Private & Commercial
SPECULATIVE BUYPrivate & Commercial Finance Group saw annual pre-tax profits drop 72 per cent to £263,000 in tough market conditions.
The AIM-quoted company, which funds equipment, plant and vehicles for small and medium-sized businesses as well as financing cars for consumers, increased turnover 22 per cent to £63 million in the year to March and grew its combined loan portfolio 3 per cent to £134.5 million. Steered by chief executive officer Scott Maybury, the London-based company managed to hold its own in a market where chairman Michael Cumming says more than half its direct competitors either pulled out or ceased trading altogether.
Profits would have been £690,000 had not accounting rules forced Private & Commercial to charge more than £427,000 to reflect ‘mark to market’ adjustments in the value of interest rate derivatives taken to protect the company’s portfolio against future borrowing cost increases. Cumming says there is no question of crystallising these losses, since the derivatives form part of a long-term hedging strategy.
He also points to a fall in fees for selling payment protection insurance to borrowers, which were hit by adverse publicity. Proposed new competition legislation will make this cover ‘even harder to sell’, grumbles Cumming, who argues ‘it is ironic this should happen when unemployment levels are increasing’.
Private & Commercial has renewed its banking facility with Royal Bank of Scotland and Lloyds, entailing ‘significant one-off costs’ but, maintains Cumming, the facility is enough to ‘support our current plans’. With a falling-off in loan demand offset by a reduction in competition, he suggests the current environment is ‘highly advantageous to us’.
At 10.75p, against a 12-month high of 26p and a low of 9.5p, the shares have scope for improvement.
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