing activities 314 3,056 5,031
Net decrease in cash and cash equivalents (574) (2,205) (1,068)
Cash and cash equivalents at the beginning of the period 1,482 2,550 2,550
Cash and cash equivalents at the end of period 908 345 1,482
Cash and cash equivalents consists of bank balances.
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 for insurance premiums,
professional and equivalent fees and other leisure activities. The group
operates in the United Kingdom.
The company is a public company listed on AIM, a market operated by the London
Stock Exchange, incorporated and domiciled in the United Kingdom. The address
of its registered office is 222 Armstrong Road, Luton, Bedfordshire LU2 0FY.
The condensed consolidated interim financial information for the six months
ended 31 January 2025 has been prepared in accordance with the presentation,
recognition and measurement requirements of applicable UK adopted
International Accounting Standards ('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 2023 which are
prepared in accordance with IFRS.
The accounting policies used in the preparation of condensed consolidated
interim financial information for the six months ended 31 January 2025 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 2023. There are a
number of new standards, amendments and interpretations that have been issued
but are not effective for these financial statements. They are not expected to
impact the financial statements as either they are not relevant to the group's
activities or are consistent with accounting policies already followed by the
group.
Under the expected credit loss (ECL) model required in IFRS 9, there has been
a further £64k charged to consolidated income (31 January 2024 £485). Last
year included a provision for a fraud amounting to £398k. The main focus of
the assessment is debt arrears as, although based on past performance, they
are the best indicator of potential default. The increase over the provision
at 31 July 2024 is not a large and is commensurate with the increase in the
loan book. Arrears are under control and there are no other factors which
would indicate potential credit losses. In assessing potential provisions, the
group has adopted the simplified approach which requires the entity to
recognise a loss allowance based on lifetime ECLs at each reporting date,
right from origination. Part of this process has been to examine the impact of
ongoing international situation.
The group's 2024 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 2024
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's activities are providing funding for insurance premiums,
professional fees, school fees, leisure activities and asset financing wholly
within the UK.
Most of our lending meets the criteria for aggregation as the underwriting
process, management of the loans, distribution channels, risks and rewards are
all similar.
The group does, however, report to the board of directors in terms of two
segments - lending for Toyota products which carry no credit risk and have a
lower return, and other lending.
Notes to the financial statements
Revenue
6 Months to 6 Months to Year to
31 January 2025 31 January 2024 31 July 2024
£000 £000 £000
Timing of revenue recognition:
Interest receivable and similar income
Over time - interest revenue outside the scope of IFRS 15 3,901 3,133 6,735
At a point in time - non utilisation fees 446 457 773
At a point in time - default and settlement fees 85 69 166
4,432 3,659 7,674
Other trading income - non-Toyota products
At a point in time - direct debit charges 193 330 558
Over time - loan administrative fees 305 307 675
Over time - licence fees 69 74 144
567 711 1,377
Other trading income - Toyota products
Over time - loan administrative fees 317 276 588
Gross total income 5,316 4,646 9,639
Expenses by nature
Interest payable and similar charges
Interest payable 936 918 1,841
Bank fees 12 14 69
948 932 1,910
Other direct costs - non-Toyota products
Bank fees 86 229 738
Other direct costs - Toyota products
Bank fees 51 47 106
137 276 844
Net total income 4,231 3,438 6,885
Other operating costs - non-Toyota products
Employee costs 1,089 924 1,710
Advertising and selling costs 485 379 853
Professional and legal fees 161 219 315
IT costs 120 97 221
Cost of listing 34 32 83
Depreciation and amortisation 45 14 95
Other net expenses 123 203 319
2,057 1,868 3,596
Other operating costs - Toyota products
Other net expenses 4 7 5
Total operating costs before impairment charges 2,061 1,875 3,601
Net impairment losses on financial assets 64 485 1,235
Reversal of impairment loss on investment at fair value through profit and - - (75)
loss
Goodwill on consolidation written off - - 11
Operating profit 2,106 1,078 2,113
3. Taxation
The tax assessed for the period differs from the main corporation tax rates in
the UK of 25% 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.
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