Non-Standard Finance plc
('NSF', the 'Company' or the 'Group')
23 February 2021
The Board of Non-Standard Finance has this morning issued the following trading update. The audit of our 2020 results is now underway and the information given below is unaudited, pending the completion of the audit process.
Branch-based lending - Whilst there was a strong pick-up in loan volume during August, September and October 2020 with new cash issued running at c.£10 million per month that stabilised the loan book, the subsequent tiered lockdowns, which were particularly severe in our customer heartland, reduced lending volumes in November and December. As a result, the net loan book at 31 December 2020 was c.20% lower than at the end of 2019. Whilst a consequence of the COVID-19 pandemic has been a significant increase in impairment and provisions, it has been most encouraging that the loans written since the start of the pandemic have performed better than our historical average and in the second half of 2020 we also saw an improvement in the collection performance of the COVID-flagged book. This robust performance of new lending illustrates the strength of our face-to-face lending model and augurs well for a return to strong sector growth once the economy begins to open up again.
Home credit - Loans at Home also experienced a significant uplift in loan volume during the second half of 2020 with new cash issued running at c.£5m per month. Although growth in lending volume continued in November and December due to the normal seasonal pattern, this was down by a third versus 2019 as a result of the tiered lockdowns and the closure of retail in December 2020. Collections improved on the whole loan book in the second half and the number of COVID-19 flagged customers had reduced to less than 1% at the year-end with the result that impairment as a percentage of revenue in 2020 was significantly lower than in 2019. This strong collections performance, in conjunction with lower lending meant that the net loan book ended the year down by a third versus 2019. We expect to see a significant increase in demand once the economy is opened up as our customers resume their normal lifestyle. There may also be opportunities to take advantage of some competitors contracting their business in this sector.
Guarantor loans - Following the FCA's review of the Group's guarantor loans division as part of a wider review of the guarantor loan sector, resulting in a £16m provision for redress announced in our 2020 half year results, lending volumes were minimal in the second half of 2020. Economically, the younger customer base has been harder hit by the pandemic than our other two divisions and calls on guarantors have been constrained due to the pandemic, resulting in a marked increase in impairment. Collections nevertheless remained robust during the second half of 2020 with the result that the net loan book reduced by c.40% versus the prior year. We are working hard on the redress methodology and hope to have concluded the process with the FCA early in the second quarter.
Group - Branch-based lending and home credit delivered a solid trading performance during the second half of 2020 in what were extremely challenging circumstances and overall, the Group's combined net loan book declined by c.27% versus the previous year.
Liquidity and funding
The Group has continued to operate within its financial covenants. The combination of lower levels of lending with a solid collections performance meant that as at 31 December, 2020 cash at bank had increased to £78m and gross borrowings were £330m.
The Group now needs to strengthen the balance sheet by raising sufficient new equity capital to support future growth, avoid future covenant breaches and to address the material uncertainties regarding going concern. The Board has therefore commenced work on a substantial capital raise with the support of Alchemy, its largest shareholder with a view to completing this in the second quarter of 2021. Once completed, the Group will be in a strong position to take advantage of what it believes to be an exceptional market opportunity in the non-standard sector.
For more information:
Non-Standard Finance plc
Peter Reynolds, Director, IR and Communications
+44 (0) 20 3869 9020
+44 (0) 20 7379 5151